Good Cop / Bad Cop Reply

If you’re traveling in Chile and encounter a police officer don’t try to bribe him to get out of a ticket. Unlike much of the rest of the world, Chile reportedly has a squeaky clean police force that will arrest those who offer to “tip” or “thank” them in exchange for favorable treatment. This warning was given to Carolyn Lindsey of TRACE by almost everyone she encountered there last week, and was even mentioned in the Frommer’s guide book, which says “never, ever, think about bribing a police officer – you’ll be taken straight to the comisaria (police station).”

Why is this noteworthy? Shouldn’t the citizens of every country expect that their police force doesn’t accept bribes or extort victims? Unfortunately, at least some of the police in most countries look for opportunities to line their own pockets. The results of BRIBEline, TRACE’s anonymous online reporting mechanism for bribe demands, back this up. In a number of countries, most of the reports to BRIBEline implicate the police force. Our reports on Russia and India revealed that over 30 percent of bribe demands reported were demanded by police officers. The numbers for China and Ukraine show that 11 percent and 18 percent of bribe demands, respectively, are made by the police. In Mexico, a staggering 46 percent of the BRIBEline reports involve police officers. TRACE has received reports on police in the United States asking for bribes, too, but has not received a single report on the police in Chile.

A strong, honest police force helps maintain the rule of law and ensures the safety, security and confidence of all citizens. Too often it’s the police in an area that people fear most and we hear a lot of stories about the “customary” response to a traffic stop or other encounter with a police officer. In one such story in Indonesia, the businessman in question decided not to pay the bribe demanded by the officer, which resulted in the individual being escorted to the police station and ultimately appearing before a judge. At each step in the process, the officers and officials he encountered were incredulous that he wouldn’t simply pay the officer to take care of the ticket – that was the accepted and expected practice.

By all accounts, the police in Chile are different. According to the Chileans we talked with, the police take pride in their office and are offended at the thought that they could be “bought off”. For this, the Chilean police force should be commended. Officials who do their duty without abusing their position do not receive enough praise and attention in a world that focuses on those who view a government position as an easy way to cash in on the power entrusted to them.

An FCPA Pūpū Platter 1

As an active year in FCPA enforcement comes to a close and Anne Richardson of TRACE prepares to head to her hometown in Hawaii for the holidays, she thought it would be worthwhile to present a sampling– a pūpū platter, if you will – of interesting and peculiar cases in the evolution of the FCPA. More information on these and other international anti-bribery enforcement actions can be found on the TRACE Compendium.

As a related matter, please note that we have “counted” (and will regularly update on the Compendium) the number of FCPA enforcement actions brought by the DOJ and SEC since 1977. As of today, the DOJ has brought 71 enforcement actions against corporate entities and 104 actions against individuals. The SEC has brought 57 enforcement actions against corporate entities and 46 actions against individuals. Calculating the number of FCPA actions is not exactly straightforward and requires a defined methodology – we explain ours on the Compendium FAQs page.

Now, for the pūpū platter:

• In the “Page Airways” case from the late 1970s, the SEC filed a civil injunctive action against Page Airways, Inc. – Grumman Corporation’s worldwide sales distributor for twin-jet Gulfstream II corporate aircraft – and six officers and directors for violating the antifraud, proxy and FCPA recordkeeping provisions in connection with over $2.5 million in alleged bribes paid to foreign officials in a variety of countries, including $200,000 to the late President of Gabon, Albert Bongo. In the end, the SEC succeeded on the reporting (Section 13(a)) and proxy (Section 14(a)) charges. Interestingly, the SEC News Digest announcing the settlement stated: “In reaching this settlement, the Commission and Page considered concerns raised by another agency of the United States Government regarding matters of national interest.” To our knowledge, this is the only FCPA enforcement action where it was publicly disclosed that “matters of national interest” (national security or foreign policy, perhaps) were a predominant factor.

• In the “Crawford Enterprises” case from the early 1980s, which concerned an extensive bribery scheme involving multiple corporate entities, individuals and officials at Mexico’s state-owned oil company, Petroleos Mexicanos, two individuals successfully based their defenses on the now-deceased “Eckhardt Amendment.” The Eckhardt Amendment, which was removed from the FCPA in 1988, had provided that an employee could not be convicted of a criminal FCPA offense unless the employer had also been convicted of a substantive FCPA provision. The removal of this amendment opened the door to prosecuting individual employees separately from, or in lieu of, a corporate criminal prosecution.

• In the “Eagle Bus Manufacturing” case from the late 1980s, the DOJ charged a Greyhound subsidiary and several individuals with conspiracy to violate the FCPA in connection with a kickback scheme involving the president and vice president of a bus company owned by the Saskatchewan provincial government in Canada. The two Canadian officials at the Saskatchewan bus company were initially indicted for conspiracy to violate the FCPA. The officials challenged the indictment, arguing that foreign official recipients of bribe payments cannot be charged with conspiracy to violate the FCPA. The court agreed, finding that foreign official bribe-takers cannot be charged under the general conspiracy statute (18 U.S.C. 371) as their conduct was not substantively criminalized in the FCPA statute itself. To find otherwise, the court said, would be inconsistent with Congress’s intent not to punish foreign officials for their participation in the prohibited bribery schemes.

• In the “Tannenbaum” case in the late 1990s, the president of a garbage incinerator company was charged with conspiring to violate the FCPA in connection with scheme to bribe a supposed Argentine official to secure sales of garbage incinerators to the Government of Argentina. Tannenbaum offered a bribe to an undercover FBI agent posing as an Argentine procurement officer. Tannenbaum’s subjective belief that the intended recipient of a bribe was a foreign official – even if the recipient was not, in fact, a foreign official – was sufficient for the conspiracy charge.

The year 2009 saw three well-publicized FCPA trials – Bourke, Green and Jefferson. As more FCPA actions to go trial, we hope to see a body of FCPA case law develop. That’s good news for companies and individuals craving more guidance and clarification in the interpretation of the FCPA.

TRACE Compendium Update: German Authorities Impose EUR 150.6 Million in Fines Against MAN Group Reply

On December 10, 2009, public prosecution authorities at the Munich District Court imposed a EUR 75.3 million fine against each of two MAN subgroups – MAN Nutzfahrzeuge AG (the Group’s commercial vehicles division) and MAN Turbo AG (the Group’s compressors/turbines division) – in connection with improper payments made to foreign officials in various undisclosed countries between 2002 and 2009. This settlement marks the conclusion of the Munich Public Prosecutor’s Office’s investigation into wrongdoing by the corporate entities. The investigations into several former managers in the MAN Group continue. According to MAN, it was able to reach settlement with the government as a result of the company’s extensive internal investigations into the alleged bribery and its cooperation with prosecutors. MAN’s internal investigations are reported to have cost a total of EUR 50 million since May 2009.

For more information on this and other international anti-bribery enforcement actions, please visit the TRACE Compendium.

Good News at Today's OECD Celebration Reply

TRACE received an early Christmas present today when the OECD announced a new recommendation on facilitation payments more closely aligned with TRACE’s longstanding position on this form of business bribery. The recommendation was made at the OECD’s celebration of “International Anti-Corruption Day” and the Tenth Anniversary of the Entry into Force of the OECD Anti-Bribery Convention. The OECD also used the forum to introduce its Initiative to Raise Global Awareness of Foreign Bribery.

This is a timely and welcome move by the OECD that brings the considerable problems associated with facilitation (or ‘grease’ or ‘expediting’ payments) in the international business arena into keener focus. Just like large commercial bribes, grease payments abuse the public trust and corrode corporate governance. Treating them as anything other than outright bribery muddies the compliance waters and adds confusion where there should be clarity. We are delighted to see the OECD take a stronger stance.

OECD Secretary-General Angel Gurría and U.S. Secretary of Commerce Gary Locke jointly unveiled the OECD’s new Recommendation for Further Combating Bribery of Foreign Public Officials via video-link from Washington, D.C. during the celebration, opened by remarks from U.S. Secretary of State Hillary Clinton.

TRACE has worked with companies for eight years to help them voluntarily end their reliance on facilitation payments. With management support, a clear message, careful planning and good internal controls, companies tell us avoiding this form of bribery is no more challenging than avoiding any other form – and the benefits are considerable. Of the companies that have moved away from reliance on these payments, none has reported a significant delay or disruption to their business.

Both the 2009 Facilitation Payments Survey Results and The High Cost of Small Bribes are available on the TRACE website. The High Cost of Small Bribes is available in English and French.