Conspicuous Prosecution in the Shadows: Rethinking the Relationship Between the FCPA's Accounting and Anti-Bribery Provisions

• Author: Nathan Golden
• Position: J.D. Candidate, The University of Iowa College of Law, 2019
• Pages: 891-925

891

Conspicuous Prosecution in the Shadows:

Rethinking the Relationship Between the

FCPA’s Accounting and Anti-Bribery

Provisions

Nathan Golden*

ABSTRACT: The Foreign Corrupt Practices Act (“FCPA”) criminalizes

foreign bribery by (1) American defendants; (2) defendants who trade stocks

in the United States or register with the SEC; and (3) foreign defendants who

act in furtherance of foreign bribery while inside the United States It imposes

accounting requirements on some potential defendants. Congress meant the

FCPA to help developing countries eliminate bribery, and, in so doing,

advance U.S. economic and political interests.

However, the FCPA has some fundamental flaws—flaws which U.S.

enforcement agencies have particularly abused of late. The FCPA is vague.

The reticence of defendants to go to trial has kept the courts from clarifying it

and allowed prosecutors to interpret it however they like. The FCPA is also

imperialist. These problems can be rectified by repealing the anti-bribery

provisions and replacing them with a modified accounting requirement

inspired by but independent from the accounting provisions.

I.INTRODUCTION ............................................................................. 892

II.UNDERSTANDING THE FCPA ......................................................... 894

A.REASONS FOR PASSAGE............................................................. 895

B.THE FCPA TAKES CENTER STAGE ............................................ 896

C.HOW IT WORKS ....................................................................... 898

1.The Anti-Bribery Provisions .......................................... 898

i.Covered Defendant ..................................................... 898

ii.Actus Reus ................................................................ 899

iii.Mens Rea .................................................................. 900

iv.Exceptions and Affirmative Defenses ........................... 901

v.Penalties .................................................................... 902

2.The Accounting Provisions ........................................... 902

*

J.D. Candidate, The University of Iowa College of Law, 2019.

892 IOWA LAW REVIEW [Vol. 104:891

3.Civil Liability .................................................................. 904

III. PROBLEMS WITH THE FCPA .......................................................... 904

A.THE FCPA IS VAGUE ............................................................... 904

1.What Is a Foreign Official? ........................................... 906

2.Mens Rea ........................................................................ 909

i.What Does “Corruptly” Mean? ................................... 909

ii.The Blurry Line Between the Other Two

Mens Rea Elements .................................................... 909

3.What is a Thing of Value? ............................................. 913

4.What Is the Difference Between a Bribe and a

Grease Payment? ........................................................... 914

B.THE FCPA IS IMPERIALIST ....................................................... 916

IV.CONGRESS SHOULD REPEAL THE FCPA’S ANTI-BRIBERY

PROVISIONS AND REPLACE THEM WITH A MODIFIED

ACCOUNTING REQUIREMENT ........................................................ 920

A.PROPOSAL ............................................................................... 920

B.EXPLANATION ......................................................................... 924

V.CONCLUSION ................................................................................ 925

I. INTRODUCTION

For enforcement of the Foreign Corrupt Practices Act (“FCPA”)—the

high-profile U.S. statute that criminalizes certain foreign corrupt payments

—2016 was a year for the record-books. The Securities and Exchange

Commission (“SEC”) filed more FCPA corporate enforcement actions than it

ever had before.1 And the Department of Justice (“DOJ”) filed 6.5 times as

many as it had in 2015.2 SEC and DOJ complaints were full of questionable

legal theories.3 For example, in eight cases, the alleged bribe recipients were

health care workers, despite little evidence that they satisfied the FCPA’s

foreign official requirement.4 Supposed corrupt payments took the form of

free beers and rounds of golf,5 despite occasional assurances by DOJ and SEC

officials that they do not pursue trivial payments.6 Because JP Morgan’s

subsidiary supposedly hired friends and relatives of Chinese officials as

1. Mike Koehler, The FCPA’s Record-Breaking Year, 50 CONN. L. REV. 91, 105 (2018).

2. See id. at 98.

3. Id. at 93–94.

4. Id. at 120–21. Under the foreign official requirement, the recipient of the bribe must

generally be a foreign government official, foreign political party or candidate to fall within the

scope of the FCPA. See infra text accompanying note 124.

5. Koehler, supra note 1, at 111.

6. See infra note 201 and accompanying text.

2019] CONSPICUOUS PROSECUTION IN THE SHADOWS 893

interns, JP Morgan was forced to pay the SEC $130 million.7 Yet the SEC cited

no authority to support its assertion that giving an internship to an official’s

friend or relative constituted an unlawful payment.8 The First Circuit had

actually just ruled to the contrary.9 Moreover, it is unlikely that JP Morgan

possessed the requisite mens rea.10 And yet almost every corporate defendant

settled or otherwise resolved the action without a fight,11 and the DOJ and the

SEC each made more money from FCPA corporate settlements than they ever

had before.12 Agency officials knew the corporations would settle because

fighting the charges would be costlier than settling.13

This Note argues that the FCPA started with honorable goals, but that it

is not working. It is an especially vague statute. Courts have not and will not

clarify it because FCPA cases virtually never wind up in open court. Given the

lack of judicial oversight, a clear statute with bright-line rules is necessary to

put defendants on notice and prevent abuse by prosecutors. While global

bribery is a serious problem, the FCPA anti-bribery provisions are imperialist.

Rather than helping developing countries hold their leaders accountable for

violating domestic bribery laws, the FCPA holds foreign business leaders

accountable for violating U.S. laws. In the process, the FCPA imposes

American rules and values on foreign countries rather than helping those

countries implement their own anti-bribery laws. Along the way, it ensures

that wrongdoers abroad pay their penalties to U.S. enforcement agencies not

7. Press Release, S.E.C., JPMorgan Chase Paying $264 Million to Settle FCPA Char ges

(Nov. 17, 2016), https://www.sec.gov/news/pressrelease/2016-241.html.

8. Koehler, supra note 1, at 126–27.

9. Id. at 129–30 (citing United States v. Tavares, 844 F.3d 46, 54–55 (1st Cir. 2016)).

10. Id. at 127. Arthur Levitt, a former chairman of the SEC, recently wrote a compelling op-

ed expressing his view of such enforcement actions:

[M]y father was New York state comptroller . . . . [Y]es, I probably got at least one or

two jobs as a result of knowing people, including my first job as a trainee for Life

magazine. But according to financial regulators now looking into the hiring

practices of major U.S. banks and multinationals in China—some of which have

employed members of influential Chinese families—anyone wh o once hired me

might have been violating ethical and legal standards. Securities and Exchange

Commission regulators now suggest that such hiring overseas is a form of untoward

influence, akin to bribing foreign officials to win business. The accusation is

scurrilous and hypocritical. If you walk the halls of any institution in the U.S.

—Congress, federal courthouses, large corporations, the White House, American

embassies and even the offices of the SEC—you are likely to run in to friends and

family members of powerful and wealthy people.

Arthur Levitt, ‘Influence Peddling’ Makes the World Go Round, WALL ST. J. (Dec. 25, 2013, 3:55 PM),

https://www.wsj.com/articles/8216influence-peddling8217-makes-the-world-go-round-1388004902.

11. Koehler, supra note 1, at 99.

12. Id. at 107.

13. See infra notes 103–05 and accompanying text. The defendants did not settle because

they found the government’s reading of the law defensible. See Jean Eaglesham et al., Wall Street

Pushes Back on Foreign Bribery Probe, WALL ST. J. (Apr. 29, 2015, 7:24 PM), https://www.wsj.com/

articles/wall-street-pushes-back-on-foreign-bribery-probe-1430349863.