Tag Archives: victim compensation

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 →

A Breaththrough in Recognizing Who is a Corruption Victim

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A decision of the U.S. District Court for the Eastern District of New York ruling shareholders of a company damaged by bribery are “corruption victims,” and its order affirming $135 million in damages establish an important precedent. The decision and order were handed down in a case arising from the prosecution of OZ Africa Management for violating the Foreign Corrupt Practices Act. OZ, a subsidiary of a U.S. hedge fund, had pled guilty to participating in a bribery scheme Israeli billionaire Dan Gertler engineered to gain control of the Democratic Republic of the Congo’s mineral resources.  As the case was about to close, shareholders in Africo, a Canadian company whose mining rights had lost value thanks to the bribery, filed a claim for damages under the Mandatory Victim Restitution Act, a statute requiring criminal defendants to compensate victims of their crimes.    

OZ and the prosecutors in the case both opposed the shareholders’ claim. Under the act, those claiming they were injured by a criminal offense must show they were “directly and proximately harmed” by it. Several events occurred between OZ’s bribes and the injury Africo’s shareholders sustained that blurred the causal link between the two. Both the government and OZ asserted that these intervening events made the shareholders at best indirect victims of corruption. And in any event the injuries were so far removed from the bribery that it could not be said the bribery proximately caused them.  Finally, OZ argued the damage the shareholders suffered, loss of the chance to develop the mine, could not be readily quantified, making any award “speculative” and “hypothetical.”

The difficulty in showing the harm from corruption is “direct” and “proximately” caused, and the challenge of precisely calculating the damage are not just hurdles to those seeking compensation for corruption under American law. They are commonly cited as reasons why, though virtually all nations permit corruption victims to sue for damages in accordance with article 35 of the UN Convention Against Corruption (here), virtually no one has (here, here [21ff], and here). While the court in OZ Africa Management was only construing a U.S. law, its reasoning offers courts in other jurisdictions precedent for awarding damages when their citizens are injured by corruption.  

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New Podcast Episode, Featuring Kevin Davis

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Professor Kevin Davis, of the New York University Law School, about his new book, Between Impunity and Imperialism: The Regulation of Transnational Bribery (OUP 2019). As the book’s provocative title suggests, Professor Davis has a mixed assessment of the current legal framework on the regulation of transnational corruption (a framework dominated by rules set by the OECD countries, especially the United States), recognizing the progress that has been made in ending impunity, but at the same time highlighting the costs and limitations of the current system, especially from the perspective of developing countries. In addition to our general discussion of his critique–including the reasons for his use of the term “legal imperialism”–we also discuss a number of more specific legal questions, including individual vs. corporate liability for corruption, the nullification of contracts tainted by bribery, the asset recovery framework, and victim compensation more generally.

You can find this episode, along with links to previous podcast 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.

Guest Post: Toward a Meaningful “Common African Position on Asset Recovery”

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GAB is delighted to welcome back Mat Tromme, Director of the Sustainable Development & Rule of Law Programme at the Bingham Centre for the Rule of Law, who contributes the following guest post:

It’s no secret that kleptocratic rulers in Africa have robbed their countries of substantial assets that could have  otherwise been used to promote development and social welfare. Indeed, the amounts are often staggering: $16 billion reportedly stolen by former Libyan President Gaddafi; $1 billion by Gambia’s ex-President Jammeh; billions by former Congolese President Kabila; and the list goes on. Recently, Nigeria’s Economic and Financial Crime Commission suggested that up to $50 billion has been looted from Africa, and whether or not particular estimate is accurate, there’s little doubt the problem is serious. More troubling is the fact that only a small proportion of these stolen assets have been recovered and repatriated to the country of origin.

As part of the effort to address the challenges of asset recovery—and to give African states more clout in negotiating the terms and conditions of asset return with the states that initially seize the stolen loot—African countries are currently undertaking an effort to develop a “Common African Position on Asset Recovery” (CAPAR). Incidentally, a common african position was the chosen theme of this year’s African Union Anti-corruption day. At this early stage, it seems likely that this effort will result only in a political proclamation (perhaps within the framework of this month’s UN General Assembly), one that will re-emphasize the importance of the speedy and unconditional return of assets, and call for better collaboration across countries. That’s a good start, but not enough! Developing a pan-African position on asset recovery—perhaps similar to the multilateral framework adopted by the Mercosur countries and by the EU—is a worthwhile endeavor, one that will likely produce tangible benefits only if it goes beyond mere statements of intent or general principles, and lays out some concrete steps to translate the vision into reality.

Ideally, CAPAR should seek to streamline policies and resources devoted to recovering assets and developing better investigative and prosecutorial capacity across African states, for example by implementing cross-border investigations and fostering collaboration, experience and information-sharing between countries. There are various ways to achieve this broad objective: 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 →

Guest Post: Mercosur’s New Framework Agreement Is an Asset Recovery Landmark, But Significant Flaws Remain

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GAB is delighted to welcome back Mat Tromme, Director of the Sustainable Development & Rule of Law Programme at the Bingham Centre for the Rule of Law, who contributes the following guest post:

In asset recovery, international collaboration is key. In December 2018, four Mercosur countries—Argentina, Brazil, Paraguay, and Uruguay—adopted a new kind of landmark framework agreement to collaborate in investigations and sharing of forfeited assets resulting from transnational organized crime, corruption, and illicit drug trafficking. The agreement’s provisions on law enforcement collaboration are important but not groundbreaking, as many countries collaborate in investigations, including through Mutual Legal Assistance (MLA) agreements. This framework agreement can be seen as a direct application of Article 57(5) of the UN Convention Against Corruption, which calls on state parties to “give consideration to concluding agreements or mutually acceptable arrangements, on a case-by-case basis, for the final disposal of confiscated property.”

Where the new framework agreement is particularly novel and innovative is in its provisions on asset return. While there are a number of technical details, the big picture is that any of the four countries may lay claim to a portion of the assets, so long as that country played a role in its forfeiture, irrespective of where the assets are located. The framework agreement provides (in Articles 7 and 8 in particular), that the asset shares will be negotiated on a case-by-case basis, with each country’s share to be based principally on that country’s role in the investigation, prosecution, and forfeiture of the assets. Other factors that may be considered include the nature of the forfeited assets, the complexity and significance of international cooperation, and the extent to which cooperation led to the forfeiture.

To the best of my knowledge, this sort of framework agreement is rare, the only other recent example is the “Framework for Return of Assets from Corruption and Crime in Kenya (FRACCK)”, a multilateral non-binding initiative for the return of assets between the Governments of Kenya, Jersey, Switzerland and the UK. There had been calls to establish a similar initiative in Latin America going back several years (see here and here). The framework agreement has the potential to set a precedent by institutionalizing the return of assets across borders, not only improving the asset recovery and return process in Latin America, but also serving as an example for other regional collaboration agreements in Africa, Latin America, or Asia. Indeed, the 3rd African Anti-Corruption Day (held last week, on July 11th) was organized on the theme of finding a “Common African Position on Asset Recovery.” According to the African Union, the purpose of this is to advocate for Africa’s unity in demanding the recovery and return of stolen assets, and making the return process transparent and accountable.

While the approach and ambition of the agreement is laudable, the framework agreement has three important shortcomings: Continue reading →

Guest Post: France’s New Asset Recovery Bill Is an Important Step Toward Achieving Victim Compensation

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GAB is delighted to welcome back Mat Tromme, Director of the Sustainable Development & Rule of Law Programme at the Bingham Centre for the Rule of Law, who contributes the following guest post:

Where asset recovery is concerned, France is probably best known for the conviction of Teodorin Obiang—the Vice President of Equatorial Guinea and son of the President—for money laundering (the first time that a French court has convicted a serving senior official of a foreign government), which resulted in the court ordering the forfeiture of some of Obiang’s assets, worth around USD 150 million. The decision is still under appeal, and the next hearing is scheduled for December 2019. But even if the conviction and associated forfeiture order are upheld, under existing French law those assets will go to the French state. (It is unclear whether other plaintiffs who can also establish a valid claim on the assets could also benefit from them in any way.) The forfeited funds will not go to the true victims of Obiang’s corruption—the people of Equatorial Guinea.

There are obviously a number of moral and practical questions coming out of this, not least the fact that the French state keeps the looted assets, as French courts remarked. Some countries and commentators argue that in cases of grand corruption like this, the forfeited assets should go back to the country from which the funds were stolen. But in the Obiang case, it would seem nonsensical to suggest that the forfeited assets be transferred to the government of Equatorial Guinea, as that would be tantamount to returning those assets to the Obiang family itself. The challenge, which many have struggled with, is how to return assets to a country in a way that benefits the victim populations when the country’s government is controlled by a kleptocratic political elite and where there is no rule of law. Related to this, it also raises questions about who ought to be considered the victim (the state, or the population?), and, if the latter, how to go about making appropriate compensation.

Earlier this month, the French Senate agreed on a new asset forfeiture bill that would address this problem by amending existing law so that when a French court orders the forfeiture of the illicit assets of a foreign public official or other politically exposed person (PEP), those assets, rather than being forfeited to the State, would instead go into a special fund that seeks to improve living standards of victim populations, improve the rule of law, and fight against corruption in the country where the offenses took place. (The state would, however, be able to retain a portion of the assets, up to a specified limit, to cover the costs of bringing the case in the first place.) Under the proposed bill, assets would be forfeited to the French state only in those cases where it is “absolutely impossible” to return the assets to the victim populations. The bill also calls for greater “transparency, accountability, efficiency, solidarity, and integrity” in the asset return process, principles that civil society had actively pushed for.

Of course, a great many details would still need to be worked out as the bill makes its way through the lower house of the French parliament (the Assemblée Nationale), especially as it’s not altogether straightforward to figure out how best to ensure that the seized funds will benefit the victim populations. The discussions at the Committee level in the Senate evince a preference for channeling forfeited funds through Overseas Development Assistance (ODA) on a case by case basis. But many of the practicalities still need attention, and French legislators have instructed the Conseil d’Etat (a body that provides legal advice to the government and doubles as a supreme court for administrative matters) to advise on the practical implementation of orders to return assets to victim populations. (When the Conseil d’Etat does so, this will itself be an important decision, one that the anticorruption should pay close attention to.)

And there are some other difficulties too, which Senators and their officials have openly acknowledged. As it currently stands, the French Criminal Procedure Code says that the return of assets requires the agreement of the requesting state (which, as discussed above, may not happen where a country is very corrupt), and so the Code will likely need amendments.Moreover, the offenses that would trigger asset forfeitures under the proposed bill are limited to concealment and laundering the proceeds of all crimes, though the Committee report also recognizes there may be difficulties with including any crime within the scope of offenses that can lead to forfeiture. Finally, though the bill focuses on assets seized from PEPs, that term is not actually fully defined in French law.

Despite these concerns, the bill is a significant step in the right direction, and a good illustration of how civil society organizations can inform and influence the asset return process (Transparency International France played a key role in encouraging the Senate to table the Bill, and CSOs and governments are also coming together to address the difficult questions that cases like these raise with respect to victim compensation.) Indeed, civil society involvement will be crucial to ensuring that the law is adopted by the Assemblée Nationale and implemented in a transparent way.

Guest Post: It’s Time for Plan B on Disbursing the Obiang Settlement Money to the People of Equatorial Guinea

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Today’s guest post is from the civil society group EG Justice, a civil society organization that promotes the rule of law, transparency, and the protection of human rights in Equatorial Guinea. (For a longer discussion of the issues raised in this blog post, please visit the EG Justice website: www.egjustice.org.)

Last month, Professor Stephenson asked: “Whatever Happened with that Charity the Obiang Settlement Was Supposed to Fund?”  Not coincidentally, thousands of people in Equatorial Guinea have been asking themselves that same question for the last five years, and they have yet to receive a satisfactory answer. We are not entirely surprised by the impasse. When one drives into a cul-de-sac, with clear road signs warning ahead of time that there is no exit, one should only expect to return to the entry point. Likewise, when negotiating with authoritarian kleptocrats who consider themselves above the law and who are accustomed to acting with absolute impunity, it would be naïve to expect them to negotiate fairly.

The settlement between Equatorial Guinea and the U.S. appears to anticipate this impasse, laying out several options. The settlement first lays out what we might call “Plan A”:  Within 180 days, the U.S. authorities and the defendant (Teodorin Nguema Obiang) are to jointly select a charity to receive the funds realized from the sale of Nguema’s seized assets, with that charity to use the funds for the benefit of the citizens of Equatorial Guinea. But in apparent anticipation of the difficulties in reaching such an agreement, the settlement goes on to lay out a “Plan B,” according to which, if the U.S. and Nguema can’t mutually agree on a charity within 180 days of the sale of the assets, a three-member panel is to be convened to receive and disburse the funds—with one member of the panel chosen by the U.S., one by Nguema, and one, the Chair, by mutual agreement. Again anticipating the possibility that the parties will be unable to agree, the settlement has a “Plan C” (or a “Plan B-2”): If the parties can’t agree on a panel Chair, within 220 days after the sale of the property, the court retains the discretion to order the parties to participate in mediation, or the court may simply select a panel Chair directly. Continue reading →