Predicting the Future: What Would Truly Global Anti-Corruption Enforcement Look Like?

Lauren Connell, Managing Associate at The Volkov Law Group, joins us with a posting on the recent Odebrecht settlement. Lauren can be reached at lconnell@volkovlaw.com.

Within the SEC and DOJ’s blockbuster ending to 2016 was the Odebrecht settlement.  The amount involved, a stunning $4.5 billion (pending a possible reduction for inability to pay), grabbed headlines around the world.  But more interesting than the final figure is the fact that the action was pursued jointly by authorities in the US, Brazil, and Switzerland.  It is the largest ever global bribery and corruption penalty.

The unprecedented global anti-corruption cooperation efforts may have been fortified by the mind-numbing audacity of the scheme.  The scope of Odebrecht’s bribery efforts is stunning, bribes were paid through what amounted to the company’s “Bribery Department” (cleverly named the “Division of Structured Operations”) to government officials around the world to win business.  Bribes were paid through shell companies, off-book transactions, and off-shore bank accounts.

The Bribery Department was the entity responsible for carrying out a secret financial structure within the company, which was overseen at the highest levels within the company and operated a completely separate and off-book communications system that used code names and passwords.  The secret budget was managed via a completely separate computer system used to request and process bribe payments and internally track accounts.  Funding for the bribery was funneled to off-shore entities who were off of Odebrecht’s books.

This far-reaching bribery scheme depended on complex financial arrangements that spanned borders, which was in part what led both US and Swiss authorities to initiate their own investigations. Odebrecht is a Brazilian construction company, but depended on US and Swiss banking infrastructure to manage the bribery accounts. A large part of the enforcement action was based on the bribery of Brazilian officials and so you have a rare occurrence where a Brazilian company is being prosecuted for bribing Brazilian officials by Brazil, the US, and Switzerland.

We have seen many prosecutions spanning borders, but the scope of Odebrecht’s settlement forces us to take another look at this model.  First, under this model countries asserted jurisdiction based on financial activity. Foreign bribery necessarily must rely on international financial infrastructure that crosses many national borders, the US and the Swiss both cited the use of bank accounts within the countries as the impetus for their own enforcement actions.

Secondly, here we did not see many countries where the bribery actually took place being involved.  Odebrecht bribed officials in countries all over the world… Angola, Argentina, Colombia, Ecuador, Mexico, Panama, Peru, and many others … yet none of these countries participated in Odebrecht’s prosecution.  What if countries in this position also asserted enforcement authority under their domestic anti-corruption laws and under foreign anti-corruption laws, as the US and Swiss did here?  The implications for global anti-corruption prosecutions would be dramatic.

While there are obvious barriers to such enforcement activity, many countries where bribery is common lack the enforcement infrastructure or high-level government commitment to end bribery, we have seen what this can look like.  China has been on a multi-year anti-corruption campaign whose results were showcased in the $490 million fine of GlaxoSmithKline (“GSK”) coupled with aggressive criminal prosecution of GSK executives.  GSK’s corrupt scheme was analogous to Odebrecht’s scheme for its broad scope and sensational details.  What if countries where Odebrecht had bribed government officials also sought to enforce their anti-corruption laws like China did with GSK?

Odebrecht is currently the largest global settlement ever, but based on trends we have seen toward global prosecution and the increasing sophistication of cross-border communication of all countries I anticipate we will see many more in the future, including countries enforcing their own domestic anti-corruption laws in connection with global enforcement actions.

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  1. January 17, 2017

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