The arrest of Hong Kong’s former home secretary, Patrick Ho, and a co-defendant for allegedly bribing Africa officials on behalf of a Chinese energy company, has triggered accusations that America uses FCPA enforcement to promote a political agenda.
The Beijing mouthpiece Wen Wei Po asked if the U.S. action was “genuinely intended to safeguard fairness and justice or merely a move to head off a perceived threat to its hegemony?”
Beijing’s Global Times said there are “deep international political motives” behind the case.
The timing of Ho’s arrest, his defenders said, showed it was “an American reaction to warming Sino-Russian trade ties,” according to the South China Morning Post. The day before his arrest on FCPA and money-laundering charges, CEFC Energy, the company that funds Ho’s NGO, signed an oil supply agreement with the Russian state oil company Rosneft.
Is FCPA enforcement political? If politics is only about trying to make another country look bad, the answer is no. But if politics means using FCPA enforcement to protect American companies overseas, and guard its national security, then yes, FCPA enforcement is political.
The DOJ said Ho used his China-funded NGO to bribe officials in Uganda and Chad. The purpose of the alleged bribery was to lock up oil and gas rights for a Chinese state-owned enterprise. That means cutting off America and its companies from energy resources.
The 2012 DOJ-SEC Resource Guide made it clear that creating a level playing field for American companies doing business overseas is a core aspect of FCPA enforcement policy.
And in the release about Ho’s arrest, Acting Assistant Attorney General Ken Blanco said the DOJ is “committed to investigating and prosecuting corrupt individuals who put at risk a level playing field for corporate competitiveness, regardless of where they live or work.”
“Their bribes and corrupt acts hurt our economy . . . .,” Blanco said. (The itals are ours.)
Beyond that, the feds have openly described the FCPA as a tool to protect America’s national security interests. In 2014, Leslie Caldwell, then the chief of the DOJ’s criminal division, said:
Fighting foreign corruption is not a service we provide to the global community, but rather a necessary enforcement action to protect our own national security interests and the ability of our U.S. companies to compete on a global scale.
In 2017, the Trump Administration’s National Security Strategy (NSS) affirmed the fight against corruption as a cornerstone of American foreign policy. In a warning apparently directed at China and Russia, the NSS said: “Strategic competitors often exploit rather than discourage corruption and state weakness to extract resources and exploit their populations.”
As with most FCPA prosecutions, it’s hard to say exactly what triggered the investigation into Patrick Ho. An American or European oil company might have heard rumors of Chinese bribery and reported them to the DOJ. An internal whistleblower could have emerged. Or maybe some of the money flow was picked up by a bank or government agency through AML or anti-terrorism surveillance.
However the investigation started, the evidence the FBI gathered and described in the 54-page criminal complaint — emails for three years, bank records, witness statements — led to Ho’s arrest. That outcome was predictable once the evidence showed that there had been alleged bribery, and that it threatened both America’s national security and the level playing field.
For China, Ho’s arrest has created a problem for its global-player image. If authorities there didn’t know what Ho and CEFC Energy were allegedly doing right under their nose, then they were negligent and incompetent. If the Chinese authorities did know but didn’t act, then the DOJ caught them in flagrante delicto. Either way, it’s embarrassing. But China’s embarrassment is a byproduct of Ho’s arrest, not the purpose behind it.
Perhaps over time, Beijing’s loss of face will give way to a more positive response, and somehow contribute to advancing China’s anti-corruption awareness and enforcement efforts.
Richard L. Cassin is the publisher and editor of the FCPA Blog.