Jack Abramoff was convicted in 2006 of fraud, tax evasion, and conspiracy to bribe public officials and served three and a half years in prison. He is the lobbyist notoriously known as the face of corruption in Washington, DC. Now released from prison, he was recently interviewed [1] by Harvard’s Edmond Safra Center for Ethics [2] (watch the video here [1]). In this interview, he discusses in detail how corruption works in the U.S. capital (FCPAméricas has previously highlighted [3] that corruption is not just a non-U.S. phenomenon).
Three of Mr. Abramoff’s lessons have relevance to FCPA counsel.
1. Payments to Political Parties and Charities: “[Elected] members are not asking for contributions to something they are disinterested in.”
The FCPA extends to payments to political parties. 15 U.S.C. §§ 78dd-1(a)(2), 78dd-2(a)(2), 78dd-3(a)(2). Enforcement also takes the position that charitable contributions to bona fine charities can be improper too. See In the Matter of Schering-Plough Corp [4].
Clients often as why. They wonder why prohibiting payments to foreign officials is not enough. And companies with well-tuned anti-corruption programs spend considerable time and resources ensuring that, when they do make such payments abroad, the payments are fully compliant with the FCPA. They hire counsel to vet foreign charitable organizations to ensure that public officials do not sit on boards or spouses of officials do not serve as officers.
Mr. Abramoff provides good insight. He tells how, in Washington, DC, it is common for special interests to donate to a Congressional representative’s political party or to a non-profit with which the representative is closely affiliated. He shows the quid pro quo resulting from this activity – the nature of the influence gained by the special interest. A public official builds seniority and influence within his or her political party by raising funds. Their travel expenses are often covered by non-profits with which they are affiliated. Their children are hired by charities they help support. Mr. Abramoff says: “Very few [elected officials] are altruistically raising money for the goodwill charities…they are raising money for things they are involved in.”
The same dynamics can apply overseas. Thus, compliance counsel should be particularly alert when companies make these types of payments abroad.
2. Annual Reviews of Compliance Programs: “No matter what is thrown at the lobbyist, they will overcome it.”
Every Deferred Prosecution Agreement since Panalpina [5] has required the subject company, “[a]t a minimum,” to “review its anti-corruption compliance standards and procedures, including internal controls, ethics, and compliance programs, no less than annually, and update them as appropriate, taking into account relevant developments in the field and evolving international and industry standards, and update and adapt them as necessary to ensure their continued effectiveness.”
Why? Because corruption has a way of finding loopholes.
Mr. Abramoff tells how lobbyists laugh at corruption reform efforts because they learn how to get around reforms. When they lose access to the elected representative, they seek access to his or her staff members. When they can no longer treat a member to an expensive seated dinner, they buy him or her an elegant meal standing up. He also tells how the elected representatives themselves have little interest in real reform. “You are asking the very people who benefit from this lifestyle, to give up this lifestyle.”
Similarly, because corruption always evolves in foreign countries as well, the associated risks to companies must periodically be assessed.
3. Less Democracy Means Higher Corrupt Risk: “Lobbyists want power concentrated.”
When conducting corruption risk assessments for their operations, companies should pay particular attention to their work in countries that are less democratic. This is often where political power is concentrated. And the more power that a single official has, the more leverage he or she has in demanding bribes from foreign companies.
I have seen this dynamic play out while working on compliance matters in places like Equatorial Guinea, Angola, and Uzbekistan. Less democracy in these countries leads to less transparency which creates higher risks. When only one official has the power to grant a mining license, that official can more easily ask for a special payment.
Mr. Abramoff also tells how, in Washington, life for a lobbyist is easier when power is concentrated. Promoting a special interest becomes a one-stop endeavor rather than a three-stop endeavor. The more diffuse that power is, the harder it is for them to do their work.
These three lessons might help FCPA counsel better grasp the underpinnings of their work. I recommend watching the entire interview.
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