February 13, 2009
It’s difficult to imagine having to write checks for the sort of FCPA penalties we’ve seen recently: $800 million for Siemens in December and, this week, $579 million for Halliburton and KBR. But where does all that money go? We asked Billy Jacobson, a veteran of the DoJ’s Fraud Section and now a partner with Fulbright & Jaworski, and he assures us that the money isn’t keeping the DoJ in coffee and doughnuts.
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"Recent news of what my kids would call the “gi-normous” fines agreed to by Siemens and Halliburton in FCPA cases has had people asking where all that money goes. Some assume it goes to fund further FCPA prosecutions; some believe the money is restituted to foreign governments; and still others think that by now the Fraud Section’s offices must be gilded with gold. (Anyone who has visited the section’s offices on 14th Street in Washington, D.C. knows that not one cent from fines has been used to improve the facilities).
In reality, all of the fine money collected by the DOJ and the disgorgement and penalties assessed by the SEC go right to the U.S. Treasury. There is no mechanism in place for the Fraud Section to fund itself through its fines. Such a scheme would likely require Congressional action and would be the subject of no small amount of controversy.
It is possible for the DOJ to send money to identifiable victims through the use of the restitution statute. It appears, however, the DOJ has not received a restitution order in an FCPA case since 1990. See U.S. v. F.G. Mason Engineering and Francis G. Mason, Case No. B-90-29 (D. Conn. 1990). The only other restitution order in an FCPA case was way back in 1979. See U.S. v. Kenny International Corp., Cr. No. 79-372 (D.D.C. 1979). The use of restitution in these cases may have fallen into disfavor due to a lack of trust in how such money might be used if returned to the victim which, in most cases, would be the same government which was corrupted in the first place.
In addition to fines and restitution, the DOJ may seek forfeiture of ill-gotten gains. While forfeiture is rare in FCPA cases, it is being used to a limited extent in relation to the Siemens case. On January 8, 2009, the DOJ filed a forfeiture action to recover nearly $3 million held in three Singaporean bank accounts, which are alleged to be the proceeds of a conspiracy to pay various Bangladeshi government officials and their family members in connection with certain public work projects. Specifically, the forfeiture complaint alleges that Siemens Bangladesh Limited and China Harbor Engineering Company made payments to the son of the former Prime Minister of Bangladesh, Arafat Rahman (a.k.a. “Koko”), and others in exchange for government contracts connected to a digital cellular mobile phone network and a mooring containment terminal at the Chittagong port. According to the complaint, some of the payments intended for Koko were transferred directly to the account held by Zasz Trading and Consulting Pte Ltd. and other payments were transferred to Koko via bank accounts held by two business consultants engaged by Siemens Bangladesh Limited, Zulfikar Ali and Fazel Salim. Both of these business consultants were interviewed by U.S. law enforcement officials and both admitted that bribe payments were made to Koko.
It is also worth noting that the DOJ has discussed the idea of setting up a system by which it would be permitted to direct fines, or some portion thereof, to various anti-corruption efforts around the world. Some candidates for funding might include the OECD Working Group on Bribery, the Interpol Anti-Corruption Academy or other like-minded institutions. Nothing has happened as of yet in this regard, but it would certainly make a great deal of sense. The DOJ is constantly (and correctly) touting its desire to level the playing field for U.S. businesses and directing some of this money toward institutions aimed at encouraging other countries to bring their own foreign bribery prosecutions could be very useful indeed."