Tag Archives: Foreign Corrupt Practices Act

The FCPA Is Not an All-Purpose Anti-Foreign-Illegality Law

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A few months back, Adam Davidson did a terrific New Yorker piece on the Trump Organization’s shady business dealings in Azerbaijan, focusing on evidence of corruption, money laundering, and sanctions evasion in connection with the Trump Organization’s licensing deal for a Trump Tower in Baku, the country’s capital. While I greatly admired the piece, I nonetheless criticized one aspect of it: the argument that the Trump Organization’s licensing deal ran afoul of the Foreign Corrupt Practices Act (FCPA), an allegation which, it seemed to me, wasn’t adequately supported by the otherwise impressive body of evidence assembled in the piece. While I recognize that a piece written for a general audience can’t get too lost in the technical legal weeds, I do think that it’s important to convey an accurate sense of what the FCPA does, and what it doesn’t do.

I was reminded of this a couple weeks back when I read an otherwise incisive essay by the political commentator Heather Digby Parton (whose work I very much admire) on Ivanka Trump’s shady business dealings and possible legal violations. Though Ms. Parton’s piece focused mainly on the Trump Ocean Club in Panama (dubbed “Narco-a-Lago” in an excellent Global Witness report), she also brought up Mr. Davidson’s reporting on the Azerbaijan project, and repeated the suggestion that the Trump Organization’s involvement in this project likely violated the FCPA. In making this case, Ms. Parton states:

The Foreign Corrupt Practices Act requires that American companies not make profits from illegal activities overseas, and simply saying you didn’t know where the money was coming from isn’t good enough…. Courts have held that a company needn’t be aware of specific criminal behavior but only that corruption was pervasive.

I hate to be nitpicky, especially when it involves criticizing a piece I generally agree with by an author I admire, but this is simply not a correct statement of the law. 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 →

Guest Post: Transparency International UK’s Pledge Tracker–Amateur Research or Different Objectives?

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Last week, GAB Editor-in-Chief Matthew Stephenson published a post sharply criticizing Transparency International UK’s new “Pledge Tracker,” which evaluates how well countries are living up to the pledges they made at the May 2016 London Anti-Corruption Summit. GAB is delighted to have the opportunity to publish the following reply from Robert Barrington, the Executive Director of Transparency International UK:

“A slapdash, amateurish collection of arbitrary, often inconsistent judgements, unsupported by anything that resembles serious research.” Not since I was taken to task over an undergraduate essay by an eminent professor at Oxford have I had work for which I was responsible receive quite such a stinging critique.  On that occasion, I could not escape a sense that my world view differed from that of the professor, and that—irrespective of the detail—was the root of our misunderstanding.

So is Professor Stephenson’s assessment of TI-UK’s Pledge Tracker merited? Here is my overall assessment: he is right on some but not all of the detail; he is wrong on most but not all of the big picture. At the root of the difference is the question of whether this is an index in which countries are compared with each other according to a consistent global standard, or whether it is the presentation of individual country assessments by local civil society organizations of their own country’s progress against their own country’s commitments. Continue reading →

Transparency International’s Anti-Corruption Pledge Tracker Is Badly Flawed. It Needs To Be Redone from Scratch.

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In May 2016, at the London Anticorruption Summit sponsored by then-Prime Minister David Cameron, participating countries issued declarations announcing a variety of commitments—some new, some continuations of existing policies—to further the fight against international corruption. Of course, all too often governments fail to follow through on their grandiose promises, so I was heartened by Transparency International’s announcement, in September 2016, that it had gone through all the country declarations, compiled a spreadsheet identifying each country’s specific promises, and would be monitoring how well each country was following through on its commitments.

Last month, a year after TI published the spreadsheet documenting the list of summit commitments, TI released a report and an interactive website that purport to track whether countries have followed through on those commitments. So what do we learn from this tracking exercise?

Alas, the answer is “almost nothing.” TI’s “Anti-Corruption Pledge Tracker,” in its current form, is a catastrophic failure—a slapdash, amateurish collection of arbitrary, often inconsistent judgments, unsupported by anything that resembles serious research, and (ironically) non-transparent. This is all the more surprising—and disappointing—given the fact that TI has done so much better in producing similar assessment tools in other contexts. Indeed, at least one such recent tool—TI’s Government Defense Anti-Corruption Index—provides a model for what the Pledge Tracker could and should have looked like. Given the importance of tracking countries’ fulfillment of their summit pledges, and TI’s natural position as a leader on that effort, I dearly hope that TI will scrap the Pledge Tracker in its current form, go back to the drawing board, and do a new version.

I know that sounds harsh, and perhaps it seems excessive. But let me explain why I don’t find the Pledge Tracker, in its current form, worthy of credence. Continue reading →

Declinations-with-Disgorgement in FCPA Cases Don’t Worry Me: Here’s Why

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Among those who follow Foreign Corrupt Practices Act (FCPA) enforcement practices, there’s been a spate of commentary on a few recent cases in which the Department of Justice (DOJ) has resolved FCPA cases with a formal decision not to prosecute (a “declination”) that includes, as one of the reasons for (and conditions of) the declination, the target company’s agreement to disgorge to the U.S. Treasury the profits associated with the (allegedly) unlawful conduct. Disgorgement is a civil remedy rather than a criminal penalty (as the U.S. Supreme Court recently emphasized); it is often employed by the Securities and Exchange Commission (SEC), which has civil FCPA enforcement authority over issuers on U.S. exchanges. Until recently, however, the DOJ – which has civil FCPA enforcement authority with respect to non-issuers, and criminal enforcement authority in all FCPA matters – had not sought disgorgement very often, and the recent “declination-with-disgorgement” resolutions appear to be something new, at least in the FCPA context.

Not everyone is happy with this development. Last week, for example, Professor Karen Woody posted an interesting commentary over at the FCPA Blog (based on a longer academic paper) on why the emergence of declinations-with-disgorgement in FCPA cases is an “alarming” development that makes her “queasy.” Professor Woody is an astute and knowledgeable FCPA commentator, and I’m hesitant to disagree with her—especially since I’m not really an FCPA specialist in the way that she is—but I’m having trouble working up a comparable level of alarm. Indeed, my knee-jerk reaction is to view the declination-with-disgorgement as a useful mechanism, one that would often be the most appropriate one to employ to resolve FCPA violations by a company that is not subject to SEC jurisdiction, and eliminating this mechanism might force the DOJ to employ a worse alternative.

Let me start by laying out the affirmative case for declinations-with-disgorgement, and then I’ll turn to Professor Woody’s concerns. Continue reading →

The Trade-Off Between Inducing Corporate Self-Disclosure and Full Cooperation

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In discussions of appropriate sanctions for corporations that engage in bribery, much of the conversation focuses on the appropriate penalty reduction for firms that self-disclose violations, cooperate with authorities, or both. Self-disclosure and cooperation are often lumped together, but they’re not the same: Plenty of targets of bribery investigations, for example, did not voluntarily disclose the potential violation, but cooperated with the authorities once the investigation was underway.

This gives rise to a problem that is both serious and seemingly obvious, but that somewhat surprisingly is hardly ever discussed.

The problem goes like this: Enforcement authorities want to encourage self-disclosure, and they want to encourage full cooperation with the investigation; they would like to do so (1) by reducing the sanction for firms that voluntarily disclose relative to those that don’t, and (2) by reducing the sanction for firms that fully cooperate relative to those that don’t. But if the minimum and maximum penalties are fixed (say, by statute or department policy or other considerations), and the penalty reductions necessary to induce self-disclosure and full cooperation, respectively, are large enough (cumulatively greater than the difference between the maximum and minimum feasible sanction), then adjusting sanctions to encourage self-disclosure may discourage full cooperation, and vice versa.

It’s easiest to see this with a very simple numerical example: Continue reading →

Guest Post: Paris Court Rules That a US FCPA Guilty Plea Precludes Subsequent Prosecution in France

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

Overseas bribery and similar crimes can often be investigated by prosecutors in more than one country. But does (or should) the resolution of a criminal investigation in one country—say, through a negotiated resolution—bar subsequent prosecutions in other countries for the same underlying conduct? In earlier posts, I have explored some recent rulings that address aspects of this debate over so-called “international double jeopardy” (see here, here and here). A recent decision of the Paris Court of Appeals added an interesting new element to this debate. Faced with a classic situation of parallel prosecutions, the Paris Court held that an individual who had pleaded guilty in the United States for violations of the U.S. Foreign Corrupt Practices Act (FCPA) could not be prosecuted under French anti-bribery law—not because of the standard international double jeopardy principle, but rather because, according to the Paris Court, the US proceedings deprived the defendant of the right to defend himself protected by the European Convention on Human Rights (ECHR).

The facts of the case are simple: an individual entered into a written plea agreement with the U.S. Department of Justice (DOJ), in which the defendant agreed to plead guilty in a US court to FCPA charges, on which he was subsequently sentenced. He was separately bound over for trial in France under French anti-bribery laws, apparently for the same underlying conduct.  In affirming the dismissal of the French prosecution, the Paris Appellate Court’s reasoning proceeded in two steps: Continue reading →

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

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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

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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 →