This article originally appeared on Richard Bistrong’s FCPA blog and is republished here with permission.
At my sentencing hearing, Judge Richard Leon stated that he had no doubt that I had been ultimately deterred, and added, “Have you made a turn in the road for the better? There is no question about that either. But I have to be concerned about others, others out there right now who are aware of this case, who are aware of other cases in this arena and who may think they can pull conduct of a similar nature or maybe even more egregious than that you engaged in, they need to understand, they need to be concerned that if they are caught, and even if they cooperate, they are going to do jail time because in this arena, that is the ultimate deterrence.”
Deterrence.
Like bribery, there is no shortage of writing on the subject of deterrence, but what I fail to see is any perspective from those, like myself, who have ultimately been deterred by incarceration. So instead of waiting, I will share my own views on this subject. But first, in the context of the FCPA, what is the goal of deterrence? I will share Professor Andy Spalding’s view in the FCPA Blog: “We want to deter the defendant from repeated bribes (specific deterrence), and put other companies on notice so that they will bribe less (general deterrence).” So, from the viewpoint of an individual who was sentenced and incarcerated, does it work?
I think there are a number of components to that question as I share my own experience. First, could I have been deterred during the time of my illegal conduct? No. Second, does my own experience as representing the personal consequences of crime help to deter others? Not sure.
Back to Professor Spalding, who in Part Two of his series on deterrence defines the decision-making process and theory as:
“…based on utility calculations. A would-be bribe payor weighs the utility of paying a bribe against the disutility of punishment. And how does he assess that disutility? As the theory goes, he considers three variables: the likelihood of being caught, the severity of the punishment and its swiftness. He weighs those three factors against all he stands to gain from the bribe and makes a rational decision.”
You had me at the “likelihood of being caught.”
Using Professor Spalding’s guide, I never got past the first variable in my own conduct. As I described in my recent posts on “rationalizing bribery,” and as I have shared via my participation in a number of anti-corruption symposiums, I knew what I was doing at the time was ethically wrong and illegal, and there is no justifying that conduct; however, more importantly for this discussion, at that time I did not think I was going to get caught. No matter how many FCPA affidavits I may have signed, it made no impact, as I did not think I was going to face any consequences for my conduct.
As to the why, well, perhaps my own rationalizing variable of “no witnesses to corrupt transactions,” had the greatest impact on my thinking. As Peter Henning recently shared in a NYT DealBook article, “unanswered is the question of whether the United States government can successfully pursue individuals for misconduct in a large organization based outside the country.” In many ways, his question very much pertained to my own thinking as to why I could engage in overseas corruption without any consequences. From the perspective of an individual, dealing with corruption far from the C-Suite, consideration of U.S. law enforcement in a remote location with no witnesses is not exactly an active concern. An illusion, but one which was easy to rationalize.
What about others?
During the years of my own bribery conduct (2001-2006) there was not the level and publicity around FCPA enforcement actions as we have seen in the last five years (2009-2014). Thus, I think it is safe to say that awareness with respect to anti-bribery enforcement, especially among front-line international business personnel, is certainly a great deal higher in present times. But does that lead to greater deterrence? I think that is still a difficult question to answer, as while enforcement is certainly higher, there are also forces out there which support continued corruption. I think those factors include my own “perfect storm” of incentive compensation, procurement instability, no witnesses and the illusion of no victims. I think there is also a strong element of “that is just the way things are done in my territory,” and “it is not even illegal in my territory,” which also supports a continuation of corruption over deterrence.
I look at the unrelenting wave of FCPA enforcement cases, and putting aside the debate on personal versus corporate enforcement, it is clear that bribery is continuing on the front line of international business, especially in regions with reputations for corruption. So, given the continued rise in cases and the continued publicity around enforcement, is deterrence taking hold? I guess that remains a rhetorical question, but is there anything that can be done to magnify the consequences of corruption in order to increase the value of deterrence to those on the front line of international business?
You have to start somewhere.
For corporations, maybe the integration of the following elements into the training process might be warranted, as to focus on deterrence.
- Let your teams know that you understand the “this is how it is done in my territory,” and “it is not even illegal in my territory” dynamic and get it out in the open. However, share the corporate philosophy of this is “not how we do it,” and “it is illegal,” along with engaging your teams on the prospects of long-term value for both the company and the customer through a business strategy that is in no way “bribe dependent.” Show them the path to success where business development and compliance are partners.
- Go through the process of “rationalizing bribery.” Use my model or your own, but neutralize each element including procurement instability (if I lose I will never see this sale again), incentive compensation (compliance as bonus prevention), no witnesses (I will never get caught) and the illusion of no-victims (bribery as win-win). Show your teams first that you understand how easy it can be to rationalize corruption and then dissect each element to pull back the distortions and show the realities.
- Talk about enforcement actions to your international business teams. Use corporate and personal indictments as case studies to reinforce to your personnel that you would not tolerate such behavior, and that there are real consequences to engaging in overseas bribery. When someone gets sentenced, again, use it as a teachable moment by keeping the consequences of corruption on the “front burner” to your teams. Remind them that this is a real-world law with real world incarceration. Talk about international law enforcement cooperation and that the days of creating an oasis of bribery by staging conversations far from the C-suite where no one gets caught are over.
- Take training to a narrative. When you train your personnel, don’t just stop at “read this” or “watch this” and now “sign this.” Ask your front-line teams if they really understand the law. Go beyond the anti-bribery provisions and explain the conspiracy elements, books and records, facilitation payments, etc. and help them to understand the lines in the sand. Show them that you understand the pressures they face in the field and that they are likely to confront risk and corruption in high-risk regions. Let them know that you are their partner, so help them to take the time to become familiar with the rules and regulations that now govern their behavior. Talk about enforcement actions and people who were incarcerated. Let them know that you will spare no resource in making sure they are properly trained but will also spare no resource if they are caught breaking the law.
Is that enough?
I view most parts of the populous as represented by bell curves, almost irrespective of issue. I learned about this in Poli-Sci 101, by S. Peter Regenstreif, one of the masters in this field. In the case of would-be FCPA violators, the same. Thus, using this theory of distribution, I would think that 10 to 20 percent of those on the front line of international business would never violate the law, with their 10 to 20 percent brethren on other side of the curve as going to violate no matter what training they receive or newspaper reports they read. Myself, I once occupied the latter and now happily reside in the former. Thus, there are 60 to 80 percent of those in the field who are susceptible to training, messaging, carrots and sticks and thus can be successfully deterred. Accordingly, let deterrence fall on those ears who can digest the consequences of incarceration and who will look to peers and supervisors to understand what tools they need to deploy in order to undertake ethical, lawful behavior.
But, just in case…
For those who might be reading my post and who are confronting their own personal storm of rationalization, inasmuch as my own personal experience might bring some value, let me share with you my perspective. The loss of liberty, even for my own 14 and a half months, is an awful experience, and no amount of personal financial or corporate upside is worth that price. While my time at the Federal Camp at Lewisburg passed without incident, and I used my time to help others with their educational challenges as a GED and English as a Second Language instructor, the time away from family and friends can never be replaced. I missed events in the life of my family from which there are no “re-enactments.”
The impact of saying goodbye to a wife and children, knowing that your only remaining contact will be in a visiting room for an extended period of time, is nothing but traumatic. Trying to “coach” my children through their college and grad-school application processes via time delayed e-mails and limited phone calls was difficult at best. Using up phone minutes before the end of a month, knowing you won’t get to hear the voices of loved ones until they re-up next month, was a gut-wrenching experience. It is not worth it, not even close. I never thought I would get caught, ever, and had 14 and a half months to think about “being above the law” while major life events for my family passed with me as a spectator from afar. Think about it, please.
