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Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

Sunday
Nov152009

Guilty Plea In (Old) Panama Bribes Case

A Virginia man pleaded guilty on Friday, November 13th to being part of an overseas bribery conspiracy that began in 1996 and ended in 2003. Charles Paul Edward Jumet, 53, was charged in federal court in Richmond, Virginia under a two-count criminal information. He admitted conspiring with others to violate the Foreign Corrupt Practices Act by making corrupt payments to government officials in Panama and giving a false statement to the FBI about how he paid some of the bribe money.

Jumet, an American citizen, was an officer of Ports Engineering Consultants Corporation (PECC), an affiliate of Virignia Beach-based Overman Associates. In December 1997, the Panamanian government awarded PECC a no-bid, 20-year contract to maintain lighthouses and buoys along Panama’s waterway. In exchange, Jumet and others authorized corrupt payments to Panamanian officials. By 2003, he and his co-conspirators had paid more than $200,000 to the former administrator and deputy administrator of Panama’s National Maritime Ports Authority and to a former, high-ranking elected official of Panama.

The bribery plot started in 1996 and was first uncovered by the U.S. Department of Homeland Security in 2004. The FBI later joined the investigation.

As in Frederic Bourke's case, the DOJ charged Jumet not with a substantive FCPA offense but under the conspiracy statute, 18 U.S.C. § 371. For conspiracy, the statute of limitations can reach back to criminal behavior more than five years old if the conspiracy ended within the past five years. Here's what the U.S. Attorneys Criminal Resource Manual says

Conspiracy is a continuing offense. For statutes such as 18 U.S.C. § 371, which require an overt act in furtherance of the conspiracy, the statute of limitations begins to run on the date of the last overt act. See Fiswick v. United States, 329 U.S. 211 (1946); United States v. Butler, 792 F.2d 1528 (11th Cir. 1986).

Jumet is scheduled to be sentenced February 12, 2010. The FCPA conspiracy count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the scheme. The false statement count carries a maximum penalty of five years in prison and a fine of $250,000.

A copy of the DOJ's November 13, 2009 release is here.

Download the November 10, 2009 criminal information in U.S. v. Charles Paul Edward Jumet  here.

Download the DOJ's statement of facts here.

Download the plea agreement here.

Our thanks to Matthew Reinhard and Cody Worthington for helping us with this post.

Friday
Nov132009

Jefferson Sentenced To 13 Years

Former nine-term congressman William Jefferson, 63, was sentenced on Friday to 13 years in prison. He was found guilty on 11 of 16 corruption charges, including one count of conspiracy to violate the Foreign Corrupt Practices Act. He was acquitted of the single substantive FCPA charge he faced.

Judge T.S. Ellis handed down the sentence in federal court in Alexandria, Virginia, where Jefferson had stood trial for six weeks in July and August. Prosecutors had asked that Jefferson be jailed for 27 to 33 years; Jefferson's lawyers wanted a sentence of less than 10 years. Next week the judge will decide when Jefferson must report to prison and whether he can remain free on bail pending his appeal.

Jefferson made FCPA history when he became the first and only U.S. public official to be charged under the law since it was enacted in 1977. But his case will always be remembered for the $90,000 in cash found in his freezer. The money was part of $100,000 given to him by a government informant. Prosecutors said Jefferson planned to use it to bribe Nigeria's then vice president, Atiku Abubakar.

But as we said before the trial began, "The money so spectacularly found in the freezer -- it was in the freezer; it was not in the bank account of a foreign official." Although the cash seemed to prove Jefferson's innocence on the substantive FCPA charge, it was also perfect evidence to prove his bad intentions. Honest money doesn't go into a congressman's kitchen freezer. So when Jefferson took the cash, and when the FBI found it hidden with the frozen food in veggie-burger boxes, prosecutors had to put the FCPA in the case even if it didn't belong there (see our post here). Without it, the cash may have become irrelevant and been excluded from the trial.

The Times Picayune said, "Jefferson's lawyers, who are owed more than $5.7 million by Jefferson, according to documents submitted in his and wife Andrea's recent bankruptcy filing, have 10 business days to file an appeal." The paper said an appeal is likely to challenge Judge Ellis' rulings about the definition of Jefferson's "official acts" and the judge's decision not to tell the jury that an FBI agent on the case had a sexual relationship with the government's informant when she was recording her conversations with Jefferson.

William Jefferson was born into back-woods poverty. He overcame impossibly long odds to graduate from Harvard Law School and become the first African-American elected to Congress from Louisiana since Reconstruction. Now he's disgraced, bankrupt, and heading for jail -- where he may live until his 76th birthday. It's a very sad turn in a life of wondrous achievement.

Read all our posts about William Jefferson here.

Thursday
Nov122009

He Said, We Said

On November 12, 2009, there was a lot of tough talk from the DOJ's Lanny Breuer (left). The new chief of the criminal division warned pharmaceutical companies and executives about their exposure under the Foreign Corrupt Practices Act. He said, "Our focus and resolve in the FCPA area will not abate, and we will be intensely focused on rooting out foreign bribery in your industry. That will mean investigation and, if warranted, prosecution of corporations to be sure, but also investigation and prosecution of senior executives."

He was speaking at an annual pharma compliance confab in Washington. A copy of his remarks can be downloaded here.

On September 3, 2009, the FCPA Blog said:

Will drug makers be the target of the next industry-wide Foreign Corrupt Practices Act investigation, following in the footsteps of the oil and gas services companies and orthopedic device makers? It's possible. Their sales practices are in the news a lot these days. And amid the healthcare debate, drug-company behavior anywhere invites attention in Washington and beyond.

Remember the orthopedic device makers? Like Pfizer this week and Eli Lilly earlier this year, they resolved enforcement actions based on illegal domestic sales practices. Soon after, most of them disclosed that the DOJ and SEC were looking into their overseas marketing methods for any FCPA offenses. Those investigations are ongoing. . . .

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Thanks to everyone who made the jump with us here to our new site. Some readers let us know what needed fixing, which was helpful. We're especially grateful for our webmaster's hard work and patience.

Thursday
Nov122009

Novak Pleads Guilty

A former consultant for a subsidiary of Houston-based Willbros Group Inc. pleaded guilty on November 12 to paying $6 million in bribes to officials who worked in the Nigerian government, in government-owned companies, and in a political party there. Paul G. Novak, 43, pleaded guilty in federal court in Houston to one count of conspiracy to violate the Foreign Corrupt Practices Act and one substantive count of violating the FCPA. He's scheduled to be sentenced on February 19, 2010.

The bribes were intended to help Willbros win and keep contracts for the Eastern Gas Gathering System (EGGS) Project, worth about $387 million. The project was a natural gas pipeline system in the Niger Delta.

Novak, along with alleged co-conspirators James Kenneth Tillery, Jason Steph, Jim Bob Brown and three employees from a German construction company based in Mannheim, Germany, agreed to make the corrupt payments to, among others, government officials from the Nigerian National Petroleum Corporation, the National Petroleum Investment Management Services, a senior official in the executive branch of the federal government of Nigeria, members of a Nigerian political party and officials from the Shell Petroleum Development Company of Nigeria Ltd.

To fund the bribes, Steph and others used a Willbros' subsidiary, Willbros West Africa Inc. (WWA), to enter into agreements with two consulting companies Novak represented. Without providing any services, the consulting companies would invoice WWA and be paid from Willbros' bank account in Houston to accounts in Lebanon. Novak then used money from the Lebanese accounts to bribe the Nigerian officials.

In addition to Novak, two Willbros employees have pleaded guilty in the case and Willbros has entered into a deferred prosecution agreement:

On September 14, 2006, Jim Bob Brown, a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, for his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract and for making corrupt payments in Ecuador. Brown's sentencing is currently scheduled for January 28, 2010.

On November 5, 2007, Jason Steph, also a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, for making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract. Steph's sentencing is also scheduled for January 28, 2010. See our post here.

On May 14, 2008, Willbros Group Inc. and Willbros International Inc. entered into a deferred prosecution agreement and agreed to pay a $22 million criminal penalty, for the illegal payments to government officials in Nigeria and Ecuador. See our post here.

James K. Tillery was charged, along with Novak, for his alleged role in the bribery scheme in an indictment unsealed on December 19, 2008. According to the indictment, Tillery was a Willbros employee and executive from the 1980s through January 2005. He remains a fugitive. See our post here.

Download the DOJ's November 12, 2009 release here.

Thursday
Nov122009

Frederic Bourke's Big Bet

While we're watching the teletype (left) for news about William Jefferson's sentencing Friday morning (see our post here), let's talk about Mr. Bourke. He was sentenced Tuesday to a year and a day in jail and fined a million dollars for conspiring to violate the FCPA and lying to FBI agents. People in the courtroom said when he was convicted, Bourke was shocked. So apparently he never expected the jury to find him guilty. But when he was sentenced, he was happy and relieved. So he must have been expecting a lot worse. And that probably means the DOJ never offered him a deal with so little jail time.

Why was Bourke shocked by the verdict? Because he had good facts and good law and good lawyers. He didn't pay any bribes himself; he was one of Viktor Kozeny's victims; he'd blown the whistle on Kozeny's fraud and testified to a state grand jury that indicted Kozeny; he thought he'd have the local law defense (he didn't; Judge Scheindlin ruled against it); George Mitchell was his friend, co-investor and character witness; he had smart, active lawyers, and so on. So let's face it. As a defendant, Bourke had a lot going for him. That's why he was shocked by the verdict.

But should he have been? We don't think so. Defendants haven't done well with juries in FCPA-related cases. There hasn't been a full acquittal -- Mr. Jefferson's split decision notwithstanding -- since 1991. Why? For two main reasons.

Before we get to reason number one, we acknowledge that there are lots of legal arguments you can raise about the words of the FCPA -- about the business nexus element, the meaning of "foreign official," and others. And those are good arguments on paper. But judges haven't wanted to hear much about them. In the Kay and Murphy case, for example, the Fifth Circuit even warned against defendants who try "splitting hairs" (they were talking about the meaning of "obtaining or retaining business"). So that's reason number one why defendants don't do well in court. Judges don't welcome a lot of legal argument about the FCPA. Bourke's trial also illustrated the point. Judge Scheindlin didn't allow the local law defense. That surprised us and it dented Bourke's chances of acquittal.

Reason number two: Juries hate graft. That's what we said when the Greens were convicted in September. There's no other conclusion to draw from the trial record in FCPA-related prosecutions stretching back eighteen years. We'll say it again: FCPA cases are about bribes to corrupt foreign officials. They're about sophisticated and often wealthy people looking for shortcuts, hoping to subvert foreign governments for personal or corporate gain. Wheeling and dealing in exotic places. Flashing cash and pulling strings. That's how the prosecutors tell it and juries lap it up. So even if the government's evidence isn't rock solid on all the elements of an FCPA offense, the jury will still get the picture that people who should know better stepped over the line. And they'll convict.

Coming back to Bourke, we'd have to say he took a big risk going to trial, even though he had a lot going for him. But he was fortunate. Judge Scheindlin was on the bench. She said he was at least partly a victim so she gave him a break on the jail time. That's how justice should work (and why no one is sorry the federal sentencing guidelines aren't compulsory anymore).

One more thing. Bourke still has an appeal to the Second Circuit. Defendants who plea bargain can't appeal but those who go to trial can. That's a reason to go to trial, although it can't be nice to sit in a jail cell hoping your appeal will work (they rarely do). Still, Bourke's chances with the Second Circuit aren't too bad.

Our conclusion: If the government never offered Bourke less than a year in prison as part of a plea deal, he came out ahead by going to trial. And he may do even better after his appeal. But his decision to go to trial in the first place was against the odds. And he ended up lucky.

Tuesday
Nov102009

Blackwater And The FCPA

Four former employees the Times interviewed claimed the payments were approved by the company's president and money was wired to Iraq from accounts in Jordan. T

Click to read more ...

Tuesday
Nov102009

Bourke Gets A Year In Prison

Frederic Bourke, the American entrepreneur who led a charmed life and whose prosecution brought new prominence to the Foreign Corrupt Practices Act, has been sentenced to a year and a day in prison and fined $1 million for investing in a bribe-tainted deal in Azerbaijan and then lying to FBI agents about it.

The co-founder of luxury handbag-maker Dooney & Bourke was convicted in July in a Manhattan federal court of conspiracy to violate the FCPA and making false statements in a federal investigation. He was acquitted of money-laundering charges. Bourke could have been jailed for up to ten years following his conviction.

The government indicted Bourke, 63, in 2005, along with Czech-born fugitive Viktor Kozeny, for bribing government officials in Azerbaijan in a failed attempt to take over the state oil company known as Socar. Kozeny, 46, has been a fugitive for about a decade. From the Bahamas, he's been fighting extradition to the United States. He's also accused in New York of stealing $180 million from his investors, including Bourke, and he's wanted by the Czech Republic for allegedly looting a national pension fund.

Bourke claimed he was a victim of Kozeny's fraud and didn't know about his scheme to bribe Azeri officials.

As reported by Bloomberg's David Glovin -- whose in-depth coverage of Bourke's prosecution and trial brought new international attention to the FCPA -- witnesses described "plane flights into Azerbaijan with millions of dollars stuffed into suitcases, of shakedowns in government offices, and of lavish spending by a flamboyant Kozeny who saw himself as a new oligarch. Kozeny told his investors they might control half of Azerbaijan’s economy if they captured Socar."

Bourke's prosecutor, assistant U.S. attorney Harry Chernoff, said, “This prosecution has served notice to potential violators of the FCPA, including passive investors, as Bourke inaccurately styles himself. They will not evade prosecution just because they have left most of the dirty work to foreigners.”

Bourke's lawyers plan to appeal his conviction.

A copy of the 2005 indictment against Kozeny and Bourke can be downloaded in two parts here and here.

Read all posts about U.S. v. Kozeny and the prosecution of Frederic Bourke here.
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Monday
Nov092009

Toss Jefferson's FCPA Conspiracy Count

Before getting to William Jefferson, this reminder: Frederic Bourke is scheduled to be sentenced in Manhattan today (Tuesday, November 10) at 2:30 pm. He could be jailed for up to ten years for conspiracy to violate the Foreign Corrupt Practices Act and lying to federal investigators.

Now Jefferson: He'll learn his sentence this Friday in Alexandria, Virginia. Prosecutors want him jailed for 27 to 33 years. And once again there's a question whether the jury found Jefferson guilty of any FCPA-related offense. This time the answer could influence how long he'll spend behind bars. Here's the issue.

The former nine-term congressman was convicted in August on 11 of 16 corruption charges. He was acquitted on Count 11 of the indictment -- the only substantive FCPA charge he faced. But the jury convicted him on Count 1. It alleged three separate illegal conspiracies -- to solicit bribes, deprive citizens of honest services, and violate the FCPA. The jury's verdict form did not require it to specify which of the three illegal conspiracies the panel believed he engaged in. So Jefferson's conviction on Count 1 may or may not have included a finding that he conspired to violate the FCPA.

Since the verdict, many have wondered whether Jefferson was really convicted of an FCPA-related offense. Could he have been acquitted of the substantive charge and convicted on the conspiracy? Our view (here) was yes, the jury could have convicted Jefferson of conspiracy to violate the FCPA. The evidence supported it. And a guilty verdict recorded for Count 1 meant all three alleged conspiracies could be presumed proven, including the FCPA-related charge.

The government has now said the same thing in its sentencing memo: "The verdict form completed by the jury on August 5, 2009 did not require the jury to delineate which, if not all, of the objects charged in the conspiracy in Count 1 were found to have been proved, only that at least one of the objects was proven by the government beyond a reasonable doubt." Jefferson's lawyers argue that based on the facts, the jury couldn't have convicted him of the FCPA conspiracy once it acquitted him of the substantive FCPA offense.

Will Judge Ellis use the FCPA-related conspiracy element to calculate Jefferson's sentence? We hope not. Trying to read the jury's mind when imposing a sentence on any defendant is wrong. In Jefferson's case, not requiring the jury to declare which of the three conspiracy objects it voted to convict on was an error. Fundamental to a defendant's rights at trial and for appeal is jury accountability. That accountability was lacking as to Count 1. So the count should be tossed as to all three conspiracies it alleged, and none of them should be included in the sentencing computation.

William Jefferson is scheduled to be sentenced on November 13, 2009 at 9:00 am in the U.S. District Court for the Easter District of Virginia (Alexandria Division) by Judge T.S. Ellis, III.

Download a copy of the government's sentencing memorandum in U.S. v. Jefferson dated November 6, 2009 here.

Download a copy of William Jefferson's memorandum in aid of sentencing dated November 9, 2009 here.

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The D & O Diary reports the resolution of an FCPA-related civil suit on November 6, 2009 against Nature’s Sunshine Products. The company agreed to pay $6 million. The plaintiffs in the securities lawsuit had alleged the company lacked appropriate internal controls and that its books and records did not reflect the foreign transactions.

In late July, the SEC filed a settled enforcement action against Nature's Sunshine Products Inc. (NSP), its CEO Douglas Faggioli and its former CFO Craig D. Huff. The charges involved bribes by NSP's Brazilian subsidiary to customs officials and false accounting to conceal the payments. The SEC's complaint alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions of the securities laws in connection with the Brazilian bribes. See our post here.
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Sunday
Nov082009

A Tweet Too Far?

Last week, the U.S. ambassador to Kenya, Michael Ranneberger (left), made a very strange announcement. He confirmed on his Twitter page that the U.S. government had denied a visa to Kenya's attorney general Amos Wako. What's strange is that as far as we know, it's the first time an American official has ever revealed a visa determination under Presidential Proclamation 7750. That's the executive order giving the State Department the power to exclude foreign kleptocrats, their families and friends. Before now, those decisions had always been made -- and kept -- in complete secrecy.

In October, U.S. Assistant Secretary of State Johnnie Carson said the U.S. had denied a visa to an unnamed senior Kenyan official who had been "obstructive in the fight against corruption." After Carson's announcement, the Kenyan press had been speculating who the unnamed senior official could be. But it was Ambassador Ranneberger who confirmed it. He didn't mention the attorney general by name but sent Twitter readers to a story in the Kenyan press that did.

We talked with a couple of State Department officials earlier this year about Proclamation 7750 (see our post here). Why, we asked, were those banned from American soil never publicly identified? "The State Department," they told us, "can't publicly release the names of those denied entry under Proclamation 7750 -- U.S. law generally prohibits disclosure of visa-related information." And consistent with that, we've never seen confirmation from the State Department or any American government source of a Proclamation 7750 visa action. Until Ambassador Ranneberger's tweet.

Attorney General Wako, meanwhile, sprang to his own defense and threatened to sue someone in the United States for defamation (a good reason to keep Proclamation 7750 determinations secret).

Kenya's Standard said Wako, who has served as attorney general since 1991, "confirmed he received a letter from the U.S. banning him from the country." The paper's account also referred directly to Proclamation 7750, which the foreign press rarely mentions and the U.S. press completely ignores. The Standard said:

In a seven-page statement that took a half an hour to read, Wako prosecuted his case, defending his record as a "reformist" and attacking the revocation of his visa as serving American interests. . . . "Let me state that Sitswila Amos Wako has not been engaged in corrupt actions which have adversely affected the national interests of the United States of America or at all," he said, in reference to Proclamation 7750 of January 12, 2004, which a U.S. official in Nairobi confirmed had been used to lock him out their country.
Wako claimed he's "totally indifferent to the revocation of the visa" since "I have no desire to visit the U.S." But, he said, the grounds given for the visa determination are defamatory and he "intends to seek legal advice with a view of instituting legal proceedings in the U.S."

We naturally have a few questions: When does United States law allow disclosure of the State Department's visa determinations under Proclamation 7750? On what grounds was it allowed in Attorney General Wako's case? Will there be more announcements of actions taken under Proclamation 7750?

And finally: Did the ambassador simply go a tweet too far?
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Thursday
Nov052009

Gotham City East And West

In China's western municipality of Chongqing, a special deployment of 25,000 police officers was called in to fight organized crime. Chongqing city proper has around five million people but the region-- called the "municipality" -- has closer to 32 million (California's population is about 36 million). Last month, police said they had so far detained 4,893 suspected gangsters and formally arrested about 1,500. Among the 30 or so municipal officials being held are a former deputy police commissioner and the head of the justice bureau, Wen Qiang.

The China Daily (which usually reflects the government's views) referred to Wen as Chongqing's criminal godfather. The paper said he amassed at least $15 million through bribes for providing "a protective umbrella" that shielded gangsters from the authorities. Reports say at least a fifth of the local police officers have been fired and the rest have been reassigned to break up Wen's web of patronage.

Like Batman's worst nightmare, Chongqing's police corruption unleashed a reign of terror. The U.K. Telegraph quoted a local resident as saying: "People who do not live here cannot imagine what goes on. The gangs were shooting people down in the city center in broad daylight or hacking them to death. Their victims could never report the cases to the police for fear of revenge."

Of the first group of gangsters to go on trial, six have been sentenced to death and 25 others were given sentences ranging from one to 18 years in prison.

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Congratulations to all New York Yankees fans. A great team proved its worth after a drought, if you can call it that, of nine years. The real drought, of course, was the 86 years when the Boston Red Sox didn't win a world series. Their dry spell stretched from 1918 to 2004. During that time, the Yankees won the series 26 times. We grew up in New England during some of the years between 1918 and 2004. While the Yankees' fans were having all the fun, Boston's were given the chance to learn faithfulness, patience, and humility -- good things to know. But we're ready for a bit more fun. Maybe next year.

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Our thanks to the correspondent who let us know this week that Bribery Abroad will be the basis for a seminar next semester at their law school. That news gives us a slim but adequate excuse to post the link to our favorite YouTube video here.
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Wednesday
Nov042009

The FCPA's Imperialist Myth

Elizabeth Spahn (left), a professor at the New England School of Law, stopped by this week. She left a comment about Andy Spalding's latest post. In it, she cited her recent article that asks: Why is there so little legal scholarship regarding international bribery? Why aren't law professors training their students on the issue? Why, she asks, don’t legal educators want to talk about international anti-corruption initiatives?

The answer, she says, is tied up with false notions in the West about legal imperialism. Law professors (she's been one since 1978) shy away from teaching about bribery abroad "because of a well intentioned discomfort with the idea of imposing Western moral values on cultures and systems vastly different from our own." In 72 pages of clear and exciting prose, she explores -- and debunks -- the idea that the Foreign Corrupt Practices Act and other anti-bribery initiatives are bad for anyone except those who are caught and punished.

Prof Spahn was a Fulbright professor at Peking University Law School and the Beijing Foreign Studies University during 1999–2000, lecturing on American constitutional law and employment law. In 2005, she returned to China as a Fulbright senior specialist in Chongqing. The corruption she saw in Asia left her in no doubt about what's wrong and what has to be done:

A global “culture of corruption” has indeed arisen. . . . It directly affects the safety of ordinary consumers throughout the world who depend on imports from a wide spectrum of MNCs doing business in countries with high levels of corruption and weak legal regimes. It directly undermines environmental reform technology and clean up efforts globally. It frustrates efforts to achieve very basic human rights. Bribery skews purchasing decisions making a mockery of any hope of a rational market. If the economists are to be believed, bribery significantly exacerbates the growing global gap between the unimaginably rich and the desperately poor.
Prof Spahn has the courage to put her heart into her scholarship. Having real people in mind elevates her words and her message. Listen to this:
My own attention was directed to anti-corruption reform at the very beginning of my field work in Asia. Before entering China to teach law, I decided that I should learn more about rice in order to better understand the root of Asian culture. I spent six weeks in Bali, Indonesia (an idyllic setting). One week I spent in a village without running water or electricity, vainly attempting to learn how to plant rice. At the inevitable banquet, on the night before I, as a Western “imperialist human rights feminist rule of law” advocate, was nervously to enter Communist China, I chatted with the patriarch of the Balinese family, a gracious elderly farmer who was blind due to cataracts he knew could be cured by Western surgery if only the money were available.

“What one thing would help his family most?” I asked. I anticipated several potential answers: running water, better medical access, perhaps electricity run into the village (I had already provided the all-important new soccer ball for the village kids as my thank you gift). His answer was that if only the corruption could be eliminated or even just reduced, his family, his village, could manage the rest on their own. This was the beginning of my true education about Asia.

Eighteen months later, at the end of my long stay in China, I was no longer nervous. (The saying is that you visit China for two weeks, you write an article; you visit for six months and write a book. After a year you can no longer speak at all. After a year and a half immersion, my connection to Chinese culture was firm, and I was pretty much speechless.)

Walking around elite Peking University’s beautiful Nameless Lake for the last time with one of my very favorite Chinese students of all time, who is perhaps the last of the genuine true believers in Marxism and the Party, I asked what topic I could work on that might really help Chinese people. “Corruption,” he said.

The simple Balinese rice farmer and the elite Peking University Party Member agreed. And so this human rights /rule of law advocate turned her attention to corruption. Seven years of hard study later, I must say they were both correct. I am grateful to both of them for my education and happy to have my speech back.

Elizabeth Spahn's article, "International Bribery: The Moral Imperialism Critiques," 18 Minn. J. Int'l L. 155 (2009), can be downloaded here.
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Tuesday
Nov032009

Professor Podgor Pops The Question

With so much to lose by going to trial, how many organizations and people will plead guilty to white collar crimes they didn't commit? Ellen Podgor (left) of Stetson University College of Law and the White Collar Crime Prof Blog asks that question in her latest essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game." She looks at three defendants who claimed their innocence at trial but were convicted -- Arthur Andersen LLP, Jamie Olis, and Jeffrey Skilling. And three who pleaded guilty and avoided trials -- KPMG, Gene Foster, and Andrew Fastow. The first group, as everyone knows, got clobbered. The second group, Prof Podgor says with considerable understatement, enjoyed reduced sentences and finite results.

"The pronounced gap between those risking trial and those securing pleas is what raises concerns here," she says. "Some refer to this as a 'trial penalty' while others value the cooperation and support the vastly reduced sentences."

In Olis's case, for example, she points out that the 'trial penalty' paid by the former Dynegy tax executive convicted of accounting fraud resulted in "an initial sentence that was 288 times greater than a non-risk taker and an eventual sentence that was approximately seventy-two times greater than a co-worker who decided not to take the risk of going to trial. [Olis's] boss, who also did not risk trial, received a sentence less than one quarter of what Olis received."

No wonder guilt or innocence doesn't always figure in decisions to fight white collar charges in court. For individuals, the trial penalty can mean sitting in jail for decades (or as long as they survive); for organizations it can mean a corporate death sentence. Plea bargaining, though, removes the risks and limits the damage.

When the amount and quality of law enforcement are just right, when the guilty are usually punished and the innocent usually go free, we call it the "rule of law." Most of us don't think much about the rule of law. We enjoy its benefits and take it for granted, forgetting that it's a rare blessing -- and very fragile. So when the rule of law is out of balance and someone points that out, we should be grateful. Ellen Podgor is someone we're grateful for.

Her essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game," can be found on SSRN here. It'll be published soon in the Chicago-Kent Law Review.
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