On December 2, 2022, the U.S. Justice Department (DOJ) announced a $315 million settlement for bribery and corruption involving Switzerland based industrial company, ABB Ltd. ABB is now distinguished as the only company to have three separate U.S. Foreign Corrupt Practices Act (FCPA) settlements, following criminal resolutions in 2010 and 2004 (not including bribery settlements with South Africa, Switzerland, and Germany). The FCPA, enacted in 1977, prohibits bribery of foreign public officials.
ABB is a sophisticated multinational corporation with substantial resources (market capitalization of $59 billion), experience (founded in 1883), and specific directives from prior settlements on how to build, enhance, and continuously update an effective anti-bribery compliance program. And, like other multinational companies who have plead guilty to international bribery and corruption, ABB’s CEO proclaimed on December 2: “We have a clear zero-tolerance approach to non-ethical behavior within our company.”
This all invites the question: Why do so many sophisticated and presumably knowledgeable companies still engage in international bribery? Does this persist from the days prior to the FCPA, when no country in the world had a law prohibiting bribery of foreign officials? Are companies oblivious to the harm that such bribery causes to markets, the rule of law, the environment, sustainable development, and the poor—not to mention the direct risk of fines, penalties and reputational harm to the companies themselves? This is not to suggest that most international companies engage in bribery. Yet to date, there are 15 repeat corporate violators of the FCPA. Last year, Deputy Attorney General Lisa Monaco reported that between 10% and 20% of all significant corporate criminal resolutions of the DOJ involve companies who have previously entered a resolution with the DOJ. The corporate recidivism rate for FCPA violations is over 6%. We are not talking about business neophytes here.
Not that long ago—just prior to the 2012 release of the FCPA Resource Guide by the DOJ and the Securities and Exchange Commission (SEC) —the popular wisdom among some defense attorneys (and apparently some members of Congress) was that the FCPA was confusing. Some believed the FCPA overzealously prosecuted actors for such benign actions as hosting a meal or exchanging traditional holiday gifts with individuals one could not be expected to know were government officials. That outdated view cannot now be justified since the FCPA Resource Guide has made it plain that the U.S. has never prosecuted FCPA cases solely on the basis of providing reasonable meals or traditional holiday gifts, and has no intention of ever doing so. In fact, U.S. authorities mildly admonished such concerns by asserting that companies should not be devoting disproportionate compliance resources to tracking meals and the like at the expense of addressing more serious forms of bribery.
This policy has been reiterated in numerous public speeches by the authorities, government guidance documents, and in various settlement agreements over the past 15 or so years. I submit that any claim that the FCPA or its enforcement is confusing, is no longer valid—if it ever was. One can check jury instructions in relevant FCPA cases to see how simple and clear the law is. In a wonderful new book, Spiderweb Capitalism (Princeton U. Press), on exploiting grey areas of the law for extraordinary profit in “frontier” global markets, sociologist Kimberly Kay Hoang lays out how those exploiting the grey areas understand all too well that there is little grey about the FCPA. And so, they go to lengths (including refusing to deal with anyone who has a US passport) to avoid the jurisdiction of U.S. enforcement authorities.
So, the question remains, why do so many knowledgeable companies find themselves entangled in foreign bribery and corruption violations? Or, more importantly, what are companies and their compliance and ethics programs to do, if one takes at face value the express desire of so many, especially the repeat offenders, to diminish the risk of bribery and corruption in their ranks? Education and training has long been a fundamental component of any effective compliance and ethics program, as it should with appropriate (not outsized) resources. However, in the past decade or two, there are so many indicators that the principals involved in foreign bribery knew fully well that what they were doing was likely against the law, against company policy, and at the very least, looked bad. This is evidenced by the vast extent to which such perpetrators went to hide their activities from enforcement authorities, internal control functions, shareholders, and the public.
Training on bribery and corruption has generally been effective insofar as educating people it is wrong. But training is not totally effective in stamping out the acts in some organizations, i.e., the repeat offenders.
Most compliance and ethics professionals know that a culture of integrity is the ultimate tool and way of life to encourage ethical conduct. But as made popular by a controversial corporate figure, and in more colorful language than is suitable here, part of encouraging ethical conduct is making a public enough display of serious discipline of those who subvert the culture by engaging in serious wrongdoing. It drives home the point. Detection of the signs of corruption, and deterrence of the acts, including by appropriately severe disciplinary action reported as publicly as possible seems to warrant a greater proportion of compliance and ethics resources in this area. But whatever the reasons for persistence of international bribery may be, confusion about the law is not one of them.
Michael Donnella is a Practice Professor of Law and the Director of Temple’s Center for Compliance and Ethics.