As highlighted in prior posts here and here, many Foreign Corrupt Practices Act enforcement actions do not occur in a vacuum. In certain instances, the road to FCPA violations is laid years, in some cases decades, earlier by government policy encouraging certain companies to do business in certain countries to accomplish certain political objectives. In such situations, it is worth pausing to consider whether the government bears some responsibility for certain FCPA violations.
I was reminded of this dynamic when reading this recent White House release announcing an Africa Strategy to “advance trade and commercial ties to increase prosperity in the United States and Africa.”
In these related remarks, National Security Adviser John Bolton stated:
“Our first priority, enhancing U.S. economic ties with the region, is not only essential to improving opportunities for American workers and businesses; it is also vital to safeguarding the economic independence of African states and protecting U.S. national security interests.
Great power competitors, namely China and Russia, are rapidly expanding their financial and political influence across Africa. They are deliberately and aggressively targeting their investments in the region to gain a competitive advantage over the United States.
From 2016-2017, China’s foreign direct investment toward Africa totaled $6.4 billion dollars. And, over the past several years, China has devoted considerable state-directed and state-supported financing to projects in the region.
China uses bribes, opaque agreements, and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands. Its investment ventures are riddled with corruption, and do not meet the same environmental or ethical standards as U.S. developmental programs.
Such predatory actions are sub-components of broader Chinese strategic initiatives, including “One Belt, One Road”—a plan to develop a series of trade routes leading to and from China with the ultimate goal of advancing Chinese global dominance.
In Africa, we are already seeing the disturbing effects of China’s quest to obtain more political, economic, and military power.
The nation of Zambia, for example, is currently in debt to China to the tune of $6 to $10 billion dollars. China is now poised to take over Zambia’s national power and utility company in order to collect on Zambia’s financial obligations.
Similarly, from 2014 to 2016, Djibouti’s external public debt-to-GDP ratio ballooned from fifty percent to eighty-five percent, with most of that debt owed to China.
And soon, Djibouti may hand over control of the Doraleh Container Terminal, a strategically-located shipping port on the Red Sea, to Chinese state-owned enterprises.
Should this occur, the balance of power in the Horn of Africa—astride major arteries of maritime trade between Europe, the Middle East, and South Asia—would shift in favor of China. And, our U.S. military personnel at Camp Lemonnier, could face even further challenges in their efforts to protect the American people.
Russia, for its part, is also seeking to increase its influence in the region through corrupt economic dealings. Across the continent, Russia advances its political and economic relationships with little regard for the rule of law or accountable and transparent governance.
It continues to sell arms and energy in exchange for votes at the United Nations—votes that keep strongmen in power, undermine peace and security, and run counter to the best interests of the African people.
Russia also continues to extract natural resources from the region for its own benefit.
In short, the predatory practices pursued by China and Russia stunt economic growth in Africa; threaten the financial independence of African nations; inhibit opportunities for U.S. investment; interfere with U.S. military operations; and pose a significant threat to U.S. national security interests.”
One of the more insightful things found in the FCPA’s extensive legislative history is an October 1975 article by Milton Gwirtzman published by the New York Times Magazine. At this point in time, Congress was in the midst of its investigations into the so-called foreign corporate payments problem and Gwirtzman noted:
“If corporate bribery abroad has offended the post-Watergate morality, the companies implicated have nevertheless taken a greater share of the blame than they deserve. […] The responsibility for present practices must also be shared by our Government, which not only encouraged investment in countries whose ethical standards differ from ours, but also in many respects set the pattern for the graft under censure today. […] The rapid acceleration of American private investment in foreign lands, which began in the mid-nineteen-sixties, was seen by our foreign policy makers as a welcome opportunity. If U.S. firms could build a nation’s infrastructure, supply its consumer goods and hire a portion of its workers, the greater the likelihood the nation would be bound to ours by the safest and strongest of ties, economic self-interest. As a result, our Government wrote the foreign investment laws of several developing countries and urged our multinationals to make use of them. New programs were established to insure foreign investment against the risks of war and expropriation. Embassy personnel were ordered to scout out export possibilities for American firms, which were published in Commerce Business Daily, the Government’s daily list of business opportunities.”
As prior posts on this general topic have highlighted, it is all fine and dandy that the U.S. government encourages greater economic ties with countries will well-known corruption risks. However, in certain instances the U.S. government encourages companies (for foreign policy and other strategic interests) to go to the edge of the cliff. As the passage of time occasionally shows, when the footing on the cliff becomes a bit loose, and the market participants fall over the edge, other segments of the U.S. government then launch a criminal inquiry seeking to discover why.
Part of the answer is fairly obvious: the business organizations were acting pursuant to government policy and Gwirtzman’s words from 40+ years ago remain relevant today:
“[I]t would be unwise, as well as unfair, simply to write off bribery abroad to corporate lust. It is a symbol of far deeper issues that really involve America’s role in the world.”
FCPA Institute - Minneapolis (June 20-21, 2019)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.