globe2For many years, the U.S. was the only country actively seeking to use its laws to fight corruption. However, more recently, a number of other countries have enacted their own anti-bribery laws while other countries have become more active in pursuing anti-bribery enforcement – including not only Germany, South Korea and Britain, but also Brazil and China (among many others). This anti-corruption drive unquestionably is a good thing and it is unquestionably right that bribery should be punished. Bribery has a corrosive effect; it distorts economic outcomes and diverts resources into the corrupt officials’ pockets.


While the enforcement of anti-corruption laws is to be applauded, at the same time, questions are being asked about whether in at least some cases things might have come too far, as the enforcement process has become astronomically expense and time-consuming.


A May 9, 2015 Economist article entitled “Corporate Bribery: The Anti-Bribery Business” (here), as well as a leader article in the same issue (here), refers to what the magazine describes as “a mounting body of evidence that the war on commercial bribery is being waged with excessive vigor, forcing companies to be overcautious in policing themselves,” noting that “some under investigation are starting to fight back.”


As evidence of the excess, the article cites the massive amounts that Walmart, Siemens and Avon Products, among many others have spent in fighting corruption allegations. It is not that the charges against the companies were not serious — the charges definitely were and are serious. The problem, the article suggests is that “the cost and complexity of investigations are spiraling beyond what is reasonable, fed by a ravenous ‘compliance industry’ of lawyers and forensic accountants who have never seen a local bribery issue that did not call for an exhaustive global review; and by competing prosecutors, who increasingly run overlapping probes in different countries.”


The huge amount of work generated for internal and external lawyers and for compliance staff is the result of firms “bending over backwards to be co-operative in the hope of negotiating reduced penalties.” The article quotes Southern Illinois Law Professor Mike Koehler, the author of the FCPA Professor Blog (here), as saying that the overkill is a by-product of what he calls “FCPA, Inc.,” a very aggressively marketed legal industry niche that has every incentive to convince their clients that the sky is falling. Corporate officials, under pressure to clean house and under the sway of the anti-corruption industry, “will then agree to any measure, however excessive, to demonstrate that they have comprehensively answered” every question.


For many companies, the expenses do not even end when they have finally managed to reach a settlement with the regulators and enforcement authorities. The bills can keep coming in for years, as many firms are required to bear the cost of being overseen for several years by an independent compliance monitor. Firms that have been the target of bribery investigations may also find themselves shut out from procurements processes. And there is always the risk of follow-on shareholder litigation as well.


Not only have the costs increased, but the time required to conclude a case has lengthened inordinately as well, as detailed in a April 20, 2015 Wall Street Journal article entitled “The Foreign-Bribery Sinkhole at Justice” (here) which of course has exacerbated the problems associated with the overwhelming costs of these types of investigations.


Part of the problem for everyone is that because so few bribery prosecutions have ever gone to trial, there is almost no legal authority guiding and informing the regulatory and enforcement process. As the article puts it, “this hands prosecutors a lot of discretion.” The article quotes Professor Koehler as saying that “we have only a façade of enforcement,” and that “the FCPA often means what enforcement agencies say it means.”


Some companies have started to push back, as Professor Koehler notes in a May 5, 2015 post on his FCPA Professor blog (here). In his post, Koehler references an April 29, 2015 Wall Street Journal article (here) that discusses efforts by Wall Street banks to resist what the banks describe as the enforcement authorities’ “overaggressive effort” to investigate the banks for hiring children and other relatives of government officials in China.   The problem for everyone is that when the regulators have such wide discretion to decide what conduct violates the law, conduct that was not previously viewed as improper can suddenly turn out to represent a violation.


No one is suggesting that anti-bribery enforcement in of itself is the problem. The problem is the excesses to which the enforcement can lead. The Economist suggests four steps to reform the process and to “stop a descent into investigative madness.”


First, the magazine suggests, “regulators should rein in the excesses of the compliance industry and take into account the cost to firms of sprawling investigations.” When companies self-report suspected violations, regulators should “tell them what level of investigation they want to that companies are not overzealous out of fear of seeming evasive.” There is reason to hope that regulators may recognize their ability to help here; the article quotes the head of the DoJ’s criminal division as saying that “We do not expect companies to aimlessly boil the ocean.”


Second, the article suggests, governments should lower the costs by harmonizing anti-bribery laws and by improving coordination between national probes. There are of course existing efforts to align international efforts, such as the OECD’s ant-bribery convention. There is more that national governments can do to ensure that they are not subjecting companies to multiple investigations and multiple punishments for the same misconduct.


The magazine’s third suggestion, while analytically valid, may be prey to an almost inevitable futility. The magazine suggests that more corruption case need to go to trial, so that legal standards that might constrain enforcement authorities are developed. The problem is that companies are scared to fight and risk a criminal indictment. It is, as the magazine itself notes, commercially rational for companies to capitulate. It may be that efforts of the type now being pursued by the Wall Street banks to push back can provide some constraint to prosecutors’ expansive legal interpretations.


The magazine’s final reform suggestion may have the most potential. The magazine suggests that anti-bribery laws should be amended to allow companies a “compliance defense” – that is, if the company had valid anti-bribery policies and were making reasonable efforts to enforce the policies, and self-reported when violations were found, the penalties imposed should be greatly reduced. Although the magazine does not add this point, it would be beneficial if companies qualifying for this defense could also look forward to a more contained and shortened investigative and enforcement process.