Archive for the ‘United Nations’ Category

World Bank / U.N. Report Rightly Identifies A Problem, Yet Ends With Contradiction

Thursday, December 12th, 2013

The Stolen Asset Recovery Initiative, a partnership between the World Bank Group and the U.N. Office on Drugs and Crime, recently released this report titled “Left Out of the Bargain:  Settlements in Foreign Bribery Cases and Implications for Asset Recovery.”

The report addresses the “core issue of how the imposition of monetary sanctions through settlement compares to the requirements of the U.N. Convention Against Corruption on the recovery and return of the proceeds of corruption.”

This post highlights other topics, beyond the above core issue, addressed in the lengthy report.

For starters, the report is a useful resource in understanding how other nations prosecute and resolve bribery and corruption offenses as well as how settlements in one jurisdiction affect legal actions in other jurisdiction (that is double jeopardy issues).  Also informative was the section of the report detailing countries who “have taken enforcement actions against foreign companies or individuals who have bribed their public officials” In other words, carbon-copy prosecutions (see here for the prior post).

From my perspective, the most notable feature of the report was its call for greater transparency of bribery and corruption settlements.

As the report notes, “over the past decade, there has been significant progress in battling foreign bribery, with the clear trend of many cases being resolved through settlements rather than full trials.”

In the Executive Summary, under the heading “Additional Observations,” the report states:

“This study calls for greater transparency in settlements. The negotiation of settlements takes place between the authorities and implicated parties behind closed doors. One critical step would be to inform affected jurisdictions that a negotiation toward a settlement is taking place. The study shows that forms of settlements (such as Non-Prosecution Agreement, Deferred Prosecution Agreement, penalty notice, or a guilty plea) provide varying degrees of transparency. In some jurisdictions, the outcomes of settlements are publicly available, illustrating that greater transparency is possible. Most settlements are negotiated with little oversight by a judge and sometimes without any public hearing at the conclusion. The report emphasizes that once an agreement has been reached, it should not be shielded from public view. More transparency helps ensure fairness to all affected jurisdictions and parties.”

After noting that the “United States has resolved more foreign bribery cases by way of settlement than any other nation,” the report states that the U.S. has some “unique procedural features” in that non-prosecution agreements and deferred prosecution agreements are “unique even among the common law jurisdictions.”

The report notes that NPAs in the U.S. have no judicial involvement and then states that “in general, if a judge oversees the [settlement] process, the public will have more confidence in the outcome” and that “without the stamp of judicial approval, settlements may have less legitimacy.”

Elsewhere, the report notes that settlements, and the “abbreviated procedures [they contain] have also helped in no small measure to boost the enforcement of foreign bribery laws and regulations globally.”

Under the heading “reduced role of the courts,” the report states:

“The more cases are concluded by means of a settlement rather than proceeding to trial, the more the role of the courts is reduced.  In common law systems, in particular, the greater involvement of courts usually leads to greater clarification of what the law means.  But as greater use is made of settlements and guilty pleas, this clarifying role is diminished.  In a trial, issues are litigated with full arguments made on each side, permitting a judge to weigh the merits of the legal issues in light of the facts.  In common law jurisdictions, such case law plays a large role, and its effect on the development of law is considered desirable.  Moreover, in such systems, legal precedent is often binding on future cases.”

Despite the above spot-on statements on the issue of settlements, the report ends with a Conclusion section and the first conclusion is stated as follows.

“Over the past decade, enforcement actions against foreign bribery have increased.  This is a positive and welcome trend, especially since improvements in enforcement also improve the climate for asset recovery.  This progress in enforcement has largely been due to the effective use of settlements in a steadily increasing number of jurisdictions.”

From calling for greater transparency of settlements, to stating that settlements have less legitimacy, to criticizing the reduced role of the judiciary in settlements, to calling such a state of affairs “effective.”

That is quite the contradiction.

Safeguarding Against Corruption In The Context Of Sporting And Other Major Public Events

Wednesday, November 27th, 2013

Note:  Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Akane Tsuruta and Jessica Dwinell are attending the Fifth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in Panama City, Panama.  See here for a live feed of the States Parties’ discussions.

This post regarding the proceedings is by Jessica Dwinell.

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News broke yesterday that oilfield services company Weatherford International agreed to pay $253 million to settle federal charges in the United States, including FCPA charges in which an allegation by the SEC was that Weatherford funded a trip to the 2006 World Cup for two officials from a state-owned Algerian company. At the same time, members of the United Nations Office on Drugs and Crime (UNODC), the Global Alliance for Integrity in Sports and the OECD were gathering at the fifth CoSP to the UNCAC to present on the importance of safeguarding against corruption in the context of sporting events.

As Nicola Bonucci (Director for Legal Affairs of the OECD) explained, “sport events are sport, but sport is also a . . . business,” and a highly lucrative one at that. Unfortunately, though hosting public and sporting events can serve as a great honor for a country, many major events also breed corruption.

Alexey Kronov (the Head of the Expert Group on Anti-Corruption for the Department of Public Administration and Russian G20 expert) outlined three factors that create the corruption-prone environment surrounding major sporting events. First, countries or regions who want to host events often feel pressure to “overcome other bidders,” a pressure which can lead to bribe offers or solicitation. Second, after winning a bid, the host country controls significant funds to build infrastructure, creating numerous opportunities for public abuse for personal gain during the procurement process. Third, sporting events are unique in that all projects must be completed by a specified time; where the opening of a transnational tunnel can be delayed, the start of the World Cup games cannot. The Executive Summary to the UNODC report, “A Strategy for Safeguarding against Corruption in Major Public Events,” similarly suggests that the high risk of corruption “is largely because such events involve significant resources and large amounts of funds as well as complex logistical arrangements within very tight timeframes.”

Representatives from Russia (set to host the Winter Olympics in 2014) and Brazil (the host of the World Cup in 2014 and the Summer Olympic games in 2016) provided information on measures their respective governments have taken to prevent corruption surrounding their upcoming major events, including efforts to undertake extensive risk assessments, audit event budgets and project proposals to ensure accurate price projections and quality designs, creation a public website detailing project expenditures to increase transparency, and conduct periodic on-site visits.

Such measures are a step in the right direction; however, Mr. Bonucci suggested several additional steps that could further decrease corruption in sports. For instance, Mr. Bonucci stressed the need for a multi-stakeholder approach, an approach of utmost importance given the constant interaction between government officials and private companies during the procurement process. Further, he recommended that the global community establish clear international standards, which include provisions detailing conflict of interest disclosure requirements, and complete transparency.

Olajobi Makinwa (Head of the Transparency & Anti-Corruption Initiatives for the UN Global Compact) stated that “it is necessary to keep sports clean because people look up to sports heroes.” Sports offer hope, break down barriers and provide role models. Sporting events can also prove crucial for morale building. A mishandling of funds, however, can quickly derail any positive advances. Though further research must be done, transparency, multi-national and multi-stakeholder approaches appear key to combating corruption in the context of sporting events.

Designing Corruption Out of The System: Collective Action Through Transformation Mapping

Wednesday, November 27th, 2013

Note:  Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Akane Tsuruta and Jessica Dwinell are attending the Fifth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in Panama City, Panama.  See here for a live feed of the States Parties’ discussions.

This post regarding the proceedings is by Akane Tsuruta.

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Companies can be agents of change.  But it is better if they act together, and act with a focus.

Representatives from the World Economic Forum`s Partnering Against Corruption Initiative (PACI), the OECD, the Basel Institute on Governance, and Siemens agreed on the need for collective action by companies against corruption and “transformation mapping” as an innovative way to focus their action.

Collective action in the corruption context is a “coordinated, sustained process whereby businesses and their partners jointly tackle the problems of corruption that affect them all.”  To be successful, action requires trust, time, and a joint understanding of the risks and potential areas for change.  But in an area as complex as corruption, companies and their collective endeavors may not know where to start.

Transformation mapping is a method to figure that out.  It “helps companies be more efficient about where to engage in collective action.”  It works by first brainstorming central topics and then radiating outward by identifying related issues, stakeholders, solutions, and challenges, until there is a “constellation” of ideas.  Such a visual may build understanding by illuminating connections and gaps between the various points – areas where company action may be especially impactful.

Yesterday at the CoSP , state delegates and observers tried transformation mapping corruption.  Some ideas that emerged were:

  • Corruption as an interaction between human beings and a system.  Human beings create the system but also react to it.
  • Corruption is the big elephant in the room, and the best way to tackle an elephant is bit by bit.
  • Language is important.  Just like visual mapping may build understanding, visual words may also better aid the emergence of new ideas.  Language may also be an indicator of business and country readiness to engage in real anti-corruption initiatives.  For example, if a company’s compliance officer cannot bear to say “corruption” and prefers “circumlocution,” the company might not be ready to take effective action.
  • Balancing collective action and anti-trust allegations. Collective action among industry competitors may raise eyebrows.  In the course of collective action, company competitors may need to discuss details that would verge on collusion.
  • Effective anti-corruption collective action may be realistically limited to companies who together hold a significant share of their market.  If competition abounds, a small band of small companies may not make a difference – bribe solicitors can just go to someone else.
  • An anti-corruption “tone from the top” should come from business leaders and government leaders, but anti-corruption recommendations should also be sensitive to the real consequences in some countries of “sticking your head above the parapet.”

In an area like corruption, where the target is always moving and adapting, transformation mapping may be a valuable means of gathering experts–whether CEOs or state delegates—and identifying the gaps where corruption may not exist now, but has the potential to spring up like a weed in the future.

The Legal Profession’s Contribution To The Global Fight Against Corruption

Wednesday, November 27th, 2013

Note:  Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Akane Tsuruta and Jessica Dwinell are attending the Fifth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in Panama City, Panama.  See here for a live feed of the States Parties’ discussions.

This post regarding the proceedings is by Jessica Dwinell.

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Politicians with legal training routinely participate in state reporting procedures and legislation drafting. Yet, the question remains, how can practicing attorneys join in the anti-corruption efforts? Yesterday at the CoSP, members of international and national bar associations, the OECD, the UNODC and the Brazilian Institute of Business Law discussed how practicing attorneys could influence countries’ anti-corruption efforts.

Practicing attorneys can assist anti-corruption efforts in three main ways: by revising and/or drafting legislative anti-corruption laws, by participating in either OECD on-site visits or during the UNCAC review process, and by serving, more or less, as an enforcement arm of the government.

In the legislative drafting context, the value of practitioners’ insight is obvious. Practitioners work daily with corporate clients, often in transnational situations, and thus understand the business realities and likely consequences of proposed laws both on domestic and foreign business. Though the politician may be well-versed in how to draft legislation, the practicing attorney will better understand the law’s practical implications.

In regards to practitioners’ participation in the UNCAC review processes, Annika Wythes (Crime Prevention and Criminal Justice Officer of the UNODC) stressed that attorneys are invaluable objective participants, able to assess strengths and weakness of national legislation and can highlight enforcement weaknesses.

Although it may appear counter-intuitive that private attorneys could serve as a “leveraged enforcement tool of the government,” the panelists often spoke of the attorney’s ability to teach clients how to comply with anti-corruption laws. By reducing resistance from the business community and ensuring compliance with new anti-corruption bills, private attorneys can effectively save governments the resources traditionally needed to investigate and prosecute corruption cases.

Governments may not universally seek assistance from private practice attorneys to draft legislation or complete anti-corruption review processes. Nevertheless, attorneys who want to participate in anti-corruption efforts should reach out to government personnel to see how they can assist and, if necessary, send written submissions to the OECD during their countries’ review process. The OECD, UNODC and most countries to date would welcome their participation and view attorneys’ insights into business realities and objective assessments of enforcement gaps as invaluable.

Constructive Public-Private Partnerships to Prevent Bribery Solicitation: The High Level Reporting Mechanism

Tuesday, November 26th, 2013

Note:  Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Akane Tsuruta and Jessica Dwinell are attending the Fifth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in Panama City, Panama.  See here for a live feed of the States Parties’ discussions.

This post regarding the proceedings is by Jessica Dwinell.

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To date, most governmental anti-bribery efforts focus on either the offering or giving of bribes. However, on Monday afternoon, members of governance institutions and the business community discussed an innovative approach to prevent demand-side bribery solicitation by public officials: the “High Level Reporting Mechanism” (HLRM). The Basil Institute on Governance and the OECD developed the HLRM concept—a mechanism dependent on public-private partnerships—in response to company concerns regarding the extent of bribery solicitation and extortion, and their fear of retaliation should they report illicit public official activity. According to the HLRM Concept Brief submitted by the OECD and Basil Institute on Governance, the HLRM seeks to mitigate such concerns by “allow[ing] companies faced with bribery solicitation to report these to a dedicated and high-level institution that is tasked with responding swiftly and in a non-bureaucratic manner to reports.”

Successful implementation of an HLRM depends on several factors, including access to high level reporting, institutional independence, ability of the institution to address concerns quickly, country-specific procedures, and, perhaps most importantly, public and corporate trust in the host institution. However, as panelists Rafael Merchan (Secretary for Transparency in the Office of the President of Colombia) and Enery Quinones, (Chief Compliance Officer of EBRD) underscored, HLRM implementation is not a cookie-cutter process and the mechanism procedures can vary greatly.

For instance, Mr. Merchan explained that prior to implementing the HLRM in the area of procurement, companies faced with bribery solicitation by Colombian officials had three choices: (1) seek a judicial remedy which could take four to five years to resolve and never adequately address corporate concerns; (2) pay the bribe and risk prosecution; or (3) refuse to invest in the country. To address this prisoner’s dilemma—one in which all companies would be better off should they collectively refuse bribery solicitations—Colombian officials proposed an HLRM. Specifically, the Colombian pilot program consists of a group of experts dependent on the Secretary for Transparency (thus providing high level access), yet independent from the agencies that make procurement decisions. Complaints of solicitation are sent directly to Mr. Merchan, who maintains confidentiality and prevents press leakages. In return, companies sign transparency pacts in which they agree to engage only in public procurement meetings, not to offer gifts to public servants and refrain from hiring public officials until two years after the completed transaction. Though the HLRM has yet to receive a complaint, the Colombian government has shown a clear political will to fight corruption and fifteen companies have voluntary signed the transparency pacts.

Ukraine’s proposed HLRM—designed in large part to address private sector concerns in an expedient manner—differs vastly and, as Ms. Quinones explained, its creation “has been a very difficult process.”  When the Ukrainian government realized that it was struggling to attract foreign investors, and the European Bank for Reconstruction and Development (EBRD) considered withdrawing its investments entirely, Ukrainian officials had to listen to investor concerns. Thus began the process of detailing an HLRM completely independent of the government. Though such independence proved the “first stumbling block,” Ms. Quinones told government personnel, “businesses will not trust this [HLRM] process if [Ukrainian officials] are controlling it.”

As a result, the proposed mechanism would consist of a director, two deputies and staff members tasked with both receiving and resolving business complaints and publicly monitoring and reporting on the actions—and non-actions—of government agencies. These individuals would not serve as law enforcement, they would not investigate allegations and they would not act in a judicial capacity. Rather, they would focus on providing a “way for businesses to feel confident in bringing complaints,” and would offer the means for resolving bribery solicitation complaints in a timely and effective manner. For instance, rather than seek to blame an individual or assess liability in cases of customs bribery solicitation, Ms. Quinones explained that the HLRM would focus on helping companies delayed at customs for failure to pay a bribe seek release of their goods. Since private sector concerns, rather than State political will, drove the creation of the Ukrainian proposal, its aims focus first and foremost on addressing businesses’ immediate concerns.

The panelist’s business representatives generally supported implementation of HLRMs. Javier Lozada, (Vice President and Regional General Counsel of Philips Latin America) stressed that for business, “any reporting mechanism that can help level the playing field, . . . particularly in growth markets . . . is more than welcome.” Dominique Lamoureux (Vice President of Ethics and Corporate Responsibility of Thalès) likewise recognized that you “need two to tango” and that businesses appreciate the HLRM concept.

Nevertheless, both individuals identified potential obstacles from a business perspective. First, they underscored that it may take considerable time for companies to fully trust that filing a complaint in accordance with the HLRM will not provoke retaliatory action. Second, the HLRM’s failure to offer—or protect—confidentiality in reporting mechanisms may dissuade companies from coming forward. And third, companies may fear that competitors who have lost a tender will simply manipulate the system to delay the procurement process.

How Colombian and Ukrainian officials will react when the first complaint is filed remains to be seen and the mandates of the HLRMs will have to clearly outline measures—if any—intended to protect confidentiality and prevent manipulation. Yet, as Mr. Merchan underscored, the process to combat corruption and discourage bribe solicitations will move forward on a “trial and error” basis. Though the HLRM may not be the solution, it is at the very least an additional piece of the puzzle.