Wal-Mart’s Victims Part IX: Are Host Governments Victims or Perpetrators?

I’ve argued in this series (see links to the prior posts below) and in this paper that FCPA enforcement should benefit the victims of bribery — namely, the citizens of the countries in which the bribery occurs. Congress intended the statute to do this very thing, and it should do so now.

Thursday’s post showed that twice in the history of FCPA enforcement we have ordered restitution to those victims: once in 1979, and again in 1990. But there are two sound reasons why we have not done it in the modern enforcement era, and probably won’t.

We learned of the first reason in the 2010 Alcatel-Lucent enforcement action. A French company bribed the Costa Rican government-run electricity and telecommunications provider, the Instituto Costarricense de Electricidad, S.A. (“ICE”), to win contracts. ICE sought to compel the U.S. government to provide restitution under federal victims’ rights statutes.

Put another way, ICE argued that federal law required restitution to the very government agency whose employees had accepted the bribes. You can see where this is going.

Though ICE claimed that the bribe acceptance (if not solicitation) was isolated to a few employees within the agency, the DOJ marshaled a good deal of evidence that corruption at ICE was pervasive in the tender process. It showed the corruption extending all the way up to the highest levels of the agency. The court agreed, and denied ICE’s petition.

My own research across the developing world sadly suggests that ICE was the rule rather than the exception. The governments of the countries in which FCPA violations occur are usually — not always, to be fair, but usually — saturated with corruption. As the DOJ successfully argued in Alcatel-Lucent, the governments are more properly understood as co-conspirators than as victims. We see this improving now, but it’s slow going.  In the meantime, deeming those governments the victims usually isn’t going to work.

But could we somehow award restitution to the citizens of developing countries without going through their governments? In theory, we certainly could. But that brings us to the second problem with FCPA restitution, which inheres in our own statutes. We’ll discuss it in tomorrow’s next post.

Wal-Mart’s Victim’s Part I can be viewed here, II here, III here, IV here, V here, VI here , VII here, and VIII here.

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Andy Spalding is a senior editor of the FCPA Blog.