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Thoughts On The “Combating Global Corruption Act Of 2017”

Congress

Recently Senator Ben Cardin (D-MD), along with Republican co-sponsors such as Senator David Perdue (R-GA) and Senator Marco (R-FL) and others, introduced a bill titled the “Combating Global Corruption Act of 2017.”

As stated in the preamble, the bill seeks “to identify and combat corruption in countries, to establish a tiered system of countries with respect to levels of corruption by their governments and their efforts to combat such corruption, and to assess United States assistance to designated countries in order to advance anti-corruption efforts in those countries and better serve United States taxpayers.” Corruption is defined as “the exercise of public power for private gain, including by bribery, nepotism, fraud, or embezzlement.”

This post provides a summary of the bill and offers two thoughts regarding the bill relevant to the Foreign Corrupt Practices Act.

In general, the bill calls upon the Secretary of State to publish annually, on a publicly accessible website, a tiered ranking of all foreign countries. Countries would be ranked into three tiers depending on whether the government of the country is complying with “minimum standards for the elimination of corruption.”

Those minimum standards are if the government:

(1) has enacted laws and established government structures, policies and practices that prohibit corruption, including grad corruption and petty corruption [the later two terms are specifically defined in the bill]

(2) enforces the laws described in paragraph (1) by punishing any person who is found, through a fair judicial process, to have violated such laws;

(3) prescribes punishment for grand corruption that is commensurate with the punishment prescribed for such serious crimes;

(4) prescribes punishment for petty corruption that (a) provides a sufficiently stringent deterrent; and (b) adequately reflects the nature of the offense; and

(5) is making serious and sustained efforts to eliminate corruption.

As to this last factor, the bill further provides factors for determining whether a government is making serious and sustained efforts to eliminate corruption.

After the contemplated annual report is published, the bill calls upon the Secretary of State, in coordination with the Administrator of the United States Agency for International Development and the Secretary of Defense, to:

(1) conduct a corruption risk assessment and create a corruption mitigation strategy for all United States foreign assistance programs to that country;

(2) require the inclusion of anti-corruption clauses for all foreign assistance contracts, grants, and cooperative agreements, which allow for the termination of the contract, grant, or cooperative agreement without penalty if credible indicators of corruption are discovered;

(3) require the inclusion of appropriate clawback clauses for all foreign assistance contracts, grants, and cooperative agreements to recover United States taxpayer funds that have been misappropriated from the prime contractor, grantee, or cooperative agreement through corruption;

(4) require the disclosure of the beneficial ownership of all contractors, subcontractors, grantees, cooperative agreement participates, and other organizations receiving funding from the United States Government for foreign assistance programs; and

(5) establish a mechanism for investigating allegations of misappropriated foreign assistance funds or equipment.

Two thoughts regarding the bill relevant to the FCPA.

First, one of the most compelling statutory construction arguments made in connection with the “foreign official” challenges was that laws enacted prior to the FCPA and laws enacted after the FCPA contain explicit definitions that capture so-called state-owned or state-controlled enterprises. Moreover, as highlighted in my amicus brief encouraging the Supreme Court to hear the “foreign official” challenge, several bills introduced during the legislative process that resulted in the FCPA contained explicit definitions that captured SOEs.

On this issue, it is interesting to note that the definition of “corrupt actor” in the “Combating Global Corruption Act of 2017” means:

(A) any foreign person or entity that is a government official or government entity responsible for, or complicit in, an act of corruption; and

(B) any company, in which a person or entity described in subparagraph (A) has a significant stake, which is responsible for, or complicit in, an act of corruption.

In short, the “Combating Global Corruption Act of 2017” once again demonstrates that, when it wants to, Congress is clearly capable of drafting legislation that explicitly captures SOEs.

Second, national security is one of the policy justifications that the DOJ has advanced in connection with its FCPA enforcement program and certain commentators have hoped on this bandwagon as a reason for the general increase in FCPA enforcement.

However, as highlighted in several prior posts including here, national security is explicitly mentioned in the FCPA as a reason not to enforce its provisions and there is no credible evidence (and self-serving political rhetoric is not evidence of anything other than self-serving political rhetoric) to suggest that national security concerns is one of the reasons for the general increase in FCPA enforcement. Rather there are many practical (and perhaps even provocative) reasons for the general increase in FCPA enforcement. (See Chapter 6 “Reasons for the General Increase in FCPA Enforcement” of the book “The FCPA In a New Era.”).

The “Combating Global Corruption Act of 2017” – similar to the FCPA – contains a “waiver” allowing the Secretary of State to “waive the requirement to delay foreign assistance … if the Secretary of State certifies to the appropriate congressional committees that such waiver is important to the national security interest of the United States.”

As highlighted in the article “The Uncomfortable Truths and Double Standards of Bribery Enforcement,” the U.S. government can say until the cows come home that  “we in the United States are in a unique position to spread the gospel of anti-corruption” and that FCPA enforcement ensures not only that the United States “is on the right side of history, but also that it has a hand in advancing that history,” but such a position is not credible so long as our laws or bills introduced in Congress contain explicit carve-outs or waivers for issues important to the national security interests of the United States.

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