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

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

Argentina’s Draft Bill on Corporate Criminal Liability for Bribery: Some Striking Innovations on Sanctions

A few weeks ago, I had the good fortune to be able to attend an event at the University of Buenos Aires (co-sponsored by the New York University Law School), that focused, among other things, on a new draft bill, currently under consideration in the Argentinian legislature, that would impose criminal liability on corporations and other legal persons for corruption-related offenses. I’m largely unfamiliar with Argentina’s legal system, so I was very much an outside observer for this discussion, but there were a couple of things about the draft bill that struck me as interesting and worthy of attention from the wider anticorruption community. (Apologies for not providing a link: I’m working off a hardcopy of an unofficial English translation of the draft bill, which I can’t find on the web.)

A lot of the provisions in the bill are fairly standard, though in many respects the bill is quite aggressive. For example, Article 3 makes parent companies jointly and severally liable for sanctions imposed on their subsidiaries (without any requirement to show that the subsidiary was an agent of the parent), while Article 4 imposes successor (criminal) liability in all cases of merger, acquisition, or other corporate transformation. In both these respects, the draft Argentinian bill imposes more sweeping corporate criminal liability than does U.S. law. Also, like U.S. law, the Argentinian bill (in Article 2) would make corporations criminally liable for the actions of its officers, employees, and agents.

But what most caught my attention were the draft bill’s provisions on sanctions: 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