LONDON (TrustLaw) - Less than 20 years ago, companies from major exporting countries like France, Germany and Britain could treat the bribes they paid to government officials as tax-deductible. Today, they are being fined hundreds of millions of dollars for making those same bribes.
A practice some used to think of as a “victimless crime” is now acknowledged by the United Nations, World Bank and Organisation for Economic Cooperation and Development as a scourge of economic development. They say bribes undermine the rule of law, are anti-competitive and cheat citizens out of quality goods and services.
So if bribing government officials isn’t a victimless crime, who are the victims?
You could make a strong case for the shareholders of an offending company. If that company is investigated by a regulator and ends up paying a large fine, any shareholder would understandably feel aggrieved.
But what if that same company were to pay a bribe and not get caught? What if, as a direct result of that bribe, it won a large government contract? Would the shareholders still be upset?
There’s a growing consensus that the true victims are the citizens of the country the bribed government official represents. What, if anything, can be done for them? How do they achieve some semblance of justice?
In February this year, Britain’s Serious Fraud Office (SFO) ordered defence contractor BAE Systems (BAE) to pay a fine of £30 million ($45.7 million) to settle its investigation into whether BAE had bribed Tanzanian government officials.
The company did not admit to bribery but wound up pleading guilty to the lesser offence of “failing to keep reasonably accurate accounting records in relation to its activities in Tanzania”. According to an SFO press release, part of the £30 million fine will go to the Tanzanian government “for the benefit of the people of Tanzania”.
This contrasts with an investigation by the U.S. Department of Justice (DOJ) into BAE’s alleged bribery of government officials worldwide, which also ended in February. Subsequently, a BAE press release announced it was pleading guilty to making “false statements to the U.S. Government in connection with certain regulatory filings and undertakings”.
Those “false statements” related specifically to the fact that between 2000 and 2002, BAE represented to the U.S. government that it would create an effective anti-bribery compliance programme. It did not do so. The DOJ fined BAE $400 million – and every dollar of that fine went straight to the U.S. Treasury.
The DOJ has been ramping up anti-bribery investigations under the Foreign Corrupt Practices Act (FCPA), with enforcement actions jumping 1,200 percent in six years. Cynics say this is not because Washington cares deeply about eradicating corruption, rather that FCPA prosecutions are extremely lucrative.
They certainly provide a lot of reward for relatively little effort on the DOJ’s part, as no company has yet fought an FCPA investigation in the courts, choosing instead to settle and thus avoid a damaging and lengthy case.
WHO’S RIGHT?
Both approaches have their flaws. Britain’s SFO is forcing a company to pay money to a government that, by definition, contains corrupt officials who are willing to accept bribes for their own personal enrichment at the expense of their country’s economic development.
Yet why should the U.S. Treasury get the money when U.S. taxpayers weren’t the victims of BAE’s compliance programme failings?
The BAE case isn’t the first time the SFO has asked a company to compensate a country as part of a settlement. In September last year, British bridge builder Mabey & Johnson pleaded guilty to charges of overseas corruption. The SFO ruled it should pay £685,000 ($1.04 million) to Ghana and £139,000 ($211,000) to Jamaica.
Interestingly, neither of those awards has yet been collected. It’s impossible to say for sure why this might be. Perhaps those governments fear that collecting the payments would imply an admission of guilt on their part. What’s clear is that compensating bribery victims is a tricky business.
Taking the BAE investigation as an example, what would you do? Distribute the fine to reputable anti-corruption NGOs in Tanzania? Spend it on a suitable infrastructure project there? Give the money to the World Bank with the provision it is spent on Tanzania? Or is the whole concept of trying to compensate Tanzanian citizens naive and patronising?
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