Tagged: FCPA

Donald Trump on bribery scandals: US “crazy” to enforce FCPA.

On CNBC’s Squawk Box, tycoon, occasional presidential candidate, Reality TV star and bottled water purveyor Donald Trump was asked about Wal-Mart’s allegedly widespread bribery in Mexico. Having obviously thought through the arguments for and against FCPA reform, he provided the following insights:

If you want to operate in Mexico, you have to pay bribes.

This is how business is done.

This country is absolutely crazy. Every other country goes into these places and they do what they have to do. It’s a horrible law and it should be changed. We are like the policeman for the world. It’s ridiculous.

The world is laughing at us.

Let’s parse this.

1. Operating in Mexico requires paying bribes.

According to Transparency International, Mexico scores 3/10 on the bribery index (10/10 meaning little or no bribery). Empirically, Trump is 70% right. Unless a company has chosen to adhere to OECD conventions and applicable anti-corruption laws, it would likely do more business in Mexico by greasing the right hands.

2. This is how business is done. Every other country goes into “these places” (countries with high levels of corruption) and does business according to local mores, in violation of the FCPA.

Here is a list of the 10 largest FCPA fines and settlements 1977-2012:

  1. Siemens (Germany) $800 million
  2. KBR/Halliburton (US) $579 million
  3. BAE (UK) $400 million
  4. Snamprogetti (Netherlands/Italy) $365 million
  5. Technip (France) $338 million
  6. JGC Corporation (Japan) $218.8 million
  7. Daimler (Germany) $185 million
  8. Alcatel-Lucent (France) $137 million
  9. Magyar Telekom (Hungary) $95 million
  10. Panalpina (Switzerland) $81.80 million

If FCPA prosecutions are an accurate statistical measure of the willingness of foreign businesses to participate in corruption, Trump is mostly correct. Only one US company makes the list. Moreover, with nine foreign corporations on the list, it does appear that the US is the “policeman for the world” (see DOJ site for the complete list).

3. The US is crazy.

That’s probably a matter of opinion. Watching CNBC for a few days straight might make one conclude that yes, it is crazy.

4. The world laughing at the US [for enforcing the FCPA].

Foreign companies might find the US’s anti-corruption stance risible (until they find themselves caught up in it). For example, Siemens had no compunction about including bribery in its budgets, despite the fact that they were directly subject to the law.

Criminal penalties, disgorgements, fines and consent orders levied against FCPA violators are tragicomically invisible to the vast majority of the world’s population which suffers through the indignity of having to live and do business within highly corrupt economies. Monies collected by the US government or the SEC never make it back to these individuals. 

His personal life, histrionics and buffoonery aside, Trump is a strategic thinker. Perhaps his frank talk isn’t surprising given that apart from a dust-up with the SEC over financial reporting about 10 years ago (settled out of court), he has not had any notable legal troubles over a long career in real estate and the gaming industry.

In my opinion, Trump runs a tight ship, otherwise there would be more blips on the map; his views on how to do business in China, India, Mexico or other ethically-challenged countries likely have nothing to do with how deals are finally done by the Trump Organization. But he would certainly appreciate being able to compete on a level field with foreign businesses for whom bribery is simply another accounting line item.

As an aside, perhaps Trump is engaged in a bit of spin in light of his competitor and onetime enemy Steve Wynn’s unlikely use of the statute internally to oust business partner Kazuo Okada?

NGO on FCPA reform: fines should compensate victims.

The SERAP (Socio-Economic Rights and Accountability Project) has added its voice to the calls for FCPA reform.

In a press release, the Nigerian NGO proposes that the US DOJ and SEC allocate a percentage of funds from fines exacted on corporations to aide the actual victims of corrupt government officials and agencies.

SERAP argues that since the FCPA and other anti-corruption laws do not provide for civil actions (apart from under the the Alien Torts Act) and moreover since there is little possibility of recovering damages in the country where the corruption occurred, the US government should share civil penalty and disgorgement proceeds with the victims.

Last week the DOJ replied to the US Chamber of Commerce’s reasonable pleas to “restore balance” and provide clarity on the law (their letter is here) by agreeing to discussions. The DOJ owes a similar response to SERAP. While the NGO lacks the backing of the hundreds of large corporations represented by the USCC, its argument is one that needs to be taken seriously.

SERAP provides some guidance on how civil penalty and disgorgement proceeds should be distributed in a systematic and fair manner to NGOs and the US Congress should invite them to testify in hearings on FCPA reform. That’s probably unlikely though since we probably won’t see any substantial progress on the issue until after the US presidential elections this November.

Updated: The FCPA Professor blog examines this issue in further depth.

 Photo: Rory Mullholland

US DOJ brings in FBI to investigate News Corp bribes to Scotland Yard.

FOXNews Headquarters

When details emerged last July that employees of News International (the press arm of News Corp) had possibly bribed 5 Scotland Yard police officers, the FCPA red alert must surely have sounded in News Corp’s legal department. Since then, News has brought in a number of heavy hitters to cover them, including immediately hiring Mark Mendelsohn from Paul Weiss Rifkind (a former deputy chief of the Fraud Section in the DOJ’s Criminal Division –  who helped devise the FCPA enforcement program) and the D.C. firm of Williams & Connolly, specialists in corporate compliance matters.

That the US DOJ has been working closely with UK investigators should come as no surprise to anyone following this matter and last month’s arrest of five alleged bribery scheme participants on criminal charges likely gave the signal to make public FBI involvement in the investigation.

Legal coverage for a necessarily international internal compliance investigation and evidence gathering (as well as putting together multiple defenses) will obviously generate considerable business for all the firms involved.

Since News earned over $30 billion last year, it can probably afford the attorney fees and any fines it will incur. However, facing criminal charges is a different ballgame and News would be remiss to not leverage its populist news media outlets to portray the investigation as politically motivated. Serving time in prison is an incredible motivator.

If you are interested in delving into the details of the UK Leveson Inquiry and its rogues gallery of hackers, hacked and outright despicable characters, the Guardian (which broke the story) does it very well.

Photo: Jim Henderson