Tag Archives: Foreign Corrupt Practices Act

Guest Post: What Trump’s FCPA Enforcement Pause Means for Accountability in Europe

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Today’s guest post is by the Daphne Caruana Galizia Foundation. Established following the assassination of Maltese anticorruption journalist Daphne Caruana Galizia, the foundation seeks to ensure full justice for Daphne’s murder, advance her work, support and protect investigative journalists, and promote public interest litigation. It coordinates the Coalition Against SLAPPs in Europe (CASE), administers the Public Interest Legal Network (PILN), is a Transparency International chapter-in-formation, a partner of OCCRP, and a member of the UNCAC Coalition.

Here on the little Mediterranean island of Malta, located just south of Sicily, news of a Department of Justice investigation into Texas-based Steward Healthcare was met with a collective sigh of relief – “the Americans will help to get it done” – some thought to themselves. “It” in this case refers to the act of achieving accountability for one of the biggest corruption scandals to rock the country.

The scandal centers around Steward’s takeover of a fraudulent concession to develop and manage three of Malta’s public hospitals. The hospitals were left in a state of disrepair and under-resourced, as public funds intended for their development and upkeep by-passed them almost completely, landing instead inside the pockets of a well-positioned few through a carefully organized international network of consultancy agreements and intermediaries. In Malta, these few allegedly included Maltese former Prime Minister Joseph Muscat, Minister Konrad Mizzi, and Chief of Staff Keith Schembri. In the US, Steward executives allegedly     did their best to collect all they could of the money hemorrhaging from the concession.

So what did Maltese citizens hope the result of the Department’s FCPA investigation would be?

Continue reading →

New Podcast Episode, Featuring Tom Firestone and Scott Greytak

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After a brief late-summer hiatus, a new episode of KickBack: The Global Anticorruption Podcast is now available.In this episode, host Liz Dávid-Barrett interviews Tom Firestone, a partner at the law firm Squire Patton Boggs, and Scott Greytak, the Director of Advocacy at Transparency International US, about the Foreign Extortion Prevention Act (FEPA), a new and groundbreaking piece of US federal legislation that makes it a crime for any foreign official to demand or accept a bribe from an American or American company, or from any person while in the territory of the United States. The conversation touches on the scope of the act, how it relates to the Foreign Corrupt Practices Act (FCPA), the effects that the law may have on anticorruption enforcement efforts in other countries, and the challenges related to FEPA enforcement.
You can find both this episode and an archive of prior episodes at the following locations:
KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

Too Nice? Why Canada’s Corruption of Foreign Public Officials Act (CFPOA) Needs Revamping

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Capping off a series of scandalous events that shook Canadian politics to its foundation, in February 2019, Jody Wilson-Raybould––the country’s then-Justice Minister and Attorney General––resigned from the cabinet and alleged that Prime Minister Justin Trudeau’s office had pressured her to intervene in a criminal case against the Canadian construction firm SNC-Lavalin. Wilson-Raybould claimed the Prime Minister’s office ordered her to arrange a more lenient remediation agreement with the firm, which was facing bribery and fraud charges for its 2001–2011 dealings with the Muammar Gaddafi regime in Libya, because of its economic significance. (SNC-Lavalin employs more than 9000 Canadians).

These revelations brought some much-needed attention to deficiencies in Canada’s enforcement of its laws against foreign bribery. While this scrutiny is welcome, and allegations of political interference are especially troubling, the SNC-Lavalin affair may be a somewhat misleading illustration of the most pervasive problems with Canadian authorities’ anti-bribery efforts. In fact, the SNC-Lavalin affair is anomalous because, notwithstanding the alleged interference from the Prime Minister’s office, the company was actually convicted and punished in the end—to the tune of a hefty $280 million CAD fine. In Canada, such prosecutions and convictions are quite rare—not because of political meddling, but because of structural deficiencies that prevent authorities from even pursuing such investigations in the vast majority of cases.

Read more: Too Nice? Why Canada’s Corruption of Foreign Public Officials Act (CFPOA) Needs Revamping

Canada enacted its federal prohibition on bribing foreign public officials, the Corruption of Foreign Public Officials Act/Loi sur la corruption d’agents publics étrangers (CFPOA), in 1998, shortly after it ratified the OECD Anti-Bribery Convention. Much like the U.S.’s Foreign Corrupt Practices Act (FCPA), the CFPOA prohibits the bribery of foreign officials, and also requires companies to maintain accounting practices and internal controls sufficient to ensure that bribery does not occur.

Unfortunately, Canada’s track record of enforcing the CFPOA does not match the United States’ track record of enforcing the FCPA. Indeed, as early as 2005, Canada’s lackluster anti-bribery efforts attracted scrutiny and criticism from the OECD Working Group on Bribery, which evaluates how well member countries abide by the OECD Anti-Bribery Convention. In response, the Canadian Parliament amended the CFPOA in 2013 to strengthen its anti-bribery provisions. Yet, enforcement of the CFPOA continued to be infrequent, and when enforcement actions took place, the penalties were typically quite low. The 2010s saw slightly more high-profile investigations, with Niko Resources fined $9.5 million CAD in 2011 and Griffiths Energy fined $10.35 million CAD in 2013. And then, of course, there was the SNC-Lavalin case, which involved alleged CFPOA violations, though the company eventually negotiated a plea bargain that removed bribery-related charges in exchange for a fraud conviction. (Doing so avoided triggering the CFPOA’s debarment provisions, which would have prevented the company from doing further business in Canada).

But these few notable enforcement actions did not change the overall picture: As recently as October 2023, the OECD Working Group on Bribery described the Canada’s anti-bribery enforcement activity as “exceedingly low” relative to the strength of the Canadian economy and in comparison to similar countries. A recent Transparency International report similarly gave Canada poor marks in enforcing its laws against foreign bribery, comparing Canada disfavorably to peer countries. As the report noted, Canada did not initiate any CFPOA investigations in 2020 or 2021; during the same time span, the United States initiated 15 foreign bribery cases, and Switzerland initiated 28. In fact, charges have only ever been laid in nine cases in the CFPOA’s entire history, with only two individuals and four companies ever having been sanctioned. Canada’s anemic CFPOA enforcement is particularly worrisome given that Canadian exports and investments are disproportionately in high-risk sectors, such as energy and mining. 

Canadian anti-bribery efforts would benefit greatly from a revised approach that does three main things: Continue reading →

Would the Foreign Extortion Prevention Act Help the U.S. Counter China?

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The U.S. Foreign Corrupt Practices Act (FCPA) makes it a criminal offense for U.S. domestic concerns, firms that issue U.S. and any anyone acting in U.S. territory from offering or paying bribes to foreign government officials. The FCPA does not, however, apply to the foreign officials who receive those bribes. (On occasion some prosecutors have advanced the theory that a foreign government official who takes a bribe can be convicted for aiding and abetting, or conspiring in, an FCPA violation, but courts have generally rejected these theories.) Additionally, while U.S. criminal law prohibits domestic government officials from soliciting or accepting bribes, the relevant statutory provisions do not apply to foreign officials who engage in comparable conduct.

Many U.S. anticorruption activists believe that U.S. law ought to target the demand side of foreign bribery transactions (that is, the bribe-takers), not just the supply side, and have therefore advocated for the adoption of the so-called Foreign Extortion Prevention Act (FEPA). These advocacy efforts appear to be paying off: In late July, the Senate adopted FEPA as an amendment to the Senate’s version of the National Defense Authorization Act. This does not guarantee that FEPA will become law, as the House of Representatives has yet to vote on a comparable bill, and there is no guarantee that the FEPA language will remain in the bill after final negotiations conclude. But the odds have gone up significantly.

Would FEPA be a good idea? I think the answer is probably yes, though the impact is likely to be modest, and probably somewhat less than FEPA’s proponents hope. I may post again later about my own assessment of FEPA’s likely impact, should it pass in something like its current form. But for now, I want to focus on a striking argument in favor of FEPA that appeared in an op-ed a couple of weeks ago. That op-ed, coauthored by Elaine Dezenski (Senior Director at the Foundation for Defense of Democracies) and Scott Greytak,(Director of Advocacy at Transparency International’s US office), argued that FEPA would “blunt China’s malign economic influence” by countering the practice of Chinese government or government-affiliated entities using bribes to secure access to valuable resources and to expand China’s political sway over developing countries.

There are many good arguments in favor of FEPA, but I’m not sure that this is one of them. I don’t want to dismiss it outright, as it’s entirely possible that I’ve missed something. But it seems to me that FEPA would have little to no impact on corrupt overseas bribery by Chinese entities, and at least in the short term might make that problem (slightly) worse. So let me lay out the source of my confusion: Continue reading →

South African NGO to U.S. Department of Justice: Please Investigate Bain and Company for FCPA Violations

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In a Guest Post Monday, Nicole Fritz of South Africa’s Helen Suzman Foundation recounted Boston consulting guru Bain and Company’s role in the massive corruption that infected her country during the reign of its now deposed president Jacob Zuma. Today, she asks the Department of Justice to investigate the Company for “potential breaches of the U.S. Foreign Corrupt Practices Act of 1977.”

As she explains in a letter sent to the head of the FCPA unit, the evidence of violations is “not mere opinion.” Rather, it is drawn

from reports produced by two separate judicial commissions of inquiry, chaired by eminent South African judges: first, the Judicial Commission of Inquiry into State Capture Report (“State Capture Report”); second, the final report of the Commission of Inquiry into Tax Administration and Governance at the South African Revenue Services, colloquially referred to in South Africa as the ‘Nugent Commission Report.’  

The full text of her letter is here.

The Future of FCPA Enforcement After KT Corp.

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Earlier this year, the US Securities and Exchange Commission (SEC) settled a Foreign Corrupt Practices Act (FCPA) case with KT Corporation, the largest telecommunications operator in South Korea. The facts of the case, as described in the settlement documents, are cinematically scandalous: From at least 2009 through 2017, high level executives at KT maintained enormous slush funds in off-the-books accounts and physical stashes of cash, from which they made illegal political contributions and paid off government officials in both Korea and Vietnam. In their home country, they frequently used these slush funds to pay for substantial unreported gifts, entertainment, and campaign donations to members of the Korean National Assembly who were serving on committees that addressed issues of public policy directly related to KT’s business. Furthermore, after the South Korean press reported on the slush fund allegations back in 2013—reporting that led to a Korean criminal prosecution of KT’s president for embezzlement—the company simply shifted its tactics for filling its slush funds: Rather than siphoning off inflated executive bonuses, KT had its Corporate Relations (CR) Group purchase gift cards, which were then converted into cash to replenish the slush funds. In genuine “cloak and dagger” style, a member of the CR Group would meet the corrupt gift card vendor in the parking lot behind the KT building and receive a paper bag containing a large envelope of cash.

In a magnificent understatement, the Chief of the SEC’s FCPA Enforcement Unit noted that KT “failed to implement sufficient internal accounting controls with respect to key aspects of its business operations,” and that in the future, the company’s leaders should “be sure to devote appropriate attention to meeting their obligations under the FCPA.” But this was not simply a case of a company failing to keep its financial records up to date. Rather, there was a complete and total collapse of any semblance of a culture of compliance at KT. The fact that executives at the highest levels of this corporation, including the president and the CR Group, were directly responsible for these bribery schemes indicates that the culture of this corporation was corrupt, thorough-and-through; bribery was an indispensable component of its business model, and continued even after the company’s president was prosecuted. Yet because KT cooperated with the SEC’s investigation, the SEC only required KT to pay a paltry $6.3 million in combined disgorgement and civil penalties; the SEC also put the company on a two-year probation, during which KT must update the SEC every six months on its compliance measures, though it is unclear what, if anything, will happen if KT somehow mishandles the recommended compliance improvements.

This outcome is unacceptable. If the U.S. government is serious about its intention to deter future misconduct, it must ensure that civil penalties for FCPA violations cannot simply be seen as an “acceptable cost of doing business.” Over the past few years, SEC and DOJ leadership have repeatedly emphasized the importance of anticorruption enforcement and have suggested a desire to reverse the trend of steadily declining FCPA enforcement actions. If deterrence of corrupt corporate conduct is truly a priority for the SEC and the DOJ, then now would be a good time to start substantially ramping up FCPA investigations and enforcement actions, especially in cases of companies like KT that have exhibited the incorrigible culture of brazen corruption.

There are two substantial objections to the call to ramp up FCPA enforcement actions against foreign companies and dramatically stiffen penalties for violations, but on closer inspection neither is compelling. Continue reading →

Taking on the Demand Side of Foreign Bribery: How U.S. FCPA Settlements Can Facilitate Foreign Prosecutions

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Laws like the U.S. Foreign Corrupt Practices Act (FCPA) target what is sometimes referred to as the “supply side” of transnational bribery transactions—the firms and individuals of offer or pay bribes to foreign officials in order to secure a business advantage. But what about the demand side? All too often, the government officials who demand or receive these bribes escape accountability—even when the bribe-paying firms are forced to pay substantial penalties for FCPA violations. Years ago, some U.S. Department of Justice (DOJ) prosecutors floated the theory that bribe-taking officials could be charged as abettors to, or co-conspirators in, FCPA violations, but that theory, though legally plausible, failed to gain traction in the courts. On occasion, the DOJ has prosecuted bribe-taking foreign officials for money laundering. And more recently, Members of the U.S. Congress have introduced a new bill, the Foreign Extortion Prevention Act (FEPA), which would make it a crime under U.S. law for a foreign public official to seek, demand, or accept a bribe. FEPA’s chances of enactment are uncertain (the vast majority of bills fail, after all); moreover, even if enacted, FEPA’s impact may be circumscribed by the practical and political difficulties of arresting and trying foreign public officials, particularly those that do not have any contact with U.S. territory.

What about the bribe-taking public official’s own government? Shouldn’t that government take the lead in prosecuting its own public officials when they behave corruptly? There would be a nice symmetry—and a great deal of practical advantage—to a system in which the supply-side government (say, the United States) goes after the bribe-paying company, while the demand-side government goes after the bribe-taking public official. But often this doesn’t happen: In the majority of cases where the U.S. government imposes FCPA sanctions on a company for paying bribes in a given country, there is no parallel or subsequent prosecution by that country’s government of the corrupt officials involved.

Sometimes the explanation is political: the public officials involved are sufficiently powerful and well-connected to escape domestic accountability in their home countries, even when their misconduct is known. That’s a big problem, and one that statutes like FEPA are designed to address. But there’s another reason that demand-side governments often fail to hold their own officials accountable: a lack of capacity and an associated lack of evidence. In a great many cases, even when a bribe-paying firm settles an FCPA case with the US government, and in doing so admits to certain facts and provides evidence about the misconduct to the DOJ, the demand-side country government does not receive sufficient evidence to identify, let along prosecute, the corrupt officials involved—either because the company did not supply that information to the DOJ, or the DOJ did not turn that information over to the demand-side official’s government. True, FCPA settlement agreements are usually public, but the official statements of facts in these agreements are often not sufficiently precise and detailed to give a foreign enforcement agency what it needs to make out a case.

The U.S. government can and should fix this problem. Doing so would not require new legislation. Rather, it could be accomplished through a straightforward and easily implementable change in DOJ policy. Continue reading →

Do Individual U.S. Senators Manipulate the Timing of FCPA Enforcement Actions? (Spoiler: No.)

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Is enforcement of the U.S. Foreign Corrupt Practices Act (FCPA) improperly politicized? The notion that it is has gained traction in some circles, particularly in countries with multinational firms that have been sanctioned by U.S. authorities for FCPA violations, such as France and Brazil. The usual claim by those who assert that FCPA enforcement is politicized is that the US Department of Justice (DOJ) deploys the FCPA as a kind of protectionist weapon against foreign multinationals that compete with US firms. But a recent working paper by two business school professors (one American and one Chinese) claims to have found evidence for a different sort or FCPA politicization. According to this paper, individual U.S. Senators exert behind-the-scenes influence over the DOJ to manipulate the timing of FCPA enforcement actions against foreign corporations. More specifically, the paper argues that when a Senator is up for reelection, he or she will influence the DOJ to announce an enforcement action against a foreign company before, rather than after, the election. Doing so, the authors suggest, helps the Senator’s reelection chances by imposing a cost on a foreign company that competes with domestic firms in the Senator’s state.

I confess that when I first saw this paper a few weeks ago, I didn’t take it too seriously, because the central argument seemed so obviously detached from reality. (I also didn’t have time to dig into the details of the empirical methods, which are somewhat involved.) But the paper seems to generated a bit of buzz—including a Tweet from one of the best and most respected economists who works on corruption-related issues, which specifically asked me and a few others for our reactions to some of the “provocative” evidence presented in the paper. So I took a closer look. Continue reading →

New Podcast Episode, Featuring Peter Solmssen

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Peter Solmssen, an American lawyer who currently serves as the chair of the International Bar Association’s Subcommittee on Non-Trial Resolutions of Bribery Cases, and who previous served as the General Counsel of the Siemens Corporation in the immediate aftermath of Siemens’ foreign bribery scandal in 2007-2008. In our interview, Mr. Solmssen discusses his perspective on the Siemens case, including both how and why a successful and large company like Siemens developed systematic bribery schemes in the first place, and how Siemens new leadership in the aftermath of the scandal took steps to clean up the company and change its culture. Our conversation then moves from the Siemens case to broader questions concerning how best to combat transnational bribery, whether statutes like the U.S. Foreign Corrupt Practices Act (FCPA) are effective, and the role of the private sector in promoting ethics and integrity.
You can also find both this episode and an archive of prior episodes at the following locations:
KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Commentary on the FACTI Panel’s Report and Recommendations (Part 1)

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This past February, the United Nation’s cumbersomely-named “High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda”—which, thankfully, everyone simply refers to as the FACTI Panel—released its report on Financial Integrity for Sustainable Development. The report (which was accompanied by a briefer executive summary and an interactive webpage) laid out a series of recommendation for dealing with the problem of illicit international financial flows. Though the report states that it contains 14 recommendations, most of these have multiple subparts, which are really distinct proposals, so by my count the report actually lays out a total of 35 recommendations.

I had the opportunity to interview one of the FACTI panelists, Thomas Stelzer—currently the Dean of the International Anti-Corruption Academy—for the KickBack podcast, in an episode that aired last week. Our conversation touched on several of the report’s recommendations. But this seems like a sufficiently important topic, and the FACTI Panel report like a sufficiently important contribution to the debates over that topic, that it made sense to follow up with a more extensive analysis of and engagement with the FACTI Panel’s recommendations.

Of the 35 distinct recommendations in the report, eight of them (Recommendations 2, 3B, 4A, 4B, 4C, 8A, 11A, and 14B) all deal with tax matters (such as tax fairness, anti-evasion measures, information sharing among tax authorities, etc.). While this is an important topic, it is both less directly related to anticorruption and well outside my areas of expertise. So, I won’t address these recommendations. That leaves 27 recommendations. That’s too much for one post, so I’ll talk about 13 recommendations in this post and the other 14 in my next post.

I should say at the outset that, while some of my comments below are critical, overall I am hugely grateful to the members of the FACTI Panel for their important work on this topic. The Panel’s report should, and I hope will, prompt further discussion and careful consideration both of the general problem and the Panel’s specific recommendation. Part of that process is critical engagement, which includes a willingness to raise concerns and objections, and to probe at weak or underdeveloped parts of the arguments. I emphasize this because I don’t want my criticisms below to be mistaken for an attack on the Panel or its report. Rather, I intend those criticisms in a constructive spirit, and I hope they will be so interpreted.


With that important clarification out of the way, let’s dig in, taking each recommendation in sequence.

Continue reading →