Whistleblowing to a Latin Tune

When the anti-corruption systems whistleblowed to a Latin tune recently, the resulting sound was remarkably ugly. It was loud, as the Odebrecht, Petrobras, and J&F cases revealed a wide-spread, refined system of corruption involving prominent politicians and businesspeople in 12 countries from Latin America and Africa named as “Operation Car Wash”. But the sound was also dissonant, as it played tunes that did not represent the patterns of justice expected from the Latin legal systems.

That sound had a peculiar U.S. American accent. The U.S Foreign Corrupt Practices Act (FCPA), which allows for the extraterritorial jurisdiction of the United States for actions of individuals or companies for actions taken outside U.S. territory, had a prominent role in the legal sanctions against those companies.

That sound also had the pitch of selective justice, as some politicians and some companies were sanctioned, while corruption remained widespread among most other politicians, companies, and countries involved with those companies.

So why are some wrongdoers punished so hard while their competitors – both in business and politics – keep paying and receiving bribes? Inspired by the Odebrecht case in Latin America, our answer to this question points to the idea of selective justice in an environment with disseminated corruption.

As we argue in our article for World Comparative Law, most countries live now under the FCPA paradigm, which represents a rather particular approach that emphasizes a set of  criminal procedures and antibribery tools that have become hegemonic since the beginning of the 2000s. We contend that the FCPA paradigm hardly reflects the mechanisms and types of criminal punishment needed in Latin American countries. There are at least three reasons for this dissent.

Firstly, most Latin American countries have what the literature calls “disseminated corruption as a point of equilibrium” for grand corruption. In such an environment, all actors have incentives to accept or offer bribes. Because of this, such an environment is incompatible with prosecutorial discretion and plea bargaining. While some politicians or businesspersons would be prosecuted, most of them would not.

The second reason is that the FCPA paradigm limits the power to prosecute to a limited number of public agents, whose discretion is significantly boosted. Plea bargaining and this increase of discretion on which cases to prosecute and how to settle them turns some public officials into key powerbrokers. Hence, those who benefit from corruption can easily map the key positions of the anti-corruption apparatus and work for the nomination of specific individuals to condone the status quo, protect those who nominated them and even isolate the individuals willing to work for change.

The third reason is mainly connected to Latin America’s political history, which is replete with instances in which collaboration agreements, whistleblower protection, and discretion have actually increased certain cases of corruption.

The Symphony Played by the FCPA Anticorruption Paradigm

The FCPA was the model that inspired the OECD Anti-bribery Convention. The FCPA was created in 1977 but remained symbolic for many decades. This changed after the OECD Convention came into force in 1999.

Besides legitimizing U.S. prosecution of international corporations, the OECD Convention also expanded its scope to many other countries, based on the argument that environments without corruption can improve people’s lives and thus serve human rights. However, market interests and international politics, too, must be included as factors for the expansion of ideas behind the FCPA and the OECD Convention.

Among the recommendations of the OECD Convention is the local adoption of whistleblowing mechanisms. Plea bargaining does not appear in the OECD Convention but is a regular enforcement tool of the FCPA. Finally, the FCPA system relies heavily on prosecutorial discretion onwhich cases to prosecute and how to settle them.

The incentives and protection for whistleblowers have turned out to be an important tool. In the Petrobras and Odebrecht cases, for instance, whistleblowers provided the information which ultimately led to the unprecedented imprisonment of hundreds of politicians and high executives throughout Latin America and Africa. The tools of the FCPA paradigm thus can be helpful in many senses but are leading to a number of conflicts.

First, there is a conflict between the FCPA paradigm and the multiplicity of institutional responses by which corruption is addressed, as is, for instance, the case in Mexico and Brazil. Corruption and bid-rigging reveal classic schemes that fall both under the scope of antitrust and criminal law. In both Mexico and Brazil, antitrust leniency policies offered immunity to cartel members that blow the whistle first and self-report to the antitrust authorities. Even though a cartel member is offered immunity by this policy, s/he still faces the risk of a corruption conviction – and thus might have good reasons for fearing to blow the whistle.

A good example of this conflict is the Odebrecht case. After the Car Wash Operation, it was argued by several scholars that all authorities with jurisdiction over the case should be bound by those agreements the public prosecution office and the office of comptroller entered into.((Maria Virgínica Nabuco do Amaral Mesquita Nasser. Lava a Jato: o interesse público entre punitivismo e desgovernança. São Paulo: Lumen Juris.))

At the same time, limitation of agents to make plea bargains succeed to neutralize the synergy previously created in the Brazilian anticorruption system. Brazil and Mexico have both built a “web” of accountability so that bid-rigging could be prosecuted by both criminal and antitrust authorities, together or autonomously. The benefits of this kind of enforcement multiplicity, designed and adapted to disseminated corruption environments, may be reduced under the FCPA paradigm.

The same old music: is it all about politics?

Corruption scandals can fuel both mass protests and radicalism. Why do some cases of corruption become scandals, and others do not? There are multiple answers to this question. A traditional response is the use of scandals as a weapon by political adversaries. But a new one is foreign anti-bribery enforcement for the FCPA paradigm potentially enlarges the scandals triggered by  political dynamics.

The disseminated corruption shown in the Odebrecht case together with locally embedded strategies of campaign financing create the on-the-ground effect that nearly everyone everywhere, politicians and companies alike, was involved. However, tips only appeared against a few of the politicians and some of the businesses. It is hard to detach whistleblowers’ tips and collaborators’ information from their survival interests in an environment with disseminated corruption. Discretion on which cases to prosecute, how to settle the cases chosen to be enforced, and the perfect timing for that reveal the non-neutral stance of public officials.

Not a Grand Finale

The OECD Anti-bribery Convention presents incentives to whistleblowers and plea bargaining as essential tools to dismantle corruption schemes. These tools structurally depend on increased levels of discretion. Recent history has shown, once again, that careless legal transplants are far away from delivering better governance to Latin American countries. Scandals as a political weapon are not new in Latin America or elsewhere. But the FCPA paradigm can enlarge their detrimental effects.