US govt. agrees to consider SERAP’s request to share foreign bribery fines
The United States Securities and Exchange Commission (SEC) has said it would “give appropriate consideration to the thoughtful” request by Socio-Economic Rights and Accountability Project (SERAP) asking the agency to “establish an efficient case-by-case process for the payment of some or all of US Foreign Corrupt Practices Act (FCPA) civil penalty and disgorgement proceeds to or for the benefit of the victimized foreign government agency or the citizens of the affected foreign country like Nigeria.”
This was contained in a letter dated 25 April 2012, and signed by Robert S Khuzami, Director SEC, and addressed to Professor Alexander W. Sierck, the group’s Volunteer Counsel through the International Senior Lawyers Project.
The letter reads in part: “Thank you for your letter on behalf of SERAP, in which you request that the Enforcement Division establish a case-by-case policy or process that would enable foreign governmental entities that have been victims of corruptly-procured contracts, civil society groups in foreign home country and the US-nonprofit organization serving that foreign country to obtain some or all of the civil penalty and disgorgement proceeds that companies pay in connection with violations of the US Foreign Corrupt Practices Act (FCPA).”
“There is no doubt that corruption exacts an enormous toll, both human and economic, across the world. Moreover, as the US Congress recognized when the FCPA was first enacted, corporate bribery is bad for business as it is fundamentally destructive of our free market system. The question of identifying parties who suffer cognizable harm in connection with the securities law violations at issue in a given enforcement matter is driven by the facts and circumstances of that particular case.”
“We appreciate your thoughtful submission, and will give appropriate consideration to your suggestions, guided by the Commission’s multi-prolonged mission, as well as the legal framework surrounding the federal securities laws,” the letter also said.
The organization also said that “civil society groups in the home country, or US-nonprofit organizations such as the Bill and Melinda Gates Foundation and The Carter Center serving that country, be eligible to apply for such proceeds as well, or instead, for use for “public benefit projects” in the affected foreign country, subject to anti-corruption safeguards.”
Adetokunbo Mumuni, the group’s executive director said: “While we welcome the consideration of our request by the SEC, our lawyer is already considering other legal options within the US and internationally to ensure justice for victims of foreign bribery in Nigeria.”
It would be recalled that SERAP in a dated 15 March 2012 made the request to the SEC. In the letter, the organization said that, “at the moment, the civil penalty and disgorgement proceeds that companies agree to pay to resolve US FCPA investigations are retained by the US government.”
“Yet, procurement and investment agreements corrupted by foreign bribery invariably lead to increased costs, not only in higher prices but also in needlessly expanded and ultimately inefficient projects in victimized societies. This has often been the case in Nigeria, where damage remedies are often elusive,” the organization said.
The organization also said that its request “would not impede the Division’s enforcement priorities,” arguing that the organization is “well-qualified to propose and help implement sensible discretionary remedies for victims of FCPA.”
According to the organization, “Victimized governmental agencies are typically without a practical remedy for recovering their economic injury attributable to foreign bribery and corruption. The US FCPA and similar laws in other OECD member states do not provide for private enforcement. International arbitration, if available under the terms of a contract, and if the home country government even permits a victimized entity to pursue it, is expensive and highly time-consuming, particularly when large multinational companies are defendants.”
“While local law can, in theory, provide for a remedy, litigation in the local courts is often fraught with political risk, and can be time-consuming and expensive in the best of circumstances; even if such cases are eventually successful, enforcement of judgments, locally and internationally, present formidable challenges as well. In SERAP’s experience, all of this is true in the Nigerian context,” the organization also stated.
“Foreign bribery and corruption by individuals and companies subject to US jurisdiction at minimum can foster resentment against the US generally, particularly among large segments of the population that may already be hostile to the US. Citizens of victims’ countries might consider FCPA civil penalties and disgorgement payments imposed by the US, and then kept by the US, as in fact representing funds that rightfully “belong” to the victim. SERAP’s proposal addresses this probable source of resentment,” the organization also said.