FCPAméricas Blog

A Seat at the Table: Alternatives to restitution for FCPA victims

Author: Matthew Fowler

SeatTableCorruption is not a victimless crime, but you wouldn’t know that by looking at the enforcement of international bribery laws. A recent study published by the Stolen Asset Recovery (StAR) Initiative found that out of 395 corruption settlements worldwide between 1999 and 2012, $6.9 billion in monetary sanctions were imposed. But of that total, only $197 million – just 3.3% – was ordered returned to the country whose official was involved.

To its credit, the U.S. is responsible for a disproportionate number of these enforcement actions. But as discussed in prior posts, its failure to compensate corruption victims creates ugly optics for the U.S., and runs counter to basic principles of U.S. law. Given the obstacles to using U.S. restitution laws to compensate corruption victims, are there any alternatives?

UNCAC Leads the Way

The United Nations Convention Against Corruption (UNCAC) suggests several possibilities. Article 56 of the UNCAC requires that States Parties – which include the U.S. – provide notice proactively to other countries about the proceeds resulting from corruption offenses. This is a hard-to-enforce “soft” requirement, but the idea is a good one. Proactive notice would permit other countries to initiate their own investigations or judicial proceedings, and allow them to seek a portion of any proceeds of corruption confiscated through the U.S. enforcement.

If proactive notice were expanded beyond the proceeds of corruption to include proactive notice of settlement discussions, it would have an even greater effect. Providing such notice to affected States Parties would also allow “victim” countries to file timely requests for restitution in U.S. enforcement actions. This would be particularly helpful in the context of settlements, since other countries are unlikely to know of those proceedings until the results are announced.

Another alternative suggested by the UNCAC is damages. UNCAC’s Article 53 requires (in relatively strong terms) that State Parties permit their courts to order damages for corruption offenses. And the UNCAC leaves some room for creativity: Article 57 suggests that states could enter into “mutually acceptable arrangements” on a case-by-case basis for the final disposal of confiscated property. This suggests that diplomatic channels could be used to resolve the claims of foreign states to a portion of the funds recovered in FCPA settlements.

The World Bank-Siemens Settlement

From the U.S. perspective, the benefit of allowing greater compensation to foreign governments could depend on the government making the claim. If a foreign government is considered corrupt, allowing it to recover money in FCPA cases would create a tangle of perverse incentives and more ugly optics. An alternative to restitution that sidesteps this problem is suggested by the World Bank’s settlement with Siemens.

In 2009, the World Bank settled an investigation into corruption by a Siemens subsidiary and other acknowledged corruption in Siemens’ global business. As part of this settlement, Siemens agreed to pay $100 million to support global efforts to fight fraud and corruption. This money goes to anticorruption organizations that Siemens selects but that the World Bank has the right to veto and audit.

Following this approach, U.S. courts could require FCPA violators to contribute to anticorruption organizations operating in the countries where bribes were paid. Or the U.S. could create an agency to carry out such operations using proceeds from FCPA enforcement actions.

No Time Like the Present

The time is ripe for a change in approach. After decades of effort, international anticorruption laws are being adopted worldwide, and their enforcement is generating significant penalties. But criticism of current approaches to enforcement and restitution is also growing. As the StAR report highlights, current settlement practices result in a transfer of wealth from poor countries – where most bribes are paid – to wealthier ones that enforce the laws. This basic unfairness undermines the case for the FCPA and similar laws – it’s time to consider alternatives.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2014 FCPAméricas, LLC

Matthew Fowler

Post authored by Matthew Fowler, FCPAméricas Contributor

Categories: Enforcement, English, FCPA, UNCAC, World Bank

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