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JP Morgan revisited: What’s a princeling supposed to do?

We at the FCPA Blog are long overdue in recognizing the new resource that is the Global Anticorruption Blog. With my colleague in the legal academy, Harvard Law professor Matthew Stephenson, at the helm, GAB analyzes corruption law issues with uncommon intellectual rigor. They break down issues as few can. In so doing, they add great value to the anti-corruption debates of our day.
And to that end, they love a robust back and forth. Case in point is Prof. Stephenson’s recent rejoinder to my earlier series on the JP Morgan princeling case. There, I argued that merely assuming, without specific evidence, that giving a job to an official’s son or daughter constitutes giving a thing of value to the official, contradicts earlier opinion releases. Prof. Stephenson’s two-part reply is essentially: 1) no they’re not, Spalding, you’ve misread the releases; and 2) regardless, opinion releases explicitly state that they have no binding effect, so we shouldn’t make too much of them.
This is getting good. I heartily disagree on both points, and here’s why.
Prof. Stephenson begins by claiming that, as a matter of policy, it is “straightforward” that offering a benefit to a third party can count as offering “anything of value” to a foreign official under the FCPA. This principle, he contends, is consistent with the language and purpose of the statute, which is “to prevent distorting foreign government decisions.”
While I would not say that distorting government decisions is THE purpose of the statute, it is certainly among the purposes. And to the extent that offering something of non-monetary value to the official (such as a job to a financially independent adult child) can distort government decisionmaking, it is precisely the sort of thing that our statute should prohibit.
But here’s the rub. Does giving a job to an official’s daughter or son necessarily meet that description? I submit that it does not, and that we learn this from two sources. The first is human experience. The second is the opinion releases themselves.
First, experience. Can we imagine circumstances in which the job would not have value to the official? Easily.  What if the child and parent are estranged? Or outright hate each other? What if the parent thinks the child is spoiled and needs to make her own way in the world? What if the official intensely dislikes foreign companies (highly possible, given China’s recent treatment of foreign firms and the low public regard post-2008 for U.S. investment banks) and would deem the child’s acceptance a betrayal? Stephenson’s “easy case” makes too many assumptions about family relations, not to mention international politics. As a matter of human experience, we simply cannot assume the job offer actually has value, even non-monetary value, to the official.
But one may retort that it’s not a subjective test. The law should not and does not require specific evidence of the official’s valuation of the job. Rather, a lucrative job to an official’s relative is objectively of value to that official.
The problem is that this contradicts the opinion releases. And Prof. Stephenson’s own analysis tells us so. I’ve previously worked through the relevant opinion releases, 82-04 and 84-01, and won’t do so again now. But here are the basics. In both cases, close relatives of government officials were hired; the requestor asked whether these hirings might violate the FCPA; and the DOJ answered that without some other thing of value passing through the relative to the official, no violation occurred. I don’t think Prof. Stephenson and I disagree there.
Prof. Stephenson observes, rightly, that “there does not appear to have been any suggestion, in either case, that the foreign officials in those cases viewed the retention of their relatives’ firms as itself a quid pro quo, offered in exchange for business.” But this is precisely my point. There was no evidence that the official thought of the lucrative contract offered to the relative as a thing of value to the official. Absent that evidence, the DOJ stated it would not treat the contract as an FCPA violation.  

Sure, the opinion releases contain the disclaimer that they have “no binding application.” But do we really wish to build an important new legal argument upon that cornerstone? Assuming a common law understanding of the rule of law, why on earth would we publish these things if they can be contradicted at any time, with retroactive application? Plainly, the purpose of publishing them is to provide guidance, albeit cautious and qualified. Future cases may well prove more nuanced. Our interpretation of key provisions may evolve incrementally. But to outright contradict them — which I continue to maintain is a risk that the JP Morgan action runs – with retroactive application and without notice, would be shameful. Building a prosecution upon a CYA disclaimer is embarrassing and lame. It’s contrary to our values. We shouldn’t do it.
But there is a point on which Prof. Stephenson and I almost agree. He notes that “if we were writing on a blank slate,” holding that a job to a relative satisfies the thing of value prong would be “entirely unproblematic.” I agree that we could indeed render that proposition unproblematic: we could develop an objective test in which the job is deemed a thing of value irrespective of the official’s subjective regard for the job or the child. This might very well make good policy. It would be consistent with the earliest scholarship on corruption, particularly the writings of another Harvard professor, Joseph Nye, who wrote of “pecuniary gain” and “status gain.” The law could objectively treat jobs to relatives as status gains for officials.
But that’s the pesky thing about common law jurisdictions. We’re rarely writing on blank slates. And we will not be in JP Morgan. So let’s do the right thing. Yes, let’s establish an important new precedent that promotes transparency and fair dealings. But let’s do it through the rule of law.


Andy Spalding is a Senior Editor of the FCPA Blog and Assistant Professor at the University of Richmond School of Law.

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