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First BP, then BofA: Could an FCPA defendant be next?

Attorney General Eric Holder announces Bank of America’s $16.65 billion settlement on August 21, 2014.Two recent blockbuster DOJ settlements have two things in common: 1) record-setting financial penalties, and 2) a portion of those penalties being set aside to fund programs to benefit the communities harmed by the crime. Shouldn’t we carry that trend into FCPA enforcement?

The DOJ recently announced an historic $16.65 billion settlement with Bank of America and two of its subsidiaries, Countrywide and Merrill Lynch, related to the 2008 financial crisis. It’s the largest civil settlement with a single entity in American history.

But that’s not its only noteworthy feature. $7 billion, or just over 40% of the settlement, is not going into the U.S. Treasury. Rather, in the words of Attorney General Eric Holder, it will fund “relief to struggling homeowners, borrowers and communities affected by the bank’s conduct.” The Attorney General further commented, “this is appropriate given the size and scope of the wrongdoing at issue.”

These terms closely resemble the BP settlement for its Gulf of Mexico spill. As a prior series of posts I wrote for the FCPA Blog discussed, the DOJ entered into a record-setting $4 billion criminal settlement for environmental violations, but only $1.6 billion was earmarked for the U.S. Treasury. The remaining $2.4 billion, or 60% of the total penalty, was set aside to fund remediation and prevention programs in Gulf communities.

Notice that these are not just victim restitution cases; the disbursement of this money is not limited to those who can show a “direct harm” from the violation. Instead, these settlements presume that communities more generally are harmed, and that these communities are entitled to a share of the settlement. Some of the money is used to clean up the harm; some of it is used to prevent future harm or otherwise stimulate healthy economic activity.

And wouldn’t FCPA cases be an ideal candidate for this kind of settlement? True, we usually cannot identify discrete victims who were directly harmed. But we can always identify communities whose governments sacrificed the public good for a bribe. Settlement money could be used to fund private-sector programs that repair the harm where they can, and otherwise fund training and public awareness programs. The money can help stimulate the growth of a new political culture. We can help people understand that systemic bribery is not inevitable, that they have a right to expect transparency, and that people all around the world are now working to protect that right. It would be money well spent.

As section III.D. of this paper explains, the DOJ presently has the legal authority to enter into such settlements. We can do it right now. We’re already doing it in environmental law specifically and financial crimes generally. Let’s do it in bribery. The world would be thrilled to see it.


Andy Spalding is a senior editor of the FCPA Blog. He is an Assistant Professor at the University of Richmond School of Law. He can be contacted here.

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  1. Reasonable compensation for documented damages is fine. Frederic Bastiat pointed out that taking the property of one person for the benefit of another is plunder – possibly LEGAL plunder, but plunder nonetheless. Where there is not a direct connection between the damage to the individual and the award to the same, the cash transfer looks more like plunder than restitution.

  2. Interesting argument you have Scott, but I'd respectfully disagree. You're assuming that the property rightfully belongs to the first party, and therefore transferring it to a second party is plunder. In the case of FCPA fines and penalties though, much of the "property" being seized is related to ill-gotten gains that should never have been obtained by the first party. Therefore, I have no issue with a government redistributing such gains.

    Andy makes a great point through this article, though I wonder if the US or other governments would act on his suggestions given the significant political message of redistributing the money cross-borders. We're effectively telling the country that took the bribe that it can't manage its own affairs, so we'll do it for them through their private sector. That is likely true to some degree in many jurisdictions, but very political. In the Bank of America and BP cases, the US government redistributed some of the fines to local communities/citizens. That's much easier.

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