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Top Eight Anti-Corruption Developments

Top Eight Anti-Corruption Developments

Corruption abroad undermines rule of law and American interests.

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.


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“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.”

Somebody please explain how having developed nations send $100 billion a year to underdeveloped nations (as par of a Climate Treaty) will make the environment out there any less corrupt ?

The answer. It just makes the environment ripe for the “pucking” by “consultants” and dictators.

Sammy Finkelman | January 5, 2016 at 11:19 am

In a dictatorship, partivcularly a cruel one, corruption is a good thing. It ameliorates what would otherwise by an intolerale or unliveable situation. I mean corruption that extends way down into the bureacracy.

It is not always the best thing to eliminate it.

Sammy Finkelman | January 5, 2016 at 11:21 am

Corruption is the only thing that makes life liveable in North Korea (for those taht can benefit from it)

The Clinton Foundation and it’s corrupt embrace with the Hillary Clinton State Department and the Obama Administration should be on this list.

An interesting post, professor. Several comments follow, in my order of importance with reference to your list item number, from someone with a bit of first-hand, if dated, FCPA experience.

5 Corruption is a national security issue. Honesty, integrity, and the rule of law are fundamental – perhaps the most fundamental – American values; their constant export and promotion should be the number one priority of our state department and the guiding principle in all that it says and does. The conduct and actions of our state department, our president, and his entire administration over the past seven years have made a mockery everything America stands for. The disastrous consequences of their actions are readily apparent everywhere in the world including the conduct of business. The trickle-down effect of our government’s behavior on companies trading commodity-like goods and services internationally is principally one of excessive, frequently unnecessary bureaucratic and financial burden and administrative headache. (Impugning certain businesses with the label ‘commodity-like’ is not intended; it’s just the quickest short-handle description that came to mind.) But, when it comes to large companies dealing in matters such as aviation and space technology, software and computer science technology, and matters of privacy philosophy among others, the game changes considerably (it shouldn’t) and the consequences here impact our national security mightily. See item three, following.

3 Compliance is separating from legal. This separation is the cornerstone of Obama’s view of the world, where corruption and dishonesty barely exist and then only when he and his administration are perceptive enough to see it (mostly in those who disagree with them). Believing this and acting accordingly have been prerequisite to serving in his administration from the start. Laws are crude at best in their view, an inconvenience, generally one-sided, and subject to never ending exemptions, waiver, selective enforcement, or outright ignoring based upon their examination, interpretation, and needs of the moment.

6, 7 “Compliance officers are making more money” and “DOJ hires a compliance expert.” (Yawn) Of course. The Topic of the Day always demands a specialist, an expert, and where better to find one than among friends who share your world-view. And who knows, it may even be someone familiar with the subject matter!

With the exception of the passing of Lee Kuan Yew, the remaining items on your list are evidence of the consequences of abandoning pursuit of what once were our values, and further, provide evidence of our scant ability to do anything about it. They define a great cross section of the world that emerges from their abandonment.

The best and worst sentences in the piece are the two last: “The FCPA is necessarily limited to reducing American companies’ contribution to corruption abroad, but that is a goal worth pursuing.” Yes, even accepting the statement’s minimalizing content. “Corruption in the United States is a topic for another day.” Tomorrow at the latest, but today’s better if you have to sign an FCPA compliance cert. Been there, done that.

The Foreign Corrupt Practices Act is an insane and immoral law. Foreign corruption is no business of ours; if it’s bad for the country in question, let it deal with it. What gives us the right to impose our cultural values on them? In the meantime, if paying a bribe is the cost of doing business in a particular place and an American businessman chooses to pay that price, how can we make that a crime? What has he done wrong? Why should we effectively prohibit our businesses from operating in vast parts of the world that dare to have a different culture than us? How is that in our national interest?

For that matter, even domestically, it is perverse to punish someone for paying a bribe. The Bible wisely bans accepting bribes, but not paying them. It recognises the obvious truth that accepting a bribe is always a choice, but paying it is usually not. If a judge demands a bribe or he will find for your opponent, what are you supposed to do, but pay up? Go to his supervisor? What if he is the supervisor, or you suspect the supervisor is in on it?

If you need legislation passed, and lawmakers demand to be paid or they’ll vote against it, what are you supposed to do? Even if you go public and destroy their careers, it still won’t get you the legislation you need. Or suppose they threaten to pass legislation against you if you don’t pay; how are you going to stop them, except by paying?

    Owego in reply to Milhouse. | January 5, 2016 at 8:54 pm

    Oh dear, it appears your moral equivalency is showing. Is that your Volkswagen I hear idling out in the driveway?

      Milhouse in reply to Owego. | January 7, 2016 at 3:49 am

      Huh? You’re not making any sense. What is “moral equivalency”, and what has it got to do with this, or with Volkswagen?