Foreign bribery fines and settlements: Who should get the money?
By Luke Balleny
‘Share and share alike,’ some parents love to tell their offspring. But when it comes to fines or settlements from foreign bribery cases, the issue of sharing is a contentious one.
The U.S. government receives all proceeds from fines or settlements that companies pay it in connection with violations, or alleged violations, of U.S. anti-bribery laws.
But would the country ever share the proceeds of such fines or settlements with governmental and non-governmental groups working in the countries where the bribery allegedly occurred?
A Nigerian accountability watchdog, the Socio-Economic Rights and Accountability Project (SERAP), wrote to the U.S. Securities and Exchange Commission (SEC) on the issue last month.
In its letter, SERAP asked for the the U.S. financial regulator’s enforcement division to establish a case-by-case policy or process that would:
“…enable foreign governmental entities that have been victims of corruptly-procured contracts to apply for, subject to appropriate anti-corruption safeguards, some or all of the civil penalty and disgorgement proceeds that would eventually be paid by companies alleged to have violated the U.S. Foreign Corrupt Practices Act.”
SERAP also suggested in the letter that: “civil society groups in the home country, or U.S. non-profit organisations serving that country, be eligible within a short time period to apply for such proceeds as well…”
So, what did the SEC make of SERAP’s request?
“We … will give appropriate consideration to your suggestions, guided by the Commission’s multi-prolonged mission, as well as the legal framework surrounding the federal securities laws,” SERAP has quoted the SEC’s enforcement division director, Robert Khuzami, as saying in a letter.
Every year the United States collects billions of dollars from FCPA sanctions – the FCPA being a U.S. law barring bribes to officials of foreign governments.
And the SERAP letter is not the first attempt by foreign parties to seek funds from Foreign Corrupt Practices Act (FCPA) settlements in the United States.
WHO’S THE VICTIM?
But some experts indicate the United States is unlikely to meet SERAP’s demands.
“I think it’s unlikely that U.S. enforcement authorities would share U.S. penalties with other countries, as U.S. penalties are intended to serve U.S. enforcement objectives and arise under various U.S. statutory schemes,” said Jay Holtmeier, an FCPA expert and a partner at global law firm WilmerHale.
“That said, we have seen much more cooperation in recent years between global enforcement authorities, which means that U.S. authorities likely would assist Nigerian or other authorities in building cases to pursue penalties in their local courts, and U.S. authorities have, and presumably will continue in the future, to consider penalties already assessed by other authorities when determining appropriate penalties in the United States.”
SERAP says that corruption is not a victimless crime and that consequently a portion of a fine should be returned to the country in which the bribe took place.
“Procurement and investment agreements corrupted by foreign bribery invariably lead to increased costs, not only in higher prices but also in needlessly expanded and ultimately inefficient projects in victimised societies,” SERAP said in its March letter to the SEC. “This has often been the case in Nigeria, where damage remedies are often elusive,” the letter added.
But some say that deciphering who the victims are is a tricky matter.
“The determination of who has true victim status can be a complex and challenging one,” said Lucinda Low, a partner at Steptoe & Johnson.
“When is an entity a victim and when is it a co-perpetrator? And on what basis could or should the U.S. government determine that a self-appointed NGO, even a worthy one with a strong anti-corruption programme, be an appropriate recipient of funds?” she added.
Although SERAP’s proposal “feels good,” individuals or organisations located in the country giving rise to any particular FCPA enforcement action are not really the most direct victims of the conduct at issue, said Mike Koehler, an assistant professor of business law at Butler University in the United States.
“It would seem that in most instances competitors who may have lost out on the foreign business because it was unwilling to make an improper payment are the most direct victims. If so, perhaps the attention to victim issues should renew interest in an FCPA private right of action,” Koehler said.
So, would the U.S. government ever change its policy on retaining all proceeds from fines and settlements?
For now, it’s still a case of wait and see…