What is the quickest way to put an end to a bribery prosecution? By paying a bribe, of course.
Although it may seem like something out of a satire, this is precisely what happened in Germany this week, when a Munich Court agreed to a staggering $100 million settlement to discontinue a prosecution against Formula One owner Bernie Ecclestone over the alleged bribery of a banker.
We will never know whether or not Mr. Ecclestone was guilty or innocent of the charge, but the incident has done much to highlight some of the fundamental conflicts existing in current anti-corruption enforcement worldwide, where the accused are almost always presumed guilty, and the defense counsel are getting used to settling instead of fighting.
Like many laws born out of politics, anti-corruption has become alarmingly mired in ambiguity, abuse, and misapplication.
In the United Kingdom, the introduction of the Bribery Act, in conjunction with the U.S. Foreign Corrupt Practices Act (FCPA), means that now essentially the globe is covered with a bundle of vague principles and unfettered prosecutorial discretions that leaves multinational businesses dangerously exposed.
Not only are the laws vague, but they are accompanied by incredible powers on behalf of prosecutors, who can issue orders to freeze assets, cripple business operations, harass employees, and destroy reputations, all before you’ve even had a chance to defend yourself in court.
This ambiguity is heightened by the outsourcing of prosecutorial responsibilities to white collar criminal “defense” lawyers, who have embraced emerging regimes of “self reporting,” placing the onus on corporate decisions to avoid the stigma of criminal charges, requiring them to inform on themselves or their own senior employees, often in the absence of any substance.
But we can now see that a central pillar of the system of administration of justice – namely legal professional privilege – is becoming seen as a problem to be solved, rather than a fundamental right and virtue of that system.
Ben Morgan, joint head of bribery and corruption at the UK’s Serious Fraud Office (SFO), recently commented that the agency doesn’t even believe lawyers are necessary for companies to broker deals. “I know this will be unpopular, but why not get a non-lawyer to conduct those first interviews and avoid from the start arguments about privilege, and worries about collateral waiver,” Morgan told a shocked audience on July 1, 2014.
Mr. Morgan is echoing a series of previous statements by senior SFO officials decrying the constraints of the law of privilege as recognised in the United Kingdom, which they see as an inconvenience rather than a right. These attacks on privilege fundamentally impact both the right to counsel and the right to defense, and given the complexity and ambiguity of corruption and bribery charges, the SFO’s line of thinking creates an environment in which a proper defense is somehow seen as a form of obstruction.
Similar to the settlement option in the Ecclestone case in Germany, part of the problem is the proliferation of Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs), which entail the company surrendering its rights to defense and admitting to a series of accusations that are not subjected to exhaustive judicial scrutiny.
As Mike Koehler cites in his important new book The Foreign Corrupt Practices Act in a New Era, the situation has arrived to the point that these deals are even offered to companies before any alleged illegal activity has even been identified, much less proven:
“We have heard from colleagues in the defense bar of prosecutors who, in their haste to compel the company’s cooperation in pursuit of individuals, have pressed the entity to enter into an NPA or DPA before any particular’s guilt could definitively be established. In such cases, the company is essentially forced to accept the filing of criminal charges ( and all the related consequences, including negative publicity); to waive a host of its defenses; to admit to certain facts; to undertake costly remedial measure; and perhaps even to pay serious ‘criminal’ penalties all before the elements of the claim(s) against it can be proven beyond a reasonable doubt.”
The defense lawyers don’t bother to fight it. Many big law firms now feature celebrity prosecutors who formerly worked in enforcement, so they see their new job as a continuation of their old job, specializing in negotiating NDAs and DPAs.
In several cases that we are familiar with, the self-reporting doctrine has ended up causing much more damage than benefit. Particularly with respect to non-public companies, a better strategy would be to fight against any untrue or exaggerated accusation, uphold basic rights to defense, take internal measures to address any issues, but above all else, refuse to be bullied into a position of confessing to actions that the company has not committed or destroying the careers and personal lives of a handful of executives to serve as the sacrifice to save the company.
We do fear that if this trend of prosecutorial hubris is not checked, we may face a very dangerous future. The potential consequences of these laws, which include lengthy periods of incarceration, could morph beyond big business and impact other areas of society, where the accused are always guilty, where rights to defense do not exist, and dirty deals replace due process.
The philosophy of self reporting, impacting as it does the lives and reputations of executives in major corporations, requires a dramatic rethink. We must carefully examine the incentives driving prosecutors and how they choose their targets, review sentencing guidelines in both the United States and United Kingdom, and reinforce the core values of the presumption of innocence and due process in order to effectively address genuine issues of corruption practices abroad while sparing compliant businesses from the burden of unnecessary harassment.
Robert Amsterdam is the founding partner of international law firm Amsterdam & Partners LLP.
