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Tuesday
Sep302014

The much misunderstood Miscellaneous Receipts Act (Part 2)

Image courtesy of the U.S. governmentWe explained in the prior post that the MRA is a seemingly absolute bar to using settlement money to fund community programs (or anything else, for that matter). After all, the statute is unequivocal: any government official “receiving money for the Government from any source shall deposit that money with the Treasury.”  31 U.S.  § 3302(b).

Turns out, the key word here is “receiving.” Put another way, note that the Miscellaneous Receipts Act applies to the spending of “receipts,” which are monies that the enforcement agency has RECEIVED. And it was a generation of innovative federal government lawyers who eventually figured this out.

Here’s the back story. Starting in the 1980s, various enforcement agencies -- including the Commodity Futures Trading Commission, the Nuclear Regulatory Commission, and ultimately the Environmental Protection Agency -- wanted to use settlement money to fund community service projects. But the Comptroller General kept pushing back, citing the MRA.  At that time, it read the MRA just as some people still read it today.

But then in the early 1990s, the Comptroller General changed its view.  It was persuaded that the MRA had legitimate wiggle room.  In this letter to a House subcommittee chairman (pdf), the Comptroller General explained that the enforcement agency’s prosecutorial discretion “empowers it to adjust penalties to reflect . . concessions exacted from the violator.”

Amidst all that lawyer speak, you may not have noticed just how much the enforcement world changed in a single sentence. The Comptroller General conceded that the MRA did not bar using settlement money for community projects. Sure, the statute still imposed an absolute requirement on money that the government “received.” But the Comptroller General was suggesting that “adjusting” a penalty to “reflect concessions” is different than “receiving” money. How?

Well, what if the government never “received” the money at all? Could we avoid triggering the prohibition of the Miscellaneous Receipts Act if there was no “receipt?”

The answer is yes. Let’s go back to our hypothetical $100 million financial fraud case from last post. The MRA says that once the $100 million is turned over to the enforcement agencies, it cannot be spent on anything; it must be deposited in the Treasury. This is the reason that the DOJ could not fund a community service project with $10 million that IT HAD ALREADY RECEIVED. But what if the defendant, anticipating a $100 million penalty, first offered to spend $10 million on community projects, and in return the enforcement agency granted the defendant a penalty reduction? The government would never “receive” the $10 million. Neither would the government ever spend it. The defendant would do all the spending, and it would be spending its own money. All the government would do is grant a sentence reduction, pursuant to its prosecutorial discretion. Would that violate the MRA?

No. It would not. And it does not. This is precisely what the Comptroller General was saying. And it is precisely what the DOJ has now been doing for over 20 years. I’ll explain further next post.

Part 1 of this series is here.

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Andy Spalding is a senior editor of the FCPA Blog. He is an Assistant Professor at the University of Richmond School of Law.