This article was reprinted with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.
In the SEC’s action against employees of Direct Access Partners for a bribery scheme involving Venezuela’s Banco de Desarrollo Economico y Social (BANDES), described here, the SEC proclaims that there is “No Honor Among Thieves.” One of the facts alleged in that case is that the U.S. participants falsified the amounts of their fraudulent fees in their reports to a Venezuelan official, thereby deceiving the person to whom they were paying kickbacks. The U.S. traders were taking more than they promised.
In Siemens Argentina, it was the foreign officials who engaged in the deception. Despite paying millions to Argentine authorities, Siemens Argentina never got the $1 billion contract to supply identification cards to the country’s citizens that it was promised. Political leadership in Argentina kept shifting and new demands for illicit payments kept surfacing. Each leader wanted his or her piece of the action.
There are lots of obvious reasons not to bribe foreign officials. You can go to jail for FCPA and other violations. Your company can be fined. (FCPAméricas provides an overview of potential sanctions here.) You might also have to incur the burdens and costs associated with an internal investigation. Your company’s reputation might be harmed. Your employees’ morale might be damaged.
The BANDES and Siemens matters highlight yet another reason not to engage in bribery – schemes can be messy and uncertain. Consider the following:
Warped Motivations. Bribery involves people motivated by money and greed and willing to break the rules. In bribery schemes, the absence of ethics is well established. A close friend in Argentina who spent years investigating corruption there explains, “In our country, corrupt officials will make promises, take your money, and then joke about how they fooled the poor gringo. They might even consider this a source of pride. Who cares if we rip them off? Who would know? Maybe they deserve it for trying to take advantage of our country.” Indeed, corrupt officials might never have the intention of following through with the scheme in the first place.
Lack of Enforceability. Unenforceability of corruption schemes is another fundamental problem. Schemes are not based on written contracts, and you cannot take non-compliance to court. The other option might be to seek assistance from the mob. But this implicates an entirely different set of problems. As a result, the deceived are often left standing with empty hands.
Unexpected Complexity. Once a person is inside a bribery scheme, it is hard to get out. This might not matter if a scheme is simple and straightforward. But schemes usually are not; they usually involve numerous actors, like agents and consultants, accountants, bagmen and anyone else consigned to help cover up tracks. As such, schemes can grow complex in unexpected ways. As demonstrated in Siemens Argentina, when personnel changes, parties need to renegotiate terms and conclude new deals. The foreign official might not be the only one that changes. New auditors might enter the fold. Consultants might switch. No matter how hard one tries, corrupt arrangements have a way of getting out of control.
Keeping Everyone Happy. When there are several participants involved, they must all be kept happy. Each is involved in the secret and each has the ability to blow up the plan. The task of maintaining buy-in is made more complicated by the fact that, these days, each participant has the ability to exercise the SEC whistleblower mechanisms, even if he or she is implicated. As FCPAméricas has explained, even guilty whistleblowers can recover bounties.
There are many perils at play when one finds him or herself trapped in a dirty arrangement. The TRACE Blog might have said it best in its highly informative post, Things Fall Apart: “The reality is that many bribery schemes simply self-implode.”
The opinions expressed in this post are those of the author in his or her individual capacity and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.
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Matteson Ellis serves as Special Counsel to the FCPA and International Anti-Corruption practice group of Miller & Chevalier Chartered in Washington, DC. He is also founder and principal of Matteson Ellis Law PLLC, a law firm focusing on FCPA compliance and enforcement. He has extensive experience in a broad range of international anti-corruption areas. Previously, he worked with the anti-corruption and anti-fraud investigations and sanctions proceedings unit at The World Bank.
Mr. Ellis has helped build compliance programs associated with some of the largest FCPA settlements to date; performed internal investigations in more than 20 countries throughout the Americas, Asia, Europe and Africa considered “high corruption risk” by international monitoring organizations; investigated fraud and corruption and supported administrative sanctions and debarment proceedings for The World Bank and The Inter-American Development Bank; and is fluent in Spanish and Portuguese.
Mr. Ellis focuses particularly on the Americas, having spent several years in the region working for a Fortune 50 multinational corporation and a government ethics watchdog group. He regularly speaks on corruption matters throughout the region and is editor of the FCPAméricas Blog.
He has worked with every facet of FCPA enforcement and compliance, including legal analysis, internal investigations, third party due diligence, transactional due diligence, anti-corruption policy drafting, compliance training, compliance audits, corruption risk assessments, voluntary disclosures to the U.S. government and resolutions with the U.S. government. He has conducted anti-corruption enforcement and compliance work in the following sectors: agriculture, construction, defense, energy/oil and gas, engineering, financial services, medical devices, mining, pharmaceuticals, gaming, roads/infrastructure and technology.
Mr. Ellis received his law degree, cum laude, from Georgetown University Law Center, his masters in foreign affairs from Georgetown’s School of Foreign Service, and his B.A. from Dartmouth College. He co-founded and serves as chairman of the board of The School for Ethics and Global Leadership in Washington, D.C. He is a member of the District of Columbia, Texas, New York, and New Jersey bar associations.
Mr. Ellis is also author of The FCPA in Latin America: Common Corruption Risks and Effective Compliance Strategies for the Region.