Tag Archives: enforcement

The Curious Absence of FCPA Trials

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As is well known, enforcement actions brought under the Foreign Corrupt Practices Act (FCPA) have expanded dramatically over the past decade and a half. With all this enforcement activity, someone unfamiliar with this field might suppose that the most important questions regarding the FCPA’s meaning and scope are now settled. But as FCPA experts well know, that is not the case; the realm of FCPA enforcement is a legal desert, with guidance often drawn not from binding case law but from a whirl of enforcement patterns, settlements, and dicta. As a result, many of the ambiguities inherent in the statutory language remain unresolved—even core concepts, such as what constitutes a transfer of “anything of value to a foreign official,” lack concrete legal decisions that offer guidance. While some claim that this ambiguity fades when the FCPA is applied to the facts at hand, past analysis shows that this may not always be the case.

The dearth of binding legal precedent in FCPA enforcement stems directly from the lack of FCPA cases that are actually brought to trial. Of course, most white collar and corporate criminal cases—like most cases of all types—result in settlements rather than trials. But a look at the major cases white collar cases going to trial in 2017, and the pattern of FCPA settlements, shows that FCPA trials are uniquely rare. In fact, FCPA cases are resolved through settlements more often than any other type of enforcement actions brought by the DOJ or SEC.

Why is this? Why are FCPA enforcement cases so rarely brought to trial, even compared to other white collar cases? The answer can help explain why FCPA case law is so sparse, and reveal whether this trend may change in the future.

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For the Love of Money: Capitalizing on Corrupt Officials’ Opulent Spending Habits to Fight Corruption

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Corruption is notoriously difficult to track and discover, not least because both sides in a corrupt exchange have strong incentives to avoid getting caught. So how can enforcement officials, journalists, and anticorruption activists catch corrupt actors? Pay close attention to flagrant and excessive spending by public officials. After all, most people who benefit from corruption, whether they are officials receiving bribes or industrialists benefitting from the government action they purchased, do it for the money. And what’s the point of taking on so much personal risk to make more money if you can’t spend it on nice things? This is why you’ll see Chinese officials wearing wristwatches worth four times their annual salary and presidents spending millions on designer clothes and shoes and other luxury goods. The additional risk of being caught seems to be outweighed by the perceived social benefits of public displays of wealth. Throwing lavish weddings and banquets seems to be a particularly common trap that captures this phenomenon. The very public nature of these events, the massive guest lists, and the attendance of well known figures all but guarantee public scrutiny. But current and former government officials just can’t seem to help themselves. For example, in the middle of India’s recent anticorruption crackdown a former government minister held a lavish wedding for his daughter at a cost of over $75 million. This is in a country where a former state chief minister and potential prime minister was recently sentenced to four years in prison, banned from politics for a decade, and fined $16 million after an investigation sparked by an astonishingly opulent wedding she hosted.

Over the past decade, the spending habits of dozens of high-ranking officials have produced a number of viral news stories and have, in some cases, led to effective enforcement actions. The fact that people are willing to spend their corruptly acquired wealth so publicly, in spite of the risks involved, provides enforcement officials and anticorruption advocates with a unique and important opportunity in three respects:

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Post-TPP Withdrawal: Loss of a Trade-Corruption Milestone?

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As promised, President Trump removed the United States from the Trans-Pacific Partnership (TPP) trade agreement soon after he took office in January. The move withdrew the world’s leading economy from the largest regional trade deal ever proposed. It also represented a major step back from what looked like a breakthrough in linking anticorruption and trade. As I discussed in a previous post, the TPP’s anticorruption chapter was an important step towards inclusion of anticorruption commitments in trade deals, making the U.S. withdrawal from the TPP a step backwards for the decades-old movement to incorporate anticorruption provisions in trade agreements.

Yet Trump’s move was not the end of the TPP negotiations. Nor should it be the end of championing an increased role for anticorruption and transparency in trade deals. With the TPP having reached the final stages of negotiation, its Transparency and Anticorruption Chapter can provide an outline for future trade deals that might provide further opportunities for trade-corruption linkage. As outlined in a previous post, the TPP’s chapter on anticorruption made several strides forward, including obligations to join UNCAC and respect other anticorruption instruments. What’s more, the anticorruption provisions were to be made enforceable in trade dispute resolution tribunals (though, as Danielle has previously written, corruption can already support certain actions in trade dispute arbitration). Looking at the strides forward in the draft TPP, there are three key avenues through which the Transparency and Anticorruption Chapter can continue to strengthen international trade deals.

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Guest Post: Anticorruption Enforcement Is the Key to Democratic Consolidation–Not the Other Way Around

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GAB is delighted to welcome Cristina Nicolescu-Waggonner, visiting professor of Political Science at Pomona College and Scripps College, Claremont, to contribute the following guest post, drawn from material in her new book, No Rule of Law, No Democracy:

It is fashionable to argue that the only way to root out systemic corruption is to establish a political system characterized by genuine democratic accountability and the rule of law. Unfortunately, corruption – specifically the conflicts of interest of political and judicial leaders – does not allow for this sort of development. True, there may be democracy, but in the presence of widespread corruption it will remain in a perpetual state of unconsolidated democracy, without true rule of law. And in such weak democracies, the electoral process stimulates rather than discourages corruption: Eager to win and short on cash, politicians make deals with businesses and misappropriate public funds to finance campaigns, a vicious cycle that starts political tenure with illicit means. Different from lobbying, this illegal activity puts the breaks on rule of law reform. Corrupt politicians, afraid of retribution, do not reform or establish enforcement mechanisms: supervisory commissions, integrity agencies, anticorruption institutions, genuinely independent courts, whistleblower protection, etc. This dilemma is exemplified by the Czech Republic, which does well on various international democracy and rule-of-law indexes, but in fact is a corruption hotbed, with politicians, members of the judiciary, and business people involved in a web of misappropriation of public funds—partly for personal enrichment, but more importantly for election and re-election. The same vicious cycle is prevalent in new democracies all over the world, from Brazil to Romania to South Korea to Mexico to Tunisia: Corruption negatively affects the process of democratization and stalls it before democracy can have a chance to fight corruption.

So, what can we do? Continue reading →

Why Does the SEC Enforce the FCPA?

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Donald Trump’s nomination of Jay Clayton to chair the Securities and Exchange Commission (SEC) has attracted some attention and concern from the anticorruption community. That concern is due mainly to a report issued by a New York Bar Foundation committee, chaired by Mr. Clayton, which criticized the Foreign Corrupt Practices Act (FCPA) for its alleged adverse and asymmetric impact on U.S. corporations. Though it remains to be seen how strongly committed Mr. Clayton is to the views expressed in the report, the concern is understandable given that the SEC is one of the two agencies—along with the Department of Justice (DOJ)—that is responsible for enforcing the FCPA. This controversy also highlights another, broader question that some FCPA critics have raised: Why is the SEC even involved in FCPA enforcement in the first place?

Congress created the SEC in 1934 through the aptly named Securities Exchange Act to enforce federal regulations regarding the trade of securities after they have been issued. The main impetus for the SEC’s creation was the belief that an under-regulated securities market helped drive the 1929 stock market crash. However, over the past 80 years, the SEC has expanded into other areas of enforcement—such as FCPA enforcement—that seem tentatively tied to the SEC’s original mandate. Some have argued that due to resource limitations, it does not make sense for the SEC to pursue vigorous FCPA enforcement at the expense of diverting resources from protecting investors. In pushing this point, some critics also point out that the SEC’s major regulatory fumbles of the past decade coincide with the escalation of FCPA enforcement activity—which perhaps suggests that expanding the SEC’s responsibilities beyond its original mandate has indeed weakened the agency.

The reasons for the SEC’s involvement in FCPA enforcement are partly historical, as explained further below. But beyond that, despite the critics’ complaints, in fact FCPA enforcement remains a valuable use of the SEC’s resources in the 21st century.

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What Can Young Lawyers Do To Fight Corruption Now that Trump Is President?

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I promise that eventually I’ll go back to blogging about things other than Trump, but that seems to be the most important challenge facing the anticorruption community right now. Also, I wanted to contemplate a question that a friend and recent law school graduate (who is currently working for the US government, and so cannot be identified by name) put to me in response to the “cry of despair” I posted in the immediate aftermath of the election. This young lawyer asks:

What can people do in the face of all this? Is there anything young lawyers who care about anticorruption policy can do? If we can expect a drop in enforcement and weakening of the FCPA, where can people concentrate their efforts?

This is a great set of questions, and I wish I had good answers. I don’t, but in the interests of contributing to these important conversations, let me offer a few preliminary thoughts (which are probably worth approximately what you’ve paid for them): Continue reading →

Was I Too Pessimistic on FCPA Enforcement in a Trump Administration? I Fear Not, But Hope So

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A couple weeks back, I published a post (really, more of an extended wail) about the likely consequences of the Trump presidency for anticorruption efforts. Among my many worries was the concern that under a Trump administration, we may see the end (or at least the significant cutback) of the era of aggressive enforcement of the Foreign Corrupt Practices Act. Other analysts—notably Peter Henning and Tom Fox—are less pessimistic in their assessments, and have written interesting explanations as to why FCPA enforcement is unlikely to change much under President Trump. I hope they’re right. And I suspect they probably are, if only because commentators—including, perhaps especially, so-called “experts”—have a demonstrated tendency to over-predict dramatic change. Most of the time, the safest prediction is that the future will resemble the past. And more specifically here, the forces of inertia in the U.S. federal government are strong, and sudden changes are both rare and unlikely.

Still, I’m not sure I’m fully convinced by the reasons that Mr. Fox, Mr. Henning, and others have offered for their more sanguine conclusion that FCPA enforcement will not change much under a Trump Administration. So, with the understanding (and sincere hope) that I’m probably wrong, let me address some of the principal arguments that have been advanced for the “no change” prediction. Continue reading →

US Anticorruption Policy in a Trump Administration: A Cry of Despair from the Heart of Darkness

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Like many people, both here in the US and across the world, I was shocked and dismayed by the outcome of the US Presidential election. To be honest, I’m still in such a state of numb disbelief, I’m not sure I’m in a position to think or write clearly. And I’m not even sure there’s much point to blogging about corruption. As I said in my post this past Tuesday (which now feels like a million years ago), 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. But blogging about corruption is one of the things I do, and to hold myself together and try to keep sane, I’m going to take a stab at writing a bit about the possible impact that President Trump will have on US anticorruption policy, at home and abroad. I think the impact is likely to be considerable, and uniformly bad: Continue reading →

Fighting Natural Resource Corruption: The Solomon Islands’ Challenge

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On September 8 & 9 the Government of Solomon Islands, the UN Office on Drugs and Crime, and the UN Development Program will host a workshop in Honiara to discuss the national anticorruption strategy the government is preparing.  One issue almost certain to arise is how the government can intensify the fight against corruption in the logging and mining sectors. Both sectors are critical to the nation’s economic well-being.  Commercial logging is currently the largest source of export revenues, but earnings are expected to decline sharply over the coming decade as forest reserves are depleted (due in no small part to corruption).  The hope is that increases in the mining of the country’s ample reserves of bauxite and nickel will replace losses from forestry.

Corruption in both sectors has been documented by scholars (here, here, and here for examples), the World Bank (here), and the Solomon Islands chapter of Transparency International.  The government has not only acknowledged the problem but has committed to addressing it.  Its recently released National Development Strategy 2016 – 2035 makes controlling corruption in logging and mining a priority.  As the strategy explains, corruption in the two sectors robs government of needed revenues and deprives local communities of the benefits from the development of resources on or under their lands.

Identifying a problem is one thing.  Coming up with solutions is another, particularly in the case of resource corruption in the Solomons where the combination of geography, poverty, and huge payoffs from corrupt deals make curbing it especially challenging.  The remainder of this post describes the hurdles Solomon Islanders and their government face and suggests ways they might overcome them.       Continue reading →

Sextortion Victims Are Not Guilty of Bribery

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On this blog, I have repeatedly called for the anticorruption community to put greater emphasis on fighting sexual corruption around the world. I have argued that a police officer demanding sex in order to perform (or not perform) an official function is a form of bribery; in a few cases, officials have been charged with and convicted of bribery or official misconduct for sexual corruption.

Characterizing this sort of sexual coercion as bribery, however, raises a potential problem: In typical monetary corruption cases, it is possible to prosecute the bribe giver as well as the bribe receiver. Does that mean that the private citizen (almost always a woman) from whom sexual favors are extorted by a public official could be deemed to have “paid” an unlawful bribe? Unfortunately, the idea of charging victims of sexual corruption with bribery is not too far-fetched. In one New York case, two police officers demanded sex from a female motorist if she wanted to avoid arrest (for drugs found in her car); at the officers’ trial, the jury was instructed that the woman was an accomplice as a matter of law to bribe receiving. The appellate court wrote that the test for whether the woman can be considered an accomplice is whether she “theoretically could have been convicted of any crime based on at least some of the same facts that must be proven in order to convict the defendant.” And because the woman in this case acquiesced to the officers’ demands, she met the definition of an accomplice to bribe receiving. (She was not charged, but according to the court she could have been.)

Thus one potential concern with heeding the call to treat so-called “sextortion” as a corruption offense (that is, soliciting a bribe) is that it could lead to greater use of anti-bribery laws to charge the women from whom sex is extorted. (For example, suppose an American businesswoman had sexual relations with a foreign procurement officer as a quid pro quo for receiving a government contract; the businesswoman in this case could conceivably be charged with violating the Foreign Corrupt Practices Act.) It will be crucial to ensure that this never happens. This can be accomplished through a generous interpretation of coercion as a defense to bribery, informed by the existing American jurisprudence on sexual harassment in the employment setting.

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