Corruption is inimical to rule of law and rule of law is the sine qua non of good governance and a free society.  So it is that the FCPA Blog‘s list of the eight most important developments from 2015 that provides insight into the state of U.S. efforts to promote good governance abroad.

FCPA stands for the “Foreign Corrupt Practices Act” (15 U.S.C. § 78dd-1, et seq.), the principle tool for the U.S. government to penalize companies engaged in corrupt practices abroad.  The FCPA Blog was founded and is run by Richard Cassin, a former law partner with wide experience in Asia.  While Asia may not be the most susceptible to graft, it is at least competitive with South America and Africa.  But Asia’s vastly greater economic relevance make its endemic corruption the most serious.

FCPA Blog’s Top-Eight:

1. Big banks settle charges they hired family of MidEast Sovereign Wealth Fund official to gain favors.

The oil producers in the Arabian Peninsula (among others) have vast financial reserves that they invest through “sovereign wealth funds.”  Winning business from a sovereign wealth fund can reap enormous fees in the form of a percentage of assets managed on the fund’s behalf, fees for brokerage services, or others.  The pressure and rewards of luring in this business can be enormous.

But doling out personal favors to win business is against corrupt and against the rules.  According to the SEC:

An SEC investigation found that BNY Mellon did not evaluate or hire the family members through its existing, highly competitive internship programs that have stringent hiring standards and require a minimum grade point average and multiple interviews.  The family members did not meet the rigorous criteria yet were hired with the knowledge and approval of senior BNY Mellon employees in order to corruptly influence foreign officials and win or retain contracts to manage and service the assets of the sovereign wealth fund.

2. The FIFA Debacle

The global soccer organizing body (or cartel, if you will) FIFA, the Fédération Internationale de Football Association, had a rough year. International sport has a bad reputation from the Olympic and World Cup bidding scandals of the last decade. In 2015, the Department of Justice blew the barn doors open.

DOJ has already obtained 8 guilty pleas from FIFA officials and, presumably on the basis of information obtained from pleaders, has indicted additional defendants. The government is not fooling around, bringing charges against FIFA’s now-banned President (Sepp Blatter), the Presidents of two of its six confederations, and FIFA vice-presidents and Executive Committee members.

Sepp Blatter

It’s easy to dismiss this as a side show since, after all, its just a game. But international athletics is big business and there is plenty of overlap between the sporting elite, the business elite and the government elite. The message that under-the-table dealing is no longer acceptable is certain to be heard.

The DOJ said of the superseding indictment:

Taken together, the 27 defendants in the superseding indictment are alleged to have engaged in a number of schemes all designed to solicit and receive well over $200 million in bribes and kickbacks to sell lucrative media and marketing rights to international soccer tournaments and matches, among other valuable rights and properties.

3. Compliance is separating from legal

This is a more technical topic. In business, people in “compliance” are charged with making sure the company is obeying the rules dictated by law and regulation. Traditionally, compliance has fallen under the legal department, meaning the people charged with ensuring the company follows the rules are answerable to the general counsel, which arguably creates an internal conflict since it is not necessarily in the company’s interest for the compliance people to inquire too deeply into what the company is actually doing. From a pure business perspective, it may be better to pretend a violation never happened instead of digging into the details. Taking compliance out of legal and into more of an ombudsman’s position with relatively free reign to investigate as he or she sees fit severs the conflict and may improve compliance.

4. Britain gets into the game

For the first time, Britain obtained a settlement with a “deferred prosecution agreement.” The defendant admitted wrongdoing and paid a fine in exchange for the government not proceeding with threatened charges. This is a very common prosecution tactic in the United States, but one that has come under fire. In theory, leveraging the threat of terrible consequences if the defendant refuses to cooperate can induce guilty pleas by innocent parties who simply calculate that the cost of mustering a defense and the risk of being found guilty despite the truth is so high that the lesser evil of pleading guilty is worthwhile.

The Director of Britain’s Serious Fraud Unit said:

This landmark [deferred prosecution agreement] will serve as a template for future agreements. The judgment from Lord Justice Leveson provides very helpful guidance to those advising corporates. It also endorses the SFO’s contention that the DPA in this case was in the interests of justice and its terms fair, reasonable and proportionate.

5. Corruption is a national security issue

President Obama’s National Security Strategy for 2015 (his first since 2010), included five separate references to the debilitating and destabilizing influence of corruption abroad.  In this, for once, he is right.  Corruption is anathema to stability and stability is good for the United States.

6. Compliance officers are making more money

This should probably be 3(a). Taking compliance out of legal and into its own domain means compliance personnel need their own chain of command up the chain to the senior executives. If the general counsel no longer oversees compliance, then it must be either a new Vice-President position or the CEO. In either event, the compliance structure has greater seniority, responsibility, and inevitably pay.

7. DOJ hires a compliance expert

DOJ hired somebody to create benchmarks for adequate compliance programs. In other contexts, companies have defended claims of malfeasance by arguing that everything they did was within the guidance provided by the government, even if something untoward appears to have happened. DOJ denies that the new compliance expert is creating a new defense, but defense attorneys will certainly make the argument.

8. Singapore’s anti-graft crusader dies

To many Americans, Singapore is is a place with a penchant for corporal punishment that caned an American kid.  That narrative isn’t wrong, but ignores a deeper history.  Not long ago, Singapore was a backwater, and today it is a commercial and economic powerhouse because of its pristine reputation. That reputation, in turn, derives from Singapore’s first prime minister and visionary, Lee Kuan Yew, who built his nation-state on a bedrock of absolute obedience to free, open and honest commercial dealings.


Lee Kuan Yew

Corruption is a malign influence.  It makes good law bad and bad law worse.  The FCPA is necessarily limited to reducing American companies’ contribution to corruption abroad, but that is a goal worth pursuing.  Corruption in the United States is a topic for another day.