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
SUMMARY

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... (see full summary)

 
FREE EXCERPT
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.

To continue reading

FREE SIGN UP