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President Biden Did Not Introduce “A Big Idea Into The Global Debate When He Declared That Combating Corruption Is A ‘Core U.S. National Security Interest” And National Security Is A Reason Not To Enforce The FCPA

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Last week, President Biden released a memo titled “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest.”

In pertinent part, the memo states that “countering corruption [is] a core United States national security interest” and Biden pledged that his “Administration will lead efforts to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”

In short, the memo directs “the Assistant to the President and National Security Advisor, in coordination with the Assistant to the President for Economic Policy and the Assistant to the President for Domestic Policy, to conduct an interagency review process under National Security Memorandum/NSM-2 and develop a Presidential strategy that will, when implemented, significantly bolster the ability of the United States Government” to:

“(a)  Modernize, increase, coordinate, resource, and otherwise improve the ability of key executive departments and agencies (agencies), including those represented in the review and listed below, to promote good governance and prevent and combat corruption, including, as needed, by proposing relevant legislation to the Congress;

(b)  Combat all forms of illicit finance in the United States and international financial systems, including by robustly implementing Federal law requiring United States companies to report their beneficial owner or owners to the Department of the Treasury; reducing offshore financial secrecy; improving information sharing; and, as necessary, identifying the need for new reforms;

(c)  Hold accountable corrupt individuals, transnational criminal organizations, and their facilitators, including by, and where appropriate, identifying, freezing, and recovering stolen assets through increased information sharing and intelligence collection and analysis, criminal or civil enforcement actions, advisories, and sanctions or other authorities, and, where possible and appropriate, returning recovered assets for the benefit of the citizens harmed by corruption;

(d)  Bolster the capacity of domestic and international institutions and multilateral bodies focused on establishing global anti-corruption norms, asset recovery, promoting financial transparency, encouraging open government, strengthening financial institutions’ frameworks to prevent corruption in development finance projects, and combating money laundering, illicit finance, and bribery, including, where possible, addressing the demand side of bribery;

(e)  Support and strengthen the capacity of civil society, media, and other oversight and accountability actors to conduct research and analysis on corruption trends, advocate for preventative measures, investigate and uncover corruption, hold leaders accountable, and inform and support government accountability and reform efforts, and work to provide these actors a safe and open operating environment domestically and internationally;

(f)  Work with international partners to counteract strategic corruption by foreign leaders, foreign state-owned or affiliated enterprises, transnational criminal organizations, and other foreign actors and their domestic collaborators, including, by closing loopholes exploited by these actors to interfere in democratic processes in the United States and abroad;

(g)  Enhance efforts to quickly and flexibly increase United States and partner resources of investigative, financial, technical, political, and other assistance to foreign countries that exhibit the desire to reduce corruption;

(h)  Assist and strengthen the capacity of domestic (including State and local) authorities and institutions, as well as partner and other foreign governments at all levels, to implement transparency, oversight, and accountability measures, which will counter corruption and provide their citizens with accessible and usable information regarding government programs, policies, and spending;

(i)  Promote partnerships with the private sector and civil society to advocate for anti-corruption measures and take action to prevent corruption; and

(j)  Establish best practices and enforcement mechanisms such that foreign assistance and security cooperation activities have built-in corruption prevention measures.”

The short three page memo uses the words “corrupt” or “corruption” approximately 30 times but makes no effort to define what those terms actually mean.

Media coverage of the memo has been interesting to say the least.

For instance, this Washington Post column asserts that “President Biden introduced a big idea into the global debate when he declared that combating corruption is a ‘core U.S. national security interest.'”

Likewise, this opinion piece in The Hill asserts that “of course, there have also been periodic efforts to root out corruption and carry out reforms” but “Biden’s effort is different” – “he had framed his initiative as a national security imperative.”

Both assertions are false.

U.S. government officials have long maintained that Foreign Corrupt Practices Act enforcement (one way in which the U.S. government attempts to address corruption) is necessary to protect national security.

Numerous statements could be cited and, as just one example, in 2014 the DOJ’s Assistant Attorney General for the Criminal Division stated:

“The threats posed to the United States by international corruption, however, cannot be overlooked.  Foremost, corrupt countries are less safe.  Corruption thwarts economic development, traps entire populations in poverty, and leaves countries without a credible justice system.  Corrupt officials who put their personal enrichment before the benefit of their citizenry create unstable countries.  And as we have seen time and again, unstable countries become the breeding grounds and safe havens for terrorist groups and other criminals who threaten the security of the United States.

International corruption also inhibits the ability of American companies to compete overseas on a level playing field.  Once bribery and corruption take hold, fair and competitive business practices are eliminated.  Nobody but the corrupt official benefits from bribery.

For all of these reasons, fighting foreign corruption is not a service we provide to the global community, but rather a necessary enforcement action to protect our own national security interests and the ability of our U.S. companies to compete on a global scale.”

See here for the prior post.

I highlighted this prior statement to the author of the Washington Post column, but was met with silence. (Moreover, the column asserts that the “Obama administration tried to strengthen the 1977 Foreign Corrupt Practices Act.” I asked the author of the column to elaborate on this statement or to provide factual support, but once again silence).

More broadly, whether many FCPA enforcement actions are related to national security is an open and debatable question. For instance, in the FCPA’s modern era, several FCPA enforcement actions concern relationships with foreign physicians and other health care professionals. Many FCPA enforcement actions concern alleged conduct in obtaining foreign licenses, permits, and certifications. Many FCPA enforcement actions concerning inconsequential things of value such as a bottle of wine, a camera, kitchen appliances and business suits, tea sets and office furniture or tickets to sporting events.

Moreover, one of the supreme ironies of linking FCPA enforcement to national security is that, as highlighted in several prior posts including here, national security is explicitly mentioned in the FCPA as a reason not to enforce the FCPA.

The FCPA itself states:

“(3)(A) With respect to matters concerning the national security of the United States, no duty or liability under [the FCPA] shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such  matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph  shall set forth the specific facts and circumstances with respect to which the provisions of  this paragraph are to be invoked. Each such directive shall, unless renewed in writing,  expire one year after the date of issuance.

(B) Each head of a Federal department or agency of the United States who issues such a directive pursuant to this paragraph shall maintain a complete file of all such directives and shall, on October 1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate.”

Related to this topic, see this prior post titled “The CIA’s Classified Relationships With U.S. Publicly Traded Companies And The FCPA.”

Moreover, U.S. national security also seems to be a reason not to enforce the FCPA as a matter of practice.

Consider the BAE enforcement action.  Despite the DOJ alleging conduct that clearly implicated the FCPA’s anti-bribery provisions, BAE (a large U.S. defense contractor) was not charged with violating the FCPA.  (To learn more about the BAE enforcement action, see “The Facade of FCPA Enforcement” pgs. 993-996).

Consider also the mysterious conclusion to the James Giffen enforcement action.  In 2003, James Giffen was criminally charged with “making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan.” However, Giffen’s defense was that his actions were made with the knowledge and support of the CIA, the National Security Council, the Department of State and the White House. The DOJ did not dispute that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court’s approval, Giffen sought discovery from the government to support his public authority defense and much of the delay in the case was due to the government’s resistance to such discovery and who was entitled to see such discovery.  In 2010, the enforcement action took a sudden and mysterious turn when Giffen agreed to plead guilty to a one-paragraph superseding indictment charging a misdemeanor tax violation.  The enforcement action ended with the presiding judge imposing no jail time on Giffen and stating that he was a Cold War hero and that the enforcement action should have never been brought in the first place. Giffen presumably prevailed over the DOJ not because of the facts or the law, but because he possessed significant leverage over the government in that he asserted his actions were taken with the knowledge and support of the highest levels of our  government. 

Consider also the fact that there has been no FCPA enforcement actions concerning contracts at the Manas airbase in Kyrgyzstan (which the U.S. used to route personnel and equipment headed for Afghanistan).  (To learn about the Manas contracts see here for a U.S. House hearing devoted to the subject and herehere and here for additional information).

In short, President Biden did not introduce a “big idea into the global debate when he declared that combating corruption is a core U.S. national security interest” and national security is a reason not to enforce the FCPA (both as a matter of statute and as a matter of practice).

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