Tackling demand-side bribery, as the proposed Foreign Extortion Prevention Act aims to do, is complex. On the supply side, we know in most cases why business people pay bribes. In the words of the FCPA, it’s to obtain or retain business or secure an improper advantage. But why do officials demand bribes?
Some need the money to survive. Bureaucrats in Africa or South Asia may not earn enough from their government salaries to buy firewood, or food or medicine for their families. Underpaid government clerks are on the receiving end of most facilitation payments.
At the next level are officials who want to buy things they can’t quite afford. A new car, maybe, or a bigger house in a better neighborhood, or a prestige school for their kids. Some extra cash from a few bribes can help bridge the gap.
Mahmoud Thiam was probably in that category. He was a successful banker in New York, first with Merrill Lynch and then UBS. At the mid point in his career he went back to Guinea in West Africa where he was from, to serve as the minister of mining for a few years.
While in office he took $8.5 million in bribes from Chinese companies. He returned to New York and bought a house in Dutchess County, one of America’s richest zip codes, and paid his kids’ tuition at a private school in Manhattan.
The DOJ charged Thiam with money laundering. He was convicted at trial and sentenced in 2017 to seven years in federal prison.
Another level up are people with bigger ambitions, much bigger. They’re kleptocrats posing as respectable billionaires.
Gulnara Karimova comes to mind. Her father was president of Uzbekistan. She took bribes from mobile phone operators on an epic scale. The money, more than $1 billion, financed her various global careers as a fashion designer, pop singer, catwalk model, art collector, diplomat, socialite, and so on.
Her father finally put her under house arrest in 2014. He died in 2016 but her house arrest continues.
Another example is Alejandro Andrade, Venezuela’s national treasurer from 2007 to early 2011. While in office he took more than $1 billion in bribes from a Venezuelan media tycoon.
Andrade used the money to buy an equestrian ranch in Wellington, Florida, part of Palm Beach County. He imported show horses from Europe, bought private jets, yachts, more homes, high-end watches, a fleet of luxury and performance cars, and a fashion line, the DOJ said.
Andrade pleaded guilty to a money laundering conspiracy and was sentenced in 2018 to ten years in prison.
In a very different category are officials who hate the institutions or people they work for. They take bribes from contractors on the “other side” as a way to betray and undermine their government employers.
Were some of the two dozen U.S. Navy officers charged in the Fat Leonard bribes-for-secrets scandal in this category? Did they hate the Navy or their bosses and set out to betray them? Maybe.
Finally, some corrupt officials are true team players. They do their part, even when it means collecting the bribes and passing them along to their bosses and co-workers.
That happened in Indonesia under Suharto. In one case from the early 1980s, Achmad Thahir, a $9,000-a-year manager at Pertamina, the state energy company, died suddenly, leaving $35 million in a personal account at Sumitomo Bank in Singapore.
Pertamina sued to recover the money. Thahir’s widow claimed the money should come to her. It was bribe money, yes, but collected openly, she said, and Pertamina officials had “endorsed” the bribes.
“Corrupt money [at Pertamina] is normally divided up and down the hierarchical ladder in classical feudal fashion, according to her case,” the New York Times reported.
The Singapore court rejected the widow’s claims and gave the money back to Pertamina.
None of the various motivations excuse the demand side of bribery. But since the Foreign Extortion Prevention Act is on the table, it’s a good time to consider exactly who the law is targeting, what drove them to demand bribes, and what defenses they might raise.
Richard L. Cassin, pictured above, is editor at large of the FCPA Blog.
Exactly ! None should be excused by considering the reasons behind accepting bribes. Everyone should be treated equally and Yes ! Foreign Extortion Prevention Act is much needed law in this increasing world of bribery.
Richard, thank you for the thoughtful and thought-provoking post. As I have mentioned elsewhere, I have been reading with interest discussions in the FCPA Blog and other places about the usefulness of the U.S. adopting stand-alone passive foreign bribery legislation. While in my experience it is always a safe bet to view anything raised by Tom Firestone as presumptively spot-on, I think it is worth the community's more clearly thinking through a few empirical and policy issues before proceeding. (Notwithstanding the fact that it is always great to see innovative thinking around international anticorruption tools.) The questions that occur to me that ought to be more clearly addressed before serious consideration is given to proceeding. First, in the jurisdictions around the world that have passive foreign bribery laws on the books, is there any record of significant enforcement – and if so, what lessons learned are there? Second, if there has been any enforcement, what has the demonstrable impact been, if any, on enforcement in the country of the bribe recipient/bribe soliciting official by its domestic institutions? Finally, we live in a very limited world of enforcement resources, legislative attention and action, and policymaker time – is this the best use of such limited resources? Or should we, for example, spend more time bolstering, where possible and through a range of means, the likelihood of domestic bribery enforcement, as well as the prevalence of local enforcement follow up in response to foreign actions such as FCPA enforcement and MDB debarment? Best, Rob Leventhal (in personal capacity)
Who can guarantee that the foreign official was the one to mention about a bribe? Who can guarantee that the Sales employee was not the one to offer the bribe? It is impossible to determine who mentioned the bribe for the first time. I don’t know that we can state that officials demand bribes. Sales employees are the ones needing to meat goals and targets and are heavily pressured to do so. Who is to say that the Sales employee wasn’t the first to mention a bribe in order to win a tender or contract? Not saying either party is innocent, just something to think about.
Richard, I am not convinced the proposed Foreign Extortion Prevention Act is the answer to ending demand-side bribery.
When the question is " Why do foreign officials demand bribes"? the simple answer is of course, because they can. There is a formula for corruption, or perhaps more accurately, the potential for corruption as follows… Corruption equals Monopoly Power plus Discretionary Power minus Accountability or, C= MP+DP-A. The beauty of this formula is that it covers both demand side corruption and supply side corruption. Clearly, not all government officials are bribe takers/extortionists. Given that bribery has been around since Old Testament times, "Your leaders are rebels, partners with thieves, they all love bribes" Isaiah 1:23 NIV (New International Version). Perhaps a more timely question is "Why would any country allow its officials to be bribed"? PROVIDED the payer first obtains "permission in writing". Can any FCPA Blog reader identify the country?As Richard so aptly stated "It's a good time to consider exactly who the law is targeting". With respect to coordinated international anti corruption efforts it is useful to remember that a chain is only as strong as its weakest link.
Rob Leventhal poses some good questions. With regard to his first two questions, my understanding is that there has been very little (if any) enforcement of foreign passive bribery laws. With regard to his third question, about whether scarce resources might be better spent on trying to bolster domestic anti-corruption enforcement efforts by foreign governments, rather than on enforcement of a statute like FEPA, I do not think that one necessarily precludes the other. In fact, FEPA prosecutions would (hopefully) stimulate foreign governments to bring charges against the bribe takers in order to avoid the appearance that they are protecting corrupt officials. In addition, FEPA enforcement and technical assistance programs to bolster anti-corruption efforts by foreign governments would presumably draw on different budgets and resource pools. So, in short, these efforts should be mutually reinforcing, not competing.
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