The FCPA and ‘Islands of Honesty’

In one of the most stunning pieces read by The Man From FCPA in some time, Amanda Taub, in the New York Times, in an article entitled, “How ‘Islands of Honesty’ Can Crush Corruption” she began with the simple question “Why are so many governments around the world collapsing amid corruption scandals?” She cited to the most current example of South Korea but also discussed the fall of the Dilma Rousseff administration in Brazil, the fall of Guatemala’s government when both the President and Vice President were accused of corruption, the fall of former President Kirchner in Argentina and the possible fall of President Zuma in South Africa amid allegations he misused public funds.

She reports on the research of Professor Raymond Fisman, from Boston University, who studies systemic corruption, “which occurs when the corruption is so widespread and severe that it becomes an integral part of a country’s economic and political life. Once systemic corruption takes hold, he explained, it can quickly infect an entire system, encouraging or even forcing bad behavior — even by those who would, in another context, remain honest.”

It is this context anti-corruption laws such as the FCPA, Brazilian Clean Companies Act and the new French law Sapin II are so critical. These laws cannot reach the bribe receiver but they can give the bribe-payor pause by instituting criminal sanctions for those who pay bribes. That is why their maintenance and strengthening, rather than watering-down, is so critical. For it is large part the payments from companies which wish to do business in these countries that is the driver of the money which fuels the corruption.

By shutting off the flow of money to a country’s leaders, a country can begin to achieve what Professor Fisman calls the “equilibrium” where the legal system can move toward prosecuting those who have enriched themselves off the public trust. Giving these institutions time and space to become “islands of honesty” to achieve such goals is an important part of anti-corruption laws such as the FCPA.