domingo, 3 de febrero de 2019

First Come, First Served: Warning Against Vicious Outcomes in the Global Prosecution Market


1.     Introduction

This paper argues that for the last ten years at least, the prosecutions of foreign bribery cases resemble some kind of global prosecution market, where strong enforcement agencies (SEA) from developed countries reach settlements with corporate wrongdoers that deceive those parties most affected by the illicit transactions: shareholders, stakeholders and the nations that have been deprived of the honest services of their public officials.
 American, German, Swiss and other leading SEA and regulators should be mindful of certain unexpected direct and collateral effects of the ways in which they conduct their investigations, and agree on different kinds of settlements in cases related to foreign bribery violations. This is especially relevant when it comes to assessing their profound impact over constituencies and victims within other jurisdictions.
They might also consider amending current legislation, protocols and guidelines, aiming to ensure fair outcomes for all parties involved, including other nation states, weak enforcement agencies (WEA), victims and stakeholders. Furthermore, in a joint effort with enforcement agencies (EA) from other nations, they could unite to promote urgent, much-needed improvements to the OECD Antibribery Convention.
This document is structured as follows: (1) Introduction, (2) Considerations on the Global Prosecution Market, (3) Lessons Learnt from Plea Agreements with Odebrecht, Siemens and PetroTiger, (4) Assessment of the Global Prosecution Market and Policy Recommendations, and (5) Conclusions. Finally, in part (6), the sources used in the preparation of this paper are presented.
            I believe this work makes a relevant contribution to discussions around the positive and negative elements of plea agreements reached by enforcement agencies of developed countries with corporations and individuals for foreign bribery offenses. Also, it makes its own, perhaps modest, contribution to providing alternatives and ideas that may serve to improve the global fight against corruption and to enhance the deterrent effect of joint and coordinated action from enforcement agencies.

2.    Considerations on the Global Prosecution Market

Prosecution of foreign bribery is on the rise. This is the case not just for the United States but also for many other nations, especially OECD members and signatories of the OECD Anti-Bribery Convention. Over the last few years, this Convention has secured 43 signatories, each of whom face strict, regular assessment by the OECD Working Group on Bribery. Some countries, however, stand out as strong and active enforcers, including Germany, the United Kingdom and Switzerland, namely SEA (Strong Enforcement Agencies).
However, annual reports from the Working Group on Bribery show that the United States is the most aggressive and successful enforcer of foreign bribery in recent history, and this is particularly true since the late 1990s. Despite the fact that the US had the Foreign Corrupt Practices Act (FPCA) enacted in 1977[1], which prohibits and allows for punishment of foreign bribery offenses, effective prosecution only became systematic after OECD countries agreed to play by the same rules, as argued by Brewster, 2017.[2]
Enforcement against foreign bribery in the US is led by the Department of Justice (DOJ)[3], which prosecutes individuals and corporations for criminal violations of FCPA provisions,  as well as by the FCPA Unit of the Securities and Exchange Commission (SEC) (created in 2010) for those cases where a company issuing stock in the US has been involved in bribery of foreign officials to secure contracts or other business.[4] Both agencies have proved to have a strong capacity to achieve effective punishment for FCPA infractions.
According to the 2017 OECD report on the enforcement of foreign bribery, as of December of that year, 23 member countries had sanctioned foreign bribery at least once. On the other hand, 18 years after the adoption of the Anti-Bribery Convention, 21 parties have never sanctioned foreign bribery.[5]
Whilst the success or failure of the Convention may be subject to controversy, it remains a fact that prosecutions for foreign bribery are increasing and that more and more countries are joining the Convention, including Israel and Peru, who signed up this year. But what is less clear is whether the Convention, and the improvement of domestic legislation and enforcement for foreign bribery from member states, is proving to be a deterrent to  potential wrongdoers.
On the one hand, payers of foreign bribes don’t seem to need be unduly concerned about the risk of individual criminal prosecution. The histogram below, prepared using OECD data, shows that only 11 individuals have been found guilty and sentenced to serve more than 5 years in prison. The rest, adding up to 86 individuals, have been sentenced to less than 5 years. Not a bad outcome for people who corrupted dozens of public officials, rigged multi-billion-dollar deals, and filled their pockets with the proceeds of shady contracts.
On the other hand, in a significant number of emblematic cases, individuals are never even charged for any of their wrongdoings. In some cases, they even obtain protection or immunity against prosecution in other countries or competing agencies. The price for such protection is the payment of considerable fines and criminal penalties, which are charged to the company, and ultimately to its shareholders, who in almost all cases have also been deprived of the honest services of the company´s management – and therefore are victims too.
It is also true that in many jurisdictions the probability that EA will do any credible effort to investigate, prosecute and punish foreign bribery is close to zero. As of the end of 2017, at least 21 parties to the Convention had never sanctioned a company or individual for foreign bribery.[6] Deterrence, therefore, is undermined by a lack of effective prosecution in at least half of OECD members, as well as by immunity agreements that protect individual criminals while allocating the burden for the payment of fines on shareholders – something especially concerning when the companies engaged as the ‘active’ or supply side of the bribe are owned by a foreign government.
This may help explain the increase in the number of foreign bribery cases worldwide. A quick look at Standford´s Law FCPA Blog brings us to the conclusion that foreign bribery cases are not just increasing in number, but that some corporations – despite observing check-box compliance obligations – remain sympathetic to engaging in corrupt practices in their home countries and elsewhere in order to secure contracts and businesses.
Against this backdrop, the countries on the ‘passive’ or demand side of the bribe are, on the majority of occasions, not taken into consideration by the US, Germany, the UK or Switzerland, just to name a few examples. Therefore, they suffer a large number of complex consequences. Firstly, they are deprived of the honest service of their officials; secondly, they are not recompensed for the wrongdoing, given that the fines are paid to American or other EAs; and thirdly, they cannot prosecute the payers of the bribes, because they have reached settlements with EAs of other countries.
This dismal picture is further accentuated by the fact that enforcement agencies often compete in the global prosecution market to get the largest possible share from liable corporations. Irrespective of what these agencies commonly say in press conferences or press releases when a big case is unveiled, cooperation is, in many cases, thwarted by harsh rivalry and self-interest.
In spite of the efforts made by US, UK, German or Swiss authorities, in this paper I contend that the outcome of prosecutions performed by SEA can produce unfair results when viewed from the perspective of the governments of the demand side. This unfair outcome is in part due to the first come, first served philosophy that underlies foreign bribery enforcement in the global prosecution market. I also argue that such unfair outcomes help make the case that we are in urgent need to improve the OECD Anti-Bribery Convention, making some suggestions and recommendations in Chapter 4.
This is particularly true in light of the growth potential of the global prosecution market. Whilst 560 individuals and 184 entities have been sanctioned for foreign bribery cases since 1999, currently over 500 investigations are ongoing in 30-member states. Likewise, at least “155 criminal proceedings (against 146 individuals and 9 entities) are ongoing for foreign bribery in 11 Parties.”[7] The years to come will undoubtedly see greater tensions between competing jurisdictions, unless steps are taken to ensure fair outcomes for all parties involved.
I believe that there are at least seven major reasons to question the way in which the global prosecution market for foreign bribery violations is working. Firstly, the first come, first served philosophy is creating incentives for negative competition between enforcement agencies instead of cooperation; secondly, investigated corporations have a counter incentive to deceive prosecution agencies and withhold information that prevents effective multi-state prosecution and punishment; thirdly, the prosecution often passes the punishment onto innocent shareholders and stakeholders, whist granting immunity to wrongdoers; fourthly, it may facilitate impunity both in the supply and demand sides of the bribes; fifthly, it leaves countries unprotected against aggressive litigation by corporations in domestic courts and arbitration tribunals; sixthly, FCPA and OECD AntiBribery Convention enforcement are having counterproductive effects in some countries; and, finally, number seven, it damages confidence and credibility in democracy and its institutions.

2.1.        First Come, First Served

EAs compete in the global prosecution market to effectively prosecute cases that fulfill the triple purpose of (i) sending a signal to the public that helps to deter wrongdoers from engaging in criminal activity, (ii) punishing individuals and corporations for their misdeeds, and (iii) collecting multi-billion dollar fines and penalties.   
In some cases, SEA of the countries of bribe payers and business facilitators – such as banks, accountants or shell companies – cooperate amongst themselves, but exclude EAs from those countries where the bribes where paid. Upon occasion, they might offer and ask for cooperation, yet they only do so when things are pretty much a done deal. Also, it is common for SEA to require and effectively receive more cooperation than they actively give, especially to developing nations.
            Therefore, SEA that receive the first tip that there have been foreign bribery infractions get to mobilize rapidly to collect evidence through the gathering of documents, interviews, wiretaps, bank statements, search and seizure proceedings or various other methods. They also get to engage in conversations with defendants and their legal counsel, reaching agreements that may vary in form and reach, such as deferred prosecution or plea agreements.
Such agreements define the terms of the collaboration of the corporation and individuals with the SEA: the admission of guilt, the obligation to improve compliance and the adoption of an independent monitor, among others. In addition, they define the fines to be paid, and the distribution of such funds. As expected, only those governments of the SEA that are actually investigating the case and talking to the firm involved are included in such agreements.
            This is the first come, first served philosophy. Only the first EAs that undertake investigations and reach agreements with firms manage to collect and share the proceeds of the fines and penalties imposed or reached. The case of Odebrecht, which I will explain in Chapter 3, is the perfect example. In that case, EAs from three countries managed to cut a deal (two deals in fact) with Odebrecht-Braskem, under which such companies admitted their guilt in conspiracy to violate FCPA provisions, and then had to pay 2.6 billion USD in fines to the US, Brazil and Switzerland. What stands out here is that none of the nations where the bribes were paid – with the exception of Brazil – received or will receive any compensation related to the agreement.
I believe that the first come, first served philosophy is creating incentives for negative competition between EAs rather than cooperation. Bearing in mind that many firms involved with foreign bribery cases related to officials of countries with weak EAs (WEA) prefer to negotiate with SEA in the first instance than with their own EA, it is more likely that WEA will not be involved in the negotiations at all or will be so only at a later date when everything is very much settled. If lucky, an MLAT[8] for judicial cooperation will facilitate their way into the final settlement with the firm.  
From the perspective of the WEAs, a question arises: Why cooperate with SEAs if the settlement or decisions they (the SEAs) reach with the firm are likely to (i) leave the firm without enough resources to actually pay the fines that would be imposed as a result of the WEAs action, and (ii) omit the fact that the State of the WEA is also a victim that deserves reparation?
From the perspective of overall fairness, the final outcome is not good. In actual cases where companies self-report, they prefer to go to SEAs and then deal later with those that they view as weaker. Furthermore, when they finally reach an agreement, they are clueless about what will happen in the country of the soliciting party. Therefore, such firms remain subject to new investigations in countries that were not part of the overall settlement.
From the perspective of effective enforcement, the outcome is also poor. WEAs have low incentives to cooperate with SEAs. Therefore, the timely collection of evidence becomes more difficult and costly, and as a result, the good guys have a higher chancer to lose in their fight against corruption.

2.2.        Incentivizes corporations to deceive competing enforcement agencies

Firms know how poor the cooperation between competing EAs can be. They also know that such cooperation grows weaker when the distance of capacities between EAs from interested nations is higher. For example, firms could easily expect that cooperation between the US and the UK in an FCPA/UK-Bribery-Act investigation for a crime related to accounting fraud and payment of bribes would be high or very high, whereas cooperation between the US or the UK and Bolivia, Ecuador or Haiti would be weaker.
Because of this, firms and their legal counsel in these cases tend to assess the pros and cons of the different available battlefields for litigation and/or cooperation. Thus, they prioritize reaching agreements with SEAs yet in some occasions go on to litigate the same cases before/against the WEA. During this process, corporations might lie, misguide or deceive both SEAs and WEAs in many ways, including on their real capacity to undertake remedial action and to pay fines or compensate the victims or affected parties for their criminal actions.
I elaborate on this idea below by mentioning the case of Odebrecht, who reached a 2.6 billion USD settlement with the DOJ, Brazil and Swiss authorities, after being initially fined 3.5 billion USD, using the argument that the company could not pay more than this lower amount  ($2.6 billion USD). Then, in January 2017, Odebrecht agreed to pay 200 million USD to Dominican Republic. Later, in December 2018, it agreed to pay 180 million USD to Perú, and it has also offered a further 30 million USD to Colombia. Where is this money coming from? Supposedly Odebrecht didn´t have more available funds.
On the other hand, because conversations oriented to reach plea agreements, DPAs or other kind of agreements, are normally kept confidential, and led by the parent company, in some cases the subsidiary moves toward settlement and negotiations with no real sense of what is really going to happen. They go into it blind. In other instances, managers simply lie to the WEA authorities in order to keep the big agreement with SEAs confidential and protected.

2.3.        It punishes innocent shareholders and stakeholders while granting immunity to wrongdoers

I have argued  that there are at least seven reasons to question how the global prosecution market is operating. One of them, has to do with the negative consequences of the first come, first served principle. Another is related to the incentives that firms have to deceive both WEAs and SEAs when they believe that cooperation between EA is unlikely. Now I will outline a third reason: the way in which the global prosecution market operates is punishing innocent shareholders and stakeholders, whereas it grants immunity to wrongdoers.
Modern corporations are complex entities, which in some cases can have thousands or even hundreds of thousands of shareholders. This is especially true when companies are publicly traded. When managers of such companies commit FCPA infractions, the global prosecution market facilitates the wrongdoers to go into a forum shopping expedition, under the guidance of their legal counsel. As a result, criminals have a higher chance of reaching settlements with EAs that will translate into big fines for their corporations, that is to say their shareholders, whilst obtaining guarantees and assurances of non-criminal prosecution against them as individuals.
The consequences of the crime are therefore externalized. Criminals that breached their fiduciary duty remain immune, whilst the innocent shareholders are punished. This is possible because law firms and companies involved in foreign bribery infractions have specialized in detecting loopholes or legal strategies that will allow them to remain out of prison, whilst putting the burden of reparation on the company.
This externalization also occurs when firms are partly State-owned. In those cases, it may very well happen that the State decides that it needs to capitalize the company in order to guarantee their payment of the fines or to undertake new investments or operations, due to a lack of resources (given that they have been used to pay the fines imposed by SEA).

2.4.        Facilitates Impunity in Both Supply and Demand

The global prosecution market can facilitate impunity in both the supply and demand sides from the perspective of countries where the ‘passive’ side of the bribe was located. Because SEAs work to ensure the imposition of the highest possible sanctions allowed by their own regulations, liable firms will likely exhaust their available resources in order to pay fines or compensations imposed by those SEAs, to the detriment of any other EA. Furthermore, because, in many cases, the agreement will include an obligation for the SEA to withdraw from taking further criminal actions against employees or managers of the company, competing EAs face a steep hill to climb if they wish to punish individuals or firms, particularly if they are a WEA.
This is particularly true when interested countries do not have an extradition treaty in place between them, or when the nation where the defendant is located does not allow for extradition. This is the case in Brazil, according to article 5 of its 1988 Constitution[9], amongst others.
Also, because defendants are unlikely to be extradited, as long as they can provide sufficient cooperation in the criminal or administrative proceedings led by the SEAs or their own country´s EA, the probability that they will effectively cooperate with the investigations led by EAs of other governments is very low. They have no incentive for that whatsoever, and it is unclear who would be in charge of supervising that such cooperation would be made to the greatest possible extent. This, of course, adds to the difficulty of achieving successful prosecutions against the demand side of bribery cases, as Arrieta 2016[10] has argued.
In the case of Odebrecht, despite the fact that the company admitted to paying bribes for securing contracts in 12 countries, in some cases the company´s agents didn´t fully disclose which specific contracts had been tainted by corruption. Therefore, countries like Colombia, Peru, Argentina or México had to embark in a Kafkian process to ascertain their own role in the scandal, which took years. This could have been avoided were it not for the first come, first served way in which the US, Switzerland and Brazil prosecuted the case.
In the Siemens case, it became clear that some level of impunity was going to take place, which wouldn´t be so much of a problem were it not for those nations from the ‘passive side’ of the bribes who did not have the opportunity to utter a word on these cases. If they had, a key issue which later became quite problematic, could have had a general solution within the plea agreement, rather than solutions offered on a case-by-case basis, depending on the domestic legislation of the affected country – namely, the continuity or nullity of tainted contracts. In a press conference held in December, 2008, the DOJ answered some pointed questions made by journalists, as follows:
“QUESTION: Does Siemens get to complete all these projects that they obtained through bribes. ACTING ASSISTANT ATTORNEY GENERAL FRIEDRICH: Let me put it this way. There is not, for example, a disgorgement process as part of a plea. Now, it may depend on, for example, if specific proceeds are identified or if a specific payment is located someplace, then there may be, for example, asset forfeiture measures that could be taken into account. But the disposition today resolves the criminal matter completely.”[11]
            This somewhat vague answer given by the Assistant Attorney General Friedrich shows the scant concern shown by the DOJ with regard to the impact that this case would have on the projects or contracts obtained in LATAM and elsewhere using bribes. This is astounding given the clear consequences that the plea agreement would have over hundreds of thousands of workers, contractors and shareholders worldwide.
In civil law countries, a general principle of contract law is that a contract that has been entered into with illicit cause of object (purpose) is to be deemed void, this is, as if it had never existed. And of course, the payment of a bribe is an illicit cause. The problem is that, whilst it is true that in some FCPA or foreign bribery cases the firm does admits guilt to conspiracy to commit a crime, it does not formally admit the guilt to a specific crime related to a contract – which the public already knows was tainted by corruption. Firms do that because in many countries the law says that the State cannot enter into, nor execute, a contract that is signed with a corrupt company or with a company managed or owned by someone punished for corruption. This can prove to have a major, distressing impact when it comes to public opinion, that demands the termination of such contracts, and contributes to aggressive litigation strategies adopted by firms that live or die by the outcome.
In the same press conference quoted above, a journalist asked:
“QUESTION: You and Mr. Persichini both said that corporate executives were willfully engaged in this practice as standard operating procedure over a period of years widespread. Why does the investigation need to continue? It sounds like you had identified executives who were engaged in this patterned practice of behavior. Why were no individuals charged?”[12]  
            The DOJ representative gave an equally vapid answer, as follows:
“ACTING ASSISTANT ATTORNEY GENERAL FRIEDRICH: I'll say it's not infrequent that a disposition is reached first vis-a-vis a company and then there are individual prosecutions after that. I'm not commenting on this case in specific. I'm talking about the practice generally. I wouldn't draw the conclusion that you're drawing.”
Despite the lawyer-like response, the truth remains that criminal liability of individuals was not a priority for American prosecutors in the Siemens case. This is true for perpetrators both on the demand and supply side. What happened in Siemens, Odebrecht and other cases, simply confirms that the system is – with or without intention – designed in a way that diminishes the possibility of reaching effective punishment of individuals in highly sensitive cases. An OECD report issued in December 2018 has stated likewise that:
 “11/12/2018: Public officials accepting bribes from OECD-based companies run little risk of being punished, according to a new OECD report.  The report looks at what happened to the public officials in a set of 55 concluded cases between 2008 and 2013 where OECD-based companies were punished for bribing foreign public officials. In only one fifth of the 55 concluded foreign bribery cases were formal sanctions imposed on one or more public officials. This is particularly striking because it is for cases in which both sides of the bribe transaction – the briber and the public official on the receiving end – were subject to the jurisdiction of Parties to the OECD Anti-Bribery Convention (…).”[13]
            Likewise, in the case of Odebrecht, Marcello Odebrecht and some of his close Brazilian collaborators were indeed tried and convicted for corruption charges by the Brazilian authorities, but the managers of the companies that paid the bribes in other nations remain free. In sum, the global prosecution market creates incentives that allow for impunity on the supply and demand side in some cases, sending equivocal signals to the public and companies.

2.5.        Leaves countries unprotected against aggressive litigation by corporations in domestic courts and arbitration tribunals

The global prosecution market provides a number of compelling reasons for firms to engage in aggressive legislation against the states where the bribes where made.  Because plea agreements say nothing about litigation of the company against the countries or entities whose public officials they bribed, it is commonplace for firms to bring charges against governments for a number of reasons.
A paradigmatic case is Odebrecht. This Brazilian company has brought several new cases to domestic and arbitration tribunals against Peru and Colombia. In the plea agreement of December 2016, signed with the DOJ, the company admitted to having paid bribes to Colombian and Peruvian public officials – as well as officials of ten other countries. However, they reserved the right to enter into civil or administrative litigation against such governments. In a global prosecution market with greater cooperation between EAs, it would be easier to work together to prohibit these  kinds of litigation within the plea agreements or DPAs reached with the companies. Or, at the very least, it would be possible to demand that the company receive the funds from any such litigation in an escrow account until any investigation related to the payment of bribes has been fully concluded.
A change of this nature would be most useful, especially bearing in mind that the governments of developing nations have scarce or weak resources to take on civil or arbitral litigation in highly sophisticated cases. It would also prevent any legal bullying perpetrated by firms and their armies of lawyers, who, in cases, can seek this kind of litigation in order to gain leverage in the negotiation of plea agreements in criminal or administrative proceedings developed by the EAs of such governments, fully funded by hedge funds or private equities.[14]
            Recently, the Administrative Tribunal of Cundinamarca, Colombia, adopted an exemplary decision against Odebrecht, at the request of the Public Ministry: it mandated the immediate termination of the contract between Odebrecht and the nation for Ruta del Sol II, also ruling that Odebrecht should pay 300 million USD to the Colombian government in compensation, and not the other way around, as Odebrecht wanted.
Odebrecht has also deployed an overtly aggressive litigation strategy in all countries subject to their bribery schemes, including Peru and Argentina. In Peru Odebrecht won awards for nearly 254 million USD in awards issued by arbitration tribunals. 19 arbitrators are under investigation for alleged solicitation of bribes in those cases. I will elaborate on this below.[15]

 

2.6.        FCPA and the OECD Antibribery Convention are having a counterproductive effects in some countries

The final outcomes and timing of decisions taken by EA in the global prosecution market are difficult to grasp and explain to the average member of society, including politicians. In many countries, legislators, policy makers and enforcement authorities are being repeatedly challenged by their own constituencies to take a strong stance against corruption, which is of course good.
What members of each country see is that other SEAs do a lot and get a big cheque after their investigation, whilst their own countries get nothing. This of course, translates into a certain attitude being adopted by their leaders who think that their countries are being left behind, which often later leads to populist anticorruption rhetoric and poor anticorruption legislation. The failed anticorruption referendum voted in Colombia in August this year, which intended to reduce the salary of Congressmen and prohibit plea agreements in corruption cases as means to fight corruption, is a good example.[16]
In many countries, therefore, constituencies demand stronger legislation, higher fines and longer jail sentences. They also demand to eradicate concepts such as the principle of opportunity, non-prosecution agreements and deferred-prosecution agreements from criminal and administrative proceedings , which they find weak and vicious. And of course, their leaders follow, for fear of receiving reprisals or punishment  in the next elections.
If this trend continues, it is more than likely that the global whistleblowing ecosystem will be negatively affected, as firms would have lower incentives for disclosing the problems or crimes that they have detected. This is not a positive scenario, particularly if we take into consideration that NPA and DPAs are an increasingly powerful tool to detect and punish FCPA infractions in the US and in other countries such as the UK. In the US, NPAs and DPAs have nearly tripled over the last few years.
Source: Gibsonn Dunn, 2016[17]
The result of the fear and distrust of WEAs and their constituencies toward NPAs and DPAs is the adoption of equivocal legislation, that hinders rather than facilitates more effective corporate prosecution.


2.7.        It Hinders Democracy and its Institutions

The operation of the global prosecution market creates public distrust in institutions, democracy and the rule of law. It is a system that happens to produce a broad array of cases settled through NPAs, DPAs or plea agreements, therefore it is highly likely that people will lose confidence in the capacity of their institutions to protect the rule of law and institutions. For now, this is an assumption that cannot be substantiated by any verifiable data, and that, therefore, requires further analysis and assessment.
For the moment, I will say two things: firstly, that there is plenty information and news in the public domain that demonstrate that leaders, politicians and activists support this approach; and secondly, that even though it is true that we may not have a clear explanation of causality between the lack of confidence in institutions, the justice sector and democracy with the outcomes of the global prosecution market, a look at the latest results of the 2018 Survey of the Barometer of the America´s should prove sufficient in raising awareness about the way in which civil society and common citizens perceive the justice systems that we have designed.
Table 1: Confidence in Institutions, LATAM, 2018
LatinoBarometer, 2018

It is clear that confidence in the judicial branch is low for all LATAM countries, but that these perceptions have declined since 2005.




Table 2: Confidence in the Judicial Power. LATAM, 1996-2018
LatinoBarometer, 2018

Likewise, it is clear that the perception of corruption as the most important problem faced by the nations of the interviewees, is quite high.
Table 3: Corruption is the largest problem faced by the country?
LatinoBarometer, 2018

Posing the following question would be a good way of further assessing the effectivity and convenience of the current performance of the global prosecution market: Is the final outcome of such prosecution producing positive results in terms of justice and fairness for LATAM or other countries?
In summary, I believe that it is clear that the global prosecution market requires adjustments that call for changes both at a domestic and international level. But this is a subject that I will return to in Chapter 4. For now, I will move on to Chapter 3, were I make a short summary of some problems that were identified in some recent FCPA cases, such as Siemens, Odebrecht and PetroTiger.


3.    Lessons Learnt from Prosecutions Against Odebrecht, Siemens and PetroTiger

Odebrecht and Siemens are emblematic cases from the point of view of LATAM anticorruption activists and enforcement agencies. PetroTiger is relevant because it shows the egregious outcomes that can sometimes result from the global prosecution market. Below, I  make some short remarks related to these cases, with the purpose of highlighting some of the most problematic concerns related to the operation of SEAs in the context of the global prosecution market.

3.1.        Odebrecht

In December 2016, the DOJ announced that it had reached a 2.6 billion USD plea agreement with Odebrecht for a corruption scheme that involved public officials from 12 countries and nearly 800 million USD in bribes. The countries involved were Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, Venezuela.[18] Switzerland and the US had jurisdiction over the case, due to infractions of their foreign bribery regulations.
This announcement, which was seen initially as a promising step in the fight against corruption, indeed helped to bring down corrupt officials in some of the aforementioned countries; but at the same time brought a broad array of difficulties, which could have been foreseen and prevented, and that ended up increasing public distrust over the enforcement ecosystem, rather than the opposite.

3.1.1.     The SEAs Perspective

According to official documents, the DOJ, Brazilian and Swiss authorities reached a plea agreement that was assumed would send the right message to the world: anticorruption enforcers worldwide will not tolerate corruption. Also, that international cooperation in the fight against corruption was key in achieving the desired outcomes. When it came to the punishment, “U.S. District Judge Raymond Dearie said at a hearing in Brooklyn federal court that about $93 million will go to the United States, $2.39 billion to Brazil and $116 million to Switzerland.”[19]
Such a punishment added up to nearly 2.6 billion USD. However, it is worth noting that the parties to the case had agreed that “the gross pecuniary gain resulting from the offense is $3.336 billion. Therefore, pursuant to 18 U.S.C. § 3571(d), the maximum fine that may be imposed is twice the gross gain, or $6.672 billion per offense.”[20] Further, based on that, the parties agreed that “the appropriate total criminal penalty is $4,503,600,000. This reflects a 25 percent discount off of the bottom of the applicable Sentencing Guidelines fine range for the Defendant's full cooperation and remediation.”[21]
            And furthermore, it was stated that “the Defendant has made representations to the Fraud Section, EDNY and the Brazilian authorities that the Defendant´s an inability to pay a criminal fine in excess of $2,600,000,000 (…). Based on those representations, the Defendant has agreed to a criminal penalty of $2,600,000,000 payable to the United States, Brazil, and Switzerland (…)” P.17
Nearly four months later, a judge approved the 2.6 billion USD agreement as of April 2017. The whole package would be distributed between three countries and there would not be a single penny allocated as compensation or remediation for other countries.
            This is even more shocking if we consider that the DOJ had eyesight over the scope of the payment of bribes in other countries, countries that were defrauded of the honest services of their own public officials. According to the document of December 12 2016, filed by the DOJ (Files Charges – Case Initiation),   “ In or about and between 2001 and 2016, ODEBRECHT made and caused to be made approximately $439 million in corrupt payments to foreign political parties, foreign officials, and their representatives, in countries outside of Brazil, including Angola, Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru and Venezuela, in order to secure an improper advantage to obtain and retain business for ODEBRECHT in those countries. ODEBRECHT benefited more than $1.4 billion as a result of these corrupt payments.”[22]
Instead of being invited in a timely manner to join the investigation, help gather evidence and benefit actively from the fines imposed, the WEAs remained isolated and had to make their own way to collect evidence and impose sanctions.

3.1.2.     Angola

According to the plea agreement of December 12 2016, between 2006-2013 Odebrecht made corrupt payments of 50 million US to corrupted Angolan officials, in order to ensure public work contracts. From those contracts, Odebrecht received nearly 261.7 million USD.[23] Angola did not receive any part of the total fine imposed to Odebrecht. A good reason for that may be that Angola under the rule of President Dos Santos seem to be a safe haven for corrupt individuals and companies. Forbes Magazine has reported that Isabel dos Santos, the eldest daughter of the President, has become Africa´s first female billionaire, with a fortune estimated to be around 3.3 billion USD.[24]
In 2017, Reuters explained that Angola has no incentives to prosecute corruption, as the consequences would affect powerful individuals. In addition, Paula Cristina Roque, “an Oxford University-based Angola analyst, said Odebrecht projects in Angola were often secured without having to go through a public tender process” and added that “Many Angolans believe the company enjoyed close ties to President dos Santos”.
Nevertheless, the DOJ and Odebrecht could have agreed to create an escrow account in favor of Angola, in anticipation of better – and more democratic – conditions.[25] They could have also donated these funds to charities or other agents doing work for democratization or strengthening the rule of law  in Angola, such as the World Bank or the African Development Bank or similar international organizations.
Here I must admit that it is perfectly reasonable, in instances where countries  are governed by autocrats, or when there is no rule of law nor respect for human rights or democratic values, to make a more conservative approach to EAs cooperation and coordination.

3.1.3.     Argentina

According to the December 2016 plea agreement, Odebrecht made over 35 million USD in corrupt payments to Argentinian intermediaries, on the understanding that they would be passed on to public officials. The payments were made in connection with three infrastructure projects, which generated a profit of 278 million USD [26] for Odebrecht.
Argentina did not participate in the settlement reached by Odebrecht, the DOJ, Swiss authorities and Brazil. Worse still, Brazilian authorities and Odebrecht became a difficult and painful obstacle for Argentinian prosecutors in charge of the investigation to overcome. Only by August 2018, more than a year and eight months after the December 2016 plea agreement was disclosed, were Brazilian authorities and Odebrecht ready to cooperate with the investigation in Argentina.[27] The negotiation process for the terms of cooperation between Argentina and Brazil took nearly five full months of conversations. Such drama could have been avoided with a broader and more inclusive plea agreement.
Argentina has faced other problems and setbacks related to the case. In 2018, Odebrecht called for an arbitration tribunal against the State, arguing that the decision of Argentinian authorities to terminate the Enhacement of Gas-Pipes Contract was unlawful. Odebrecht sued Argentina in this case for nearly 50 million USD. This strategy is being replicated by Odebrecht in several LATAM countries, including Peru and Colombia. It is said that in many cases Odebrecht has been awarded contracts with artificially low costs, which are later recuperated through corrupt arbitration tribunals. In the case of Argentina, a court ruled to stop the claim of Odebrecht.[28]

3.1.4.     Colombia

According to the plea agreement between the DOJ and Odebrecht, the company paid nearly 11 million USD to Colombian officials, in order to secure at least three public contracts worth nearly 2 billion USD, including the Ruta del Sol II and Ocaña-Gamarra. Later it became apparent that the information that Odebrecht had provided to the DOJ was incomplete. The bribes in Colombia were actually much higher, almost 30 million USD.[29]
It later became clear that instead of working in good faith to cooperate and  resolve the problems resulting from the tainted contracts, the only thing that the Colombian government could expect from Odebrecht would be increased trouble. Odebrecht has filed several civil and administrative actions against the Colombian government, requiring the State to compensate the Brazilian company for problems related to the execution of some of the contracts with the country. Given that the contracts were obtained under false, corrupt, pretenses, it is shameful that they have chosen to respond in this way. The last claim that Odebrecht filed against Colombia, as of August 1 2018, asks for a 1.3 billion USD in compensation.[30] This is nearly half the total of what Odebrecht has paid in bribes that have promoted corruption over the last ten years or more.
In their claim, the company asserted that the Colombian government was performing a persecution campaign against Odebrecht by employing hostile acts that range from precautionary measures to disciplinary proceedings against the company, and even the illicit appropriation of the project Ruta del Sol.[31]
Therefore, instead of cooperation and joint efforts by the company, or the appointment of a compliance monitor and a person in charge of restructuring its operations and contracts, what happened was that the company embarked on an aggressive legal quest to protect the contracts that it had obtained by illegal means and to obtain “reparations” derived from the work that it had done to further said contracts.
            In the midst of this legal battle, Colombian EAs and the Administrative Tribunal of Cundinamarca have taken landmark decisions related to Odebrecht. Firstly, the Colombian Attorney General and the Comptroller General rejected the plea agreement offer made by Odebrecht, who offered 30 million USD to settle the criminal and fiscal proceedings. Secondly, the Administrative Tribunal of Cundinamarca ruled that all contracts between the State and Odebrecht would need to be immediately terminated and that the company and its business partners would have to pay a fine of 400 million USD[32] to the Ministry of Transport.
The abovementioned excesses from Odebrecht could have been avoided had the EAs from all interested parties worked cooperatively rather than competing in the global prosecution market. Now that Colombia has imposed such a high sanction of 400 million USD to Odebrecht, one can start to speculate where that money might come from? Odebrecht had said that they only had 2.6 billion USD… And what if we include other fines, such as the one included in the plea agreement reached by Peru with Odebrecht for 180 USD? I will come back to this later.

3.1.5.     Dominican Republic

According to the DOJ, “In or about and between 2001 and 2014, ODEBRECHT made and caused to be made more than $92 million in corrupt payments to government officials and intermediaries working on their behalf in the Dominican Republic. Odebrecht realized benefits of more than $163 million as a result of these corrupt payments.”[33] The Dominican Republic government did not receive a cent from the 2.6 billion USD agreement.
However, Dominican authorities did manage to perform search and seizure operations in Odebrecht´s headquarters in the Dominican Republic, though this was only in January 2017, some days after the DOJ made the information public.
Despite the delay in the search and seizure operations, the Dominican government reached a 184 million USD settlement, twice the amount that had been paid in bribes, as regulated under Law 448-06, the Dominican Antibribery Law. It was then agreed that the 184 million USD would be paid during a period of 8 years.
Odebrecht agreed to cooperate with the investigation led by the Dominican Prosecutor General in exchange for immunity for their executives, as well as for a permit to continue operating in the Dominican Republic, where it was developing the construction of the Punta Catalina thermal energy plant, among other projects.[34] Those 184 million USD were not mentioned, included or accounted for in the December 2016 plea agreement signed by the DOJ and Odebrecht.
So, something doesn’t seem to add up. Remember that: “the Defendant has made representations to the Fraud Section, EDNY and the Brazilian authorities that the Defendant´s an inability to pay a criminal fine in excess of $2,600,000,000 (…). Based on those representations, the Defendant has agreed to a criminal penalty of $2,600,000,000 payable to the United States, Brazil, and Switzerland (…)”.
One of two things could therefore be true: either the DOJ was deceived in the December 2016 agreement or the Dominicans were in their January 2017 agreement, which was finally executed in April that year. Regardless of that, Dominican Republic´s EAs proceeded with their investigation. To-date, 14 people have been indicted and 10 arrested, including congressmen, former ministers and businessmen.
Finally, it must be said that contrary to Odebrecht’s approach and attitude in many LATAM countries, they have been altogether more cooperative and committed to procedures undertaken by EAs and other government agencies of Dominican Republic.

3.1.6.     Ecuador

According to the plea agreement of December 2016, “In or about and between 2007 and 2016, ODEBRECHT made and caused to be made more than $33.5 million in corrupt payments to government officials in Ecuador. Odebrecht realized benefits of more than $116 million as a result of these corrupt payments.”[35] Out of the 2.6 billion USD that were the supposedly the most that Odebrecht could pay, nothing will go to Ecuador.  Again, something doesn´t seem to add up.

3.1.7.     Panama

According to the plea agreement of December 2016, “In or about and between 2010 and 2014, ODEBRECHT made and caused to be made more than $59 million in corrupt payments to government officials and intermediaries working on their behalf in Panama in order to secure, among other things, public works contracts. ODEBRECHT realized benefits of more than $175 million as a result of these corrupt payments.[36] Just as has been the case in the other instances detailed within this paper, out of the 2.6 billion USD that were the supposedly the most that Odebrecht could pay, nothing will go to Panama.
However, Panama did manage to indict at least 17 individuals related to the bribes paid by Odebrecht, including Ricardo and Jose Enrique Martinelli, the sons of former President Ricardo Martinelli.[37] Ricardo Jr. and José Enrique were arrested in the United States in November 2018.[38] Also, Panamanian authorities and Odebrecht reached a settlement whereby Odebrecht agreed to pay a fine of 220 million USD for using the Panamanian banking systems for money laundering. The millions keep on adding…

3.1.8.     Peru

According to the plea agreement reached by Odebrecht and the DOJ in December 2016, between 2005 and 2014 Odebrecht made and caused to be paid nearly 29 million USD to government officials in Peru in order to secure public contracts. Those contracts generated benefits worth over 143 million USD.[39] Nevertheless, the plea agreement did not involve the Peruvian government in any way, despite the fact that it had been defrauded of the honest services of those public officials that solicited or received the bribes.
However, after nearly two years of investigation and domestic prosecution, as of December 4 2018 Reuters reported that, according to three sources, Odebrecht had reached a plea agreement with the Peruvian Attorney General´s Office in exchange for information on officials that had been bribed, according to the company.[40]
Such an agreement would include the obligation to pay 180 million USD to the Peruvian government. Apparently, the plea agreement would allow Odebrecht to continue with the execution of those contracts that were awarded through corrupt means. It would also ensure that Odebrecht´s officials in Peru would not be criminally prosecuted by enforcement authorities.

3.1.9.     Other Countries and the Brasilia Agreement

Mozambique, Mexico, Guatemala and other countries where bribes were paid by Odebrecht faced similar developments to the ones mentioned above. In no instance did the countries receive remuneration from the initial 2.6 billion USD basket. However, they did make some progress at a later date owing to their own independent investigations.

3.1.10.  The Brazilia Declaration

After the bombshell declaration by the DOJ at the end of 2016, all EAs from LATAM countries were put under huge pressure by their own constituent bodies. As is natural, most – if not all – contacted their counterparts in the US and Brazil, seeking all possible cooperation for the development and progression of the investigations.
It was agreed that a meeting would be held in Brazil by mid February 2017. There, the heads of the EAs from eleven nations signed the Brazilia Declaration, where they agreed to mutually “provide the most ample, rapid and effective cooperation” related to the corruption involving Odebrecht. The US did not sign the declaration.
The language used in the Declaration provides a good indication of the actual levels of intent from the signatories to cooperate. Whereas the Declaration states that the signatories agree to cooperate, the first pages of the Declaration made it very clear, albeit subtly, that cooperation would be slow or nearly impossible. Competing interests of competing parties in the global prosecution market were clearly the parameters within which such a Declaration of good intentions had been signed.
The Declaration stated, among other things, that: “In consideration that the Ministry Public of Brazil signed two plea agreements with Odebrecht and Braskem, and signed cooperation agreements with 78 individuals related to both companies, with the intent of enhancing the reach of its investigation, as well as protecting public interest; and that “the leniency agreements and those of cooperation are subject to confidentiality duties, according to the Brazilian legislation and the provisions thereof”, the parties assumed the commitment to “mutually provide the most ample, rapid and effective cooperation…”.
            Such an agreement would be more part of the show that the Prosecutors had to stage for their own public, rather than the basis for effective collaboration and prosecution. Some days after the Brazilia Declaration, the Prosecutor General of Colombia issued a strong attack against the Brazilian EA, against the loopholes of the OECD Antibribery Convention and the Brazilia Declaration itself (which he had reluctantly signed).
In March 2017, Mr. Martínez said that “the AntiBribery Convention is not effective because it is designed to advance the interest of industrialized countries… over the interest of affected countries”. He added that “this creates obstacles to do the investigations in the country of the passive side of the bribe, because in the case of Odebrecht, the collaboration agreement reached by the 78 officials of the company (in Brazil) gives them immunity against criminal prosecution and allows the company to engage in public contracts with the affected governments.”[41]

3.1.11.  And Switzerland?

In a press release dated 21 December 2016, Swiss authorities reported their own participation in the Odebrecht plea agreement. They stated that the investigation had initiated in a suspect banking transaction from the Money Laundering Reporting Office. They went on to say that based on that information, they could later ascertain that various companies in the construction industry had paid bribes in order to secure contracts. Their investigators had traced the payments back to, among others, Odebrecht.[42]
            Swiss authorities also reported that “In a summary penalty order issued on 21.12.2016, the OAG found Odebrecht SA and CNO guilty of a violation of corporate criminal law (Art. 102 para. 2 Swiss Criminal Code (SCC)), in that they did not take all reasonable organisational measures required to prevent the offences of bribing foreign public officials (Art. 322septies SCC; CNO) and money laundering (Art. 305bis SCC; Odebrecht SA and CNO).”
They added that the “two companies have been held jointly and severally liable to pay Switzerland the sum of CHF 117 million”, and that “The company Braskem SA also paid bribes via the same channels as Odebrecht SA and CNO”.
In this statement, contrary to what happened with other EA, Swiss authorities acknowledge that “Proceedings in Switzerland against Braskem SA have been abandoned as the company is being held accountable in the USA for offences that include the acts of bribery under investigation in Switzerland. However, the Swiss decision to abandon the proceedings involves the company paying compensation of CHF 94.5 million.” This shows that, on this occasion, the Swiss authorities recieved significant gains from the first come, first served rule, as well as from effective cooperation with the US and Brazil in the global prosecution market.[43]
Regardless of the closer cooperation with authorities from those two countries, Swiss authorities reported in 2017 that they were processing and implementing over 50 requests for mutual judicial assistance. They added that over “CHF 1 billion in assets have been seized (…) It is a particular concern of the OAG that Switzerland refunds seized assets to their rightful owners. So far, over CHF 200 million has already been refunded to the Brazilian authorities in relation to the Petrobras / Odebrecht cases.”[44] Once again, the 3 countries from the leading EAs of this case remain the sole beneficiaries of the plea agreement with Odebrecht.

3.1.12.   Some final considerations on Odebrecht


According to the Plea Agreement between Odebrecht and the DOJ, signed on 21 December 2016, the Defendant received full cooperation credit for its cooperation with the Fraud Section and EDNY's investigation (…)”[45]. Moreover, due to that cooperation, “after considering (a) through (h) above, the Defendant received an aggregate discount of 25 percent off of the bottom of the applicable U.S. Sentencing Guidelines fine range.”
Moreover, this Plea Agreement also stated that “At the request of the Fraud Section and EDNY, the Defendant shall also cooperate fully with other domestic or foreign law enforcement and regulatory authorities and agencies, as well as the MDBs, in any investigation of the Defendant, its affiliates, including Braskem and its affiliates, or any of its present or former officers, directors, employees, agents, and consultants, or any other party, in any and all matters relating to corrupt payments, false books and records, the failure to implement adequate internal accounting controls, investment adviser fraud, mail, wire, securities, bank fraud, or false statements to a bank, obstruction of justice, and money laundering.”[46]
As seen above, it is questionable as to whether Odebrecht has fulfilled their obligation to cooperate with other “domestic or foreign law enforcement and regulatory authorities and agencies” in good faith. Whereas in some countries Odebrecht and Odebrecht´s officials have become active litigators, poor or elusive witnesses and even “enemies of the state” as some have called the company and their officials, in others Odebrecht and its agents have given valuable cooperation in dismantling networks of corrupt public officials and bribe payers from the private sector.

3.2.        Siemens: More of the Same

In 2008 Siemens was involved in a huge corruption scandal that affected Argentina, Bangladesh and Venezuela. That year, Siemens AG pleaded guilty before US District Judge Ricard Leon in the District of Columbia to charges for violations of the FCPA´s provisions on internal control and books and records. Siemen S.A. Argentina pleaded guilty to similar charges, as did Siemens Bangladesh Limited and Siemens S.A. Venezuela. Siemens Bangladesh and Siemens Venezuela also pleaded guilty to counts of conspiracy to violate the antibribery provisions of the FCPA. Combined, the companies of the conglomerate agreed to pay a total criminal fine of 450 million USD.[47]
The corruption of Siemens had reached – however – even higher levels. Four Siemens subsidiary companies had been involved in the Oil for Food Program scandal in Iraq, for acts committed between 2000 and 2002. Specifically, these were named as Siemen S.A.S. France, Siemens Sanay ve Ticarte A.S. of Turkey, Osram Middle East FZE and Gas Turbine Technologies S.P.A., all of which were wholly owned by Siemens or other of its subsidiaries.
These companies were awarded 42 contracts totalling more than 80 million USD, with the Ministry of Electricity and Oil in Iraq. In order to get them, the Siemens group had paid at least 1.7 million USD in bribes to the Iraqi government. As a result, Siemens earned collectively over 38 million USD in profits.[48]
As a result of American and German investigations, Siemens reached settlements with SEAs from both countries. Specifically, Siemens agreed to pay a fine of 350 million USD in an agreement with the Securities and Exchange Commission of the US in a “disgorgement of profits relating to those violations”[49]. It was also agreed that Siemens would pay a criminal fine to the United States to the tune of 450 million USD.[50] Furthermore, it also reached an agreement with the Munich Public Prosecutor´s Office to pay 569 million USD based on its corporate failure to supervise its officers and employees.[51]
            Shockingly, Siemens didn´t admit explicitly to having paid bribes. [52] They only admitted to accounting fraud and conspiracy to pay bribes, which of course, has different legal consequences than admitting to actually having payed the bribes themselves. According to the press release dated 15 December 15 2008, “in the case of Siemens Venezuela, the prize was a $340 million contract to build two city rail systems. In the case of Siemens Bangladesh, corrupt payoffs there resulted in a $40 million mobile phone project. And in the case of Siemens Argentina, the goal was a USD 1 billion dollar contract for work on Argentina's national identity card.”[53]
            In conclusion, as a result of the investigation and settlement, Siemens agreed to pay a combined amount of 1.6 billion USD in criminal and civil penalties in the US and Germany. Not one USD dollar would go to the victim states, countries that had been defrauded of the honest services of their public officials.[54] Therefore, the big winners in this illustration of  the global prosecution market were the US and Germany, that is to say the countries from where the bribes originated. Then there are the lawyers hired by Siemens.
According to “Siemens’ latest estimates, over 1.5 million hours of billable time by Debevoise and Deloitte professionals have been devoted to the investigation. This includes the extensive and sustained participation of approximately 100 lawyers and 100 support staff from Debevoise and 130 forensic accountants and support staff from Deloitte. The investigative work has taken place in 34 countries and has involved over 1,750 interviews and over 800 informational meetings.” This keeps the legal, accounting and audit industries very happy and well-financed, whilst Argentina, Bangladesh and Venezuela, were excluded from all deals and didn’t receive a single dollar in compensation.
Interestingly enough, it has been documented that when certain governments from the victim states took strong measures against Siemens and their corrupt actions, such as terminating contracts, Germany’s diplomatic services in-country applied strong pressure to protect Siemens’ investments there. For example, after Argentinian officials took the decision to terminate contracts, the German Ambassador began a lengthy campaign requesting that Argentina protect German investment in the country. It also became vox populi that the harsh position of Germany against Argentina in the IMF after the economic collapse of the latter nation was a retaliation for Argentina´s tough position on Siemens Argentina.[55]

3.3.        PetroTiger: Story of a Failed Trial

In 2014, the Secretary of the Presidency of Colombia disclosed a corruption case involving bribes totaling almost 333,500 USD that PetroTiger, an oil and gas company domiciled in the United States, had paid in 2009-2010 with the intention of securing the adjudication of an oil exploitation contract with Mansarovar, an instrument of the Colombian State-controlled oil company, Ecopetrol.[56] The Mansarovar contract was valued at around 39.6 million USD and, as of 2014, had produced more than 3.5 million USD in profit. The mastermind of the payments was Joseph Sigelman, an American citizen and Harvard Business School Graduate.[57] Prosecution began in Colombia, and several public officials were found guilty. One of them was sentenced to 16 years’ imprisonment in 2017.
Parallel, the DOJ had begun investigations in the US in 2014 after a self-disclosure of PetroTiger, which occurred after a change of control of the company. After a long litigation and a complex trial where one of its witnesses was put under fire by the defense, the DOJ decided to settle with Joseph Sigelman by mid-June 2015. Sigelman and the DOJ entered into a plea agreement. The former accepted to pay a 339,115 USD penalty, did not spend a single day behind bars and instead received probation for 36 months.[58]
The agreement reached between Mr. Sigelman and the DOJ was such that it would be most unlikely that Mr. Sigelman be extradited to Colombia, in case of a formal request from the Colombian authorities. Therefore, the final result for Colombia was far from positive. Whilst the wrongdoer In Colombia was held to account, it could not and probably would never be able to bring the payer of the bribe to account, given that he was now protected by the American government.
Furthermore, despite the fact that Sigelman and the US settled the case for a 339,115 USD penalty, none of that would be sent to Colombia. So, having invested hundreds of hours in the case, many of which were focused on ensuring constructive and positive international cooperation with the US, Colombia left the case empty handed. The global prosecution market in this case too shows nothing short of wickedness. All for the powerful, nothing for the weak… first come, first served.




4.     Assessment of the Global Prosecution Market and Policy Recommendations

I began this paper by saying that there are seven major reasons that allow us to question the way in which the global prosecution market for foreign bribery violations is working. I believe the cases presented in this paper help to support that idea. The first come, first served philosophy, that expressed itself in the unfair distribution of penalties and fines, excluding the victim countries, is creating negative incentives for international cooperation between EAs, particularly when it comes to cooperation between SEAs and WEAs. The efforts of global corporate prosecution should ensure that,  contrary to what happens today, a win-win result is put in place for all parties that have been victim of and participated in these kinds of investigations.
The all-for-me result of cases such as Siemens, Odebrecht and PetroTiger is nurturing strong feelings of resentment, from which nothing good is to be expected. The Declaration of Brazilia is a symbol of that. Heads of EAs from 11 LATAM countries, trying to find ways to cooperate, where the US was not a party to the discussion, is symptomatic of how LATAM EAs perceive the US. Furthermore, statements such as that of Nestor Humberto Martinez, Prosecutor General of Colombia, show the lack of confidence and credibility that could all too easily spread throughout EAs in the region.
Indeed, because the global prosecution market is operating based on competition and not on real and sound cooperation, investigated corporations tend to hide information or deceive EAs of WEAs or even SEAs as they know that the cooperation between such agencies is low. Firms know that each EA wants to be the first to get to the bottom of the case, reach an agreement with them and secure as much money as possible for their own country, in furtherance of the first come, first served philosophy. Therefore, firms are better off withholding information from some weak EAs whilst they reach an agreement with the most powerful. Such agreements, as we have seen with Odebrecht and Siemens, are not necessarily the best outcome in terms of fairness and justice… at least not from the perspective of the state where the public official was bribed.
Likewise, the cases analysed in this paper help to support the conclusion that the global prosecution market is allocating the costs of the punishment for foreign bribery infractions on innocent shareholders and stakeholders, whereas the actual criminals that used the company with criminal intentions receives immunity. Whilst it might be true that companies should be fined, based on the respondent superior principle, it is nevertheless also the case that the wrongdoers end up having immunity.
Now, the key problem here is this: SEAs are protecting corrupt businessmen domiciled not just in their own country but also those domiciled in foreign countries. The latter, who worked for subsidiaries of the parent company, conspired, paid and/or aided and abetted the commission of those crimes in foreign soil. But the EAs of the countries where those crimes were committed end up in a situation where all those people become protected witnesses of the SEAs. Thus, the enforcement proceedings of the WEAs face a higher risk of failure.
Moreover, such immunity, added to exhaustion of resources of the firm that reached an agreement with a SEA, is likely to facilitate impunity in many cases, both on the supply and the demand side. This is even more concerning if we look at the overtly aggressive attitude of some of these corrupt firms towards some governments. During the last decade, Odebrecht has sued Peru in at least 24 arbitration tribunals[59], some of which were being “bought” by Odebrecht paying bribes to the tribunal members.[60]
Therefore, the lack of improved coordination between EAs interested in these corruption cases, leave victim states unprotected against the litigation strategies of firms that intend to gain leverage and recover lost terrain by taking governments to court and arbitration tribunals.
Another relevant conclusion is that the global prosecution market is working in such a way that, instead of building trust relationships between EAs across the globe, and instead of enhancing the trust of the constituents of countries involved in corruption cases with their own EAs, it is creating an environment of distrust and competition, that on occasion pushes for absurd or counterproductive legislation. The pragmatic approach of SEAs is hard to understand by constituents of victim states when they don´t see any concrete benefit for their own country as a consequence of such agreements, and when they see that their own EAs have been left behind. Therefore, they demand harder, tougher and stronger measures against the corrupt. The problem with this is that key witnesses and criminals in such cases become protected by SEAs, and prosecution undertaken by WEAs end up going nowhere.
Finally, the cases presented in this paper also support the idea that the current operation of the global prosecution market hampers democracy, trust and confidence in institutions. Though this requires further analysis and data, we will leave this for a future paper. Last, I will make what I hope and believe to be valuable policy recommendations for key actors competing in the global prosecution market.

4.1.         Renewing the OECD Anti-Bribery Convention

The OECD Anti-Bribery Convention remains an important tool to combat foreign bribery. Recently countries like Israel and Peru have signed up to the Convention.[61] More will probably do so in the near future. However, the Convention has shortfalls. For instance, it focuses too heavily on the supply side, and too little on the demand side. Because of that, the global prosecution market is producing some negative outcomes. Particularly, when it punishes only the supply side, yet also impedes cooperation between EAs to ensure effective punishment on the demand side.
Also, the Convention does not develop rules related to the distribution of the proceeds of fines and criminal penalties amongst member states. Nor does it develop any rules on the repatriation of proceeds from the crimes. Therefore, I believe that OECD members could explore a draft amendment of the Anti-Bribery Convention, that looks to enhance the overall fairness and efficacy of transnational antibribery efforts.

4.2.         Increase Cooperation with EAs of Demand Side Countries Before DPAs or NPA are Agreed with Firms

Enhancing cooperation between SEAs and EAs from demand side countries would have a positive impact in corporate prosecution for corruption-based crimes. This could protect countries against retaliation and litigation-bullying by the subsidiaries of corrupt companies that on occasion try to gain leverage through the application of this kind of pressure. It would also improve the overall fairness of the distribution of fines and criminal penalties, which should go some way towards repairing the countries of the demand side of the bribes. This would also facilitate better collection of evidence, access to key witnesses and would improve monitoring measures undertaken by the company in order to advance its compliance system to a new level.  

4.3.         Reform Prosecution and Sentencing Guidelines

Given that foreign bribery is an offense that affects not only the interest of supply side countries and of the shareholders of the companies, but also the demand side countries, who are deprived of the honest services of their public officials, the SEAs should consider reforming their prosecution and sentencing guidelines in such a way that would acknowledge the importance of giving full reparation to the demand side countries too.

 

4.4.         Monitor

For cases such as Odebrecht or Siemens, where SEAs demand the firms to appoint a special monitor, SEAs could also consider requesting the appointment of additional monitors who would report to the special monitor and the SEA for each demand side country. Usually in “FCPA actions, just one monitor is stipulated for the corporate parent”, as is commonly known.[62] It seems to me that is not enough, especially for firms with tens of thousands or even hundreds thousands employees.



5.     Conclusions

The day the DOJ announced the agreement reached with Siemens, the press release stated: But what is potentially even more significant, and as this case makes clear, is the fact that the United States is not the only player at the table. We aren't the only ones fighting global corruption. Other nations are joining us in this effort, and I'm here to tell you that's a good thing, and something that we will only see more of in the future.”[63]
            Despite the fact that the DOJ acknowledged the importance of international cooperation, the fact remains that many countries with interest in the case were never part of the equation. The global prosecution market operated in such a way that benefited the powerful and ignored the weak. Something similar happened with Odebrecht between 2016-2018.
            Nevertheless, the DOJ was right to say that: “Corruption is not a gentlemen's agreement where no one gets hurt. People do get hurt. And the people who are hurt the worst are often residents of the poorest countries on the face of the earth, especially where it occurs in the context of government infrastructure projects, contracts in which crucial development decisions are made, in which a country will live by those decisions for good or for bad for years down the road, and where those decisions are made using precious and scarce national resources.”[64]
To evolve this thinking, I conclude that the US, Germany and countries with SEAs could make use of a more collaborative approach to global corporate prosecution, especially when it comes to corruption cases. A new approach such as this could greatly improve results in the global effort to fight corruption.


6.     Sources

§  Brewster, Rachel. Enforcing the FCPA: International Resonance and Domestic Strategy. Virginia Law Review. 2017.
§  ATTACKING BRIBERY AT ITS CORE: SHIFTING FOCUS TO THE DEMAND SIDE OF THE BRIBERY EQUATION. Arrieta, Lindsay B . Public Contract Law Journal ; Chicago Vol. 45, Iss. 4, (Summer 2016): 587-612.
§  DOJ. Second Press Release. Siemens v. Argentina. December 15, 2008.
§  Press Conf Siemens.  P.7.
§  Plea agreement. 21 Dic. 2016.
§  Document of December 12, 2016 filed by DOJ. Files Charges. Case initiation.
§  La Justicia frenó una demanda millonaria de Odebrecht. https://www.lanacion.com.ar/2143431-la-justicia-freno-una-demanda-millonaria-de-odebrecht - Suscribite al periodismo de calidad – Copyright. La Nación. June 13, 2018.
§  Report of the Office of the Attorney General of Switzerland on its activities in 2017 for the attention of the supervisory authority. P. 22
§  Plea Agreement. Odebrecht-DOJ. December 21, 2016. P. 4.
§  Siemens Case. First Press Release.
§  Transcript of Press Conference Announcing Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations. December 15, 2008. P. 6.
§  Press release by the DOJ. December 15, 2008.  Second Press Release
§  Second Press Release. Siemens Case.
§  Case 1:13-mj-02087-JS Document 1 Filed 11/08/13. Criminal Complaint.
§  Press Release. Siemens. P. 3.













TABLE OF CONTENTS



[2] Brewster, Rachel. Enforcing the FCPA: International Resonance and Domestic Strategy. Virginia Law Review. 2017.
[8] Mutual Legal Assistance Treaty.
[10] ATTACKING BRIBERY AT ITS CORE: SHIFTING FOCUS TO THE DEMAND SIDE OF THE BRIBERY EQUATION. Arrieta, Lindsay B . Public Contract Law Journal ; Chicago Vol. 45, Iss. 4, (Summer 2016): 587-612.

[11]  Siemens v. Argentina. Second Press Release of the Department of Justice. December 15, 2008.
[12] Idem.  P.7.
[16] Consideraciones sobre la Consulta Anticorrupción. Instituto Internacional de Estudios Anticorrupción. August, 2018. https://www.estudiosanticorrupcion.org/
[20] Plea agreement. 21 Dic. 2016.
[21] Idem. P. 17.
[22] Document of December 12, 2016 filed by Department of Justice. Files Charges. Case initiation. P. 16.
[23] Idem. P. 17.
[26] Idem. P. 17.
[28] La Justicia frenó una demanda millonaria de Odebrecht. https://www.lanacion.com.ar/2143431-la-justicia-freno-una-demanda-millonaria-de-odebrecht - Suscribite al periodismo de calidad – Copyright. La Nación. June 13, 2018.
[33] Document of December 12, 2016 filed by DOJ. Files Charges. Case initiation. P. 19.
[35] Document of December 12, 2016 filed by DOJ. Files Charges. Case initiation. P.19.
[36] Idem. P.19.
[39] Document of December 12, 2016 filed by DOJ. Files Charges. Case initiation. P.19.
[41] “Críticas del fiscal Martínez a la cooperación internacional en caso Odebrecht. El fiscal general Néstor Humberto Martínez hizo fuertes críticas a los sistemas de cooperación internacional para la lucha contra los sobornos transnacionales. Enfatizó en que la Convención Anticohecho de la Organización para la Cooperación y el Desarrollo Económico (OCDE), (…) no es efectiva porque está diseñada bajo intereses de países industrializados que privilegian sus legislaciones sobre las de los países afectados. (…) El sistema de cooperación de la OCDE privilegia a los países de los que son procedentes las empresas corruptoras, dijo (…) Agregó que eso crea dificultades para hacer investigaciones en el país receptor de sobornos, pues en el caso de Odbrecht, el acuerdo confidencial al que llegaron los 78 directivos les da inmunidad para ser procesados penalmente y permite que la constructora siga contratando con los Estados. Según Martínez, la situación genera graves líos, pues la entrega de pruebas y la cooperación internacional queda sujeta a los beneficios que le otorgaron Oderbecht en Brasil y no obliga a comparecer a los responsables de la constructora ante las autoridades de otros países.” https://www.elespectador.com/noticias/judicial/criticas-del-fiscal-general-al-caso-odebrecht-articulo-682607 March 2, 2017
[43] Idem.
[44] Report of the Office of the Attorney General of Switzerland on its activities in 2017 for the attention of the supervisory authority. P. 22
[45] Plea Agreement. Odebrecht-DOJ. December 21, 2016. P. 4.
[46] Plea Agreement. Pp. 9-10.
[47] Siemens Case. First Press Release.
[48] Siemens. 2008. 1st Press Release.
[50] Idem.
[51] Siemens. 2008. 1st Press Release. P. 3.
[52] Transcript of Press Conference Announcing Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations. December 15, 2008. P. 6.
[53] Press release by the DOJ. December 15, 2008.  Second Press Release
[54] Siemens. 2008. Second Press Release.
[56] Case 1:13-mj-02087-JS Document 1 Filed 11/08/13. Criminal Complaint.
[63] Press Release caso de Siemens.  DOJ.
[64] Press Release. Siemens. P. 3.

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