Bribery and Corruption 2013

Another IMF Chief bites the Dust

Grete Chan, 28 May 2013

Christine Lagarde, IMF Chief (Photo Credit: BBC)

Another blow to France and the International Monetary Fund (IMF) as yet another IMF chief is thrown into the spotlight for alleged misconduct which steers Christine Lagarde onto the path of her predecessor Dominique Strauss-Kahn, who was publicly disgraced over a scandal that cost him his career as chief of IMF and excluded him from the presidential race.

The Bernard Tapie Case

Just a month into her job, Christine Lagarde faced allegations of her handling of a dispute which resulted in a €285m ($516m) payout to Bernard Tapie, a French tycoon well associated with former French president, Nicholas Sarkozy. Tapie is also a convicted football match fixer and tax dodger.

The case stretched back to 1993 when Credit Lyonnais bank was handling the sale of Adidas, in which Tapie was a majority stakeholder. Tapie accused the bank of undervaluing the sale of Adidas and sought damages for his loss for the real market value. The case dragged on until 2007 when Tapie switches his socialist support to Nicholas Sarkozy, where Lagarde was the finance minister. Lagarde allegedly intervened the Tapie case by requesting a binding arbitration, leading to a payout in favor of Tapie.

In 2011, a public prosecutor ordered investigations into Lagarde’s alleged misconduct over the Tapie case. The court found no personal benefit to Lagarde after a raid of her home, however, questioned Lagarde over the alleged misuse of public funds or corruption as Tapie received a larger payout than he would if he went through the court.

Bernard Tapie, former Tycoon (Photo Credit: AFP/Bouteille à l’Amer Blog)

Sudden drop of charges

Fortunately for the new IMF chief, investigations were dropped providing much relief as this would avoid pressures to resign her post. However, the dropped investigation does suspiciously echo political shadowing which may have pulled the strings to prevent yet another public embarrassment of a prominent French figure following Strauss-Kahn.

While Lagarde is off the hook, she is summoned as key witness to the fresh investigation into the arbitration of Tapie’s case. Her performance as witness will reveal where her loyalty lies.

A muddy trail of corruption allegations: Christian Laurent

Looking back, this was not the first case of graft allegations associated with her time spent as finance minister under Nicholas Sarkozy. During the investigation of the Tapie case, another inquiry emerged as Christian Laurent, who ran Itea, an insurance company which collapsed in 2009, attempted to file for compensation for his loss against Lagarde. These charges were sanctioned by a legal body which deals with complaints against former ministers.

Laurent was an entrepreneur that created the Itea group of companies which provided life insurance and various capital redemption operations with himself as the sole shareholder. Laurent was ahead of his game where he found that he could profit from selling insurance contracts at municipal offices of the French banking giant, Crédit Agricole, where he divided his profits with willing participants.

These offices originally were pushed to sell insurance underwritten by Caisse Nationale de Prévoyance, an insurance company curiously 40% controlled by the Deposits and Consignments Fund, held by the French government which includes the civil servants’ pensions. Before long, this collusion scheme paid off, with Laurent obtaining 30% of Credit Agricole’s market.

The government swiftly ordered a crackdown on Laurent’s business, appointing a controller who subsequently ordered the wind up of Laurent’s businesses. The crackdown was so suspicious, that Laurent sought compensation for his losses, claimed at €400 million.

Nicholas Sarkozy, former President of France (Photo Credit: Christophe Ena/AP)

This is where Xavier Musca, a financial expert and former Secretary-General of the Sarkozy office, recommended to Lagarde to grant Maurice Nussenbaum, another expert, France’s top civilian award the Legion d’Honneur, so that he would act favorly towards the government in the Laurent trade dispute.

Nussenbaum subsequently produced a report assessing the loss of Christian Laurent at zero, denying Laurent any hope for his dissolved businesses. The whole case is smeared with conspiracy considering the government’s interest in the insurance market, which was seemingly in danger of competition with Laurent’s former businesses and the alleged actions of Lagarde during the Sarkozy administration.

Lagarde as role model

With the Lagarde’s list stirring questions of morality and ethics within the Greek parliament, the graft allegations against Lagarde, particularly under the Sarkozy administration have not earned her much points for the best role model in the anti-corruption arena. Whether it is a coincidence that it was all committed and alleged under the Sarkozy begs the opening of a can of worms.

In the meantime, Lagarde will have to fight harder to maintain her image of the good citizen.


Free Online Anti-Bribery Research Guide

Grete Chan, 4 April 2013

Anti-Corruption and Bribery

Great news for the anti-bribery savvy interest groups. The University of Richmond School of Law has launched its free Online Anti-Bribery Research Guide for the use of practitioners and scholars. Many thanks to the fantastic FCPA Blog who provided this information. Professor Andy Spalding summarized that the guide contains several tabs, under which are organized links to a wide variety of online sources:

  • Under the FCPA tab, you’ll find numerous online treatises and guides, case indexes, legislative history, the statute and DOJ guidance, and more.
  • The tabs for the UK Bribery Act, OECD Convention, and UNCAC contain similar collections of law, interpretive guidance, legislative history, law firm memoranda, and select scholarship.
  • A tab linking to the various corruption indices used to gauge both the supply and demand of bribes.
  • A tab for the Anti-Bribery Scholarship Database, a collection of almost 100 scholarly articles on anti-bribery.

You can access the guide here.

Source: FCPA Blog


Russia combats Corruption, reaching farther than the FCPA and Bribery Act

Grete Chan, 9 March 2013

kremlin and st. basil's (Source:

Just as China has been fine-tuning their anti-corruption tactics and guidance, Russia has also released their own rules against bribery and corruption, which went into effect January 1, 2013. The rule is an addition to the wider law known as “The Requirement of Organizations to Take Measures to Prevent Corruption”, and the relevant new sections form under Article 13.3.

The FCPA Blog reported that it is now definite that a compliance program is required, that involves the designation of departments or officers to oversee this matter; mechanisms that coordinates with authorities; code of ethics and ethical business conduct; and the identification of conflicts of interest and prevention of falsification of documents.

While Russia does not have criminal liability, they do provide for fines up to 100 times the bribe amount. The FCPA Blog author also furthers that there is nothing in the rules that limits the scope to Russian organizations, potentially outreaching the scope in the US FCPA and the UK Bribery Act.

It would be interesting to see the first prosecution under this law for a non-Russian organization, this would provide precedent and international scrutiny. Until then, Corruption is definitely the word of the year.

Source: FCPA Blog


Blackmail as defence from FCPA proceedings

Grete Chan, 15 January 2013

A relief for many as “forced bribes” are indeed recognized in the recent US Department of Justice (DoJ) and Securities Exchange Commission (SEC) Guidance on the Foreign Corruption Practices Act (FCPA) (note page 27). The FCPA Blog pointed out that the FCPA certainly considers cases of bribes in situations of duress or extortion, however, “economic coercion” such as threats of not issuing certain licenses without bribe does not serve any grounds against the decision in providing a bribe. In the case of United States v. Kozeny, it differentiated economic coercion from duress and extortion,

…a bribe payor who claims payment was demanded as a price for gaining market entry or obtaining a contract “cannot argue that he lacked the intent to bribe the official because he made the ‘conscious decision’ to pay the official”

To use duress or coercion as defense in any FCPA case, the guidance provided in the footnotes the following proofs,

In order to establish duress or coercion, a defendant must demonstrate that the defendant was under unlawful, present, immediate, and impending threat of death or serious bodily injury; that the defendant did not negligently or recklessly create a situation where he would be forced to engage in criminal conduct (e.g., had been making payments as part of an ongoing bribery scheme); that the defendant had no reasonable legal alternative to violating the law; and that there was a direct causal relationship between the criminal action and the avoidance of the threatened harm.

In the Securities and Exchange Commission v. NATCO Group Inc. case, it was recognized that extortion was exerted as blackmail money was required in order to protect the welfare of NATCO’s employees in Kazahkhstan. NATCO however, did not oversee that this was accurately entered into their accounting books as they attempted to camouflage the payments, therefore resulted in civil penalties regardless of mens reas (intent), as the concept does not apply to civil proceedings.

Some Anecdotes working abroad

While many people cannot imagine how anyone who have the right mind would be in the situation to bribe other than for profit and greed, there are certainly situations where expatriates have no choice. I had a stint at the Australian Trading Commission, and those stories rolled, not to mention, bribery due to unfortunate choices of love.

There was one case where an Australian businessman was invited to meet with potential partners in China. He flew over expecting to meet with them as ordinary businessmen, only to be shuffled into a small motel room, with the door locked. His “potential partners” started violently abusing him, requesting for “gifts” such as Rolex watches, as it was the way to do business. What was told to be a scuffle broken out, the Australian businessman apparently escaped through the motel window and reported the occurrence to the Australian embassy.

Many businesses that run high-risk operations such as the petroleum industry are also highly susceptible to extortion in the foreign country. When I did temp work at one such company who had operations in Angola, I helped draft an Operations Manual that also included sections to restrict employees from purchasing diamonds from locals, as it is illegal and usually the sellers were undercover Angolan police. The company also had difficulties with obtaining proper business visas, and were tempted by local agencies for the “easy way out”. I left the company at the time when they were considering paying off the agencies for their help in obtaining the appropriate visas.

While it is a relief that the FCPA covers situations where an individual or company must make the decision in light of physical harm to themselves or its employees, the question of “this is how they do business” is still as grey as rain clouds. The FCPA does intend to police the world through US and US-affiliated companies to promote fair practices, but what if the world does not see it in the same light?


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