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Silly “Scholarship”


Academics like to measure things.

However, just because something can be measured, doesn’t necessarily mean that it should be measured or that the measurement has any meaningful significance.

There are lots of things in the Foreign Corrupt Practices Act space that can and should be measured.

However, this recent paper titled “The Political Economy of Anti-Bribery Enforcement” once again demonstrates the silliness of measuring certain things.

The article abstract states:

“This paper documents novel evidence on the influence of political incentives in the regulatory enforcement of foreign bribery. Using case-level data from the U.S. Securities and Exchange Commission and U.S. Department of Justice, we find strategic discretion in the timing of enforcement in the years leading up to a Senate election against foreign firms in the Senator’s state. The probability of a Foreign Corrupt Practices Act (FCPA) enforcement action against foreign firms located in the state increase significantly, spiking 23%, but zero for U.S. firms domiciled in the same states. We use exogenous variation in the timing and geographic location of U.S. Congressional elections to establish identification of our effects at the fine geographic level. Larger discretion occurs in regions where foreign firms are larger global competitors of in-state firms, operate in locally important industries, and when Senators serve as the Chairman of the Senate Judiciary Committee. Anti-bribery enforcement has electoral implications, leading to greater vote shares for the Senator in power, coupled with spikes in media coverage. Moreover, the cases pushed through against these foreign firms just prior to elections appear to be weaker cases. The enforcements result in real effects, as in response to strategic timing in enforcement, firms reallocate business segments and sales.”

For starters, it is hard to take a “scholarly” article seriously when the introduction includes the following phrase. “FCPA enforcement policy is conducted in state courts.” But then again, one of the article’s authors is affiliated with Harvard so he must know what he is writing about.

To get readers to perhaps overlook an obvious early factually false statement, the authors return to sophisticated language as follows.

“We [explore the political determinants of anti-bribery enforcement] by utilizing cross-sectional variation in incentives for identification. In particular, we examine U.S. Congressional Senate elections – which have schedules that are pre-determined, known years in advance, and are plausibly exogenous from a timing and location perspective. They are staggered spatially and in time – with one third of the senate seats being up for re-election of 6-year terms every even-numbered year (outside of special election circumstances). Moreover, unlike presidential elections, there is substantial cross-state variation in the timing of treated states in each election cycle. This allows us to exploit this exogenous variation in Senate election timing and locations to explore the extent to which anti-bribery enforcement is related to electoral concerns.”

Remember the 2013 FCPA enforcement action against Total in which the French oil and gas company paid approximately $400 million to resolve DOJ and SEC charges related to a bribery scheme in Iran? The enforcement action, per the DOJ, was related to a prior French criminal law enforcement inquiry in which the DOJ stated: “we announce the first coordinated action by French and U.S. law enforcement in a major foreign bribery case.”

However, the authors found the real reason for the 2013 Total enforcement action. They state:

“Exxon Mobil Corporation is an American multinational oil and gas corporation headquartered in Irving, Texas, which is also one of the world’s six largest publicly traded oil and gas companies. Exxon Mobil competes with Total in multiple aspects of the oil, natural gas, and energy procurement and production. The 2014 United States Senate election in Texas was held in November 2014, with incumbent Republican Senator John Cornyn running for re-election to a third term, eventually winning Senate re-election. The enforcement action against Total was brought in 2013, preceding the Senate election in Texas.”

Right. OK. Gotcha.

Never mind that – per Total’s previous disclosures (see here) – the SEC and DOJ inquiry began in 2003, in 2010 Total opened talks with U.S. authorities to consider out of court settlements, and in late 2011 Total was unable to agree to several substantial elements of the potential settlement.

The real reason the 2013 Total enforcement action happened when it did was because of a Senate election in Texas!

But how could the authors be wrong when their findings are based on formulas like this:


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