The U.S. Justice Department unsealed an indictment Wednesday that charges 47 individuals, including FIFA officials, with bribery, racketeering, money laundering, fraud and other related crimes. While many of the details are still unclear, it appears that many of these alleged crimes were neither committed in the United States nor by U.S. citizens:
“The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” said Attorney General Lynch. “It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks. And it has profoundly harmed a multitude of victims, from the youth leagues and developing countries that should benefit from the revenue generated by the commercial rights these organizations hold, to the fans at home and throughout the world whose support for the game makes those rights valuable. Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice – and we look forward to continuing to work with other countries in this effort.”
Why is it that the United States can prosecute non-citizens who work for an organization located in Switzerland and who are accused of taking bribes abroad? Philip Bump explains that there are U.S. statutes that that can target foreign citizens for crimes committed abroad as long as these foreign citizens have some ties to the United States. An especially important legal instrument is the 1977 Foreign Corrupt Practices Act (FCPA). The Justice Department (for criminal investigations) and the Securities and Exchange Commission (SEC) frequently use this law: For instance, the law was used to levy heavy fines against German companies, registered with the New York Stock Exchange, that bribed foreign government officials to win contracts.
FIFA has an office in the United States, which likely grants the Justice Department jurisdiction.
When you think about it, it isn’t at all obvious why the United States would have a law like this. Many countries, until recently, considered bribes for foreign government officials tax deductible expenses. It is awkward from a foreign policy perspective to prosecute companies for something that is not illegal in their own country. Moreover, why would Congress put U.S. companies at a disadvantage by imposing restraints that its foreign competitors do not face? Indeed there are stories galore about how FCPA concerns hinder U.S. companies in their competition with Chinese companies over investments in Africa. It would seem foolish to allow foreign companies to bribe their way to government contracts for mining valuable natural resources simply to hold the moral high ground.
This is where the Watergate investigations come in. During congressional hearings, investigators wondered where the money came from to fund the burglaries. The trail led to slush funds, which companies primarily kept to bribe foreign government officials. (See here for a Wall Street Journal story, here for a brief segment from a Frontline documentary or here for a more detailed academic account). In the post-Watergate moral climate, it was politically ill-advised to vote against bills designed to root out bribery and corruption. Senator William Proxmire, of Golden Fleece fame, seized on this moment and drafted the FCPA.
Still, for many years the law was only occasionally enforced. There were just 30 convictions between 1977 and 1999; only two leading to jail time. That has changed. Since 2008 the Justice Department has charged 99 individuals with FCPA criminal offenses. Many more companies have been fined, totaling $1,566 million last year alone.
A game-changer was the adoption of a 1997 Organization for Economic Cooperation and Development (OECD) Convention in which other wealthier countries also committed to outlaw bribing foreign government officials. Many countries still often do not enforce the laws they have on the books. Yet, the fact that the activity is now illegal in most wealthy democracies allows for more prosecutorial cooperation, which is essential in complex bribery investigations.
Moreover, Sarah Kaczmarek and Abraham Newman show in an article in International Organization that countries whose companies were targeted by a U.S. investigation were twenty times more likely to start enforcing their own domestic laws. Just to give an example: the U.S. investigated Siemens for bribing Argentinean government officials. After Germany started to cooperate with the investigation, it received $813 million of the $1.6 billion dollar fine. In the process, it created an enforcement agency that is now prosecuting cases independent of American investigations.
We don’t (yet) know precisely what role the FCPA plays in the FIFA indictments. Some of the indictments appear to be about bribery by U.S. sportswear companies rather than foreign governments. Yet, it should be troubling to FIFA officials that they are being charged with something that is now a crime in many countries and that borders form no insurmountable obstacle to enforcement.