18 March 2012.
Socio-Economic Rights and Accountability Project (SERAP) has sent a request to the US Securities and Exchange Commission (SEC) urging it to “establish an efficient case-by-case process for the payment of some or all of US Foreign Corrupt Practices Act (FCPA) civil penalty and disgorgement proceeds to or for the benefit of the victimized foreign government agency or the citizens of the affected foreign country like Nigeria.”
The organization also said that “civil society groups in the home country, or US-nonprofit organizations such as the Bill and Melinda Gates Foundation and The Carter Center serving that country, be eligible to apply for such proceeds as well, or instead, for use for “public benefit projects” in the affected foreign country, subject to anti-corruption safeguards.”
The request dated 15 March 2012 and addressed to Robert Khuzami, Director of the Enforcement Division of SEC, was made by SERAP’s Volunteer Counsel Alexander W. Sierck, who is Adjunct Professor at the prestigious Georgetown University Law Center, where he teaches a course on international white collar crime.
The organization said that “at the moment, the civil penalty and disgorgement proceeds that companies agree to pay to resolve US FCPA investigations are retained by the US government.”
“Yet, procurement and investment agreements corrupted by foreign bribery invariably lead to increased costs, not only in higher prices but also in needlessly expanded and ultimately inefficient projects in victimized societies. This has often been the case in Nigeria, where damage remedies are often elusive,” the organization said.
The organization also said that its request “would not impede the Division’s enforcement priorities,” arguing that the organization is “well-qualified to propose and help implement sensible discretionary remedies for victims of FCPA.”
According to the organization, “Victimized governmental agencies are typically without a practical remedy for recovering their economic injury attributable to foreign bribery and corruption. The US FCPA and similar laws in other OECD member states do not provide for private enforcement. International arbitration, if available under the terms of a contract, and if the home country government even permits a victimized entity to pursue it, is expensive and highly time-consuming, particularly when large multinational companies are defendants.”
“While local law can, in theory, provide for a remedy, litigation in the local courts is often fraught with political risk, and can be time-consuming and expensive in the best of circumstances; even if such cases are eventually successful, enforcement of judgments, locally and internationally, present formidable challenges as well. In SERAP’s experience, all of this is true in the Nigerian context,” the organization also stated.
The organization also said that, “The FCPA not only seeks to ensure that US public companies and their foreign subsidiaries maintain accurate and complete books and records but also seeks, for national security and foreign policy reasons as well, to prohibit virtually all bribery of foreign government officials by individuals and companies subject to US jurisdiction.”
“The pre-FCPA scandal of Lockheed’s having bribed senior Japanese officials dramatizes this point: namely that pervasive bribery, once revealed, has the potential to destabilize the governments of important US allies, then in the Cold War and now in the wars on terrorism and on nuclear proliferation,” the organization further said.
“Foreign bribery and corruption by individuals and companies subject to US jurisdiction at minimum can foster resentment against the US generally, particularly among large segments of the population that may already be hostile to the US. Citizens of victims’ countries might consider FCPA civil penalties and disgorgement payments imposed by the US, and then kept by the US, as in fact representing funds that rightfully “belong” to the victim. SERAP’s proposal addresses this probable source of resentment,” the organization also said.
The organization also said that “The proposal is not intended to interfere with the Enforcement Division’s full discretion to investigate and to resolve possible FCPA violations. Actually, SERAP’s proposal would only come into play after an FCPA matter has been resolved, typically as a result of a settlement with the company.”
“Specifically, SERAP proposes that after, and only after, publication of an FCPA settlement agreement, the victim foreign government entity would have 60 days to file a request that the Enforcement Division pay some or all of the agreed payment proceeds to or for the benefit of the victim government entity or to a US-based NGO that would present a proposal to spend the proceeds for public purposes (e.g. on public health programs) in the country of the victim entity.”
“Thereafter the Enforcement Division would have 60 days to act upon the request, favorably or not in its discretion; in this context the Enforcement Division should provide a brief statement of its reasons for its decisions. The Enforcement Division would have the inherent authority to consult with Executive Branch agencies of the US government in making this decision.”
“Under SERAP’s proposal it would, of course, be incumbent upon an entity seeking such proceeds to demonstrate that it has adequate anti-corruption safeguards in place, including the sort of rigorous anti-bribery compliance programs that the Enforcement Division expects companies subject to its jurisdiction to maintain.”
“In considering this novel proposal, the Enforcement Division might wish to publish a notice seeking public comments on the concept and the details for its implementation. SERAP stands ready to cooperate in such efforts and to respond promptly to whatever questions the Enforcement Division or the public may have,” the organization further stated.
SERAP Executive Director