By Ann Hollingshead
In the murky world of international corruption, it’s frequently unclear who is paying who and how much they’re paying.
It’s even harder to figure out how much profit a businessman or a company may have derived from greasing the palms of a corrupt government official.
Despite this lack of clarity, ill-gotten gains are one of the primary metrics governments use to calculate penalties for bribe-payers — the thought being, proceeds can only be confiscated if they are calculated accurately.
A study released Monday by the Organisation for Economic Co-operation and Development and the World Bank/UNODC Stolen Asset Recovery Initiative (the “StAR initiative”) aims to make it easier for governments to recover the proceeds of corruption by laying out a road-map for calculating the economic effect of a bribe.
The study, titled “Identification and Quantification of the Proceeds of Bribery”, analyzes the existing legal framework in a handful of countries for calculating the gains made by companies that pay bribes. It draws on cases in Indonesia, South Africa, and the U.S., among others, in an effort to highlight the most accurate methods for calculating gross and net profits, as well as what can be legally recovered.
“Countries’ ability to seize and confiscate the gains from bribery is integral to the international fight against bribery and corruption, ” Mark Pieth, the chair of the OECD Working Group on Bribery, said in a news release. “It’s a requirement of all countries that join the OECD Anti-Bribery Convention and the UN Convention against Corruption.”
According to the report, only a small number of courts have specific methods to confiscate or recover ill-gotten gains. Jean Pesme, a coordinator for the StAR initiative, said the study lays out in practical terms methods that can be followed by corruption hunters without the necessary tools.
For example, in the U.S. prosecutors rely on the Federal Sentencing Guidelines created in 1984 to provide a uniform sentencing policy for individuals and corporations that violate federal law. They provide judges and prosecutors with a formula to analyze the level of a company’s crime, criminal history, culpability and determine a minimum and maximum recommended fine. In 2005, the Supreme Court ruled in the United States vs. Booker that the guidelines are advisory only.
The U.S. Department of Justice frequently uses the guidelines in its enforcement of the country’s primary foreign bribery law, the Foreign Corrupt Practices Act. Under the guidelines, prosecutors must consider “the pecuniary gain” a company derived from paying bribes when calculating a base fine level.
But, while the process has an air of methodology, some legal experts say prosecutors have wide discretion in calculating the gain. They arrive at a sum after analyzing certain contracts from certain time periods. Fine calculations are ultimately the product of negotiations — more of an art than a science.
Still some sort of uniform system is better than none, the report concludes.
“While this diversity of legal frameworks and the complexities of legal and financial concepts may at first blush make quantification sound daunting, it should not be viewed as an obstacle for jurisdictions which have no significant experience in quantifying proceeds of active bribery and wish to develop their practices.”
