Last week, International Anti-Corruption Day was recognized.
This short White House press release used the word “corruption” 13 times. DOJ Assistant Attorney General Leslie Caldwell co-authored this short Huffington Post piece in which the word “corruption” appeared 34 times. In this short press release from Secretary of State John Kerry, the word “corruption” appeared 14 times. In this post, another State Department official used the word “corruption” 90 times.
Everyone was talking about “corruption” – but what is it?
Are payments to incentivize a low-ranking foreign official with ministerial or clerical duties to do something that the official ought to do anyway – is this corruption? In passing the FCPA Congress said no, but FCPA enforcement actions in this new era seem to suggest otherwise.
Is it corruption when a foreign tax official threatens to assess penalties and shut down a company’s offices unless a cash payment is made and the company acquiesces so that it can continue to do business in the country? In the eyes of the DOJ and SEC, the answer seems to be yes.
Why if person x is the recipient of a corporate gift or entertainment or other things of value might we call it effective sales and marketing and maintaining good will with a customer, yet if person y is the recipient we call it corruption?
Who decides what corruption is? Under our legal system, Congress passes laws, enforcement agencies enforce the laws, and courts oversee an adversarial system in which mitigating facts and potential defenses are weighed to determine if the enforcement agency has met its high burden of proof as to each element of the law that Congress passed. Yet, FCPA enforcement in this new era has largely bypassed this system that has served our country well since its founding
Is it corruption if the conduct was engaged in with the knowledge and support of the highest levels of the U.S. government?
Indeed, one of the ironies of International Anti-Corruption Day was the release of the U.S. Senate Intelligence Committee’s report on CIA tactics during the aftermath of 9/11. As detailed in this Forbes piece:
“According to the report, “the CIA provided millions of dollars in cash payments to foreign government officials” to get foreign governments to host and support secret CIA detention sites. For example, the report says that one country that hosted a secret CIA detention facility rejected the transfer of Khalid Shaykh Muhammad, the architect of the 9/11 attacks, but the decision was reversed after the U.S. ambassador to that country intervened. The next month the CIA provided more than $1 million to an unidentified party in that country, the report says. According to a cable referenced in the report, “the CIA Station speculated that the change of position was ‘at least somewhat attributable… to our gift of $ [redacted] million….” Khalid Shaykh Muhammad was reportedly held by the CIA in Poland and Romania before being transferred to Guantanamo Bay.
CIA officials were keenly aware about how easy it would be for them to use money to get certain countries to facilitate the CIA interrogation program. “Do you realize you can buy [Country Redacted] for $,” one chief of station is quoted as saying in the report. Coincidentally, the payments to foreign government officials to facilitate torture occurred at the same time that the U.S. Justice Department was operating the biggest enhanced Foreign Corrupt Practices Act enforcement effort ever, going after dozens of U.S. companies that had allegedly made payments to foreign government officials for business purposes. CIA headquarters also encouraged CIA Stations to construct “wish lists” and “think big” in terms of proposed financial assistance to the arms of foreign governments that could help with the program, the report says.”
If corruption – however defined – is bad, does that mean that all attempts to punish corruption and deter future misconduct is good? Is more FCPA enforcement an inherent good, regardless of resolution vehicles used, regardless of enforcement theories, and regardless of actual outcomes? Has quantity of FCPA enforcement actions become a higher priority for the enforcement agencies than the quality of the enforcement actions?
On International Anti-Corruption day, the above questions were the ones worthy of examination (and are examined in detail in my book “The Foreign Corrupt Practices Act in a New Era“), but the official releases linked above of course shy away from these questions.
However, as Congress recognized when passing the FCPA in 1977, corruption was not the “simple, safe issue it seemed at first blush.” Indeed, the FCPA’s legislative history further instructs that there will be “countless situations” in which fair-minded individuals “will be hard-put to determine whether a particular payment or practice is a legitimate and permissible business activity or a means of improper influence.” It was noted that reasonable persons “and even angels will differ on the answers … [and] such distinctions should make us less sweeping in our judgments and less confident in our solutions.”