This BBC article quotes GE's former lawyer as saying that:

Pierre Laporte, a former GE lawyer who now works as Pierucci's partner, notes that 70% of firms targeted for US anti-bribery action are foreign - notably European. The FCPA and other laws that apply beyond US borders, Laporte says, are "tools of economic domination".

Is there any actual evidence or grounds for belief, that such statistics result from differential DOJ targeting, differential encouragement/incentives, different prosecution considerations (they're on unfamiliar ground or softer/easier targets), and/or political/other targeting, of US vs non-US businesses, and not just from differences in how US and non-US businesses conduct themselves?

Note - I'm not interested in this specific case per se , so no need to rehash whether GE/Alston/Pierucci did/didn't do as claimed, or did/didn't have a fair trial, or reanalyse that case or article. It's the general question it raises that I'm asking about.

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    I think this depends on how narrow the claim actually is. The FCPA is two-part: The SEC handles enforcement for any company it regulates, and the DOJ handles the rest. That, combined with the fact that the law is specifically about bribing foreign entities, makes it likely true if you're looking at DOJ enforcement of the FCPA itself. Not sure about "anti-bribery action" in general.
    – Is Begot
    Apr 24, 2019 at 13:04
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    This is rather opinion-based/broad. For example, note that the US contains less than 5% of the world's population. From that, we would expect more than 95% of firms to be overseas. There are going to be a large number of arguments like that, and this question doesn't have an objective way to compare them.
    – Brythan
    Apr 24, 2019 at 17:48
  • @Brythan - that sounds likely to be fallacious, because on one hand there may well be reputable quotes, documentary evidence, authoritative analysis/commentary, and evidence of concerns raised by reputable level-headed bodies, to draw on; on the other hand we wouldn't apply that argument to many other questions with similar structure. I'm not sure that the argument "95% overseas => expect some %age of cases to be" holds either. A better direction would be: in cases where misconduct concerns arise, is there any evidence that such factors have formed a significant part of a handling decision?
    – Stilez
    Apr 24, 2019 at 18:05

1 Answer 1


TLDR: from the little research there is on this (one paper seriously trying to eliminate confounders, many off-the-cuff options otherwise), there's still an unexplained "foreign fine gap" in FCPA enforcement, particularly when the SEC part of the (total) fine is included in the model. Confounders that were considered (but don't fully explain the gap) include: market capitalization of the company, bribe amount, voluntary disclosure, how poor is the country (GNI per capita) where the bribe was given, whether a subsidiary company was also involved, and whether a foreign regulator also fined or at least investigated the company in the same case.

The less difficult (statistically) analysis of FCPA enforcement over time supports the idea that political factors may have played a role in the amount of fines levied. E.g., before the OECD convention that allowed easy sharing of such bribery information between countries, the FCPA fines were mostly applied to US corporations, and these fines were quite small compared to the contemporary ones.

As far as I know it's hard to explore "differential DOJ targeting" because for that one would need to know the number of actual corruption cases as a baseline, which is mostly unknown. But I can confirm from a different source that mostly non-US corporations have been prosecuted, at least until 2014.

Figure [...] below shows the 20 highest FCPA penalties to date. Of the top 10, 8 were foreign.

enter image description here

On the other hand...

30% of [total] FCPA cases have been brought against non-U.S. companies. Yet these 30% of companies have paid for 67% of the total FCPA fines. Thus, foreign firms are paying more than five times the FCPA fines paid by domestic firms. [and more stats]

enter image description here

Perhaps there is some proxy measure for actual corruption cases that can be used as a proxy baseline... for the kind of confounder elimination you want, but insofar I haven't found a paper exploring such.

Sure, one could argue that the US is only bringing big profile cases against non-US companies, leaving the foreign small fish alone... but I don't see how you could easily test this alternative hypothesis.

That paper proposes that US prosecutors has a lot of power in bringing such cases:

As a result of the high cost of litigation and the broad interpretation and uncertainty of the FCPA, cooperation is generally the only viable option for firms who are charged with FCPA violations. As Yockey notes, “[t]he consequences of indictment, prosecution, and, ultimately, conviction are seen by many firms as being too great to consider doing anything other than settling.” Firms that are charged with FCPA violations generally take a severe reputational hit. Even the announcement that a corporation is the subject of an FCPA investigation can lead to significant reputational harm. This is why counsel generally advises firms facing FCPA related charges to settle on good terms as opposed to pursuing a trial on the merits.

For these reasons, federal prosecutors have a significant impact on interpreting the law and have substantial leverage when it comes to FCPA investigations. The DOJ essentially controls the disposition of the FCPA cases they initiate and impose their own extremely broad interpretation of the FCPA’s provisions. Settlements receive little judicial oversight. In light of this, federal prosecutors in FCPA cases yield immense power.

An argument in support of this view (of high discretionary power) is the spread over time of FCPA prosecutions and the fines imposed:

Given the robust enforcement of the FCPA today by both the DOJ and SEC, the near-complete lack of FCPA enforcement in the statute’s first two decades provides a striking contrast. Between 1977 and 1996, the agencies collectively brought only 40 cases (the median year would see two cases or fewer) and settled these charges on sympathetic terms (the average of the ten highest fines was under $10 million). By comparison, between 1997 and 2016, the agencies brought 428 cases and started to collect blockbuster settlements (the average of the ten highest fines in that period was $484 million). Even accounting for inflation, the tenth highest fine today is more than twice the combined penalties of the top ten fines between 1977 and 1996. The number of cases and the size of penalties are of a different order of magnitude in the last two decades than the first two decades. [...]

After the initial passage of the FCPA, American industry argued that the FCPA put them at a competitive disadvantage with foreign rivals, who would not be bound to similar anti-bribery rules. When the FCPA was enacted, other major developed countries (such as Germany and the United Kingdom) did not prohibit foreign bribery and even subsidized it by making bribes tax-deductible. This made the enforcement of the FCPA politically unviable. Various efforts were made to repeal the statute, but these efforts were largely muted by the executive branch’s decision simply not to dedicate resources to enforcement.

The latter article goes on to discuss how the OECD Anti-Bribery Convention and then the Sarbanes-Oxley Act multiplied prosecutions. As far as I can tell, that doesn't explain why the fines are a lot heavier (on average) against foreign corporations though; the latter article doesn't seem to touch this issue specifically. But it does highlight that differential costs to US vs foreign corporations was alway a (political) concern in FCPA enforcement.

Interestingly, if you consider the total sums of fines (not taking into account the per-case fine), the stats from first paper are somewhat more equal (2.015 billion by foreign corps and 1.545 by domestic corps.) I don't know if there was any specific goal to reach a kind of parity like that though.

On the other hand, the 2nd paper notes:

Germany, Switzerland, and the United Kingdom have revised their anti-bribery laws and now regularly bring foreign corruption cases against domestic firms. Other OECD nations, including France and Canada, are reforming their anti-bribery legislation and possibly could become more active enforcers. Nevertheless, the vast majority of OECD states have limited to no enforcement of their anti-bribery laws.

This is quite interesting, because the heaviest US fines were exactly against companies from countries that now seriously enforce such anti-bribery laws domestically; going back to the first paper:

Figure [...] below shows the nationality of the foreign corporations most heavily targeted in FCPA enforcement actions. The United Kingdom, Germany, Switzerland, and France have had the most number of corporations targeted in an FCPA enforcement action.

enter image description here

So, possibly, just possibly, the US is riding the coattails (of such domestic anti-bribery investigation abroad) with their own FCPA fines. This doesn't explain the magnitude of the fines though.

Here's an updated (to 2016) fines top also contrasted with the earlier, pre-OECD convention fines (from the 2nd paper); there now one more heavy fine against a US corp, shifting that tally to 7:3.

enter image description here

And for (my) "riding the coattails" theory, it's somewhat backed by this 2nd paper:

The OECD Convention has promoted information sharing both formally and informally. On a formal level, the treaty committed governments to providing mutual legal assistance in gathering evidence and sharing information. Prosecutors can make requests to their overseas counterparts for documents or to find individuals. This formal legal assistance is frequently acknowledged by the DOJ in their settlements. Aid in evidence gathering also often occurs in a less formal and less centralized manner. Investigators and prosecutors are able to reach out to foreign counterparts without necessarily going through their national governments. As a result, cooperative relationships can form even without the encouragement (or even with the discouragement) of high-level political (and often elected) leaders. In addition, the OECD’s requirement that countries enact domestic laws to criminalize bribery has created government offices whose regulators are responsible for investigating claims of bribery. Even if foreign governments do not prosecute many cases themselves, the fact that all OECD states have government offices with jurisdiction over foreign corrupt practices provides American officials with a host of foreign regulators who share their mandate. These foreign investigations can be fertile ground for evidence sharing. For instance, the French government’s investigation into Technip’s bribery of Nigerian officials resulted in tips to American officials regarding Technip’s and Halliburton’s activities in Nigeria. Similarly, the American case against BAE Systems (“BAE”) was built on the British investigations into the company, an investigation that was shut down for political reasons in the United Kingdom but later resulted in a joint U.S.- U.K. settlement.

Through formal and informal channels, the OECD Convention has resulted in much more transnational cooperation in evidence gathering. Both the treaty’s legal obligations and greater foreign law enforcement interest in corruption has resulted in more investigations and greater willingness to share evidence. This expanded cooperation has been critical to a spike in successful American prosecutions.

Like I said, this still doesn't get to the magnitude of the fines on foreign corps though. And of course opinions differ on that

This Table (while suggestive) does not control for the size of the bribe, the level of corporate benefit from the bribe, the degree to which top management was involved in the bribery scheme, the level of cooperation with U.S. officials, or the quality of evidence; so it is not evidence that the DOJ and SEC are making sure that as many foreign firms face prosecution as American ones. However, some commentators have maintained that the U.S. policy of seeking high fines against foreign firms is discriminatory and violates general international legal principles of equal treatment before the law. While most commentators (including the author) would strongly resist the idea that the DOJ or SEC are purposefully discriminatory toward foreign firms, one study has found that foreign firms face higher FCPA fines than American ones. Professors Stephen Choi and Kevin Davis find that the DOJ assesses greater FCPA penalties against foreign firms than domestic ones, even accounting for the size of the bribe and whether the firm voluntarily disclosed the illegal activity, although not controlling for the quality of the evidence, the participation of senior executives, or the level of cooperation.

Note that this "one study" is a different one from the one I started my answer with. So the opinion may be more widely shared that this (undocumented) "counter-consensus" claim. The abstract of the latter

We examine factors that might explain how sanctions imposed in Foreign Corrupt Practices Act (FCPA) enforcement actions vary across the firms and countries implicated using a dataset of FCPA actions resolved from 2004 to 2011. We find evidence that the sanctions in an individual FCPA action are positively correlated with the egregiousness and extensiveness of the bribe. The sanctions also increase if the ultimate parent company of entities involved in the FCPA violation is foreign and if foreign regulators are involved in the action. At the country level we report evidence that the SEC and DOJ impose greater aggregate sanctions for violations in countries with a lower GNI per capita and weaker local anti-bribery institutions. The SEC and DOJ also impose disproportionately greater aggregate sanctions for violations where the home country of the ultimate parent company of FCPA defendants has a greater GNI per capita, stronger anti-bribery institutions, and a cooperation agreement with U.S. regulators. Overall, these findings suggest that factors besides those deemed relevant by U.S. and international law influence enforcement of the FCPA.

enter image description here

Model 4 supports the hypothesis that U.S. companies are fined disproportionately less compared with foreign companies [...]. The coefficient on US Company is negative and significant at the 1% level. [...]

To test all the hypotheses in one model, we re-estimated Model 1 of Table 3, adding Vol. Disclosure, GNI Per Capita, US Company, and Foreign Regulators as independent variables in the same model. Model 6 of Table 3 reports the results. [...] We test the Self-Interest hypothesis in Model 6 with the inclusion of US Company as an independent variable. The coefficient on US Company is negative and significant at the 5% level, indicating that all other things being equal the SEC and DOJ impose lower FCPA penalties on U.S. companies, consistent with the Self-Interest hypothesis. [...]

They did a whole bunch of robustness checks e.g.

First, we reestimate Model 6 of Table 3 with the log of 1 + the total DOJ monetary penalty for a particular FCPA action as the dependent variable (excluding SEC monetary penalties, which include disgorgement). We report the results as Model 1 of Table 4 with robust standard errors in parenthesis. Due to the small sample size we also report bootstrapped standard errors in brackets for Model 1 and all the other models in Table 4. The significance levels of the coefficients are similar. We obtain similar qualitative results as in Model 6 of Table 3 with two exceptions. The coefficient on US Company is no longer significantly different from zero. Note, however, that the coefficient on US Company remains significantly different from zero at the 10% confidence level using bootstrapped standard errors.

[...] to control for possible time trends in FCPA enforcement, as a robustness test we added indicator variables for the resolution year of the FCPA enforcement action to Model 6 of Table 3. [But] we obtain the same qualitative results as in Model 6 of Table 3.

[...] since the monetary penalties cannot take negative numbers, the dependent variable in Model 6 of Table 3 is constrained to be zero or above. As a robustness test, we re-estimate Model 6 of Table 3 using a tobit model [and] we obtained the same qualitative results as in Model 6 of Table 3.

enter image description here

In most of these the US vs. foreign indicator remained significant. It became less so when considering only DOJ (and not also SEC) action and/or considering the fine as part of structured penalty (an ordered logit model with 6 coded outcomes), but the latter hardly had any significant explanatory variables, e.g. not even the bribe amount was explanatory anymore for anything in this ordered logit. (I think this model didn't have enough statistical power, i.e. not enough data given the amount of stuff [dependent outcomes] they tried to simultaneously explain with it.)

So at least when controlling from some potential confounders, there's still a "foreign fine gap" in FCPA. Also, there's some support of the "riding the coattails" idea. A with all such (observational) research, you can never quite eliminate all confounders:

Although our models control for Bribe Amount, they may omit factors correlated with both egregiousness of the violation and variables such as US Company, Foreign Regulator or Foreign Reg. Sanction. For instance, it could be that the most egregious misconduct tends to attract attention from both U.S. and foreign regulators. This would explain the positive relationship between Foreign Regulator and Foreign Reg. Sanction and the total monetary penalty. Similarly, it could be that U.S. firms tend to be more skilled at demonstrating unreported forms of mitigation. This would explain why they receive lighter penalties. Our models also do not take into account all factors bearing on the ease of detecting the defendants’ misconduct. Those factors might be relevant if regulators employ sophisticated deterrence-oriented enforcement strategies.

For (a converse) perspective, the EU has levelled some big fines on US companies, e.g. on Google, on antitrust grounds, a measure that Obama himself called protectionism. How do you disprove that claim? The Obama administration had a very close relationship with Google; see article for details. But Trump said the same thing even though he might not have the same close relationship with Google, although he may have other motives to do make that kind of claim. Etc. The counter-explanation for that is "they are likely a result of the Commission’s decision to focus significant attention on the tech sector. Because the vast majority of large tech firms are US-based, all else equal, it is to be expected that the majority of investigations and enforcement actions would involve US firms." But of course, that doesn't fully explain why is the Commision focusing on the tech sector to begin with, etc. "The decision to prioritize enforcement in the tech sector is not taken in a vacuum. Whether this policy preference is down to legitimate concerns about high-tech markets or to (potentially unconscious) protectionism is almost impossible to tell."

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    Wow- what a thorough answer. Is there some kind of periodic recognition of really good answers? If so, I'd like.to submit this one as a candidate.
    – Stilez
    Apr 25, 2019 at 7:32

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