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Harry Cassin
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Shruti J. Shah
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Russell A. Stamets
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Eric Carlson
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Is the CPI upside down?

Transparency International released its 2019 Corruption Perceptions Index Thursday. The results of this latest iconic list beg the question: Should we look at the ten cleanest countries on the CPI to see where the next mega-FCPA settlement will come from?

Companies from the five highest-ranking “very clean” countries on the 2019 CPI (Denmark, New Zealand, Finland, Singapore, Sweden) have collectively paid $2.49 billion in FCPA penalties since FCPA enforcement began.

Companies from the ten cleanest countries (Denmark, New Zealand, Finland, Singapore, Sweden, Switzerland, Norway, Netherlands, Germany, Luxembourg) have paid a total of $5.43 billion over the same period.

Since 1980, all companies combined from anywhere have paid $17.24 billion in 239 FCPA enforcement actions.

That means companies based in the five cleanest countries have been responsible for 14.4 percent of all FCPA fines. Companies headquartered in the top ten cleanest countries were responsible for 31.5 percent of all FCPA settlements.

Put another way, the cleanest five percent of the world’s countries have been responsible for nearly a third of all FCPA penalties.

The CPI’s number five country, Sweden, has had a string of high profile FCPA cases. Last year, Swedish telecom Ericsson agreed to pay the DOJ and SEC over $1 billion in the second biggest FCPA enforcement action ever. In 2017, another Swedish telecom, Telia, paid $965 million to settle FCPA charges, the third biggest FCPA enforcement action.

Germany’s Siemens paid $800 million in 2008, and Holland’s VimpelCom paid $795 million in 2016, to resolve FCPA violations.

As the FCPA Blog has said before, apparently a country’s rank on the CPI isn’t always a good predictor of how companies will behave when they do business overseas. In fact, there may be a negative correlation. Companies from the cleanest countries may behave the worst when they land on foreign shores.

There have not been any FCPA settlements involving companies from the bottom ten countries on the CPI.

The CPI is a methodological wonder, to be sure. We’re big fans of it. But looking at the numbers, the CPI also appears to be an unintended indicator of where the next giant FCPA settlement will come from.

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4 Comments

  1. True Harry that the CPI is an indicator of what public sector corruption perception is in any participant country. The fact that It does not deal with private sector corruption means an incomplete picture to me, for the eye has traditionally be on third world public officials as the ones to be blamed for corruption, ignoring the feeders of the system, mostly private actors from developed countries. So I think both public and private should be combined to have a thorough perception.

  2. Depends on whether or not a particular observer is upside down… I guess this is what social theory indicates… “notwithstanding our ability to measure the coastline of England with some degree of accuracy”… and it is complicated by the fact that the most sophisticated forms of corruption may more closely resemble the ordinary forms of social communication… so one could say that as corruption becomes more sophisticated or complex it becomes even more difficult to measure… hence for example the shouts of surprise when PwC “discovers” they’ve been auditing the funds of the “most corrupt” or “richest” woman in Africa… depending on how you look at it.

  3. CPI is designed to “evaluate” corruption within the country and not how companies operate abroad. In 1999, TI established a Bribe Payers Index (BPI) that was much more relevant but, unfortunately, it was discontinued after 2011 (as far as I know).

    The OECD has flagged more than once the insufficient progress of countries like Sweden (see, for example, http://www.oecd.org/corruption/sweden-must-urgently-implement-reforms-to-boost-fight-against-foreign-bribery.htm)

    In fact, what this reveals, is that there can be a disconnect, both in terms of countries and of companies, between the domestic situation and the behaviour abroad.

  4. …..but still the corruption happened in affiliates of these companies located in the countries which have a low CPI score.


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