Multinational corporation commits bribery in foreign country.

Department of Justice prosecutes company under the Foreign Corrupt Practices Act (FCPA).

Multinational corporation enters into a deferred prosecution agreement and pays a $500 million fine.

Money goes to the U.S. Treasury.

Fine the company and deter it and other companies from future bribery.

That’s the deterrence model.

But Andy Spalding has a better model.

Restorative justice.

Instead of turning over the penalty money to the U.S. Treasury, use the penalty money to create anti-corruption institutions in countries where the bribes were paid. Build a civilian anti-bribery infrastructure with FCPA penalty money.

Spalding has just written a paper titled Restorative Justice for Multinational Corporations. It will be published in 2015 in the Ohio State Law Journal.

Spalding is an Assistant Professor of Law at the University of Richmond School of Law.

“A body of scholarship has long argued for moving away from the traditional adversarial model of legal practice and toward an understanding of the lawyer as a ‘peacemaker,” Spalding writes. “By this account, the lawyer’s aim in practice is to prevent future conflict by understanding and improving social interactions between offender, victim, and community. Lawyering is thus recast as a ‘healing profession,’ taking a ‘restorative’ approach to the practice of law. Suffice it to say that this literature is not typically associated with multinational corporate practice. But might it be? Can multinational corporations, who have committed crimes, heal social wounds? Can corporate defense counsel, and federal prosecutors, be peacemakers?”

Spalding argues that the answer is yes. And that restorative justice is already being applied in the corporate crime arena — most notably in environmental crime settlements.
Take the BP Gulf Oil case.

“It was a $4 billion criminal settlement,” Spalding told Corporate Crime Reporter in an interview last week. “The largest in criminal enforcement in history. You would expect that $4 billion to be deposited in the U.S. Treasury. Instead, over half of it — 60 percent of it — was set aside to fund assorted programs in the communities harmed by the oil spill. People have cleaned up the harm resulting from that spill. They took that money to fund a number of training programs, environmental cleanup programs and others in the Gulf of Mexico.”

“Restorative justice needs to do more than just punish the perpetrators. Restorative justice brings the perpetrator, the community and the victims together to remediate the harms resulting from the crime, to help rehabilitate the perpetrators, by acknowledging the harm they have inflicted and by participating in the remediation.”

“BP was responsible for many of the prevention programs it was funding. The idea is that the defendant has to fund and oversee programs designed to prevent the very kinds of crimes that the defendant committed.”

Spalding wants to apply the restorative justice model to Foreign Corrupt Practices Act (FCPA) enforcement cases.

Restorative justice as opposed to what?

“As opposed to deterrence,” Spalding says. “Deterrence is your classic law and economics approach to criminal punishment. Deterrence holds that would be perpetrators are rational actors. They weigh the utility of committing a crime against the disutility of being caught. And if we are to deter crime, we have to manipulate the incentives so that they rationally decide not to commit that crime.”

Why doesn’t deterrence work for corporate crime?

“For multinational corporate crime it doesn’t work because you only have some of the potential perpetrators subject to the jurisdiction of the government that is trying to deter that crime,” he says.

“Take the United States. We have decided that we want to deter corporate bribery in developing countries. As a tool of deterrence, we are going to punish these companies quickly and severely. We are going to broadcast the sentence across the corporate world so that all other corporate perpetrators are on notice — if you commit this crime, this will happen to you. The idea is — the corporations will commit fewer crimes and crime will go down over all.”

“But that only works if all of the potential perpetrators are subject to that jurisdiction. But you have instead a situation like we have today. You have multinational companies from jurisdictions that enforce laws as we do, and multinational corporations from jurisdictions that don’t and who are all committing bribery in those countries. If we are going to ramp up enforcement, make the penalties more severe and broadcast that to the world, then yes, the companies subject to our jurisdiction will commit less bribery. But what happens then?”

“Some governments have said — our companies can’t pay bribes. Some governments have said — our companies can. Bribe paying companies are now going to do more business. Deals will transfer from the companies that didn’t want to pay bribes to those that can pay bribes recklessly.”

Has restorative justice ever been applied in an FCPA case?

“There is one,” Spalding says. “It was a long time ago. It involved James Giffen. He was arrested in 2002. It was one of the very first high profile FCPA cases. He was an attorney representing U.S. oil companies in Kazakhstan. He was arrested for paying $84 million in bribes to the Kazakhstan government. It’s a long and colorful story with many angles to it.”

“The U.S. traced the bribe money to Swiss bank accounts and collected that money through a forfeiture action. They took all $84 million of it and set up an NGO in Kazakhstan called the Bota Foundation, which funds various programs to fund the poor and needy in Kazakhstan — scholarships, health care initiatives. It’s been very successful. It’s been in operation since 2007.”

Spalding says we don’t need to change any laws to apply restorative justice to FCPA cases.

“We don’t need to change the laws to do this,” he says. “We would do it for multinational corporate crime exactly as we do it in environmental crime.”

“Our enforcement agencies can do this right now. It requires no change in the law. Imagine a multinational corporation pays a bribe in a developing country. They are going to be penalized $100 million. Instead of depositing the $100 million in the U.S. Treasury, we could instead give them a reduction in their sentence in exchange for the company taking that money and investing it in corruption prevention programs in the country where the bribery occurred.”

“You could bring a training center in which local lawyers, business people and others could receive anti-corruption training. You could fund investigations and reports on the causes of corruption in these countries.”

You could fund an anti-corruption newspaper?

“Sure,” he says.

With the funds, you would fund an civilian anti-corruption infrastructure?

“Correct,” he says. “Completely private sector, subject to corruption controls being in place. It would fund a series of private sector initiatives designed to identify the causes of systemic corruption and to develop and implement solutions to them.”

You wouldn’t limit it to developing countries. You could even fund a similar infrastructure in the United States?

“Sure,” he says. “But under federal law, the projects they fund have to be specifically tied to the violation being punished.”

Restorative justice comes from the left side of the political spectrum?

“For sure,” he says.

“Applying restorative justice to multinational corporations might come from the right side?

“People on the left are going to apply restorative justice to natural person criminals, but not to multinational corporations,” Spalding says. “They don’t have much sympathy for multinational corporations. People on the right don’t think in restorative justice terms. They think in law and economic terms. And law and economics is the paradigm at the heart of deterrence. Those white collar crime people are going to be pretty well steeped in a deterrence framework.”

Is Spalding a Chicago school law and economics professor?

“My research does not fit into a tidy box like that,” he says.

How would you describe your politics?

“I’m decidedly centrist and independent,” he says.

[For the complete q/a transcript of the Interview with Andy Spalding, 27 Corporate Crime Reporter 14(11), March 31, 2014, print edition only.]