Tag Archives: reparations

Principles for Victim Remediation in Foreign Bribery Cases

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There is a broad consensus that foreign bribery harms the citizens and governments of developing nations. But in most cases where enforcement agencies in a “supply side” jurisdiction (that is, the home jurisdiction of the companies that paid the bribes) reach a settlement with a company accused of bribing foreign officials, the settlement does not provide for any remedial payments to the government or citizens of the “demand side” country where the bribery took place. Given the inherent difficulties in setting right the harm corruption causes, this is hardly surprising. Nevertheless, scholars and activists have increasingly called for settlement agreements between supply side enforcers and bribe-paying companies to include requirements that the companies make such remediation to the victims of the foreign bribery scheme, and some prosecutorial agencies, like the U.S. Department of Justice (DOJ) and the U.K. Serious Fraud Office (SFO), have occasionally done something along these lines. They have done so, however, only intermittently, and as an exercise of prosecutorial discretion, without any overarching policy agenda or conceptual framework.

In a recent article, I proposed a framework that could achieve more consistent outcomes and be used as a benchmark for developing best practices. I do not focus on grand designs for a private right of action for the foreign victims of corruption, or on obligations under international law. Because the action is happening on the ground, through the exercise of prosecutorial discretion in negotiating settlements, that’s where I focus. In this post, I outline the factors that enforcement agencies should take into account when deciding whether to pursue remediation in any given case. Continue reading →

The Trilateral Nigeria-US-Jersey Agreement to Return Nigerian Dictator Abacha’s Assets: A Preliminary Assessment

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This past February, the United States signed a trilateral agreement with Nigeria and the British dependency of Jersey to repatriate to Nigeria $308 million in funds that the late General Sani Abacha had stolen from the Nigerian government during his time as Head of State from 1993-1998. This enormous sum was a mere fraction of the estimated $2-5 billion that Abacha had laundered through the global banking system. Back in 2013, the U.S. Department of Justice (DOJ) filed a civil forfeiture complaint against more than $625 million that could be traced as proceeds from Abacha’s corruption. Shortly afterwards, in 2014, a U.S. federal court entered a forfeiture judgment against over $500 million of these assets, including the $308 million held in Jersey bank accounts. Appeals of the forfeiture judgment in the United States were finally exhausted in 2018, at which point the United States, Jersey, and Nigeria entered into negotiations to repatriate the recovered assets. The February 2020 trilateral agreement represents the culmination of those negotiations.

Back in 2014, when DOJ first froze Abacha’s assets, Raj Banerjee asked on this blog an important question, one that has come up in several other asset recovery cases too: Who will get Abacha’s assets? Would the United States simply give the money back to the Nigerian government? Or would the United States, out of concerns that the repatriated assets would be stolen again, insist on attaching conditions to the returned funds, or even create or empower a non-governmental nonprofit entity to allocate the funds (as the United States has done in some other cases)? Now, six years later, we finally have an answer. Under the terms of the trilateral agreement, the repatriated funds will be used to help finance three infrastructure projects that had already been approved by the Nigerian legislature and President Muhammadu Buhari: the construction of the Second Niger Bridge, the Lagos-Ibadan Expressway, and the Abuja-Kano road. These projects aim to better connect people and supply chains in Nigeria’s impoverished Eastern and Northern regions to the developed Western region. Additionally, the agreement declares that the Nigeria Sovereign Investment Authority (NSIA) will oversee the funds, that a yet-to-be-determined independent auditor will conduct a financial review, and that a yet-to-be-determined independent civil society organization with expertise in engineering, among other areas, will have a monitoring role.

There is much to admire about the agreement. Using these assets to fund critical infrastructure projects that Nigeria’s legislative and executive branches had already approved demonstrates a respect for Nigerian sovereignty and democratic institutions, while at the same time directing the money to projects that would tangibly benefit the Nigerian people, particularly in some of the country’s poorest areas—the people who were most victimized by Abacha’s looting of the national treasury. Yet while the governments of the United States, Nigeria, and Jersey all heralded the trilateral agreement has a landmark, some voices, particularly in the United States, have expressed skepticism. Most notably, U.S. Senator Chuck Grassley sent a letter to DOJ questioning whether the returned funds will truly be protected from misuse. Senator Grassley suggested that senior officials in the Buhari Administration, including the Attorney General, could not be trusted to ensure that the Nigerian government would face consequences if it misappropriated the returned funds, and he questioned why DOJ would return the money without “proper safeguards” to prevent misuse a second time. Unsurprisingly, Nigeria took issue with Grassley’s accusations. But his concerns have some merit.

Continue reading →

Making Political Parties Liable for Corruption

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When corrupt politicians are caught and convicted, they may suffer a variety of penalties, including fines and incarceration, and the government might also seize assets that were the proceeds of the wrongdoing. But punishing the individual politicians is not enough to deter wrongdoing or to compensate for the harm that the corruption causes. Moreover, even when an individual politician was the only actor who deliberately and intentionally engaged in corrupt criminal activity, that individual politician is not the only one at fault. Politicians’ decisions are affected by norms within a political party— for example, by expectations (sometimes unstated) that politicians will bring in a certain amount of money for campaign funds through graft.

For these reasons, political parties— in addition to the individual politicians— should be held liable for corrupt acts committed by their members in the course of their political activities or official duties. And such liability should attach even if the political parties’ leaders did not specifically know about or overtly endorse the corrupt acts in question.

This may seem like a radical suggestion, but in fact there are many contexts in which the law imposes so-called “vicarious liability” on organizations for acts committed by the organization’s members or agents. For example, the legal doctrine of respondeat superior (Latin for “let the master answer”) says that an employer (or other principal) can be held accountable for the wrongful actions of an employee (or agent), if the wrongful actions were within the normal “scope of employment.” Common examples include suing a hospital for the malpractice of one of its physicians or holding the government financially liable for wrongful conduct by law enforcement officers. (Although respondeat superior derives from English common law, other legal systems, such as those of Brazil and France have broadly similar concepts of vicarious liability.) Similarly, under the law of many jurisdictions, a corporation may be held liable (not only civilly, but also criminally) for acts committed by corporate employees—even if corporate management did not condone or even know about the criminal acts. These vicarious liability doctrines are important because a single employee frequently does not have the resources to redress the wrongs committed, and also because the employer often bears some responsibility for whatever the employee did, due to company culture, training, and incentive schemes. Because of this, economists point out that vicarious liability can be more socially efficient: The organization may be in a better position to detect and prevent wrongful conduct, so placing the liability on the organization can give it the appropriate incentives to take cost-justified measures to prevent the wrongful activity from occurring in the first place.

Although vicarious liability is a well-established legal principle, often used to hold employers responsible for the conduct of their employees, that concept has not yet been extended to hold political parties, as organizations, legally responsible for the corrupt acts of their members. Such an extension may seem radical, and in a sense it is, but it would be justified.

To make this case, I’ll apply the three-pronged standard that Black’s Law Dictionary lays out for respondeat superior liability to be appropriate in the employment context: (1) The individual was an employee when the occurred; (2) The employee was acting within the scope of his or her employment; and (3) The activities of the employee were a benefit to the employer. Continue reading →

Providing Reparations to the Victims of Foreign Bribery: What Criteria Are Appropriate?

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It is widely agreed that foreign bribery is capable of causing harm to a range of different victims, including the governments whose officials are bribed (the so-called “demand-side countries”), and the citizens of those countries. Yet traditionally, when supply-side countries (those with jurisdiction over the firms that paid bribes abroad) reach settlement agreements with corporate defendants in these cases, the fines and penalties collected—which can sometimes run into the tens or even hundreds of millions of dollars—go to the supply-side government treasuries, a fact that has attracted considerable discussion and criticism.

In recent years, we’ve started to see some changes in the approach taken by supply-side governments on this issue, with the United Kingdom being particularly active. On several notable occasions, the UK’s Serious Fraud Office (SFO) has included in its settlement agreements with corporate defendants specific provisions to remediate the victims of foreign bribery. Importantly, such remediation (not just in the UK case, but more generally) can take two forms, which are often unhelpfully conflated:

  • In some cases, the resolution of a bribery case may include compensation to identifiable victims, if it can be shown that the victims suffered a direct loss, the value of which can be reasonably estimated. The victim might be a foreign government itself. For example, the 2015 deferred prosecution agreement negotiated between the SFO and Standard Bank included a payment to the Tanzanian Government, because in that case an agent of Standard Bank had used money to which the Tanzanian government was entitled in order to pay an illegal bribe. The payment to the Tanzanian government in the settlement agreement was compensation for this loss.
  • In many cases, though, the harm done by foreign corruption is more diffuse, the victims are difficult to identify individually, and the monetary value of the harm inflicted is impossible to calculate. Nonetheless, even though traditional victim compensation is not possible in these cases, it is still possible, and often desirable, for a portion of the fines and penalties collected from the responsible corporation to be directed toward improving the lives and livelihoods of the population victimized by the misconduct—perhaps by making a payment to the government of the demand-side country, possibly earmarked for a specific purpose, or perhaps by donating money to charities, or by purchasing assets that benefit the public, or even by making payments directly to citizens. Though these sorts of payments are also sometimes described as “victim compensation,” I prefer the term reparations, which makes clear that these payments are not “compensation” in the traditional, narrower sense, but rather payments intended for the benefit of a general populace or society at large. An example of this sort of reparations payment can be found in another case involving the SFO and Tanzania, this one the SFO’s 2010 settlement agreement with BAE Systems for illegal commissions that the company had paid to an intermediary in connection with the sale of an aircraft radar system to the Tanzanian government. (Technically, BAE admitted and was penalized for an accounting offense—failing to keep accurate records of the payments—rather than the underlying bribery.) The settlement required BAE systems to pay approximately £30 million for the purpose of buying educational materials in Tanzania. There is no evidence to suggest that BAE System’s misconduct in connection with the radar system sale caused any damage, let alone £30 million worth of damage, to Tanzania’s education system. So this payment was not “victim compensation” in the narrow sense, but rather an effort to offset some of the damage BAE’s wrongful conduct had done at a more general, societal level.

The legal mechanisms for determining compensation awards, though imperfect, are relatively straightforward. Determining an award of reparations is much more complicated, because (almost by definition) it will not be clear exactly who suffered due to the act of foreign bribery, nor how much loss was suffered, nor how that loss should be recouped. (While the United Kingdom does have “compensation principles” in place which are intended to provide a guiding framework for remedial awards in foreign bribery cases, these principles are phrased at too high a level of abstraction to be much use.) One question that will need to be addressed, and the one I want to focus on here, is whether there must be some kind of nexus between the harm caused by a particular act of bribery and the proposed reparations. Of course, as I have explained, reparations are distinct from compensation, and will not require a showing of a quantifiable harm to an identifiable victim. But does the reparations payment need to have any strong connection—in sector, location, or amount—with the harm plausibly caused by the defendant’s act of bribery? Continue reading →