I have no doubt that the individuals associated with Transparency International have a genuine interest in reducing bribery and corruption in the global marketplace.
Nevertheless, I have long had good-faith concerns (see prior posts here , here , here , here , here  and here ) about how TI goes about this task. The latest example is TI’s recent “shaming report” (that is my term, TI technically calls its report “Exporting Corruption – Progress Report 2020 ″ ).
The Executive Summary states:
“Transparency International’s 2020 report, Exporting Corruption, rates the performance of 47 leading global exporters, including 43 countries that are signatories to the Organisation for Economic Cooperation and Development (OECD) Anti-Bribery Convention, in cracking down on bribery of foreign public officials by companies operating abroad. The report shows how well – or poorly – countries are following the rules. More than 20 years after the Convention was adopted, most countries still have a long way to go in meeting their obligations. In fact, active enforcement has significantly decreased since our last report in 2018.
The need for robust foreign bribery enforcement is as urgent today as when the OECD Anti-Bribery Convention was first adopted in 1997. Now more than ever, we need stronger foreign bribery enforcement and international cooperation and coordination.”
The 2020 report is the 18th version of this specific TI report. The fact that few countries made the “active” enforcement category and that active enforcement actually decreased since the last report in 2018 is perhaps a good indication that TI’s shaming of countries accomplishes very little.
TI puts countries into the following categories: active, moderate, limited and little or no enforcement based on the following scoring system.
- for commencing investigations – 1 point
- for commencing cases – 2 points
- for commencing major cases – 4 points
- for concluding cases with sanctions – 4 points
- for concluding major cases with substantial sanctions – 10 points
For starters measuring the occurrence of these things across various OECD Convention countries is of little value because the points are not adjusted for differences in population or the number of business organizations or persons subject to the law for which enforcement is being measured.
For instance, the United States has a population of approximately 330 million, tens of millions of business organizations and persons logically subject to the FCPA, approximately 1,000 foreign companies with shares listed on a U.S exchange and thus subject to the FCPA, and a prominent worldwide banking system which often represents the singular jurisdiction basis for the DOJ and/or SEC to bring an FCPA enforcement action. Of course the U.S. is going to have a higher incidence of most everything – including enforcement of a specific law – compared to for instance Portugal (population of approximately 10 million, few foreign companies with shares listed on their stock exchange, and a less prominent banking system).
Against this backdrop, comparing U.S. enforcement of the FCPA to Portugal’s enforcement of its FCPA-like law is like comparing which state California (population approximately 40 million) or Wyoming (population 580,000) issues more speeding tickets and thus has a greater commitment to enforcing speeding laws.
Moreover, the point system TI uses is not necessarily reflective of commitment to enforcing bribery laws.
In Scenario A a country’s law enforcement agency pro-actively uncovers a bribery scheme, commences an investigation, commences a case, and concludes the case by proving to a jury that the company under investigation violated the law and secures a $1 million verdict. This country receives 7 points (1 + 2 +4) under TI’s scoring system.
In Scenario B a country’s law enforcement agency receives a voluntary disclosure concerning a substantial bribery scheme across various countries, based on the voluntary disclosure commences an investigation, which then results in commencement of a “major” case, that is resolved through a non-prosecution agreement that is not subjected to any judicial scrutiny, through which the law enforcement agency secures a $50 million settlement. This country receives 15 points (1 + 4 + 10) under TI’s scoring system.
Most people would presumably agree that in Scenario A the country’s law enforcement agency did more work and demonstrated a greater commitment to enforcement than in Scenario B in which a “major” bribery case fell “into the lap” of the law enforcement agency through a voluntary disclosure. However, in Scenario B the country received approximately 75% more points than the country in Scenario A.
Doesn’t make much sense does it?
It really doesn’t make much sense when one considers that in the same report TI criticizes how certain countries resolve bribery investigations and cases. As stated in the report:
“Countries should ensure that non-trial resolutions meet standards of transparency, accountability and due process, with clear guidelines and judicial review.”
Non-trial resolutions or settlements offer an economic way to hold companies accountable for wrongdoing and resolve foreign bribery cases. Such resolutions can help incentivise self-reporting, boost enforcement of foreign bribery laws and improve corporate compliance. However, they may not act as a significant deterrent to foreign bribery if low standards apply.
Non-trial dispositions in many countries also fail to meet standards of accountability and due process, lacking clear guidelines and judicial review. Often, they fail to provide effective, proportionate and dissuasive sanctions.
Moreover, comparing FCPA enforcement to enforcement of similar FCPA-like laws is an apples to oranges comparison for reasons in addition to those highlighted above.
First, the U.S. is rare among OECD Convention countries in having so-called respondeat superior liability in which a business organization can face criminal or civil liability based on the conduct of any employee or agent to the extent the conduct was within the employee or agent’s scope of employment/agency and was intended, at least in part, to benefit the business organization. In contrast, most other OECD Convention countries either: do not recognize legal person liability; or if they do only allow such liability to the extent conduct was engaged in by so-called ‘‘controlling minds’’ of the business organization such as board members or executive officers.
Second, the FCPA contains three separate independent provisions: the anti-bribery provisions, the books and records provisions, and the internal controls provisions. In contrast, the FCPA-like laws of many other OECD Convention countries are not as expansive and may merely contain anti-bribery provisions.
Third, the FCPA is enforced both criminally and civilly. In contrast, the FCPA-like laws of many other OECD Convention countries are only enforced criminally or civilly and not both.
Fourth, the FCPA is predominately enforced against business organizations through alternative resolution vehicles (NPAs, DPAs, declinations with disgorgement, administrative orders) that are not subjected to any meaningful judicial scrutiny. In contrast, in most other OECD Convention countries law enforcement agencies must do something that may be considered old-fashioned by current U.S. standards—and that is prove actual legal violations to someone other than itself.
Fifth, as highlighted in this prior post , in the last decade approximately 40% of corporate FCPA enforcement actions are the result of voluntary disclosures. In contrast, voluntary disclosures are not a dominate feature in most other OECD Convention countries (perhaps because most other OECD Convention countries do not have a multi-billion industry focused on enforcement of their FCPA-like law like the U.S. does).
Sixth, as highlighted in this prior post , much of the largeness of corporate FCPA enforcement in recent years (both in terms of the number of actions and settlement amounts) has resulted from the U.S. “piling on” to enforcement actions against companies from other OECD Convention countries even though the “home” country brought an enforcement action against their “domestic” company based on the same core conduct. In contrast, most other OECD Convention countries don’t “pile on” to foreign law enforcement investigations and generally only enforce their FCPA-like law against domestic companies and not foreign companies.
On final point about TI’s report.
It largely relies on “corporate or criminal lawyers who are experts in foreign bribery matters to assist in the preparation of the report.” A quick review of this roster indicates that a high percentage of these individuals are associated with law firms and other professional service advisers who have a vested interest in there being more enforcement.
This is sort of like asking barbers if more people should get a haircut, the barbers then ranking communities on hair cut frequency (based on a flawed scoring system), and then the barbers shaming certain communities for low hair cut frequency rates. The seemingly obvious take-away point here is that barbers have a vested interest in people getting haircuts very frequently.
Strategies For Minimizing Risk Under The FCPA
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