What Might We Learn from the (Predicted) Walmart Settlement?

My post two weeks ago discussed reports that Walmart is on the verge of reaching a settlement with the U.S. government regarding allegations that several of Walmart’s foreign subsidiaries violated the Foreign Corrupt Practices Act (FCPA), and that the total penalties that Walmart would pay would be around $300 million. That may sound like a big number, but it’s much smaller than the $1 billion penalty some commentators predicted when the investigation got under way, and only half of the $600 million the U.S. government was reportedly demanding as recently as last October.

As I write this, a settlement still hasn’t been formally announced, though it’s possible it will have been by the time this post is published. (I’m traveling this week, so I wrote this post a several days in advance and wasn’t able to update it to reflect any developments that may have occurred in the last 72 hours or so.) But let’s assume for the moment that the media reports are accurate, and that sometime this year – approximately six years after Walmart first disclosed to the SEC and DOJ that it might have an FCPA problem – the case settles for around $300 million. What would we learn from that?

Or perhaps I should frame the question more starkly, at the risk of oversimplification:

  • There are a bunch of folks out there (the “FCPA Reform” crowd) who argue that the U.S. government’s approach to FCPA enforcement is out of control, with the government imposing enormous and unjustified costs on companies for relatively minor and/or unproven infractions. The government can do this, the argument goes, because the government has corporations over a barrel: most corporations can’t risk being indicted for FCPA violations, and so (the FCPA Reform crowd asserts) the government can and does extract exorbitant settlements with little regard to whether the government’s legal theories have an adequate basis in law and fact.
  • Then there are a bunch of folks (lat’s call them the “FCPA, A-OK” crowd) who think that the aforementioned concerns are grossly exaggerated, and that in fact the U.S. government’s FCPA enforcement posture is reasonable, grounded in a plausible view of the law, and that allegations of overreaching don’t withstand critical scrutiny. (And then of course there are those who think that the government isn’t nearly aggressive enough in enforcing the FCPA, and that in fact both the resources devoted to investigation and enforcement, as well as the penalties, should be increased dramatically.)

If the Walmart settlement resembles what the most recent media reports predict, I think that both the “FCPA Reform” crowd and the “FCPA, A-OK” crowd can and will find material to support their positions. Continue reading

Jared Kushner May Have Violated the Foreign Corrupt Practices Act

Recent media reports – which would be even more sensational if we weren’t getting so desensitized to Trump-related scandals – indicate that prior to Trump’s inauguration, his son-in-law and senior advisor Jared Kushner had private meetings with Russian government officials, including both Ambassador Sergey Kislyak and Sergey Gorkov, the head of a Russian state-owned bank (and a close associate of Vladamir Putin). We still don’t know (and may never know) the precise contents of the meeting, but based on circumstantial evidence, several of the media reports discuss speculations Kushner and his Russian government contacts discussed the possibility of extending financing to business ventures owned by Kushner or his family (including, most notably, a financially struggling office building at 666 Fifth Avenue in Manhattan), if Kushner would help to persuade his father-in-law, the President-Elect of the United States, to lift the sanctions that the U.S. had imposed on Russia for its military intervention in Ukraine.

Again, we don’t yet know whether this is true. But let’s suppose for a moment that some version of that story is approximately correct: that during conversations with Russian government officials, Jared Kushner proposed or endorsed the idea that he would try to persuade his father-in-law to lift the Russia sanctions, and that Kushner did so because he believed (or was told) that if he did, a Russian state-owned development bank would provide valuable financing for his family’s business.

If that’s what occurred, then even nothing further came of these discussions, then there’s a very good argument that Jared Kushner committed a criminal violation of the Foreign Corrupt Practices Act (FCPA). Though there’s been quite a bit of discussion in the reports so far about various federal laws that Kushner may or may not have been broken in connection with these meetings (such as the little-used Logan Act, which prohibits private citizens from interfering with U.S. diplomacy). But I haven’t seem much discussion of the FCPA angle. So even though it might still seem unrealistic to imagine that FCPA charges will be brought, let me elaborate a bit on why I think there’s a plausible case for an FCPA violation here, if the evidence supports the characterization of the meetings sketched above: Continue reading

China Should Go After Bribe Takers in FCPA Cases

As other contributors to this blog have noted (see here, here, here, here, and here), in transnational corruption prosecutions there is a huge disparity in the enforcement of corruption laws against bribe-givers (the “supply side”) and bribe-takers (the “demand side”). For example, corporations have been penalized under the U.S. Foreign Corrupt Practices Act (FCPA) for bribes they allegedly paid to foreign officials, but the foreign officials implicated in these enforcement actions have largely remained untouched under their respective countries’ legal and political regimes. The reasons why demand-side governments have not stepped up and investigated officials who have been implicated in FCPA cases may include the lack of political will, the lack of capacity, and lack of inter-governmental cooperation. The particular reasons likely vary from country to country.

The People’s Republic of China is one of the demand-side countries that has demonstrated such a disparity. In 2016, for example, the SEC concluded 26 FCPA-related enforcement actions, 14 of which were related to corruption in China. In the same year, the DOJ published 24 FCPA-related enforcement actions as well as five declinations under its pilot program, and ten of these cases involved China. (Note that there were some overlap between the DOJ and the SEC’s enforcement actions.) Yet there has been no report about China initiating investigations into any of the officials implicated in these cases. This suggests a failure, or missed opportunity, in China’s otherwise aggressive and wide-ranging anticorruption campaign. If the government officials who take bribes can escape without any consequences, even as the bribe-paying firms are penalized, it will be very hard to effect fundamental changes to corrupt business and cultural norms, which eventually will become roadblocks to the Chinese economy’s healthy and sustainable development. Furthermore, unlike other countries, China does not seem to face significant structural obstacles that prevent it from acting on these FCPA cases. It has the political will and capacity, and it has been collaborating with the U.S. government on other matters, such as bringing back corrupt fugitives from the U.S. It seems to be just a matter of awareness or choice. This post urges the Chinese government to take a look into the government officials implicated in the FCPA cases.

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Wake Me Up When the Walmart Case Actually Settles

Big news in the world of Foreign Corrupt Practices Act Enforcement! According to a report earlier this month in Bloomberg, the U.S. government’s investigation into allegations that Walmart’s subsidiaries abroad (particularly in Mexico, India, Brazil, and China) engaged in extensive bribery of public officials, is about to wrap up! “People familiar with the matter” report that the settlement is nearing finalization, and that Walmart will end up paying penalties that are much smaller than the U.S. government originally sought. All of us FCPA nerds should be on pins and needles awaiting the imminent announcement of the settlement, which should come out any day now…

… or maybe not. Maybe this time the news is for real, and we’re about to see a settlement announcement, in which case there will certainly be something important to write about. But at the moment, what I find more interesting is the succession of stories, spread out over a nearly two-year period, that suggested that a Walmart settlement was just around the corner. To recap:

  • In October 2015, the Wall Street Journal reported that, according to unnamed “people familiar with the probe,” the Walmart matter was about to be wrapped up–and the fine was going to be much smaller than originally predicted, because it turned out (according to the WSJ’s sources) that the FCPA violations were not as serious or widespread as had been previously reported.
  • Almost exactly one year later, in October 2016, Bloomberg reported (on the basis of conversations with “three people familiar with the matter”) that, contrary to the previous WSJ report, although the US government encountered difficulties making out the FCPA violations in Mexico (not so much because of lack of evidence of misconduct, but rather because the most egregious conduct was outside of the statute of limitations), the government had evidence of misconduct elsewhere, and was seeking a penalty of around $600 million. According to that report, Walmart was still resisting, but the report nonetheless indicated that the administration was “working to wrap up an agreement before a new administration takes over in January [2017].”
  • Approximately nine months later, Bloomberg’s latest report states that, “according to people familiar with the matter,” Walmart is preparing to settle the case for $300 million – about half of what the government sought.

Now, though my initial reaction, given this history, is to take reports of imminent settlement with a grain of salt, I hasten to add that none of these reports are inconsistent with each other, or with the claim in the most recent report that a settlement announcement is imminent. Indeed, one could reconstruct roughly the following timeline of events, which I think is probably the best way to understand what’s going on: Continue reading

Guest Post: A Pending Federal Case Could–and Should–Limit the FCPA’s Extraterritorial Reach

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Can the U.S. government prosecute an individual for Foreign Corrupt Practices Act (FCPA) violations if that individual is not a U.S. citizen or resident, and committed no unlawful act in U.S. territory? An important case posing that question is now before a U.S. appeals court. The decision may have important implications on the territorial reach of the FCPA.

The facts and relevant statutory provisions are straightforward, although the analysis is not. The defendant, Lawrence Hoskins, is a British national who at all relevant times was an officer of a British subsidiary of French manufacturing giant Alstom. Alstom and several of its subsidiaries were investigated by the US Department of Justice for alleged illicit payments in Indonesia, and ultimately reached a global corporate settlement that included several corporate guilty pleas and Deferred Prosecution Agreements, pursuant to which the corporate entities paid US fines of over US$750 million. The DOJ also pursued several individuals, including Mr. Hoskins, who was ultimately arrested when he arrived in the United States on vacation. His attorneys moved to dismiss the indictment on the ground that the US prosecutor lacked power to prosecute him. After energetic procedural activity by both sides, the District Court granted his motion in significant part. Unusually, the prosecutor appealed, and oral argument was heard on March 2, 2017.

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Anticorruption Tools in the Anti-Trump Toolkit: A Primer

[Kaitlin Beach provided helpful research and thoughtful contributions to this post.]

Since Donald Trump’s election, critics have asserted that his presidency presents unprecedented risks of corruption, cronyism, and conflict of interest. Many argue that President Trump and members of his administration are already engaging in conduct that is not only unethical, but also illegal. Because it can be hard for non-specialists to keep track of the myriad rules that have been referenced in the context, this post provides a brief, non-technical overview of the most important federal laws and regulations that are designed to prevent corruption, conflict-of-interest, and self-dealing in the U.S. government, focusing on those that have been most widely or most creatively discussed in relation to fighting a purportedly corrupt Trump administration.

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Guest Post: Rolling Back Anticorruption

Laurence Cockcroft, a founding board member of, and current advisor to, Transparency International, contributes today’s guest post:

The global campaign against corruption has become a cornerstone of Western foreign and development policy for the last 25 years. This campaign built on a number of earlier measures, most notably the 1977 enactment of the US Foreign Corrupt Practices Act (FCPA), which criminalized foreign bribery by companies under US jurisdiction, but the campaign really accelerated beginning in the late 1990s. For example, while European countries had resisted adopting legislation similar to the FCPA for 20 years, this changed with the adoption of the OECD Anti-Bribery Convention in 1997, which was followed a few years later by the 2002 UN Convention Against Corruption. International financial institutions like the World Bank have become more aggressive about debarment of contractors found to have behaved corruptly, and we have also seen the proliferation of corporate-level ethical codes, promoted by organizations like the World Economic Forum and UN Global Compact, designed to prevent corrupt behavior.

More recent initiatives have pushed for greater corporate transparency. For example, in the United States, the Dodd-Frank Act ended the aggregation of corporate income across countries; an EU Directive promulgated shortly afterwards imposed similar requirements. More recently, an initiative to disclose the true beneficial owners of corporations and other legal entities, pushed by former British Prime Minister David Cameron, has already taken legislative form in the United Kingdom; beneficial ownership transparency is also the subject of an EU Directive, and was being promoted by the Obama administration. And although the so-called “offshore centers” have yet to embrace similar transparency of beneficial ownership, regulatory systems in these centers have been significantly improved. There have also been a number of important sector-level initiatives, particularly in the resources sector. These include the Extractive Industries Transparency Initiative (EITI)—which requires participating governments of mineral and energy exporting countries, as well as companies in the extractive sector, to commit to a process of revenue transparency—as well as national-level laws, such as Section 1504 of the Dodd-Frank Act, which impose so-called “publish what you pay” obligations on extractive firms.

Even more encouragingly, this gradually improving regulatory environment has been accompanied by growing public opposition to corruption, as reflected in large-scale demonstrations around the world. Crowds on the streets, for example, have recently supported the proposed prosecutions of the current and past Presidents of Brazil, and opposed weakening of anticorruption laws in Romania.

But in spite of public opinion, the forces opposed to anticorruption initiatives have never gone away. The arrival of President Trump has let many of them loose both inside and outside the United States: Continue reading