Issue link: https://digital.shearman.com/i/1389983
18 THE BIDEN ADMINISTRATION: ANTI-CORRUPTION COMMITMENTS AND INITIAL DEVELOPMENTS On June 3, 2021, President Biden issued a Memorandum on Establishing the Fight Against Corruption as a Core United States National Interest. In the memorandum, President Biden emphasized the costs of corruption, stating that corruption reduces global gross domestic product by an estimated two to five percent. He further stated that corruption poses a threat to national security, effective governance, economic equity and access to services, global development efforts, and democracy. President Biden committed his administration to promoting good governance and transparency in global financial systems as well as preventing and combating corruption. The memorandum orders certain agencies and departments, such as the Department of State, Department of the Treasury, and Department of Justice, among others, to conduct a review and issue recommendations on how to combat global corruption within 200 days from the issuance of the memorandum, at which point President Biden will take further action. The memorandum makes clear that the administration has made global corruption a priority in its foreign policy and wants agencies and departments to make improving anti-corruption measures a priority as well. One department that has already begun taking steps to strengthen its global corruption enforcement is the DOJ. In March 2021, it was reported that the DOJ's foreign bribery unit, the part of the fraud section responsible for enforcing violations of the Foreign Corruption Practice Act, now has thirty-nine prosecutors. The increase in personnel may signify that the unit is preparing for more aggressive enforcement under the Biden administration, which aligns with President Biden's recent commitment to combat global corruption. The unit also hired a new compliance specialist with extensive private sector and corporate monitoring experience, indicating that corporate compliance may be another area of focus for the DOJ under the new administration. The new compliance specialist joined the fraud section's strategy, policy, and training unit, which advises on compliance considerations. RECORD FCPA RELATED REWARD ISSUED UNDER THE SEC WHISTELBLOWER PROGRAM On May 19, 2021, an unnamed whistleblower was awarded $28 million by the Securities and Exchange Commission and the Department of Justice for their service in a 2018 investigation against Panasonic Avionics Corporation, the Delaware subsidiary of Panasonic Corporation, which resulted in a $280 million settlement. In that case Panasonic Avionics Corporation allegedly made improper payments to an executive of a foreign state-owned airline in exchange for business. Under the Securities Exchange Act of 1934, where a whistleblower's information leads to monetary sanctions of over $1 million, the award to the whistleblower can range from 10% to 30% of the money secured from the enforcement action. The whistleblower's assistance in another agency's related action creates eligibility for an additional award in that related action under certain Exchange Act Rules. Recent whistleblower awards have been frequent, with the SEC awarding approximately $339 million to fifty-three individuals since the start of the 2021 fiscal year. The new Chair of the SEC, Gary Gensler, has affirmed strong support for the whistleblower program, indicating this trend will likely continue. DOJ OFFERS INCONSISTENT READING OF FOREIGN GOVERNMENT ROLE IN BRIBERY SCHEMES The success of claimants in the Och-Ziff matter to obtain restitution as part of the criminal settlement over the government's objections has emboldened other entities to similarly seek restitution, albeit without any success. In large part this was due to the fact that the entities themselves were viewed by the government—and ultimately by the courts—as having been themselves complicit in the corruption. The government's complicity argument creates some tension with the agency theory that underlying corruption laws, i.e., that a person may not provide a benefit to principal's agent in connection with that agent's duties without the consent of the principal. In other words, a principal is not harmed or defrauded if it permits a third party to provide a benefit to its agent, presumably because it is able to monitor the benefit and ensure the agent remains loyal to the principal in the exercise of its duties. Here, however, after first convicting individuals for corrupting the officials of foreign state entities, the government then turns around in the restitution stage to argue that the officials' employer (or their principal in agency parlance) was complicit in the corruption and therefore consented to it. We have seen a few instances of SOEs alleging victim status to seek restitution of late. In a criminal proceeding brought against Frank Chatburn Ripalda, a co-conspirator in an Ecuadorian bribery scheme, Petroecuador, Ecuador's national oil company, asked the federal district court to recover millions of dollars from Ripalda. Ripalda pleaded guilty in the U.S. District Court for the Southern District of Florida in October to a count of conspiracy to commit money laundering for his role in the bribery scheme from 2011 to 2016, in which he facilitated the payment of bribes to Ecuadorian officials and hid the payments through Swiss bank accounts and offshore shell companies. PetroEcuador moved for restitution in the amount of up to $5.8 million, depending on the calculation of bribery damages, as a victim of Ripalda's conduct. PetroEcuador claimed that it was the principal corporate victim of the bribery scheme and that it was unaware of the scheme until the release of the 2016 Panama papers.