FCPAméricas Blog
The World Bank’s Negotiated Resolution: Settling a Sanctions Case
1.09.2013
Settlements of foreign bribery charges by national authorities are common. The vast majority of the DOJ’s FCPA actions end in plea agreements, deferred prosecution agreements (DPAs), or non-prosecution agreements (NPAs). Such mechanisms are gaining traction in the UK as part of UK Bribery Act enforcement.
The World Bank is following suit. Since 2010, the Bank’s Integrity Vice Presidency (INT), the unit in charge of investigating allegations of corruption, fraud, and collusion tied to Bank-financed projects, has pursued formal “Negotiated Resolutions” with companies with a growing frequency.
Normally, as described here, INT builds its case and the Evaluation and Suspension Officer (EO) reviews it and reaches a finding on wrongdoing. If contested, the matter goes before the Sanctions Board for review. But, with the negotiated settlement, the matter is put to rest quickly and efficiently.
The Bank demands three things as part of the agreement. First, it requires acknowledgement of wrongdoing. It wants wrongdoers to admit when they are guilty.
Second, the Bank requires companies to put in place compliance measures. This helps ensure that the entity’s business is clean going forward. It also positions the company to serve as a model for other companies in the high-corruption risk markets in which the Bank often operates. The compliance standards that the Bank follows are spelled out in its Integrity Compliance Guidelines. They are similar to the principles that US and UK authorities apply. As part of these conditions, the Bank might also require that the company take disciplinary action against responsible individuals or other remedial action. To ensure that the company meets these conditions, the Bank can apply a “debarment with conditional release” penalty.
Third, the Bank requires cooperation. INT sees the settlement as an opportunity to obtain additional information that can lead to other actions. For example, the company could have information about other collusive bidders or other actors in a corruption scheme.
Settlements can occur at any stage of the sanctions process. The EO and the Bank’s General Counsel review and sign off on settlements to ensure an element of accountability and due process. If a respondent does not have legal counsel, the Bank takes steps to ensure that the company is well informed on the agreement’s terms.
What kinds of dynamics are at play in such settlements? To begin with, INT often has much leverage to encourage the settlement. Companies like the certainty that comes with quick resolutions. They prefer to avoid the headaches and costs associated with long proceedings that might extend all the way to the Bank’s Sanctions Board.
INT also claims that the sanction is likely to be lighter with a settlement than it would otherwise be. In addition, oftentimes Bank settlement discussions are part of a broader picture of discussions with numerous national enforcement bodies – see Siemens and Alstom. INT will most likely be communicating with these authorities as well (see discussion here).
Why would the Bank want to settle if giving a break to a bad company might harm its reputation? In their book, “The World Bank Group Sanctions Process and Its Recent Reforms,” Anne-Marie Leroy and Frank Fariello suggest some reasons. Settlements are attractive when certain factors mitigate the severity of the wrongdoing. For example, perhaps the respondent is willing to cooperate or can show that it has already taken corrective measures or otherwise no longer presents a significant fiduciary risk to the Bank. Settlements can also save Bank resources. Not only does the Bank avoid a full sanctions process and an outcome that is uncertain, but it might also obtain valuable information on other wrongdoers.
Based on my own experience, I know that the Bank also might want to settle because it does not currently have enough evidence to prove its case. As described previously by FCPAméricas, INT’s investigative powers are limited. Because the respondent does not know how much evidence INT has, a settlement can be an easy way to conclude a case that INT might otherwise drop.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
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© 2013 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
Comments
January 9th, 2013 at 10:29 pm
[…] FCPAProfessor reviews the Justice Department’s enforcement record in 2012. The FCPAmericas blog explains how to quickly settle a World Bank corruption case. Mike Volkov says the whistleblower is the […]
January 11th, 2013 at 3:14 pm
We have read this blog post with some interest. We are of the view that resolving investigations into allegations of fraud and corruption thru negotiated resolution agreements can be good for both the Bank and Respondents.
As the author acknowledges, Negotiated Resolution Agreements (NRAs) allow for much more efficient resolution of investigations and sanctions cases, providing certainty of outcome to both parties. Further, NRAs allow for a collaborative rather than combative resolution between the parties and are always more forward looking, focusing on ensuring companies will improve their own integrity standards and be cleaner and better partners with the Bank in future projects. For this reason it is the World Bank’s practice to offer all companies an opportunity to resolve a case against them thru an NRA before we commence sanctions proceedings. Of course they are always free to contest the charges thru the Bank’s robust sanctions process. It goes without saying that existence of sufficient evidence is what makes a settlement negotiation viable for both parties. We believe that most, if not all firms, that have chosen to resolve cases through NRA’s, as well as the lawyers that were involved in such cases, would agree on their value in reaching quicker and fair resolutions when culpable behavior is discovered.
We hope the continued use of such innovative mechanisms will incentivize companies and their counsel, who are so inclined, to join with the World Bank in its fight against corruption. Together we can level the playing field and make sure that development dollars really do go to the parties intended: the poor.