La Grande Illusione of the International Anti-Corruption Fight

The fairy tale

The Milan Transnational Economic Crime Unit was also a product of its time. Conferences on grand corruption and transnational crimes began to blossom across the world in the late ‘90s and aughts, especially after the adoption of the OECD Anti-bribery Convention on November 21, 1997. Business people became excited and particularly keen to understand more about the actual reality of criminal enforcement around the world, including multi-jurisdictional cases, prosecution and defense challenges, asset recovery, etc. Curiously, many of these get-togethers were hosted in five-star hotels and financed by both big corporations and  “the professionals” of anti-corruption: the champions of best practices for due diligence, the savants behind the most detailed compliance models, and the psychopomps who could guide us through exhaustive internal investigations. These professionals—auditors from international firms, consulting accountants, and former prosecutors—would help these corporations comply with international laws, though in my opinion they were and still are there to help hide wrongdoing or mollify consequences rather than surface it.

In hindsight, the reasons for such excitement seem clear. Since 1977, the good old Foreign Corruption Practices Act (FCPA) had established certain patterns in fighting corporate misconduct: deferred prosecution agreements, non-prosecution agreements, government monitors, big fines, etc. The corporations knew how to calculate the benefits and risks of their actions. They knew how to play the game. Now, new actors entered the scene: prosecutors from different countries and international organizations like the OECD and Financial Action Task Force. In theory, these organizations had the power to monitor and reprimand their member states for weak enforcement. For multinational corporations in particular, it became important to learn the rules of the new game. For big law firms and auditors, there were vast fortunes to be made from understanding these new rules and translating them for clients.

How international investigations falter

AIRET reflects and has benefited from the international anti-corruption zeitgeist. It often worked with law enforcement from other countries. The international nature of AIRET reflected the expansive, often international scope of the operations the unit targeted.

 The core point of this methodology regarded the scope and purpose of the investigation, basically oriented to fully discover the extent of the criminal behaviors under scrutiny and fully understand the roles and responsibility of the individuals involved. Therefore, in case of grand corruption or other significant corporate offenses, since these offenses are not committed by solitary wolves, it was deemed crucial to accurately identify the international chain of command. When the bribe is big, so is the business. Decisions are made at the highest level in the corporation. As one defendant pithily summarized during Saipem’s corruption trial for alleged bribery in Algeria: “The three of us decided to pay the commissions: me (the COO), the CEO and the head of legal affairs.”

Of course, for investigators to achieve such ambitious goals, substantial resources are required. International cooperation, along with the contribution of cooperating witnesses, plays a crucial role in constructing robust cases. If any of these factors falter, the whole case can collapse.

A weak point: international cooperation

Despite the speeches and conventions establishing international cooperation among law enforcement and government prosecutors, international cooperation remains a weak point in many investigations.

One might expect joint investigative efforts in multi-jurisdictional cases to be frequent and effective. In practice, what occurs is one country leads the investigation while the others merely execute ad hoc requests for assistance. Any substantial, autonomous contribution is rarely forthcoming, even though evidence from the country where most of the crime happened is vital to the investigation.

Why does this happen?

Firstly, the interests of law enforcers may not align. Authorities in one state may be genuinely committed to pursuing malicious corporations and their leaders, whereas authorities of the other state may simply participate to show engagement and embellish their records in future peer-review processes (e.g., under the OECD or FATF frameworks) or, worse, to “monitor” the investigation from inside.

Secondly, some agencies operate independently, while others are legally required to follow government directives. The government’s strategies are secret and are never disclosed to foreign partners in joint investigation teams. Real coordination and shared investigative strategies become unfeasible since one party doesn’t really know what the supposed “ally” has in mind. 

These difficulties are further exacerbated in the rare partnerships between developed countries and the so-called “victim states.” In the latter, where the rule of law is often weaker, the police and other investigative agencies are often part of the executive branch and under strict hierarchical control. The numerous anticorruption commissions are generally linked to the presidency. Agencies under government control frequently suffer from limited specialization, scarce resources and motivation, and are often prone to corruption themselves. Anti-corruption commissions have, at times, demonstrated greater activism and expertise, but their effectiveness tends to be contingent upon the political will of the legislature and the charisma of the sitting president. In both scenarios, enforcement in victim states faces formidable obstacles, including resistance from local political bosses and powerful legislators. Additionally, multinational corporations enjoy extensive support from numerous “friends” within the political and economic elites of the country.

Troubles continue even once an investigation identifies and targets corporate leaders for indictment. The corporate leaders will never declare themselves guilty. Consequently, the company will not declare guilt. Trial becomes the only way forward. Here is where the real nightmare starts.

The trials

It is obvious that the criminal trial of big corporations and their leaders cannot be a quiet walk. It is also reasonable to expect the defense to mount a stern resistance in court and employ a cunning use of any procedural devices available to hamper the trial. Overcautious attitudes by the judges and timidity in fear of excess by the prosecution can further set up the prosecution for failure. This is routine.

There is much more.

First, witnesses are a problem. In theory, they should tell the truth and are solemnly admonished to do so. But nobody really knows the ways in which corrupting influences with economic power can reach them. How pervasive its action can be.

If witnesses are still employees of the company, it is rare to hear them say in court the same things that they said during the investigation. This is not an effect of sophisticated cross-examination techniques. Simply, they sit in the box showing, since the beginning, an intractable mood, little apparent comprehension of the most important questions, and exhibit uncertain recollections of the facts.

Sometimes witnesses are no longer at the company, generally because they were sacked and blamed for the wrongdoings. Sometimes for no reason at all. It can be a hard life for them if they maintain the accusatory statements they made during the investigation. If they do, they will be depicted at least as “ambiguous” or, in the worst case, “lunatic.” It’s easy to get rid of a witness’s unfavorable testimony. One can do so simply by using constant media attacks and other influence campaigns. This can go on up to the point where the corporation can afford to renounce to cross-examine the witness because the witness has been so thoroughly discredited. I saw that.

Of course, witnesses can be bribed. But this never emerges or might emerge only many years later. I saw that.

Under the surface

The most powerful maneuvers benefiting corporate wrongdoing do not occur in plain sight, so caution must be used when discussing these issues.

The allocation of cases is crucial. It is widely believed that randomly allocating cases to judges is the best system to ensure fair trials. However, in complicated matters, it can help to allocate cases to those judges who specialize in the relevant law. The combination of these factors, coupled with contingent situations that may affect the random selected judges (e.g. workload or personal impediments) open ample spaces of discretion for ad hoc allocations.

Moreover, in the course of a trial, the courts can be influenced through subtle influences from other judges, especially high-ranking judges or blunt warnings from the defense. One refrain I’ve heard before is the defense warning the judge of the “devastating effect of this trial for the national economy, the investors, thousands of jobs…”

Since the public does not perceive international corruption and economic crimes as an immediate or real threat to their lives, the media play a pivotal role in forming public opinion. The media can easily portray these trials with little thought. Favorite denigrations by the media include that these trials are a “huge waste of money,” that prosecutors disregard Italy’s economic champions (“damn to our national industrial champions”), or the recurrent “Così fan tutte”(i.e., all corporations pay bribes to do business in poor countries). As one famous Italian commentor wrote after the court acquitted Eni and Shell in the OPL case: “Do you have any idea the damage these trials will do to the second largest Italian company? Its leaders will travel the world with a reputation for pizza, mandolins, and bribes.”

Prosecutors involved in high-profile cases are generally not loved by the media and often viewed with suspicion by their peers. Unlike those who deal with organized crime, they do not risk their lives, yet they become famous. One newspaper said of me“he works too little and has too much power.”

Finally, despite the anti-corruption zeitgeist of the last quarter-century, legal doctrines remain favorable to offenders. In 2022, the OECD remarked that international corruption prosecutions are overly burdened by “very onerous standards of proof,” “systematic rejection of circumstantial evidence,” and “exculpatory inferences that are arguably speculative.” Furthermore, the report noted that “instead of considering simultaneously the totality of the circumstantial evidence, each piece of circumstantial evidence is generally considered individually only. An alternative, exculpatory interpretation is adopted for each item…” Lastly, the courts often request “proof of all the agreement details, such as its date, place, parties, and precise financial terms, as well as the exact act to be performed by the public official.” Anything less than everything can scupper a prosecution.

Conclusion

For all the initiatives and policy made over the last three decades to hold multinational corporations responsible for their wrongdoing, the system is still designed to give them every opportunity to act without accountability. Just one thing has to go wrong in the investigation or trial for them to walk free. In my personal experience, the same cannot be said of the prosecutors assigned to protect the public interest and hold these corporations responsible. For the prosecution, even the most speculative and uncertain allegations can lead to serious problems and even a guilty conviction.

The prosecution is not meant to win. Large corporations are.

Author Disclosure: Fabio De Pasquale and his fellow prosecutor, Sergio Spadaro, prosecuted OPL245 and were recently convicted in the first instance for failing to disclose potentially exculpatory material related to the trial. The appeal is pending. The conviction has been criticized by civil society groups, a former OECD head of anti-corruption, a prominent Italian legal scholar, and the Latin American Federation of Prosecutors for being unprecedented and contrary to the principle of prosecutorial independence. You can read ProMarket’s disclosure policy here.

Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.

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