Tags

, ,

The FCPA Map shows where bribes were paid. Should the citizens of those countries be treated as victims?

The FCPA Map shows where bribes were paid. Should citizens and business in those countries be treated as victims?

Should the U.S. Foreign Corrupt Practices Act (FCPA) be used as a vehicle for restorative justice?

The FCPA is currently enforced with the aim of deterring the bribery of foreign officials. The 1977 law prescribes civil and criminal liability for individuals and entities, with the potential for criminal fines of up to $25 million and imprisonment of individuals for up to 20 years. Those fines go into U.S. government coffers, even when — as is often the case — taxpayers and citizens of an emerging market country are the ones harmed by the bribe.

The theory of restorative justice, on the other hand, seeks to repair the harm caused by criminal acts and heal the community by bringing together victims and perpetrators to diagnose the causes of criminal behavior and determine the appropriate punishment. It aims to offer justice to victims while reintegrating the perpetrator into the community. If this concept were to be applied in an FCPA context, how should we define victims and perpetrators? Andy Brady Spalding of the University of Richmond Law School has an answer. He labels citizens of the host community where bribery occurred as victims and companies that engage in bribery as perpetrators.

Spalding is proposing an alternative approach to FCPA enforcement based on restorative justice principles. In his proposal, the accused multinational corporation (MNC) and Department of Justice (DOJ) would enter into a deferred prosecution agreement (DPA) in which the DOJ would grant a downward departure in fines in return for funding a series of community service projects designed to help the particular local communities where the bribes were made.

Under Spalding’s vision, the MNC would develop three specific projects in consultation with internationally recognized anti-corruption experts. The three projects, to be implemented in the country where the bribery took place, would be as follows:

  1. A small business-loan program for any local firms who can demonstrate that their local business materially suffered as a result of the MNC’s bribes. This is designed to remedy certain of the harms the defendant’s conduct caused to local markets.
  2. A training center for local businesses, attorneys, and government officials. The training programs would offer training on how to conduct business with foreign companies without putting those companies at risk of violating foreign anti-bribery laws, such as the FCPA and U.K. Bribery Act. The training center would certify graduates as being well versed in how to prevent bribery, thus alleviating the concerns of risk-averse MNCs.
  3. A comprehensive report on the MNC’s experience paying bribes in the country. Based only on the facts made public in the DPA, the report would describe the bribes the MNC paid and why. It would indicate where bribes were thought necessary to obtain the government’s approval and explain the conduct of local and foreign competitor companies. It would further describe the adverse impact of the conduct on the local community. The report would be translated into the local language and thoroughly disseminated through local media.

Spalding argues that the report, in combination with the training facility, would begin to improve the host-country conditions that perpetuate bribery. The training facility would educate host-country officials in bribery-reduction strategies. The report would serve to create reform pressure from local actors and international organizations. Spalding notes that these measures would probably only make a minor dent in any given country’s corruption environment but says the measures serve the more modest goal “to ensure that our efforts to reduce overseas crime make the situation incrementally better or, at very least, do not make the problem worse.”

Spalding’s proposal certainly serves a noble purpose. Corruption weakens the rule of law, exacerbates inequality and poverty, and raises the cost of doing business for companies. Even incrementally reducing bribery would produce tremendous benefits.

However, one prominent critic says that using the FCPA as a tool of restorative justice is problematic in a number of ways. The FCPA Professor Mike Koehler points out, “[T]his proposal assumes two things: (i) that FCPA enforcement actions always represent provable FCPA violations; and (ii) that there is always a causal connection between the alleged bribes influencing ‘foreign official’ conduct, that then always causes harm to citizens of the ‘foreign official’s’ country.” These assumptions are not always warranted.

As to the first assumption, the vast majority of FCPA enforcement actions are resolved via DPAs, non-prosecution agreements, neither admit nor deny SEC settlements, or SEC administrative orders. Koehler notes, “These resolution vehicles often represent the end result of a risk adverse business decision, not necessarily provable FCPA violations. . . . For this reason, a typical FCPA resolution vehicle should not automatically trigger other actions or issues (whether plaintiff litigation, whistleblower bounties, or payments to an ill-defined group of alleged victims).”

Even in the relatively rare instance in which a defendant is found guilty by a court of law of FCPA violations, there remains the problem of establishing causation. Koehler notes that many FCPA enforcement actions concern unsuccessful bribery attempts, payments to receive what the company was otherwise legitimately owed by a foreign government, or other situations in which there is a lack of causal connection between the bribes influencing foreign official conduct and harm caused to host country citizens.

For the proposed small business-loan program, it would be difficult for local businesses to prove that the harm they suffered directly resulted from the defendant’s bribery. In many instances, the defendant may have offered the best product for the best price, regardless of bribery. The other proposed projects assume that all the host country citizens qualify as victims. While corruption does produce negative effects on society writ large, myriad factors aside from the defendant’s conduct (including the actions of other actors and structural issues such as weak rule of law) work together to cause corruption. Any harm the defendant caused the host community would simply contribute to a cumulative burden of corruption weighing down on the entire society, rather than specific damage to specific individuals or companies.

Restorative justice rests on the notion of reconciliation between victims and perpetrators. For example, the South African Truth and Reconciliation Commission was established in 1995 for the purpose of healing the country by uncovering the truth about human rights violations that occurred during apartheid. Its mandate emphasized gathering information and collecting evidence from victims and perpetrators, rather than on prosecuting individuals based on past crimes. But in the case of FCPA enforcement actions, it is not always clear who qualifies as a victim or a perpetrator. If the company that is forced to pay a bribe is considered a victim of a corrupt system, then FCPA enforcement actions can have the perverse effect of punishing victims of corruption.

The difficulty in defining victims and perpetrators in the FCPA context makes it problematic to place the burden of community restoration on the accused MNC. However, private sector actors (including MNCs) should be encouraged and offered incentives to voluntarily cooperate with local and international civil society organizations and other stakeholders to implement programs like the ones proposed by Spalding. Anti-corruption training centers and reports examining the prevalence and causes of bribery are valuable initiatives that could form part of a larger effort to reduce corruption around the world.

Peako Jenkins is a Program Assistant for the Middle East & North Africa at CIPE.