Corruption Is Still Corruption, Folks

Yes, the Supreme Court reached a preposterous conclusion last Friday in Snyder v. United States, when the conservative majority ruled that a “gratuity” that’s plainly part of a corrupt bargain is not a crime under federal anti-corruption law. Anxious corporate compliance professionals, however, should begin by asking a crucial question: Who cares? 

Seriously — how will this ruling, blissfully divorced from real life as it may be, affect your compliance program? Who expects sales executives to start demanding that they be allowed to offer “gratuities” to government officials after they win a big contract? Who expects FCPA prosecutions to vanish like a fart in the wind? Who expects this ruling will lead to less exposure under the Anti-Kickback Statute, or various procurement fraud statutes, or state and local prosecutions? 

Eye on the ball, people. None of that is going to happen any time soon, if ever; and your compliance risks have not receded. Snyder may offer individuals charged with corruption new avenues of defense, and it’s certainly an affront against common sense and civic virtue. But it isn’t a hammerblow against the foundations of corporate compliance. That bedrock holds firm.

The Case Itself

First, for those unfamiliar, let’s recap the case itself. James Snyder was the mayor of Portage, Ind., in 2013. That year he awarded government contracts worth $1.1 million to a local trucking company, Great Lakes Peterbilt; and he engineered the contract terms so that only Great Lakes Peterbilt could fulfill the terms. The following year, Great Lakes Peterbilt paid Snyder $13,000 as a “consulting fee” — even though its employees denied that any consulting took place, no contract was ever produced, and the controller testified that the money was for giving Great Lakes an “inside track.” 

The legal question here is whether that payment violated  Title 18, Section 666 of the U.S. Code. Section 666 bars state and local government officials from corruptly soliciting or demanding anything of value “intending to be influenced or rewarded” (that’s important here) for an official act.

Obviously that $13,000 no-show consulting job was a corrupt payment, rewarding Snyder for fixing those trucking contracts in favor of Great Lakes Peterbilt. Hence he was convicted in federal district court on corruption charges, and that verdict was upheld when he appealed. 

The right-wing majority of the Supreme Court, however, concluded that since the payment arrived after Synder awarded the contract to Great Lakes Peterbilt rather than before, it was a gratuity for Synder’s routine official duties rather than a bribe to induce him into a corrupt act — and therefore not a violation of Section 666. The consulting gig was just a gratuity, you see; akin to the Amazon gift card you give to your kid’s teacher at the end of the year or the sweatshirt you give to your state rep when he or she gives a speech at your charity fund-raiser. 

At least, that was the conservatives’ hackneyed reading of U.S. anti-corruption law. It’s disturbing and pathetic, and flies in the face of facts and common sense. 

That doesn’t mean it’s the doom of corporate compliance programs. 

Corruption Risks Carry On

First, Snyder v. United States only applies to Section 666, which only applies to bribes of state and local government officials. Bribery of federal officials is addressed in Section 201(b) of Title 18, and that section does outlaw gratuities. Nor does this ruling affect any of your anti-bribery compliance obligations under the Anti-Kickback Statute or the Foreign Corrupt Practices Act. So if your company was subject to those statutes last week, you’re still subject to them today. Your anti-bribery policies and training are still just as necessary.

OK, but let’s say you’re not subject to either of those laws. For example, maybe you’re a domestic retailer with extensive needs for local permits and licenses to build or operate stores. Could your local VP then start promising “consulting gigs” to local mayors or zoning board officials after they give their blessing to your big project? 

Even with Snyder in your back pocket, that still seems like a foolish idea to me. First, your VP might be violating state or local anticorruption laws, inviting an enforcement action from state or district attorneys. Those cases are less of a headache than their federal counterparts, but they’re no fun either. Second, you might still face federal enforcement risk under procurement fraud statutes if the local permitting involves federal dollars (say, winning a contract to build a center funded by a federal grant). 

And if we really want to split hairs here, a public company engaging in such corruption gratuity giving might face civil enforcement for a books and records violation. After all, Great Lakes Peterbilt never did have a contract with Snyder, and he provided no actual consulting services. Those are internal control failures. If a company did that at scale for foreign government officials, the SEC enforcement team would be all over it. Who’s to say the agency wouldn’t try the same if a domestic company did the same? 

Focus on the Corruption, Not the Statute

We could probably spin up numerous other scenarios about which corruption risks are or aren’t affected by the Snyder ruling. The simple way for compliance officers to avoid them all, however, is to focus on the fact that all corruption is unethical and should be avoided

Like, haven’t the best practice thought leaders out there been preaching for years that your anti-corruption training should focus on bribery being bad, rather than the nuances of the Foreign Corrupt Practices Act or the Anti-Kickback Statute? How has that supremely wise point changed just because right-wing theorists on the Supreme Court churned out a hare-brained decision on what a bribe actually is? 

The answer, of course, is that it hasn’t changed. Your anti-corruption policies and training should still stress above all else that bribery is wrong in all of its forms, and employees shouldn’t engage in it, full stop. If your policies and training don’t do that — if instead they dwell on specific anti-corruption laws — then you need to ask whether you’re doing it wrong.

Sure, perhaps future litigation (because you know that’s coming) will weaken public corruption laws even more. For example, someone is bound to argue that payments made to foreign government officials after the fact are gratuities rather than bribes, and therefore aren’t violations of the FCPA. We could poke numerous holes in that argument both practically and legally, but trust some right-winger somewhere out there to try it. 

Well, that fight is years away. Here and now, the primary objective of anti-corruption compliance is to avoid corruption. Keep that point fixed foremost in mind.  

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