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Harry Cassin
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Andy Spalding
Senior Editor

Jessica Tillipman
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Richard L. Cassin
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Eric Carlson
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Wal-Mart’s Victims, Part XII: The Problem with Disgorgement

In the last post I suggested that disgorgement, though a seemingly promising way to compensate victims, may not work. Here’s why.

The Fair Fund provides that disgorged monies may be used for the restitution of victims. Although the statute does not define that key term, the regulations do. While the statute reads “for the benefit of the victims,” the regulations read, “for the benefit of  the ivestors.” That is, the SEC has defined the victims, for purposes of disgorgement, as the investors. 

And that’s hardly surprising. Let’s remember that the SEC’s broader mission is, indeed, to “protect investors.”

So the Fair Fund would work to the extent that the victims are the investors. And to some extent those investors are indeed victimized. But the investors in companies subject to FCPA jurisdiction will obviously tend to be concentrated in the U.S. and other developed countries. This money would not reach the developing countries, which of course is where the overwhelming majority of FCPA violations occur.  Providing restitution to investors would do little for the real victims of bribery – citizens of the countries whose governments are corrupted.

We can imagine the SEC amending its regs to define “victim” more broadly for purposes of the Fair Fund.  But we probably have to recognize that improving the social, legal, and economic conditions in developing countries is, for better or for worse, beyond the SEC’s mission. We’re swimming upstream here.

So if we’re committed to helping the real victims of bribery, but neither disgorgement nor statutory restitution will work very well, we’re going to have to get creative.

This is where fun starts. Stay tuned.

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


Andy Spalding is a senior editor of the FCPA Blog.

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