Imagine I give a test to the 37 students in my class. However, because of reasons uniquely relevant to many of the students, not all students are equally capable of passing the test.
I hope all would view this test to be a bit empty.
This post summarizes the OECD Working Group on Bribery Annual Report and Transparency International's Annual Progress Report of the OECD Anti-Bribery Convention.
For reasons discussed below, these two report cards suffer from the same dynamic described in the above hypothetical.
In many OECD member countries there is no such thing as corporate criminal liability - or even if there is - such corporate liability can only be based on the actions of high-ranking executives or officers. This of course is materially different than in the U.S. where, under respondeat superior principles, a business organization can face legal liability (civil and criminal) based on the actions of any employee to the extent the employee was acting within the scope of his or her duties and to the extent the conduct was intended to benefit, at least in part, the organization.
In most OECD member countries prosecuting authorities have two choices - to prosecute or not to prosecute - there is no such thing as non-prosecution or deferred prosecution agreements (NPAs/DPAs). Not so in the U.S. where the majority of these alternative resolution vehicles are used to resolve FCPA enforcement actions. As the OECD itself stated in its Phase 3 Report of U.S. enforcement of the FCPA - "it seems quite clear that the use of these agreements is one of the reasons for the impressive FCPA enforcement record in the U.S." (See here for the prior post). Former DOJ FCPA enforcement chief Mark Mendelsohn was asked directly – if the DOJ “did not have the choice of deferred or non prosecution agreements, what would happen to the number of FCPA settlements every year,” and he stated as follows: “if the Department only had the option of bringing a criminal case or declining to bring a case, you would certainly bring fewer cases.”
In certain other OECD member countries, there is a compliance defense relevant to the prosecution of bribery and corruption offenses. (See here for the prior post).
Given these differing dynamics (among others), it is fairly obvious why OECD member countries have varying degrees of enforcement of bribery and corruption offenses.
With that in mind, on to the report cards.
Transparency International Progress Report 2011 - Enforcement of the OECD Anti-Bribery Convention
On May 24th, Transparency International (TI) released (here) its seventh annual Progress Report on Enforcement of the OECD Convention.
The report "shows no improvement in the enforcement of the OECD Anti-Bribery Convention in the past year and warns that this could signal a dangerous loss of momentum in the fight against corruption."
The report covers 37 countries and "shows that there are still only seven countries with active enforcement, nine with moderate enforcement, and 21 with little or no enforcement." Huguette Labelle, Chair of TI, stated that "the collective commitment to stamp out foreign bribery made by all OECD parties is undermined when a large number of countries have inadequate enforcement."
The introduction of the report includes the following statement.
"Continued lack of enforcement in 21 countries a decade after the Convention entered into force, notwithstanding repeated OECD reviews, clearly indicates lack of political commitment by their governments. And in some of those with moderate enforcement, the level of commitment is also uncertain. This is a danger signal because the OECD Convention depends on the collective commitment of all parties to ending foreign bribery."
The reports "major conclusions" include the following: "risk of loss of momentum" and "lack of political commitment."
As to the former, the report states as follows. "The Convention has not yet reached the point at which the prohibition of foreign bribery is consistently enforced. With little or no enforcement by half of the signatory governments, backsliding by enforcing governments is a serious threat. This concern is aggravated in a troubled global economy in which companies are scrambling for business. Business organisations have increasingly criticised anti-bribery enforcement as a competitive obstacle. The present position of the Convention is unstable, and unless forward momentum is recovered, the progress made in the past decade could unravel."
As to the "lack of political commitment", the report states as follows. "Reviews conducted by TI experts indicate that the principal cause of lagging enforcement is lack of political commitment by government leaders. In countries where there is committed political leadership, the OECD’s rigorous monitoring programme has helped improve laws and enforcement programmes. However, in the absence of political will, even repeated OECD reviews have little effect."
Once again, Canada received a public lashing from TI.
Under the heading "lack of progress in Canada," the report states as follows. "Canada is the only G7 country in the little or no enforcement category, and has been in this category since the first edition of this report in 2005. It is also the only OECD member that does not provide nationality jurisdiction, which presents a serious obstacle to enforcement. [...] TI welcomes that the government of Canada has publicly reported the number of investigations for the first time. It is promising that 23 foreign bribery investigations are under way. If these investigations lead to prosecutions, Canada may finally move out of the little or no enforcement category." (A future post will summarize the recent Canadian enforcement action against Niko Resources).
TI's 2010 report (see here for the prior post) included reference to many big picture enforcement issues such as the use of negotiated settlements (NPAs and DPAs), judicial scrutiny of enforcement actions, and the proper amount of fines and penalties. However, TI's 2011 report was silent as to many big picture issues.
OECD Working Group on Bribery Annual Report
On April 20th, the OECD Working Group on Bribery released its annual report (here). The release (here) states as follows. "Most governments are not meeting their international commitments to clamp down on bribery and corruption in international business, with only five signatories to the OECD Anti-Bribery Convention having sanctioned individuals or companies in the past year."
Showing posts with label Transparency International. Show all posts
Showing posts with label Transparency International. Show all posts
Thursday, June 30, 2011
Thursday, October 28, 2010
The TI Report
[Before turning to the TI Report, I am pleased to share that FCPA Professor has been named a "Top 25 Business Law Blog" by LexisNexis. Voting is open for the top blog, which will be announced on November 3rd. Here is the link to vote. Thank you for your support]
Earlier this week, Transparency International a "global civil society organization leading the fight against corruption" released its annual Corruption Perceptions Index ("CPI") (see here).
As TI's report explains, the CPI "draws on different assessments and business opinion surveys" to compile an index "relating to bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and questions that probe the strength and effectiveness of public sector anti-corruption efforts."
In a release TI noted that the "2010 CPI shows that nearly three quarters of the 178 countries in the index score below five, on a scale from 0 (perceived to be highly corrupt) to 10 (perceived to have low levels of corruption), indicating a serious problem.
The United States scored a 7.1 in the CPI index - 22nd out of 178 countries and below several European countries, New Zealand, Australia, Japan, Qatar, the United Kingdom, and others. As others have reported (here) "this was the lowest score awarded to the United States in the index's 15-year history and also the first time it had fallen out of the top 20."
In a video release (here) TI's Chair, Hugette Labelle, stated that "corruption remains a serious obstacle and cause for concern" and that a "vital issue remains enforcement without which all the laws in the world will be of little value."
While the CPI may just seem like a bunch of numbers, the index has real-world application as many companies and FCPA compliance professionals calibrate FCPA risk assessment to the CPI.
Earlier this week, Transparency International a "global civil society organization leading the fight against corruption" released its annual Corruption Perceptions Index ("CPI") (see here).
As TI's report explains, the CPI "draws on different assessments and business opinion surveys" to compile an index "relating to bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and questions that probe the strength and effectiveness of public sector anti-corruption efforts."
In a release TI noted that the "2010 CPI shows that nearly three quarters of the 178 countries in the index score below five, on a scale from 0 (perceived to be highly corrupt) to 10 (perceived to have low levels of corruption), indicating a serious problem.
The United States scored a 7.1 in the CPI index - 22nd out of 178 countries and below several European countries, New Zealand, Australia, Japan, Qatar, the United Kingdom, and others. As others have reported (here) "this was the lowest score awarded to the United States in the index's 15-year history and also the first time it had fallen out of the top 20."
In a video release (here) TI's Chair, Hugette Labelle, stated that "corruption remains a serious obstacle and cause for concern" and that a "vital issue remains enforcement without which all the laws in the world will be of little value."
While the CPI may just seem like a bunch of numbers, the index has real-world application as many companies and FCPA compliance professionals calibrate FCPA risk assessment to the CPI.
Thursday, August 12, 2010
Report Cards
The start of school is just around the corner, but summer is report card time for various groups focused on reducing bribery and corruption.
This post highlights two such report cards: Transparency International's Annual Progress Report of the OECD Anti-Bribery Convention and The OECD Working Group on Bribery Annual Report.
Transparency International 2010 Progress Report of the OECD Anti-Bribery Convention
On July 28th, Transprancy International (TI) (see here) released its sixth annual Progress Report on Enforcement of the OECD Convention.
"The 2010 report covers 36 of the 38 parties to the Convention, all except Iceland and Luxembourg. It covers enforcement data for the period ending 2009 unless otherwise stated and includes reports on recent case developments through June 2010. Like prior reports, this report is based on information provided by TI experts in each reporting country selected by TI national chapters."
According to Appendix A of the report, the U.S. experts responding to the TI questionnaire were Lucinda Low (here) and Tom Best (here) of Steptoe & Johnson LLP.
In summary fashion, the report states:
"The increase in the number of countries with active enforcement from four to seven is a very positive development, because active enforcement is considered a substantial deterrent to foreign bribery. With the addition of Denmark, Italy and the United Kingdom, which previously were in the moderate category, there is now active enforcement in countries representing about 30 per cent of world exports, 8 per cent more than in the prior year."
"The number of countries in the moderate category has changed from 11 to 9 countries, because three countries have moved up to the active category and one country, Argentina have moved up from the lowest category. The risk of prosecution in the nine countries with moderate enforcement – representing about 21 per cent of world exports – is considered an insufficient deterrent. Among this group are G8 members France and Japan."
"The most disappointing finding is that there are still 20 countries – including G8 member Canada – with little or no enforcement, representing about 15 per cent of world exports. That number has shown little change in the last five years. This is deeply disturbing because companies in these countries will feel little or no constraint about foreign bribery, and many are not even aware of the OECD Convention. Governments in these countries have failed to meet the Convention’s commitment for collective action against foreign bribery."
The report contains the following conclusions.
Current Levels of Enforcement are too Low to Enable the Convention to Succeed
"With active enforcement in only seven of the 38 parties to the Convention, the Convention’s goal of effectively curbing foreign bribery in international business transactions is still far from being achieved. The current situation is unstable because the Convention is predicated on the collective commitment of all the parties to end foreign bribery. Unless enforcement is sharply increased, existing support could well erode. Danger signals include efforts in some countries to limit the role of investigative magistrates, shorten statutes of limitations and extend immunities from prosecution. The risk of backsliding is particularly acute during a time of recession, when competition for limited orders is intense."
Cause of Lagging Enforcement: Lack of Political Will
"The principal cause of lagging enforcement is lack of political will. This can take a passive form, such as failure to provide adequate funding and staffing for enforcement. It can also take an active form, through political obstruction of investigations and prosecutions. The lack of political will must be forcefully confronted not only by the Working Group on Bribery but also by the active involvement of the OECD Secretary-General, as well as high-level pressure on the laggards from governments committed to enforcement."
Although the TI Report probably did not have the U.S. and U.K. in mind when making the above statement, many have questioned whether both the U.S. and U.K. governments lacked the political will to charge BAE, a large defense contractor to both governments, with bribery offenses. The U.S. enforcement action (see here) was not an FCPA enforcement action and the U.K. enforcement action (here) merely concerned a book keeping issue in Tanzania. And of course, TI's statement about lack of political will was made before the Giffen Gaffe (see here).
Positive developments noted in the TI Report include:
"During the last year prosecutors in the US, Germany and the UK announced a number of settlements of important foreign bribery cases in which the defendants agreed to pay fines amounting to many hundreds of millions of dollars. These settlements demonstrate the ability of prosecutors to resolve cases without interminable litigation. The settlement levels provide a sharp wake-up call to international business regarding the gravity of foreign bribery."
In seeming recognition of how aggresive enforcement of bribery laws can become a cash cow (see here for more) for the enforcing government, the report then states: "[The settlements] should also make clear to laggard governments that investing in adequate enforcement can have substantial returns."
Other snippets from the TI Report.
As to the U.K.'s delay of the Bribery Act (see here for more) the report states:
"... it is regrettable that the entry into force of the law has been delayed until April 2011. There should be no further delay. It is also important that the consultation on the publication of official government guidance on compliance will not result in weakening any provision of the law."
As to the use of alternative resolution vehicles such as non-prosecution and deferred prosecution agreements - a common way corporate FCPA enforcement actions are resolved (see here and here for more) and a model the U.K. SFO seeks to follow - the report contains this recommendation:
"The Working Group should undertake a study on the use of negotiated settlements to resolve foreign bribery cases. There are strong reasons for negotiated settlements, most importantly to avoid the high costs, long delays and unpredictable outcomes of litigation. However, there is concern that these settlements could be questionable deals between prosecutors and politically influential companies. Therefore, procedures should be adopted to make settlement terms public and subject to judicial approval. This should follow a public hearing where representatives of the country where the bribes were paid, competitors and other interested stakeholders such as public interest groups should be given an opportunity to present their views."
The report also states as follows:
"TI considers that all settlements should be submitted to judicial review independent from the Prosecutor’s Office. This review should include a public hearing with representatives of the country where the bribe was paid, competitiors and civil society organisations before the settlement becomes final and published detailed conclusions."
In a section of the report discussing current cases and trends, the report notes that some fines and penalties are based on the amount of the bribe while in other cases the fines and penalties are based on the amount of profit or gain from the transaction.
In apparent recognition that many FCPA fines and penalties (even eye-popping ones such as Siemens) still result in the company seemingly emerging from the prosecution with a net profit from the improper activity, the report states:
"TI considers that corporate fines should exceed the amount of profit from the wrongdoing."
Further, the TI report questions whether the increase in enforcement and the penalties imposed are actually making any difference as it states: "[w]hile the amounts paid by companies are rising steadily in some jurisdictions, the question remains whether there is adequate deterrence."
Continuing the dialogue on the question of "where should fines and penalties" go (see here and here for more) the report states:
"It would be desirable for the OECD Working Group on Bribery to conduct a study on corporate liability and penalties. TI considers that part of the fines paid or profits reimbursed should be made available for the benefit of the country that suffered from the offence."
In addition to Transparency International, the OECD itself issued a summer report card.
OECD Working Group on Bribery Annual Report
On June 15th, the OECD Working Group on Bribery issued its annual report (see here).
As stated in the report, "the OECD has been at the forefront of international efforts to combat corruption in business, taking a multi-disciplinary approach, via its Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as well as through its work in the areas of taxation, development aid, and governance."
The Anti-Bribery Convention (here) has been implemented by 38 countries (see here) and these countries comprise the OECD Working Group on Bribery.
Among recent achievements noted by OECD Secretary General Angel Gurría are:
"Israel—the Working Group’s newest member— [...] underwent a series of intense
evaluations and implemented significant anti-bribery legislative changes to the anti-bribery standards expected of candidates for membership of the OECD;" and
"Chile, which recently became a member of the OECD, also passed legislation that holds Chilean companies liable for bribing foreign public officials when doing business abroad;".
Secretary General Gurria also noted that "in 2009, Russia officially asked to join the Anti-Bribery Convention as part of its OECD membership drive" and that the OECD is also deepening relations on anti-bribery issues with China, India, Indonesia and Thailand, and hopes to bring other countries on board."
As the report notes, 2009 "marked the completion of ten years of monitoring Parties’ implementation and enforcement of the Anti-Bribery Convention."
This is the first year that official data on enforcement efforts by Parties
to the Anti-Bribery Convention is publicly available. The data (see here) is from "Decisions on Foreign Bribery Cases from 1999 to December 2009."
According to the report, "the data has been compiled and published by the OECD Secretariat on the basis of statistics, data and information provided by the Parties to Convention in order to provide a realistic picture of the level of enforcement in the jurisdiction of each of the Parties. However, the responsibility for the provision and accuracy of information rests solely with the individual Parties."
Further, in a seeming reference to U.S. enforcement of the FCPA and the frequency by which FCPA enforcement actions are resolved through non-prosecution agreements, the report notes that the data includes information "provided on a voluntary basis by certain countries concerning the number of foreign bribery cases that have been resolved through an agreement between the law enforcement authorities and the accused person or entity, with or without court approval."
Interested in how many individuals and business entities have been criminally sanctioned by OECD signatory nations for bribery? Curious as to how many investigations are currently pending by signatory nations? Want to compare Hungary to Iceland or the U.S. to Germany?
It is all possible with OECD data.
This post highlights two such report cards: Transparency International's Annual Progress Report of the OECD Anti-Bribery Convention and The OECD Working Group on Bribery Annual Report.
Transparency International 2010 Progress Report of the OECD Anti-Bribery Convention
On July 28th, Transprancy International (TI) (see here) released its sixth annual Progress Report on Enforcement of the OECD Convention.
"The 2010 report covers 36 of the 38 parties to the Convention, all except Iceland and Luxembourg. It covers enforcement data for the period ending 2009 unless otherwise stated and includes reports on recent case developments through June 2010. Like prior reports, this report is based on information provided by TI experts in each reporting country selected by TI national chapters."
According to Appendix A of the report, the U.S. experts responding to the TI questionnaire were Lucinda Low (here) and Tom Best (here) of Steptoe & Johnson LLP.
In summary fashion, the report states:
"The increase in the number of countries with active enforcement from four to seven is a very positive development, because active enforcement is considered a substantial deterrent to foreign bribery. With the addition of Denmark, Italy and the United Kingdom, which previously were in the moderate category, there is now active enforcement in countries representing about 30 per cent of world exports, 8 per cent more than in the prior year."
"The number of countries in the moderate category has changed from 11 to 9 countries, because three countries have moved up to the active category and one country, Argentina have moved up from the lowest category. The risk of prosecution in the nine countries with moderate enforcement – representing about 21 per cent of world exports – is considered an insufficient deterrent. Among this group are G8 members France and Japan."
"The most disappointing finding is that there are still 20 countries – including G8 member Canada – with little or no enforcement, representing about 15 per cent of world exports. That number has shown little change in the last five years. This is deeply disturbing because companies in these countries will feel little or no constraint about foreign bribery, and many are not even aware of the OECD Convention. Governments in these countries have failed to meet the Convention’s commitment for collective action against foreign bribery."
The report contains the following conclusions.
Current Levels of Enforcement are too Low to Enable the Convention to Succeed
"With active enforcement in only seven of the 38 parties to the Convention, the Convention’s goal of effectively curbing foreign bribery in international business transactions is still far from being achieved. The current situation is unstable because the Convention is predicated on the collective commitment of all the parties to end foreign bribery. Unless enforcement is sharply increased, existing support could well erode. Danger signals include efforts in some countries to limit the role of investigative magistrates, shorten statutes of limitations and extend immunities from prosecution. The risk of backsliding is particularly acute during a time of recession, when competition for limited orders is intense."
Cause of Lagging Enforcement: Lack of Political Will
"The principal cause of lagging enforcement is lack of political will. This can take a passive form, such as failure to provide adequate funding and staffing for enforcement. It can also take an active form, through political obstruction of investigations and prosecutions. The lack of political will must be forcefully confronted not only by the Working Group on Bribery but also by the active involvement of the OECD Secretary-General, as well as high-level pressure on the laggards from governments committed to enforcement."
Although the TI Report probably did not have the U.S. and U.K. in mind when making the above statement, many have questioned whether both the U.S. and U.K. governments lacked the political will to charge BAE, a large defense contractor to both governments, with bribery offenses. The U.S. enforcement action (see here) was not an FCPA enforcement action and the U.K. enforcement action (here) merely concerned a book keeping issue in Tanzania. And of course, TI's statement about lack of political will was made before the Giffen Gaffe (see here).
Positive developments noted in the TI Report include:
"During the last year prosecutors in the US, Germany and the UK announced a number of settlements of important foreign bribery cases in which the defendants agreed to pay fines amounting to many hundreds of millions of dollars. These settlements demonstrate the ability of prosecutors to resolve cases without interminable litigation. The settlement levels provide a sharp wake-up call to international business regarding the gravity of foreign bribery."
In seeming recognition of how aggresive enforcement of bribery laws can become a cash cow (see here for more) for the enforcing government, the report then states: "[The settlements] should also make clear to laggard governments that investing in adequate enforcement can have substantial returns."
Other snippets from the TI Report.
As to the U.K.'s delay of the Bribery Act (see here for more) the report states:
"... it is regrettable that the entry into force of the law has been delayed until April 2011. There should be no further delay. It is also important that the consultation on the publication of official government guidance on compliance will not result in weakening any provision of the law."
As to the use of alternative resolution vehicles such as non-prosecution and deferred prosecution agreements - a common way corporate FCPA enforcement actions are resolved (see here and here for more) and a model the U.K. SFO seeks to follow - the report contains this recommendation:
"The Working Group should undertake a study on the use of negotiated settlements to resolve foreign bribery cases. There are strong reasons for negotiated settlements, most importantly to avoid the high costs, long delays and unpredictable outcomes of litigation. However, there is concern that these settlements could be questionable deals between prosecutors and politically influential companies. Therefore, procedures should be adopted to make settlement terms public and subject to judicial approval. This should follow a public hearing where representatives of the country where the bribes were paid, competitors and other interested stakeholders such as public interest groups should be given an opportunity to present their views."
The report also states as follows:
"TI considers that all settlements should be submitted to judicial review independent from the Prosecutor’s Office. This review should include a public hearing with representatives of the country where the bribe was paid, competitiors and civil society organisations before the settlement becomes final and published detailed conclusions."
In a section of the report discussing current cases and trends, the report notes that some fines and penalties are based on the amount of the bribe while in other cases the fines and penalties are based on the amount of profit or gain from the transaction.
In apparent recognition that many FCPA fines and penalties (even eye-popping ones such as Siemens) still result in the company seemingly emerging from the prosecution with a net profit from the improper activity, the report states:
"TI considers that corporate fines should exceed the amount of profit from the wrongdoing."
Further, the TI report questions whether the increase in enforcement and the penalties imposed are actually making any difference as it states: "[w]hile the amounts paid by companies are rising steadily in some jurisdictions, the question remains whether there is adequate deterrence."
Continuing the dialogue on the question of "where should fines and penalties" go (see here and here for more) the report states:
"It would be desirable for the OECD Working Group on Bribery to conduct a study on corporate liability and penalties. TI considers that part of the fines paid or profits reimbursed should be made available for the benefit of the country that suffered from the offence."
In addition to Transparency International, the OECD itself issued a summer report card.
OECD Working Group on Bribery Annual Report
On June 15th, the OECD Working Group on Bribery issued its annual report (see here).
As stated in the report, "the OECD has been at the forefront of international efforts to combat corruption in business, taking a multi-disciplinary approach, via its Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as well as through its work in the areas of taxation, development aid, and governance."
The Anti-Bribery Convention (here) has been implemented by 38 countries (see here) and these countries comprise the OECD Working Group on Bribery.
Among recent achievements noted by OECD Secretary General Angel Gurría are:
"Israel—the Working Group’s newest member— [...] underwent a series of intense
evaluations and implemented significant anti-bribery legislative changes to the anti-bribery standards expected of candidates for membership of the OECD;" and
"Chile, which recently became a member of the OECD, also passed legislation that holds Chilean companies liable for bribing foreign public officials when doing business abroad;".
Secretary General Gurria also noted that "in 2009, Russia officially asked to join the Anti-Bribery Convention as part of its OECD membership drive" and that the OECD is also deepening relations on anti-bribery issues with China, India, Indonesia and Thailand, and hopes to bring other countries on board."
As the report notes, 2009 "marked the completion of ten years of monitoring Parties’ implementation and enforcement of the Anti-Bribery Convention."
This is the first year that official data on enforcement efforts by Parties
to the Anti-Bribery Convention is publicly available. The data (see here) is from "Decisions on Foreign Bribery Cases from 1999 to December 2009."
According to the report, "the data has been compiled and published by the OECD Secretariat on the basis of statistics, data and information provided by the Parties to Convention in order to provide a realistic picture of the level of enforcement in the jurisdiction of each of the Parties. However, the responsibility for the provision and accuracy of information rests solely with the individual Parties."
Further, in a seeming reference to U.S. enforcement of the FCPA and the frequency by which FCPA enforcement actions are resolved through non-prosecution agreements, the report notes that the data includes information "provided on a voluntary basis by certain countries concerning the number of foreign bribery cases that have been resolved through an agreement between the law enforcement authorities and the accused person or entity, with or without court approval."
Interested in how many individuals and business entities have been criminally sanctioned by OECD signatory nations for bribery? Curious as to how many investigations are currently pending by signatory nations? Want to compare Hungary to Iceland or the U.S. to Germany?
It is all possible with OECD data.
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