Tag Archives: Chamber of Commerce

Why Does the American Bar Association Oppose Beneficial Ownership Transparency Reform?

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Right around the same time that this post appears on the blog, the U.S. Senate Judiciary Committee will be holding a hearing on “Beneficial Ownership: Fighting Illicit International Financial Networks Through Transparency.” The main focus of the hearing will be on a pending bill, the True Incorporation for Transparency for Law Enforcement Act (TITLE Act). That bill’s major provisions do two main things:

  • First, subject to certain limited exceptions, the Act would require that every applicant wishing to form a corporation or limited liability company (LLC) in a U.S. State must provide that State with information on the true or “beneficial” owners of the company—that is, the live human beings who actually exercise control over, and/or receive substantial economic benefits from, these entities—and to keep this information updated. This information could then be requested by a law enforcement or other government agency, or by a financial institution conducting due diligence on a customer. Those applicants who don’t have a U.S. passport or driver’s license who want to form a corporation or LLC would have to apply through a U.S.-based “formation agent”; this agent would be responsible for verifying, maintaining, and updating information on the identity of the legal entity’s beneficial owners.
  • Second, the bill would also subject these “formation agents” to certain anti-money laundering (AML) rules applicable to financial institutions, including the requirements for establishing AML programs and filing suspicious activity reports (SARs) with the Treasury Department. However, the TITLE Act expressly exempts attorneys and law firms from this provision—provided that the attorney or law firm uses a separate formation agent in the U.S. when helping a client form a corporation or LLC. (The idea, as I understand it, is that the bill would avoid putting attorneys in the position of potentially having to file SARs on their own clients—but in order to avail themselves of this exemption, an attorney helping a client form a corporation would have to retain a separate formation agent, and it would be this latter agent that would be subject to the AML rules. More on this in a moment.)

Compared to the more aggressive beneficial ownership transparency reforms touted by anticorruption/AML advocates, and adopted in some other countries, the proposed U.S. legislation is fairly mild—but it is still, as prior commentators on this blog have emphasized (here and here), a welcome step in the right direction. After all, while the U.S. record on fighting global corruption and international money laundering is good in some respects (Foreign Corrupt Practices Act enforcement and the Kleptocracy Asset Recovery Initiative come to mind), when it comes to addressing the facilitators of corruption, such as corporate secrecy, the U.S. is a laggard (as illustrated by poor U.S. score on the Tax Justice Network’s 2018 “Financial Secrecy Index,” released last month). So it’s indeed encouraging that the TITLE Act, and its counterpart in the U.S House of Representatives (the less-cleverly-named “Counter Terrorism and Illicit Finance Act”) have received both bipartisan support and the endorsement of a wide range of interest groups—including not just anticorruption, AML, and tax justice advocacy groups, but also representatives of law enforcement, the finance industry and other business interests (here and here). Many are cautiously optimistic that some version of these bills might actually become law this year.

But some opposition remains. The sources of that opposition are, in some cases, predictable: the Chamber of Commerce, for example, opposes these reforms, as does FreedomWorks, the lobbying group sponsored by the libertarian billionaire Koch brothers. One of the major opponents of the legislation, though, was more surprising, at least to me: the American Bar Association (ABA), which represents the U.S. legal profession. The ABA has come strongly against this legislation, sending letters to the responsible committees in both the House and Senate expressing strong opposition to even these relatively mild reforms.

What’s the explanation for this uncompromising opposition? Do the objections make sense on the merits? How did the ABA decide to take such a strong stand, despite the fact that I’m sure many ABA members support greater beneficial ownership transparency? I don’t know the answers to any of these questions yet, and I may try to do a few more posts over this month as I try to work through these issues. But for now, let me offer some preliminary thoughts: Continue reading →

US Anticorruption Policy in a Trump Administration Revisited: An Evaluation of Last Year’s Doom-and-Gloom Predictions

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Almost exactly one year ago, the day after the U.S. presidential election, I published a deeply pessimistic post about the likely future of U.S. anticorruption policy under a Trump presidency. As I acknowledged at the time, “the consequences of a Trump presidency are potentially so dire for such a broad range of issues–from health care to climate change to national security to immigration to the preservation of the fundamental ideals of the United States as an open and tolerant constitutional democracy–that even thinking about the implications of a Trump presidency for something as narrow and specific as anticorruption policy seems almost comically trivial.” That statement is, alas, still true. But what about the impact on anticorruption specifically? In my post last year, I made a bunch of predictions about the likely impact of a Trump presidency on corruption, anticorruption, and related issues. What did I get right and where did I go wrong?

This may seem a bit self-indulgent, but I think it’s often useful to go back and assess one’s own forecasts, not only in the interests of accountability and self-criticism, but also because examining where we got things right and, more importantly, where we went wrong can help us do a better job in the future. Of course, one difficulty in assessing my own predictions is that many of them concerned longer-term effects that we can’t really assess after one year (really 9+ months). And in some cases the predictions concern things that it’s hard to assess objectively. But it’s still a useful exercise. So, here goes: Continue reading →

Some Thoughts on the Trump-Tillerson FCPA Exchange

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Dexter Filkins’ terrific New Yorker piece on US Secretary of State Rex Tillerson earlier this month included an anecdote about an exchange between Tillerson and President Trump concerning the Foreign Corrupt Practices Act (FCPA). For those who haven’t seen it, here’s the basic gist: In February 2017, shortly after Tillerson was sworn in as Secretary, he was meeting with Trump about an unrelated personnel matter when Trump launched into a tirade about the FCPA, and how it put US businesses at an unfair disadvantage. (That Trump holds this view is no surprise: He had expressed similar criticisms of the FCPA in public prior to his election.) But Tillerson pushed back, using an anecdote about how, when Tillerson was CEO of Exxon, senior officials from Yemen had demanded a $5 million bribe to close a deal that Exxon was pursuing in that country. Tillerson told Trump that he refused to pay, and made it clear to the Yemenis that this wasn’t how Exxon does business—and in the end Exxon got the deal anyway. According to Mr. Filkins’ source, “Tillerson told Trump that America didn’t need to pay bribes—that we could bring the world up to our own standards.”

Though it’s only a minor part of Filkins’ piece, the alleged exchange about the FCPA has attracted a fair bit of attention and commentary over the past month (see, for example, here, here, here, and here), much of it expressing or implying concern about this further evidence of President Trump’s hostility to the FCPA. It’s slightly puzzling that this anecdote is attracting more attention now, since the alleged exchange (which took place in February) was actually reported in early March—though Filkins’ piece has a little bit more detail (like the name of the country involved). Perhaps it’s because a news item about the FCPA was drowned out in early March by more pressing and immediate matters. (Trump issued the second version of his travel ban two days before the March report about the Trump-Tillerson FCPA exchange, and the federal district judge in Hawaii issued its injunction temporarily blocking enforcement of the ban a week later.) And perhaps the renewed attention to this item also has something to do with recent reports of an increasingly strained relationship between Trump and Tillerson.

Ultimately, though, it’s not so important to figure out why this anecdote is getting more attention now than it did back in March. The more interesting question is what, if anything, it reveals about the state of thinking—in government and the private sector—about the FCPA. There’s only so much that one can or should draw from a single vignette, but I do think it invites a few observations: Continue reading →

Troubling Signs of a Resurgent Anti-FCPA Lobbying Campaign

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One of the biggest stories in anticorruption enforcement over the last two decades is the surge in enforcement of the U.S. Foreign Corrupt Practices Act. This development has not only been greeted with enthusiasm by anticorruption advocates, but has had bipartisan political support, at least within the executive branch (the enforcement surge began under President George W. Bush, and has continued through President Obama’s administration). But not everyone has been happy about aggressive FCPA enforcement. About five years ago, the U.S. Chamber of Commerce and its allies launched a coordinated lobbying assault on the statute and on the U.S. government’s enforcement practices. The Chamber not only published a report (“Restoring Balance”) advocating significant limitations on the FCPA’s scope, but it convinced (and/or paid) a number of other “experts” to take up the cause, writing op-eds, testifying before Congress, and lobbying in other forums. (The Chamber seemed to deliberately prefer to hire ex-DOJ officials to make its case, most notably former Attorney General Michael Mukasey.) These editorials and presentations, perhaps not surprisingly, tended to recite the same Chamber of Commerce talking points.

But this concerted, coordinated lobbying effort basically went nowhere. Why not? Well, there were probably a number of reasons, including the vigorous resistance of the Department of Justice, the intrinsic weakness of many of the Chamber’s arguments, and the difficulty of getting anything through the U.S. Congress. But another major factor was the Walmart corruption story, which the New York Times broke in 2012 (see here and here.) The allegations involving Walmart’s conduct in Mexico were so shocking that any appetite there might have been in Congress for “reforming” (that is, weakening) the FCPA quickly dissipated. Although FCPA critics continued to advocate changes to the statute and current enforcement practices, the concerted, orchestrated push for FCPA “reform” faded away.

But now there are signs that it’s back. Maybe I’m over-reading the limited evidence, but I think a new campaign for FCPA reform may well be underway—and anticorruption advocates should may attention and be ready to fight back. Continue reading →

Private FCPA Enforcement: Some Troubling Trade-Offs

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In my last post, I suggested that one possible drawback to dramatically ramping up enforcement of the Foreign Corrupt Practices Act against individuals (from the perspective of those who, like me, favor aggressive FCPA enforcement) is that individual defendants are relatively more likely to litigate than are corporate defendants. This not only might entail a greater drain on the resources of the government enforcement agencies—a familiar and well-understood concern—but it could also lead to adverse appellate rulings on the meaning of key FCPA provisions (particularly if the targeting of more individuals also entails the targeting of relatively more sympathetic individuals). In this post, I want to raise a similar concern in connection with a prominent proposal for increasing the FCPA’s deterrent effect: the addition of a private right of action under the statute.

The FCPA in its current form does not authorize private individuals to sue defendants for alleged violations of the statute. Although some other statutes might authorize certain forms of private FCPA enforcement—for example, in the form of shareholder derivative suits, or suits alleging violations of the antitrust laws or the RICO Act—these forms of private recourse are quite limited in their availability. (I won’t go into all the reasons in this post—Professor Gideon Mark has a nice discussion in his paper on the topic.) Yet many people (including Professor Mark) have advocated the addition of an express FCPA private right of action which, in the view of its proponents, would substantially enhance FCPA deterrence. This idea has attracted at least some interest in the U.S. Congress, though the proposed bills to add an FCPA private right of action have not yet gone anywhere.

My natural instincts are to support a proposal along these lines, both because I’m more of a “hawk” when it comes to FCPA enforcement, and because I’m generally an enthusiast for the “private attorney general” model for enforcing public law. And I could still be persuaded that a private FCPA action is a good idea. But I have concerns similar to those I raised in my last post about greater targeting of individuals, as well as some additional, closely related worries. Here are the main worries, as I see them: Continue reading →

The New Head of the DOJ’s Fraud Unit Advocated Gutting the FCPA: Shouldn’t We Be More Upset About That?

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Two months ago, the U.S. Department of Justice announced that Andrew Weissmann would take over as chief of Fraud Section in the DOJ’s Criminal Division, a position that involves responsibility for, among other things, the DOJ’s enforcement of the Foreign Corrupt Practices Act (FCPA). Mr. Weissmann has had a distinguished professional career, with previous stints in private practice and in government, including prior positions as Special Counsel to the Director of the FBI, and as the director of the DOJ’s Enron Task Force. But for those of us who care about maintaining the US government’s aggressive enforcement of the FCPA and its leadership in the global fight against corruption, Mr. Weissmann’s appointment should be cause for concern. The reason? Mr. Weissmann was one of the principal authors of the U.S. Chamber of Commerce’s 2010 report, Restoring Balance: Proposed Amendments to the Foreign Corrupt Practices Act. That report is notable principally for three things: (1) its strident attack on aggressive FCPA enforcement, (2) its proposal of a series of amendments to the statute that would gut the FCPA, and (3) its misleading manipulation (and sometimes outright misrepresentation) of both facts and law in making its case.

Fortunately, Professor Dan Danielsen at Northeastern School of Law and my Harvard colleague Professor David Kennedy provided an exceptionally thorough take-down of the Chamber of Commerce’s arguments in a report for the Open Society Foundations (OSF), called Busting Bribery: Sustaining the Global Momentum of the Foreign Corrupt Practices Act. Aside from a few small (but admittedly important) errors, the OSF report provides a sufficiently thorough rebuttal that I won’t attempt to summarize it all here; rather, I urge readers to follow the links above. But let me just highlight a few aspects of Mr. Weissmann’s report for the Chamber of Commerce to explain why I think it deserves the harsh language I used. Continue reading →