Tom Waits sang, “the large print giveth, and the small print taketh away.” The same might be said for the notion of restitution for FCPA victims. As discussed in a previous post, U.S. law appears to obligate courts to order restitution for FCPA victims – at least in some cases – but restitution generally does not reach FCPA victims. This post reads the fine print that impedes such restitution, and identifies an international movement toward restitution for bribe victims.
Limits on Ordering Restitution
Courts have the authority to order criminal restitution by virtue of the Victim and Witness Protection Act (VWPA) and the Mandatory Victim Restitution Act (MVRA). The VWPA, originally passed in 1982, gave courts discretion to order criminal restitution. The MVRA, passed in 1996, made it mandatory for courts to order such restitution.
There are limits to that obligation, however, some of which are relevant to FCPA victims. One is that both the VWPA and the MVRA address restitution for Title 18 offenses, but the FCPA is codified under Title 15 of the U.S. Code. As a result, the MVRA does not require restitution for FCPA violations directly. But restitution in FCPA matters is still possible, since charges for FCPA violations are routinely accompanied by charges of Title 18 violations, such as conspiracy, money laundering and wire fraud.
Another limitation is a “complexity exception” that relieves the court of its obligation to order restitution where the process of determining a victim’s loss would be too complicated or would unduly prolong the sentencing process. This exception was invoked by the trial court in Alcatel, (see below) but in general it seems unlikely that determining restitution for a foreign government would be more complicated than doing so for a corporation or NGO.
Limits on Obtaining Victim Status
While courts have an obligation to order restitution, victims also have a right to restitution. The Crime Victims Rights Act granted crime victims certain rights in criminal cases, including the right to “full and timely restitution” as provided in law. But these rights are also subject to limitations that limit restitution for FCPA victims.
The CVRA requires the DOJ to make “best efforts to see that crime victims are notified” of their rights as victims. If the DOJ does not identify and notify a victim of an FCPA or related crime, the victim can petition the trial court for victim status and protection of victim rights. But foreign victims of FCPA violations are unlikely to be aware of their right to restitution. And without timely notice from the DOJ, a victim will learn about an FCPA violation – if they learn about it at all – only when the settlement is announced. At that point, the victim would have to petition the court to reject a settlement already agreed.
But another reason courts do not order restitution to foreign victims appears to be concern about treating a “corrupt” government as a victim. This concern was evident in Alcatel, an enforcement action in which three subsidiaries of the French multinational pled guilty to conspiring to violate the FCPA by paying millions in bribes to officials at ICE, a company owned by the Costa Rican government. Following Alcatel’s settlement with U.S. authorities, ICE petitioned the trial court for restitution, arguing that it was a victim and had suffered losses at the hands of its corrupt directors and employees. The trial court, and later the 11th Circuit, held that ICE was a co-conspirator in the corruption and was not entitled to restitution, noting that in general, “a participant in a crime cannot recover restitution.”
This concern should not apply in all cases – some have suggested that ICE was arguing a particularly bad set of facts. And the court’s co-conspirator finding suggests that another Costa Rican government entity – one untainted by the corruption in question – might have had more success in asserting victim rights.
Contrary International Trends
Given these obstacles, court-ordered restitution for FCPA victims is an unlikely prospect. But it may be time for the DOJ to consider another approach – there are signs of an international movement toward compensation for victims of bribery.
The Stolen Asset Recovery Initiative recently published a study and database regarding settlements in foreign bribery cases and the implications for asset recovery.
And on October 25, 2013, a coalition of anticorruption NGOs including Transparency International, Global Witness and Christian Aid called on states to comply with their obligations under Article 53 of the United Nations Convention Against Corruption (UNCAC). That provision requires State Parties to:
[take measures] to permit its courts to order those who have committed [corruption offences] to pay compensation or damages to another State Party that has been harmed by such offenses.
Some nations have already taken steps toward that end – UK law provides for restitution to victims of the UK Bribery Act.
All of which raises the question of whether the U.S. could remove obstacles to restitution in FCPA cases, allowing more frequent compensation for the foreign victims of foreign bribes? Or is it a bad idea to provide restitution to foreign governments whose officials have participated in a corruption scheme? As put by Mike Koehler at the FCPA Professor:
I am not sure where criminal fines should go when a French company bribes Costa Rican “foreign officials,” but I am pretty sure that the answer should not be 100% to the U.S. Treasury.
Note: a version of this post appeared first at Sin Miedos, a blog of the Inter-American Development Bank.
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Post authored by Matthew Fowler, FCPAméricas Contributor