FCPA Scholarship « FCPA Professor

Archive for the ‘FCPA Scholarship’ Category

Foreign Corrupt Practices Act Enforcement As Seen Through Wal-Mart’s Potential Exposure

Tuesday, September 18th, 2012

I am pleased to share my article “Foreign Corrupt Practices Act Enforcement As Seen Through Wal-Mart’s Potential Exposure” recently published in the Bloomberg BNA White Collar Crime Report.

The abstract is as follows.

High-profile instances of Foreign Corrupt Practices Act scrutiny focus attention on the law and its enforcement across a broad spectrum. In spring 2012, arguably the most high-profile instance of scrutiny in the FCPA’s 35-year history occurred as Wal-Mart’s alleged conduct in Mexico dominated the news cycle. Wal-Mart’s scrutiny has been instructive in many ways at a key point in time for the FCPA. The article uses Wal-Mart’s potential FCPA exposure as a prism to view the current FCPA enforcement environment.

Among the issues discussed in the article are the following: whether Congress intended in passing the FCPA to capture the type of payments at issue in Wal-Mart; what caselaw instructs as to the payments; whether what Congress intended or what courts have concluded even matters; the impact of Wal-Mart’s scrutiny on the company as well as industry peers; and the politicization of Wal-Mart’s scrutiny and its impact on FCPA reform.

The complete article can be downloaded here.

Further Thoughts On A Compliance Defense

Tuesday, September 4th, 2012

The day after Labor Day has always seemed like a second New Year. In that spirit, let’s kick off the “new year” with further thoughts on a compliance defense.

For starters, I am pleased to share (here) the published version of my scholarship “Revisiting a Foreign Corrupt Practices Act Compliance Defense.” The published version in the Wisconsin Law Review (compared to the draft released last January) contains additional reasons and rationale for why the FCPA ought to be amended to make a company’s pre-existing compliance policies and procedures, and its good-faith efforts to comply with the FCPA, relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures.

In other developments relevant to a compliance defense and of particular note, a Senior Investigations Counsel with the SEC’s FCPA Unit published an article (here) in Standford’s Journal of Law, Business & Finance arguing that “the United States should adopt a compliance procedures defense for the FCPA similar to the adequate procedures defense under the Bribery Act.” The typical “I am not speaking on behalf of the SEC” disclaimers applied to Jon Jordan’s article, but it is hard to ignore calls for reform from a current SEC official who spends his days investigating FCPA issues.

As noted in this previous post, William Jacobson (former assistant chief of DOJ FCPA enforcement and current co-general counsel and chief compliance officer at Weatherford International Ltd.) has joined the growing chorus of former high-ranking DOJ officials calling for reform. The FCPA Blog recently (here) called for a revival of Jacobson’s plan for recognizing a company’s pre-existing FCPA compliance policies and procedures. While I agree with much of what Jacobson says, I disagree that the solution to this important issue is non-binding DOJ policies and procedures. I also disagree that a trigger for recognizing a company’s pre-existing FCPA compliance policies and procedures should be, as Jacobson suggests, a company’s voluntary disclosure to the enforcement agencies.

Over the summer, Alexandra Wrage (President of Trace International) compiled a list of antibribery and anticorruption resources (here) for in-house counsel to consult in developing and implementing compliance programs. Separately, Transparency International announced here its “Assurance Framework for Corporate Anti-Bribery Programs” with the goal of “provid[ing] benchmarks in the form of control objectives for use by enterprises in designing and evaluating their anti-bribery programmes in anticipation of independent assurance.” Ought not these quality resources and the benchmarking factors they contain matter other than in the opaque world of enforcement agency discretion?

Also over the summer, Ben Heineman (former General Electric Company senior vice president-general counsel and current senior fellow at Harvard) wrote here that “federal enforcement authorities should give much more systematic credit to effective corporate compliance programs when making decisions about criminal prosecutions …”.

In this post concerning a compliance defense, Michael Volkov states that my proposal to have compliance incorporated into the FCPA as an element of a bribery offense, the absence of which the DOJ must establish to charge a substantive bribery offense is “unprecedented.” This is not true. Such a concept is not unprecedented as several peer countries, as noted in my Revisiting article, have adopted this approach in their FCPA-like laws. Volkov returned to the issue of compliance in this post arguing that “one alternative which is not discussed very often is to increase the benefit for an effective corporate compliance program under the US Sentencing Guidelines.” Perhaps the Sentencing Guidelines could be tweaked, but revising non-binding guidelines that are only implicated after liability has been established is not a comprehensive solution to the issue.

I have debated an FCPA compliance defense with Howard Sklar (see here). His main objection to a defense seems to be that if there is such a defense, an FCPA inquiry will turn into an investigation of the company’s overall compliance culture. For starters, how is this any different from the current enforcement environment in which the “where else” question is typically asked (see here for the prior post) and in which instances of FCPA scrutiny typically lead to world-wide reviews of a company’s operations? In addition. Sklar’s fears are overblown because a compliance defense ought to be situational. The FCPA compliance defense that passed the House in the 1980′s was situational in that it focused on specific employees engaged in specific conduct and the specific officers and employees of the company who had supervisory responsibility of the specific employees and specific conduct. Likewise, the adequate procedures defense in the U.K. Bribery Act is situational. The statutory text itself references particular instances of bribery (i.e. “such conduct”) and Ministry of Justice guidance states that “the commercial organisation will have a full defence if it can show that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing.” (emphasis added).

There will likely be no movement on FCPA reform until after the DOJ releases its guidance this Fall and until a new Congress begins after the elections. When reform discussion begins anew, it will be against the backdrop of a growing chorus who do not believe that the enforcement agencies adequately recognize and credit pre-existing FCPA compliance policies and procedures.

There is disagreement as to the remedy, but I believe for the reasons stated in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” that the best solution is to make a company’s pre-existing compliance policies and procedures relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures.

A New Strategy For Preventing Bribery And Extortion In International Business Transactions

Monday, August 27th, 2012

Today’s post is from Bruce Klaw (here), an Assistant Professor of Law at Keimyung University in South Korea. Klaw discusses his recent scholarship “A New Strategy for Preventing Bribery and Extortion in International Business Transactions” recently published in the Harvard Journal on Legislation (see here to download the article).

*****

I’d like to thank Professor Koehler for this opportunity to write about my article and more importantly, for running FCPA Professor, an invaluable resource for scholars and practitioners alike.

With that said, let me introduce my article with a bit of context, using two stories of FCPA violations in Mexico:

The first story involves Tyson de Mexico, a wholly-owned subsidiary of Tyson Foods, Inc., a U.S. issuer subject to the FCPA. From 1994 to 2006, Tyson de Mexico made approximately $350,000 worth of secret payments to veterinarians employed by the Mexican government to inspect Tyson’s facilities after those veterinarians expressly threatened to disrupt the operations of two of its chicken processing plants. When Tyson voluntarily disclosed the extorted payments to U.S. enforcement authorities, it was forced to pay $5.2 million in penalties as part of a non-prosecution agreement and settlement with the S.E.C. concluded in early 2011. (See here for the previous FCPA Professor post).

The second story involves Wal-Mart, which became the focus of significant FCPA attention when the New York Times broke a story in April about an alleged pattern of bribery of Mexican officials in order to facilitate the expansion of Wal-Mart’s business south of the border. (See here for the previous FCPA Professor post). The real kicker of the Wal-Mart story, however, was not the fact that bribes were paid to local officials in apparent violation of the FCPA, but rather that top level executives at Wal-Mart’s U.S. headquarters learned about the apparent misconduct through an internal investigation but effectively hushed it, choosing not to disclose the matter to U.S. enforcement officials until their hand was forced by The Times several years later.

The Tyson and Wal-Mart cases illustrate a number of the problems inherent within the FCPA that are identified within the article:

1) its one-sided focus on only the supply-side of bribery transactions (i.e., the payer) and not the corrupt government recipients who may solicit or demand them;

2) its failure to meaningfully account for the circumstances under which payments are made or legally distinguish between bribery and extortion; and

3) its paradoxical reliance on voluntary disclosure as the primary means of detection and corresponding penalization of companies that voluntarily disclose such payments.

As a result of these flaws and others identified within the article, the U.S. anti-corruption regime establishes a structure that all but encourages bribery and extortion in international business transactions to remain secret and pervasive. Many companies, including Wal-Mart, may well be making the choice to try to keep their payments to foreign officials secret rather than risk the almost certain negative consequences of disclosure.

This is what my article seeks to address.

In this piece, I argue that the focus of the U.S. anti-corruption strategy should be shifted from punishment to prevention. To accomplish this end, the article argues for a number of detailed and significant changes to the FCPA, which implemented together, should better serve the interests of justice and provide the appropriate incentive structure for substantially reducing international bribery and extortion.

Chief among the changes I propose is decriminalizing the act of giving bribes to foreign officials. Decriminalization is not only morally appropriate in some cases (i.e., when a company like Tyson makes a payment to a foreign official in response to an extortionate demand), but also is likely to prevent bribery in the long run. Decriminalization will help bring corruption out of the shadows, have a nominal impact on the number of bribes offered, and ultimately reduce the incidence of bribe solicitation and acceptance by foreign officials.

In place of criminalization, I argue Congress should focus on strengthening payment disclosure requirements. Congress should impose upon all companies subject to U.S. jurisdiction a strict requirement of mandatory disclosure of all bribe solicitations by foreign officials, and all payments to foreign intermediaries or foreign officials above a certain monetary threshold, similar to the requirement currently imposed on financial institutions to report suspicious activity.

Once disclosed and investigated, payments to foreign officials will tend to fall into two categories: willing and unwilling. The distinction rests on the presence or absence of express or implicit coercive extortion by a public official. By following the natural implications of such a distinction—that criminals should be punished and victims should be compensated—the law can incentivize the disclosure of corruption, enable the true victims of such corruption to take action against the wrongdoer, and facilitate restitution where appropriate.

In the case of truthfully disclosed unwilling payments to foreign officials, such payers should be entitled to restitution and granted safe harbor to insulate them not only from U.S. enforcement action, but also from private civil litigation, the threat of which currently impedes disclosure.

Bribes made willingly, on the other hand, should be publicly disclosed so that foreign governments may prosecute and take other action to rescind tainted contracts. Likewise, upon disclosure and after the creation of a limited private right of action under the FCPA (for which I also argue in the article), competitors harmed by such unfair business practices may take action against those willing payers to recover their damages. After all, why should the U.S. government devote its resources to prosecuting bribe-givers when business competitors and foreign governments stand ready and willing, in most cases, to police violators at a fraction of the cost to U.S. taxpayers?

Finally, I argue that to address the demand-side of bribery, Congress should expand extraterritorial U.S. jurisdiction under the FCPA to prosecute foreign officials who solicit or demand unwilling payments if foreign governments are unwilling or unable to do so.

By addressing the problems and implementing the prescriptions I have laid out in the article, it is hoped that the occurrence of bribery and extortion in international business transactions may be substantially reduced.

*****

As highlighted in various previous posts, discussed in my “foreign official” declaration (here), and will be discussed in greater detail in my forthcoming scholarship “The Story of the Foreign Corrupt Practices Act” (Ohio State Law Journal), addressing the foreign corporate payments problem discovered in the mid-1970′s via a disclosure approach (vs. the current criminalization approach) was favored by the Ford administration. President Ford’s point person on the issue was Elliot Richardson (Secretary of Commerce) who, in a letter to Senator William Proxmire, summarized the work of the Ford Task Force as follows. “The Task Force has concluded that the criminalization approach would represent little more than a policy assertion, for the enforcement of such a law would be very difficult if not impossible. [...] The criminal approach would represent poor public policy. [...] At the same time, the Task Force perceived several very positive attributes of systematic disclosure.”

President Ford stated as follows. “The reporting requirement covers a broad range of payments relative to government transactions as well as political contributions and payments made directly to foreign public officials. By requiring reporting of all significant payments, whether proper or improper, made in connection with business with foreign government, the legislation will avoid the difficult problems of definition and proof that arise in the context of enforcement of legislation that seeks to deal specifically with bribery and extortion abroad.”

The disclosure regime was rejected by Congressional leaders. A Senate Report stated as follows. “The Committee concluded that an outright prohibition would be at least as feasible to enforce as any meaningful disclosure requirement. [...] Clearly, in order to enforce such a disclosure requirement and apply sanctions for failure to file reports, it would be necessary to prove that the undisclosed payment was actually made, and that it was made with an improper purpose. Thus, the same evidence necessary to prove a violation of a direct prohibition would have to be marshalled in order to enforce a disclosure statute. Accordingly, the Committee concluded that a disclosure approach has at least the same enforcement problems inherent in the direct prohibition approach and none of its advantages.”

Jimmy Carter (who favored a criminalization approach over a disclosure approach) defeated Ford in the 1976 election and the rest is history.

Foreign Official And The Missing Link

Monday, May 21st, 2012

A guest post today from Paul Rose (here – Associate Professor of Law, The Ohio State University Moritz College of Law). Professor Rose presented his scholarship “State Capitalism and the Foreign Corrupt Practices Act” (here) in March at a symposium hosted by the Ohio State Law Journal titled “The FCPA at Thirty-Five and Its Impact on Global Business.” (See here for a previous guest post concerning the symposium).

*****

“Many thanks to Professor Koehler for the opportunity to talk about my work. His research on the FCPA has been crucial in illuminating the many issues surrounding the DOJ’s enforcement of the FCPA, and particularly useful for me in focusing attention on the “foreign official” definition. My research interests include state-controlled enterprises and funds, including state-owned pension funds and sovereign wealth funds. The application of the FCPA to such funds—the managers and employees of which would almost certainly be considered “foreign officials” by the DOJ and SEC—raises a host of issues that are only just beginning to be addressed in the growing literature on the FCPA. My short article “State Capitalism and the Foreign Corrupt Practices Act was prepared as part of the Ohio State Law Journal’s symposium on the Foreign Corrupt Practices Act and it attempts to sketch out some of the issues.

First, it is unclear whether the FCPA can or should be read to cover state-owned funds. There are several practical reasons for arguing that it should not, among them a recognition that most of these enterprises and funds operate as quasi-independent entities that should not be viewed as direct agents of their respective governments. These funds also typically (but admittedly not always or exclusively) serve economic and financial purposes, rather than a political or governmental purpose.

Second, even if foreign enterprises and funds can be viewed as foreign instrumentalities, it is not clear that the FCPA provides the best remedy for the type of harm that occurs when a state-controlled fund employee is bribed. In non-FCPA contexts, the SEC has characterized the acceptance of bribes by fund managers as a breach of fiduciary duty to the fund investors. Cast in these terms, the harm was an agency cost, and the SEC assists the fund investors by applying their enforcement resources to cover some of the investors’ costs of monitoring the fund managers. If the fund investors are the beneficiaries of this shifting of agency costs from private investors to public enforcers, who are the beneficiaries of a similar shift when foreign officials are bribed?

A third concern, related to the foregoing, is the apparent enforcement agency and judicial drift away from the original purpose of the FCPA as a tool to prevent corruption that affects foreign policy. If this original purpose is to have any meaning in the context of state-controlled enterprises and funds, there must be a link between the foreign government, the instrumentality of the government, and the foreign officials who work for the instrumentality. Each of these entities must be connected like three links of a chain—the foreign government linked to the instrumentality, and the instrumentality linked to the foreign official. In this way, the acts of the foreign government have an effect on the foreign official, and the acts of the foreign official have an effect on the government. Only if there exists this linkage between the foreign official and the foreign government—in the case of state-controlled enterprises and state-controlled funds, through their respective links to an instrumentality—should we expect to find the kind of foreign policy effect that the FCPA was designed to police. Current SEC and DOJ interpretations, as well as the scant jurisprudence that has tested these interpretations, tends to look only at the connection between the foreign government and the instrumentality. The legislative history of the FCPA, however, suggests that because foreign policy concerns are central to the FCPA, the link between the instrumentality and the foreign official must also be tested. To more directly rephrase the question of who is benefitted when the U.S. government pays for foreign fund agency costs, why are U.S. taxpayers paying for enforcement that serves to reduce agency costs for foreign governments, their citizens, and in some cases, the stockholders of partially state-controlled enterprises, but has no effect on U.S. foreign policy considerations?

My article attempts to get at the core issue of the proper scope of the FCPA by considering who is an “instrumentality” and “foreign official” under the statute. Additional clarity could be brought to this question by looking first at the link between the foreign government and alleged instrumentality. Other areas of the law, including foreign investment law, have developed a substantial base of knowledge on the issues of foreign government control of state-affiliated enterprises and funds that could help inform FCPA jurisprudence. As noted above, however, the more significant problem concerns the unidirectionality of current tests for “instrumentality” and “foreign official” status. The tests used by the few courts addressing the issue have tended to look only at the issue of governmental control, but have ignored the link between the foreign official and the instrumentality—in other words, does the foreign official exercise control over the instrumentality so that there is a meaningful connection between the foreign government and the foreign official? This analysis is key because if one takes the legislative history of the FCPA seriously, an FCPA prosecution is predicated on the ability of the foreign official to affect foreign policy.”

Friday Roundup

Friday, May 4th, 2012

From the campaign stump, Wal-Mart civil suits start to pour in – plus a comment regarding statute of limitations, where should the money go, don’t believe the hype, and for the weekend reading stack. It’s all here in the Friday roundup.

From The Stump

Zein Obagi (here – a fiscally conservative Democratic candidate for California’s new 33rd Congressional District) earlier this week posted a letter (here) he sent to U.S. Senator Dianne Feinstein (D-CA). Titled “Keeping California Companies Competing Abroad Competitive” the letter begins as follows. “I am writing to ask you to show our party’s understanding of international trade by updating and clarifying the Foreign Corrupt Practices Act. As you know Senator, both sides of the aisle have put forth efforts to clarify the FCPA, to assist in its enforcement and also keep America competitive with foreign nations’ trade practices.” In the letter, Obagi states that “California businesses expend enormous resources with insufficient assurances that they will not run afoul of the FCPA.”

Kudos to Obagi for the courage to tackle the politically sensitive issue of reforming the FCPA. His letter reminds us of an issue lost in the FCPA reform debate – that certain aspects of FCPA reform share bipartisan support. See here for the transcript of the Senate’s 2010 FCPA hearing (particularly statements from Democratic Senators Amy Klobuchar and Chris Coons) and here for the transcript of the House’s 2011 FCPA hearing (particularly statements from Democrat Representative John Conyers).

Wal-Mart Civil Suits Begin to Pour In

One of my earlier Wal-Mart posts (here) noted that not only will the DOJ and SEC likely be examining the conduct of Wal-Mart executives, but so too will plaintiff law firms representing shareholders who will likely scour Wal-Mart’s SEC filings and other statements to the market in bringing derivative claims alleging breach of fiduciary duty and potential Section 10(b) claims based on material omissions concerning Wal-Mart Mexico. On this score, shareholders are likely to allege, among other things, that Wal-Mart’s officers and directors demonstrated conscious disregard for fiduciary duties by failing to act diligently in the face of known facts suggesting a duty to act.

Approximately ten days later the civil suits are starting to pour in. See here (New York Times) and here (Los Angeles Times) for the derivative lawsuit brought by the California State Teachers’ Retirement System, the country’s second-largest public pension fund, the California State Teachers’ Retirement System, against current and former board members and executives of Wal-Mart Stores Inc., accusing them of using bribery and corruption to gain authorization from Mexican government officials to build new stores.

The complaint (here) generally tracks the New York Times article (see here for a prior summary), but also includes allegations suggesting potential insider trading. The complaint alleges as follows. “[T]he trading records of defendants [H. Lee Scott Jr.] and [Eduardo] Castro-Wright show that both of these defendants began selling millions of dollars worth of Wal- Mart shares in the months after The New York Times first contacted the Company regarding possible FCPA infractions by Wal-Mex in December 2011. Scott and Castro-Wright were divesting their shares in Wal-Mart in apparent anticipation of the publication of The New York Times exposé and the corresponding stock drop that would undoubtedly occur, and did occur. On the three trading days after The New York Times’ April 21, 2012 exposé, Wal-Mart stock dropped eight percent, wiping out all of its gains in 2012. Scott and Castro-Wright sold uncharacteristically large amounts of stock while in possession of the materially adverse nonpublic information that the Company was exposed to undisclosed liability for massive FCPA penalties and other contingences relating to the bribes and cover-up …”.

In addition, yesterday Gilman Law LLP announced here a derivative lawsuit filed in the United States District Court for the Western District of Arkansas against Wal-Mart. According to the release, the “complaint alleges the Directors of Wal-Mart breached their fiduciary duties by violating the Foreign Corrupt Practices Act and engaging in a six-year-long cover-up of a massive bribery scheme concerning Wal-Mart’s expansion in Mexico.”

Wal-Mart Statute of Limitations

In recent days, there has been much talk about the FCPA’s statute of limitations (5 years) and how the limitations period can generally be extended through conspiracy charges. All correct observations as to a fundamental black-letter law concept. Except in corporate FCPA inquiries, one can generally toss aside fundamental black-letter law concepts because they simply do not matter.

Sure, Wal-Mart (or any other company subject to FCPA scrutiny) can talk about statute of limitations around conference room tables behind closed doors in Washington D.C., but to truly challenge the DOJ on this issue (as all others) first requires that the company be criminally indicated, something few corporate leaders are willing to let happen. Cooperation is the name of the game in corporate FCPA inquiries and to assert statute of limitations issues is not cooperating. Given the “carrots” and “sticks” relevant to resolving FCPA enforcement actions (to learn more about these “carrots” and “sticks” please read ”The Facade of FCPA Enforcement” – here), one of first steps during a corporate disclosure of FCPA issues (one that Wal-Mart made in December 2011) is to enter into a tolling agreement or to waive any statute of limitations defenses.

As evidence, dig into the details of most FCPA enforcement actions and one quickly discovers that the conduct at issue is old – in some cases very old. The 2012 Biomet enforcement action (see here for the prior post) concerns conduct going back to 2000; the 2012 Smith & Nephew enforcement action (see here for the prior post) concerns conduct going back to 1998; and the 2012 Marubeni enforcement action (see here for the prior post) concerns conduct going back to 1995 (17 years ago) with the last act alleged occurring in 2004.

For a similar post on fundamental black letter law concepts in FCPA enforcement actions, see this prior post “Does DOJ Expect FCPA Counsel to Roll Over and Play Dead?”

Don’t Believe the Hype

Writing at the Huffington Post (here), Professor Brandon Garrett (here - University of Virginia School of Law) says “Don’t Believe the Hype on Corporate Bribery.” Professor Garrett notes that ”at first, foreign bribery prosecutions may seem big and brash and the farthest thing from a wrist-slap” but he cautions that many FCPA enforcement actions “can be smaller than they appear.”

I frequently am put in the “the DOJ is too aggressive in enforcing the FCPA” camp and in many respects that is true. However, I have also frequently stated (see here for my Facade of FCPA Enforcement article, here for my Senate testimony and here and here for prior posts as to the same Siemens and BizJet enforcement actions Professor Garrett references) that in egregious instances of corporate bribery that legitimately satisfy the elements of an FCPA anti-bribery violation involving high-level executives and/or board participation the DOJ’s aggressive rhetoric does not match the reality of the enforcement action.

See this prior post for discussion of Professor Garrett’s article “Globalized Corporate Prosecutions.”

Where Should the Money Go

This prior post discussed the recent letter by Socio-Economic Rights and Accountability Project (“SERAP”) (a non-governmental civil society organization in Nigeria) to SEC Enforcement Division Director Robert Khuzami (with a copy to Assistant Attorney General Lanny Breuer and Deputy Chief, Fraud Section Charles Duross) regarding “FCPA civil penalty and disgorgement proceeds that companies agree to pay to resolve US Foreign Corrupt Practices Act investigations.”

The specific SERAP proposal is as follows. “…[A]fter, and ony after, public notice of an FCPA settlement agreement, the victim foreign government entity and any applicant NGO would have 60 days to file a request that the Enforcement Division pay some or all of the agreed payment proceeds to or for the benefit of the victim government entity or to a home country-based or US based NGO that would present a proposal [to] spend the proceeds for public purposes (e.g. on public health programs) in the country of the victim entity. Thereafter, the Enforcement Division would have 60 days to act upon the request, favorably or not in its discretion; in this context the Enforcement Division should provide a brief statement of its reasons for its decisions. In reaching its decisions the Enforcement Division would have the inherent authority to consult with Executive Branch agencies of the US government.

Recently the SEC responded to the letter (see here). The SEC thanked SERAP for its ‘thoughtful submission” and stated that it will “give appropriate consideration” to its suggestions while also noting as follows. “Although the macro effects of corruption can be ascribed generally, the framework of our securities laws requires a proximate connection to the harm caused by a particular violation. The question of identifying investors or other parties that suffer cognizable harm in connection with the securities law violation(s) at issue in a given enforcement matter is driven by the facts and circumstances of that particular case.”

For more, including my views, see here from Trustlaw.

Others are also thinking about the issue of where FCPA enforcement proceeds should go. In this draft paper titled “Reforming the Foreign Corrupt Practices Act to Reduce Rent Seeking and Better Deter Transnational Bribery,” Matthew Turk argues as follows: “(1) the SEC should cease retaining profits disgorged by corporate defendants; (2) disgorgements should be transferred to the Host country where the bribe took place, conditional on the Host government’s cooperation with the FCPA investigation; and (3) if cooperation is not forthcoming, disgorgement proceeds should be transferred to the OECD Working Group, an international organization designed to facilitate the enforcement of an important anti-bribery treaty.” According to Turk, ”Reforming disgorgement practices in the manner suggested here would not constitute a legalistic attempt to ratchet the total level of anti-corruption enforcement up or down in a particular direction. Instead it would re-allocate the proceeds from FCPA enforcement on a global scale so as to properly align the incentives of the parties involved and provide greater access to the information required for effective enforcement.”

Weekend Reading Stack

I recommend this recent Q&A in Metropolitan Counsel with Homer Moyer (Miller & Chevalier) a “Dean” of the FCPA. Might as well make it a Homer Moyer weekend – see here for a prior Q&A post on this site with Moyer.