Tag Archives: Department of Justice

(Why) Is the Walmart Case Taking So Long?

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So this might not be the most important question in the world, but I’ve been wondering why the U.S. Government’s investigation into Walmart’s alleged violations of the Foreign Corrupt Practices Act (or, more accurately, FCPA violations committed by Wal-Mart’s Mexican subsidiary, Walmex) has yet to produce a final settlement.

A quick and somewhat simplified recap (for those among our readers who don’t obsessively follow every FCPA case in the pipeline): In April 2012, two New York Times reporters broke a blockbuster story about how Wal-Mex had been systematically paying bribes to scores of Mexican officials to get permits for new stores (often circumventing local environmental protection and historical preservation regulations in the process), and—perhaps even more damningly—about how Walmart’s senior leadership, upon learning of the bribery allegations from an internal whistleblower and preliminary internal investigation, had decided to cover up the problem and reject its own compliance department’s calls for a thorough investigation. (Walmart tried to get out in front of the story by including a disclosure of possible FCPA problems in its December 2011 FCPA filing, though that disclosure downplayed the seriousness of the issue.) The original New York Times story, along with a follow-up story published in April 2012, netted the two reporters a Pulitzer Prize. Those reports, along with Walmart’s December 2011 disclosure, prompted the Department of Justice Securities & Exchange Commission to begin investigating Walmart for FCPA violations.

That was back in April 2012. It’s now three and a half years later, and there’s still no resolution of the case; the investigation is still ongoing—something that has prompted grumbling in some quarters about both the length and cost of the investigation (see here and here). Why is this taking so long?

This is a question I’ve heard several people raise at various conferences and meetings. I don’t have any good answers, but I thought I’d throw out a few hypotheses: Continue reading →

Asset Recovery and the Department of Justice’s Discretion to Return

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The U.S. Department of Justice’ trumpets its so-called “Kleptocracy Asset Recovery Initiative,” which seeks to freeze and seize illicit assets stashed by corrupt foreign leaders in the United States. When Attorney General Eric Holder had introduced the Initiative before the African Union in 2010, he described it as a program for recovering public funds for “their intended – and proper use”. For his audience, “proper use” was no doubt understood as implying return of the looted assets to the victim countries. Yet over the past few years, these expectations have been eroded, as the US has proved reluctant to turn over seized asses, and the DOJ’s public statements regarding asset return now increasingly incorporate qualifying language to the effect that forfeited assets will be returned to the originating jurisdiction “where appropriate“. This is inequitable and harmful to global anticorruption efforts. 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 →

Individual FCPA Liability: A Risky Proposition for FCPA Enforcement Proponents?

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Both supporters and skeptics of aggressive enforcement of the Foreign Corrupt Practices Act have criticized the fact that the act is enforced much more often against corporations than against individuals. Some critics of FCPA enforcement often assert that it is unfair for the government to insist on corporations acknowledging criminal liability when the government is unwilling or unable to prosecute the individuals who committed the actual crimes. At the same time, supporters of aggressive FCPA enforcement argue that the failure to hold individuals personally liable, and to impose criminal penalties (including prison time) on those culpable actors undermines the FCPA’s deterrent effect. And they have a point: many doubt that fines and other monetary sanctions on corporations—at least at the levels that can be imposed under the FCPA—are sufficient to deter bribery, and there is evidence to support this claim.

Of course, individual FCPA liability is hardly novel; a number of past FCPA cases have included criminal convictions of individual company employees. But many have called for dramatically ramping up focus on individuals, and there are some signs that the U.S. Department of Justice may be heeding those calls. For someone like me, who tends to think that FCPA enforcement needs to be even more robust, this would seem like welcome news. And for the most part it is… but I do have a nagging worry, which may be entirely groundless, but that I want to try to flesh out in this post. The worry goes something like this: Continue reading →

Why Do People Care So Much About the Proposed FCPA Compliance Defense?

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A while back I posted a commentary on the proposal to add a so-called “compliance defense” to liability under the Foreign Corrupt Practices Act (FCPA). My basic take was that despite all the attention and controversy surrounding this proposal, in fact it would not make very much difference in practice. Without rehashing all the arguments in detail, my reasoning was basically as follows: First, corporate defendants (the only ones who would benefit from a compliance defense) are so reluctant even to be indicted—independent of the likely outcome if a case were actually to go to trial—that the addition of a formal compliance defense to liability would not significantly alter the bargaining game between the government and the corporate defendant. Second, the government already takes compliance efforts into account at several other stages in the process (and believes it is doing so appropriately), so the addition of the formal defense wouldn’t have much of an effect on the government’s position in settlement negotiations (which, as Jordan emphasized in a post from a few months ago, is really where all the action is).

I recently had an opportunity to discuss my hypothesis that the compliance defense wouldn’t actually matter much at a Duke Law School conference, where a bunch of white collar crime and FCPA experts who know much more about this subject than I do—including Duke Law Professor Sam Buell and Richmond Law Professor (and occasional GAB contributor) Andrew Spalding—pushed back against my argument. Among their many cogent criticisms, I wanted to address one in particular: If an FCPA compliance defense would make as little practical difference as I suggest, then why do the interested parties seem to care so much about it? Why (Professor Buell asks) have the Chamber of Commerce and the defense bar made this such a high priority on their FCPA reform agenda? And why (Professor Spalding asks) is the DOJ so dead set against it?

These are fair questions. I don’t have good answers, but in the interest of moving the conversation forward, let me suggest a few possibilities—and maybe folks out there in the blogosphere can react or offer their own explanations. 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 →

JP Morgan, Sons & Daughters, and the Rule of Law

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One of the more interesting ongoing Foreign Corrupt Practices Act investigations involves allegations that the investment banking giant JP Morgan’s “sons and daughters” program in China. According to media reports, JP Morgan’s China and Hong Kong offices offered jobs, and in some cases consulting contracts, to the children of well-connected officials in China (including the heads of state-owned enterprises and senior party officials) in return for lucrative business opportunities in the Chinese market (see, for example, here and here). The case is still under investigation, the facts are still in dispute, and the government enforcement agencies have not yet accused JP Morgan of any of its executives of any wrongdoing. Yet there have been hints that if the facts turn out to be as bad as they look, the U.S. government will consider JP Morgan’s so-called “sons & daughters” hiring program to have violated the FCPA’s anti-bribery provisions. That conclusion would depend crucially on the premise that providing a job to the (adult, non-dependent) child of a foreign official counts as providing “anything of value” to the official. (Things would be different if there were evidence that the officials’ children funneled some of the money back to their parents, but at the moment no such evidence has come to light.)

About six months ago, Professor Andrew Spalding (who has also contributed a number of insightful posts to this blog – see here, here, and here) published a provocative four-part series at the FCPA Blog (see here, here, here, and here) raising serious concerns about this legal theory, and suggests that applying it in JP Morgan’s case would be not only inappropriate, but a serious affront to fundamental legal principles. Somewhat unusually, I find myself in disagreement with Professor Spalding. Indeed, if the facts turn out to be as bad as early media reports suggest, I think that this is an easy case. To my mind, it’s straightforward that offering a benefit to a third party can count as offering “anything of value” to a foreign official under the FCPA, and nothing in the DOJ’s prior opinion releases would constrain the U.S. government from applying that principle in this case. Continue reading →

Policing Private Parties: How to Get Kleptocrats’ Seized Assets to their Citizens

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As Rick has pointed out, it is exciting to see the successful forfeiture of U.S.-based assets owned by sitting Vice President of Equatorial Guinea, kleptocrat and international playboy Teodoro Nguema Obiang Mangue (“Obiang”). The Department of Justice estimates that the assets are worth an estimated $30 million. Also encouraging is the fact that the bulk of the settlement funds will be returned to the people of Equatorial Guinea. This is the first case in which the assets of a current leader’s cronies will be seized and repatriated to the country of origin by the U.S. Disbursing millions of dollars transparently in country that ranks 163/177 on Transparency International’s Corruption Perception Index will be challenging.

In stolen asset repatriation cases, the debate over disbursement typically boils down to whether to channel reclaimed cash through the government or through private actors. In Equatorial Guinea, returning the money directly to the government is a non-starter: the Obiang family has an extensive record of human rights and corruption abuses and a tight grip on power. The DOJ settlement accordingly cuts the government and its henchmen out of the forfeiture proceeds and channels repatriated funds through a private charity. But simply relying on private actors will not eliminate corruption challenges; there are pitfalls in channeling aid through private NGOs as well.

The DOJ should keep the following risks in mind as works out a disbursement plan for the Obiang settlement funds: Continue reading →

U.S. Department of Justice/Civil Society — 1; Kleptocrats — 0

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October 10, 2014, deserves mention in any future history of the anticorruption movement, for it was on this date that a ruling kleptocratic family (colloquially known as thugs in power) conceded the obvious: that the money to fund a kleptocratic lifestyle — in this case a mansion in Malibu, a Ferrari 599 GTO, and Michael Jackson memorabilia – did not come from the family’s hard work on behalf of the citizens they rule.  Rather, it came the easy way: from the wholesale theft of the nation’s patrimony.

This startling, if obvious, concession came in the settlement of a civil suit filed by the U.S. Department of Justice, with the support and encouragement of civil society, against an unlikely group of defendants.  In the order listed in the complaint, they are: 1) One White Crystal Covered Bad Tour Glove and Other Michael Jackson Memorabilia, 2) One Gulfstream G-V Jet Airplane Displaying Tail Number VPCES, 3) Real Property Located on Sweetwater Mesa Road In Malibu California, 4) One 2007 Bentley Azure, 5) One 2008 Bugatti Veyron, 6) One 2008 Lamborghini Murcielago, 7) One 2008 Rolls Royce Drophead Coupe, 8) One 2009 Rolls Royce Drophead Coupe, 9) 2009 Rolls Royce Phantom Coupe, and 10) the Ferrari 599 GTO.

Although defendants stood mute before the court, their owner, Teodoro Nguema Obiang Mangue, Second Vice President of Equatorial Guinea and (surprise?) son of the country’s president, was anything but.  Through the mouths of expensive American legal talent he complained loudly and bitterly that the ten named defendants were innocent.  But in settling the case, he agreed in effect that three – the mansion, the Ferrari, and some of the Michael Jackson memorabilia, were indeed guilty.  Guilty? Of what? Continue reading →

Don’t Give Back that Glove General Holder!

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Although few readers likely can find Equatorial Guinea on a map (hint: it’s that small square wedged between Cameroon and Gabon), many have heard its name in connection with the annual contest to identify the “most corrupt country.” For despite the always stiff competition from the likes of such states as Iran, Afghanistan, Sudan, Somalia, year-in-year-out Equatorial Guinea always manages to place at or near the top.  Observers attribute its perennially strong showing to a combination of two factors: 1) the country’s vast mineral wealth and 2) its rulers’ skill and ruthlessness in keeping it all for themselves. Continue reading →