Thank you for that extremely kind introduction. It is a privilege for me to be here today at the 3rd Russia and CIS Summit on Anti-Corruption. I am honored to participate in this important event, and appreciate the invitation to speak with you. I know that you also have the good fortune of hearing later today from Ambassador Beyrle, who is a great friend to Russia, and from many other distinguished speakers.
I have had the opportunity twice before to visit Russia. I was delighted to be here then, and I am just as delighted to be here again. Russian hospitality has no equal as far as I can tell. This is a beautiful country with a rich and important history, and I thank you for welcoming me so warmly.
This conference comes at an important moment in Russia’s efforts to strengthen its rule of law. In the Justice Department, we have long recognized corruption as a transnational problem.
Corruption affects countries rich and poor, large and small, and it has particularly harmful effects on emerging economies. When a developing country’s public officials routinely abuse their power for personal gain, its people suffer. Roads are not built, schools lie in ruin, and basic public services go unprovided. And when corruption takes hold in any nation, its political institutions tend to lose legitimacy, threatening democratic stability and the rule of law. Corruption undermines the health of international markets, stifling competition and repelling foreign investment. Moreover, corruption is a “gateway crime,” allowing money laundering, gang violence, terrorism and other crimes to thrive.
In Russia today, nearly 20 years after the dissolution of the Soviet Union, corruption is a significant problem. This has been widely recognized. On Transparency International’s annual 2010 Corruption Perceptions Index, Russia ranks tied for 154th out of 178 countries. Russia also ranks 22nd out of 22 countries on Transparency’s 2008 Bribe Payers Index, which periodically ranks top exporting countries according to how likely their firms are to pay bribes abroad. Yet, in spite of these and other indicators, Russia is making progress in its battle against corruption – and stands today, I believe, at a significant moment of opportunity.
President Barack Obama has called the struggle against corruption “one of the great struggles of our time.” Having led the Department of Justice Criminal Division’s efforts against corruption for the past two years, I have seen first-hand how difficult this struggle can be: in many countries, beating back corruption requires a fundamental shift in the way business leaders and public officials conduct themselves. But I also know that such fundamental shifts can happen. In the United States, we have made tremendous progress in recent years, and I believe that you are poised to do so here as well.
A centerpiece of the Department of Justice’s anti-corruption efforts is our enforcement of the Foreign Corrupt Practices Act, or FCPA, a statute that I know all of you have heard of and are familiar with. Before I delve more deeply into our FCPA enforcement, however, I want to describe for you some of our other anti-corruption efforts, which are perhaps less well known to you, including our efforts to fight corruption at home, help foreign countries increase their anti-corruption enforcement capacity, and recover the proceeds of foreign corruption.
We are not immune from corruption in the United States. Far from it. In fact, the Justice Department’s Criminal Division has a dedicated group of prosecutors – in the Public Integrity Section – whose sole task is to prosecute corruption cases involving federal, state, and local officials in the United States. The Public Integrity Section works in close partnership with the Federal Bureau of Investigation and other law enforcement agencies, as well as with federal prosecutors in each of the nation’s 94 U.S. Attorneys’ Offices. To give you a sense of the kinds of cases that the Public Integrity Section prosecutes: last week, prosecutors in the Public Integrity Section obtained jury convictions against a senator from Puerto Rico and a local business owner for engaging in a bribery scheme involving the exchange of cash and lavish trips for votes on specific pieces of legislation and other official acts. On March 1, Public Integrity Section prosecutors obtained jury convictions against a former U.S. Army major stationed in Iraq, and his spouse, for taking bribes in exchange for official contracting action on behalf of the Army. These individuals corruptly used their positions to pocket millions of dollars for their own personal benefit.
On Feb. 10, prosecutors in the Public Integrity Section secured a jury conviction against a former staff member in the U.S. House of Representatives on corruption charges relating to his acceptance of an all-expenses paid trip to the first game of the 2003 World Series in baseball. And on Feb. 1, Public Integrity Section prosecutors obtained a jury conviction against former U.S. Senator Edward Kennedy’s office manager in connection with a scheme to pay himself $75,000 in unauthorized bonuses.
As you can see from this recent slice of the Public Integrity Section’s work, we are waging an ongoing battle against all forms of corruption in the United States.
In addition to our prosecution efforts at home, we have also devoted significant resources to helping foreign countries build up their criminal justice institutions. Since 1991, in partnership with the U.S. Department of State, the Criminal Division has, at the request of host nations, placed legal advisors in dozens of countries around the world – including Russia – to participate in developing and sustaining these institutions. For example, we have recently been partnering with Indonesia’s Attorney General’s Office to establish and support the work of a 50-prosecutor anti-corruption task force. And right here in Russia, we have been assisting Russian authorities with their efforts to amend the Criminal Procedure Code. Indeed, I want to recognize the two Resident Legal Advisors who are currently stationed in Moscow: Tom Firestone, an experienced federal prosecutor from New York City; and Luke Dembosky, who comes from the federal prosecutor’s office in Pittsburgh. Thank you Tom and Luke for all of your excellent hard work and dedication.
Since 1986, the Criminal Division has also focused on improving policing and law enforcement capacity abroad. Our police training program is staffed by law enforcement professionals with decades of police experience at the federal, state and local levels, and has programs in dozens of countries, including Iraq, Colombia and Rwanda, among many others. Anti-corruption work is an important part of these police programs. As one example, in Peru last year, we assisted the national Congress with the revision of an outdated police conduct law. The revised law includes new penalties for corrupt and unethical behavior; standards for the investigation and discipline of police misconduct; and requirements for the annual evaluation of officers.
Finally, last year our Asset Forfeiture and Money Laundering Section initiated a Kleptocracy Asset Recovery Initiative, which is designed to target and recover the proceeds of foreign official corruption that have been laundered into or through the United States. In November of 2009, at the Global Forum on Fighting Corruption and Safeguarding Integrity, in Qatar, Attorney General Holder pledged to redouble the United States’ commitment to recovering foreign corruption proceeds. The Kleptocracy Initiative represents a concrete step toward fulfilling that commitment; and once the initiative is fully implemented, it will allow the Justice Department to recover assets on behalf of countries victimized by high-level corruption.
In addition to the anti-corruption efforts I’ve just described, the Criminal Division’s Fraud Section also plays the leading role in enforcing the FCPA on behalf of the United States.
The FCPA was the first effort of any nation to specifically criminalize the act of bribing foreign officials. The statute was enacted in the wake of the “Watergate” scandal in the United States, which led to the resignation of President Richard Nixon in 1974 and resulted in a dramatic plunge in Americans’ overall trust in government. In 1976, following certain prosecutions for illegal use of corporate funds arising out of the Watergate scandal, the U.S. Securities and Exchange Commission, or S.E.C., which regulates the securities industry in the United States, issued a “Report on Questionable and Illegal Corporate Payments and Practices.” In its report, the S.E.C. determined that foreign bribery by U.S. corporations was “serious and sufficiently widespread to be a cause for deep concern.” S.E.C. investigations revealed that hundreds of U.S. companies had made corrupt foreign payments involving hundreds of millions of dollars. With this background, the U.S. Senate Banking Committee concluded that there was a strong need for anti-bribery legislation in the United States. “Corporate bribery is bad business,” the committee said in its Report. “In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet.”
The passage of the FCPA was a milestone. But the Act did not become a strong enforcement mechanism overnight. Indeed, in the first decades immediately following the law’s enactment, many saw the FCPA as a slumbering statute. That is no longer the case. In recent years, the Criminal Division has dramatically increased its FCPA enforcement efforts. To give you a sense: in 2004, we charged two individuals under the FCPA and collected around $11 million in criminal fines. In 2005, we charged five individuals and collected around $16.5 million. By contrast, in 2009 and 2010 combined, we charged over 50 individuals and collected nearly $2 billion.
Moscow is, of course, far away from the FCPA Unit of the Criminal Division’s Fraud Section. What, then, is the practical significance of the Act for people doing business in Russia? Let me highlight three ways in which the FCPA can affect Russian interests. First, a core area of our enforcement involves U.S. businesspersons conducting business abroad. Last August, for example, Bobby Jay Elkin Jr., a former country manager for a U.S. tobacco company pleaded guilty for his role in a conspiracy to pay bribes to officials of the Republic of Kyrgyzstan. And in April of last year, Charles Jumet, an American executive for an engineering consultant company, was sentenced to over seven years in prison for bribing Panamanian government officials in violation of the FCPA. Thus, as the Elkin and Jumet cases show, any U.S. citizen who bribes a Russian official in order to obtain or retain business is potentially within our reach, and could face substantial time in prison.
Second, we have traditionally also pursued foreign executives who work for U.S. corporations or for foreign corporations that trade on U.S. exchanges, as well as the foreign corporations themselves. For example, in 2007, Christian Sapsizian, a French citizen and former executive at Alcatel, pleaded guilty to two counts of violating the FCPA, and in 2008 he was sentenced to 30 months in prison on those charges. In addition, we recently resolved a wide-ranging investigation against the Swiss-based freight-forwarding company Panalpina World Transport (Holding) Ltd., its U.S. subsidiary, and several foreign and domestic oil and gas service providers. Thus, as the Sapsizian and Panalpina cases show, any Russian citizen working for an American company in Russia or for a Russian company that trades on an American exchange, as well as any Russian company that trades on such an exchange, are also within our reach.
Third, we have on more than one occasion brought charges against foreign officials under U.S. money laundering statutes, alleging that those officials laundered the proceeds of foreign bribery through U.S. financial institutions. In 2009, for example, we indicted two former Haitian government officials on money laundering charges for their alleged roles in a scheme to bribe officials of Haiti’s state-owned national telecommunications company. Thus, as the Haiti Teleco case shows, Russian officials who launder the proceeds of foreign bribes through U.S. financial institutions could also be liable for FCPA-related offenses.
In short, the FCPA is a strong enforcement mechanism, and we are not shy about using it. Indeed, the threat of liability under the FCPA is itself a powerful tool, particularly for those from whom Russian officials seek bribes. As the U.S. House of Representatives’ Report on the FCPA put it, a strong anti-bribery law can “help U.S. corporations resist corrupt demands.” In the words of the former chairman of a major oil company, quoted in the report, “If we could cite our law which says we just may not do it, we would be in a better position to resist” the pressure that sometimes comes from foreign officials. That was true in 1977, and it’s true now. To the extent that an individual doing business in Russia understands that he or she may be prosecuted under the FCPA for bribing a Russian official, the Act provides a strong incentive for him or her to play by the rules, and a good reason for refusing not to.
As I said at the outset, it is widely recognized that corruption and graft are significant obstacles to this country’s full-fledged modernization. As Vice President Biden noted last week, in 2008 President Medvedev called Russia “a country of legal nihilism.”
Yet, Russia is in the process of taking important steps on the road to fighting corruption here at home, and stands at a unique moment of opportunity in this struggle. To begin with, Russia has ratified the United Nations Convention against Corruption, a comprehensive anti-corruption pact that seeks to ensure that State Parties take steps to prevent corruption within their public and private sectors. The U.N. Convention provides a solid legal framework for any country serious about combating corruption. In addition, U.S. and Russian law enforcement have been coordinating on international corruption investigations, and we are committed to furthering this relationship.
Moreover, on Feb. 16 of this year, President Medvedev introduced important anti-bribery legislation to the Duma. And I understand that just last week this legislation passed its first reading there. If it becomes law, the president’s anti-bribery bill would significantly strengthen the law against corruption in Russia by, among other things, criminalizing foreign bribery, and increasing penalties for all forms of bribery. Of particular importance, it appears that the law would go a long way in support of Russia’s bid to accede to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, a convention whose members periodically undergo rigorous peer reviews, as the United States did last year. Indeed, this very week in Paris, the OECD Working Group on Bribery is debating Russia’s accession to the Convention.
Just as the FCPA did not eliminate corruption in the United States or within U.S. corporations abroad, the anti-bribery legislation pending in the Duma would not cure all of Russia’s corruption ills. But I believe that its enactment would be an extremely important step forward, as would Russia’s accession to the OECD Anti-Bribery Convention. In the United States, we have seen aggressive FCPA enforcement lead to changes in corporate behavior, bringing the problem of foreign bribery into the foreground for many corporations. The enactment of significant anti-bribery legislation – accompanied by the promise of subsequent enforcement – could have the same effect here. Moreover, these efforts would likely encourage foreign investment in Russia, showing the rest of the world that Russia is serious about strengthening its rule of law. Upon the conviction in the second trial of Mr. Khodorkovsky this past December, U.S. Secretary of State Hillary Clinton said that “serious questions” had been raised “about selective prosecution” in Russia and “about the rule of law being overshadowed by political considerations.” These are real concerns. At the same time, I believe that passage of the pending legislation, accession to the OECD Convention, and an open commitment to anti-bribery enforcement could help to begin easing them, and reversing a trend that has placed Russia against the growing tide of anti-corruption efforts in other parts of the world.
I want to thank you again for your invitation to speak here today. It is well recognized that Russia has urgent work to do to change the perception abroad that corruption is stronger here than the rule of law. That work has begun. I believe that a significant moment of opportunity has arrived to make additional progress, and I encourage all of you, your colleagues in the business world and others in Russia to seize it. Thank you all.