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TI’s Shaming Of Countries Accomplishes Little

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 [1], here [2], here [3], here [4], here [5] and here [6]) 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 2018″ [7]).

As explained in TI’s related material [7]:

“Transparency International’s 2018 Progress Report is an independent assessment of the enforcement of the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention, which requires parties to criminalise bribery of foreign public officials and introduce related measures.”

Under the provocative headline “Foreign Bribery Rages Unchecked in Over Half of Global Trade [8],” TI states:

“In prioritising profits over principles, governments in most major exporting countries fail to prosecute companies flouting laws criminalising foreign bribery. What is missing is active enforcement. Transparency International’s new report, Exporting Corruption [7], finds that only 11 major exporting countries – accounting for about a third of world exports – have active or moderate law enforcement against companies bribing abroad in order to gain mining rights, contracts for major construction projects, purchases of planes and other deals. Country by country, the report names the top offenders as well as the flaws in national legal systems that allow this crime to continue unchecked. One of the most shocking examples exposed in recent years is the massive foreign bribery scheme carried out by the Brazilian construction conglomerate Odebrecht involving about US$788 million in bribes to government officials and political parties in at least 12 countries.”

Let’s stop right here to analyze the term “one of the most shocking examples.” One of the most shocking examples of what? Bribery going going unchecked? Excuse me but Odebrecht and related entities agreed in December 2016 to pay approximately $3.5 billion in penalties to resolve bribery investigations in Brazil, the U.S. and Switzerland. (See here [9]). This coordinated enforcement action has spawned other investigations in other countries as well. In short, just an absurd example by TI of bribery supposedly “going unchecked.”


Back to its ranting, TI states:

“The results [of its report] show that we are far from bringing enforcement against foreign bribery to a tipping point. Governments must scale up their foreign bribery enforcement. This means investigating allegations and pressing charges, as well as courts convicting guilty individuals and companies, and imposing substantial sanctions where appropriate.”

Elsewhere, TI materials [11] state:

“Most of the world’s most powerful export markets are failing to punish corporations paying bribes overseas, according to a new report from Transparency International …” “It is unacceptable that so much of world trade is susceptible to consequence-free corruption,” said Delia Ferreira Rubio, Chair of Transparency International.”

If one thinks of this in terms of numerators and denominators, TI seems to acknowledge that with each passing year the numerator gets larger but seems concerned that this is not sufficient because the denominator remains large. Yet from my perspective, the denominator (in other words the alleged corruption that is taking place in the global marketplace) often consists of media reports of alleged corruption or white papers written by so-called civil society organizations.

However, there is more to bringing criminal charges against a person (whether a natural person or legal person) than just writing a newspaper article or white paper. The power to bring criminal charges is one of the most awesome powers government has and should be exercised with caution. Legal elements need to be met consistent with relevant burdens of proof.

Regardless, TI’s comparative approach in ranking countries is significantly flawed – something even TI seems to acknowledge. As explained in more detail in this article [12] “Ten Seldom Discussed Foreign Corrupt Practices Act Facts That You Need to Know,” comparing FCPA enforcement to enforcement of similar FCPA-like laws is an apples to oranges comparison.

“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. Against this backdrop, it is not surprising that the country with the most lenient form of business organization liability—the U.S.—has the most enforcement actions. Second, the U.S. is rare among OECD Convention countries in resolving alleged FCPA violations via NPAs, DPAs or administrative actions [and declinations with disgorgement].


In contrast, in nearly every other OECD Convention country 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. Against this backdrop, it is not surprising that the country—the U.S.—with numerous options to resolve alleged instances of bribery has more enforcement actions than other OECD Convention countries with only the traditional two options (charge vs. do not charge). In short, comparing U.S. FCPA enforcement statistics to enforcement statistics in other OECD Convention countries is an apples to oranges comparison.”

A couple of additional observations regarding TI’s report.

The TI report uses a detailed point system for weighing different enforcement activities. As explained by TI:

“The weighting used is as follows: one point for commencing investigations, two points for commencing cases, four points each for commencing major cases or concluding cases with sanctions, and 10 points for concluding major cases with substantial sanctions. The definition of “major case” includes the bribing of senior public officials by major companies, including state-owned enterprises. In determining whether a case is “major”, additional factors to be considered include: • whether the defendant is a large multinational corporation. • whether the amount of the contract and of the alleged payment(s) is large. • whether the case constitutes a major precedent and deterrent.”

This point system has a number of flaws, starting with points for commencing investigations and cases. In any given year, approximately 50% of corporate FCPA enforcement actions originate for voluntary disclosures – an outgrowth of the FCPA practice in the U.S. being a multi-billion dollar niche industry. Why should many non-U.S. countries lose points because there is not a vibrant niche industry? Behind voluntary disclosures, foreign law enforcement investigations are often an originating source of FCPA investigations. Why should the U.S. get points because another country commences a case?

And then there is TI’s point system that assigns points based on major cases with substantial sanctions. Why should this matter? It’s not like government law enforcement agencies can control this highly-fact dependent variable. This strikes me as being similar to ranking a U.S. state’s commitment to enforcing its speeding laws by assigning more points if law enforcement issues tickets to drivers of semi-trailers packed with valuable products compared to drivers of a Toyota Prius. This would be unfair because some states, merely by virtue of their geographical location, have more commercial traffic than others. Moreover, if the speed limit is 65 does this mean that State A (a highly populated state) is less committed to enforcement because the average speeding ticket is for going 74 miles per hour, compared to State B (a sparely populated state) where the average speeding ticket is for going 80 miles per hour?

In short, TI’s point system is odd and assigns points based on variables that government can’t necessarily control.

One final observation about TI’s report. Like other TI “shaming” reports, TI relies upon so-called country/region experts for information. 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 their being more enforcement. Just saying.

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