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Tuesday
Aug272019

No easy solutions to the scourge of demand-side bribery

Imagine your house is on fire. In the front of the house, you have a fire department working tirelessly to put out the fire with water. In the back, someone is spraying your house with gasoline.*

Such is the current state of U.S. anti-corruption enforcement. The United States has vigorously enforced the FCPA against individuals and companies that bribe foreign government officials. Yet the vast majority of the foreign officials who demand these bribes continue to act with impunity.

In a perfect world, countries would enforce existing anti-corruption laws against their own, corrupt officials. But although the United States helps many countries increase their domestic enforcement capacities, this “solution” is unlikely to effectively increase enforcement for the reasons Tom Firestone and Maria Piontkovska explained in their recent article:

Foreign officials who take bribes often share a portion of their illegal proceeds with their superiors, and bribe-taking officials frequently threaten to expose the higher-ups with whom they shared if they are not protected. Even without such a blackmail threat, serious independent investigation and prosecution of such a crime may expose corruption at high levels. Therefore, it is not surprising that FCPA prosecutions so rarely involve corresponding “demand-side” prosecutions of the bribe-takers.

Even when demand-side enforcement actions take place, the officials are rarely sanctioned. A 2018 OECD report found that public officials were “known to have been sanctioned in only one fifth of the 55 schemes covered by the [OECD] survey.”

Some prosecutors in the United States have attempted to fill this enforcement void by employing a patchwork of statutes -- like the Travel Act, mail/wire fraud, and money laundering statutes -- that enable demand-side prosecutions of foreign officials. Unfortunately, their use has been infrequent.

In light of these limitations, U.S. legislators recently introduced a law aimed directly at the demand side of transnational bribery schemes. The Foreign Extortion Prevention Act (FEPA) targets foreign officials who demand or accept bribes in return for fulfilling, neglecting, or violating their official duties. Like most legislative proposals, FEPA would solve many problems and create a few new ones.

First, any attempt to combat the demand side of bribery is a very welcome development. If passed and aggressively enforced, FEPA would address a long-standing complaint by the individuals and companies that often face prosecution while the foreign officials remain untouchable. This should be applauded. 

As one of the bill’s co-sponsors, Rep. John Curtis (R-UT), has explained: “Currently, a business being extorted for a bribe can only say ‘I can’t pay you a bribe because it is illegal and I might get arrested…. [t]his long-overdue bill would enable them to add, ‘and so will you.'” 

FEPA would also align the United States with other countries -- such as the United Kingdom, France, the Netherlands, and Switzerland -- which have laws in place to prosecute corrupt foreign officials. Moreover, it is consistent with anti-bribery conventions, such as the UNCAC, which encourage  parties to address both the demand and supply sides of bribery schemes in implementing legislation (the OECD has similarly called for the prosecution of both sides of bribery transactions).

Critics may argue that the corrupt foreign officials are unlikely to be extradited. But as Firestone and Piontkovska point out, “even if the bribe-takers are never extradited or prosecuted, a U.S. indictment would make it difficult for them to travel (lest they travel to a country that has an extradition treaty with the United States) and to spend their ill-gotten gains…[and] the fact of an indictment could be used to support other penalties, such as sanctions under the Global Magnitsky Act (GMA).”

The legislation is not without its flaws. By placing the FEPA prohibitions under 18 U.S.C. § 201 -- widely considered the centerpiece of U.S. domestic anti-bribery legislation -- foreign officials now face a different standard of liability than the companies or individuals who fall within the purview of the FCPA.  There is no compelling reason for this different standard, and creating one adds an unnecessary hurdle for prosecutors.

FEPA also fails to include critical provisions found in the FCPA, such as the affirmative defenses (local law and reasonable/bona fide expenditure) and the grease payment exception. This subjects bribe recipients to a far more stringent standard of liability than bribe payers.

Although it is not a perfect means to address demand-side bribery, FEPA is a positive step forward for U.S. anti-corruption enforcement. Unfortunately, it is unlikely to become law due to the current political climate. This is a particularly disappointing reality given the flurry of anticorruption-related legislation proposed in recent months (e.g. the CROOK Act and the Kleptocrat Exposure Act). Nevertheless, we should applaud this latest attempt to combat transnational corruption.

*Thank you to Edward Davis, who provided this analogy at an anti-bribery conference I hosted at GW Law several years ago.

____

Jessica Tillipman, pictured above, is a Senior Editor of the FCPA Blog and Assistant Dean at The George Washington University Law School. You can follow her on Twitter at @jtillipman

Reader Comments (3)

It is great to see that this proposal is getting attention. I would like to briefly address Professor Tillipman's very thought-provoking points about (i) different standards of liability for bribe payers under the FCPA and bribe takers under FEPA and (ii) the absence of the FCPA affirmative defenses in FEPA. As for the first point, the standards should be different given that the two statutes are designed to capture different kinds of wrongs (i.e. bribery vs. extortion). This is consistent with domestic US criminal law. For example, the Hobbs Act's provision on extortion under "color of official right" differs from 18 USC §201's prohibition on domestic active bribery. As for the second point, the affirmative defenses and facilitation payments exception are designed to protect companies that Congress decided should not be criminally prosecuted (largely because they lack criminal intent). Allowing foreign officials who are extorting these same companies to benefit from provisions designed to protect them would risk undermining the purpose of FEPA. Therefore, it seems like placing FEPA in Title 18 rather than in the FCPA is appropriate precisely because it avoids the potential problems identified by Professor Tillipman.
August 27, 2019 | Unregistered CommenterTom Firestone
A small but important correction: in The Netherlands, no similar law exists that allows prosecution of foreign officials. It only targets Dutch civil servants or officials of multilateral institutions established in the Netherlands. There are good reasons for this, and it is not self-evident that the U.S. prosecutor should go after individuals that are in the service of foreign, sovereign states--even if for the purpose of targeting the demand side of corrpution.
August 28, 2019 | Unregistered CommenterJelle Dorst
the tools are necessary and implementation of any degree would be welcomed by the citizenry subject to kleptocracy
August 28, 2019 | Unregistered Commentergeronimo
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