He's a Swiss prosecutor and the chair of the Organisation for Economic Co-operation and Development's (OECD) Working Group on Bribery, overseeing member states' enforcement of the OECD Anti-Bribery Convention. This is an edited transcript of an interview conducted on Sept. 19, 2008.
- The origins of the international fight against bribery
- He prefers punishing companies to putting executives in jail
- Does the BAE case threaten the OECD Convention?
- His view of the DOJ and FBI's role - how it helps him...
You're the coordinator of efforts by the OECD, or signatories to the treaty?
I'm the chairman of the meetings, yes. ... Our group, first of all, develops rules. ... And we have a monitoring mechanism. We mutually look at each other, and then push each other, motivate each other maybe, to implement those rules. And my main role in that monitoring process is to see to it that the countries are actually drafting laws and that law enforcement takes place. ...
... If you were to give us a list of your signatory countries who have been recalcitrant, who would that be?
Well, there have been several in the past that have also then changed. Japan was very much a problem case for us in some ways. After a moment of getting used to the new situation -- I mean, this is not a normal process in international law -- they have actually made quite substantial moves.
Italy was a problem under the first [Silvio] Berlusconi government -- or the last, I must say; there have been several. So until around 2003, there has been difficulty with the Berlusconi government. It had to do also because the situation was extremely politicized. The OECD Treaty was used by the Milan prosecutors directly in the Constitutional Court in Italy.
Related to Berlusconi?
Yes. So, I mean, we were clearly the enemy for him, the personal enemy, but we've gone beyond that. And so far it looks that we're out of trouble with Italy. Italy has made quite big steps ahead. The problem is, you have many countries who have a tendency to make a step in advance, and then suddenly they pull back again. ... We had quite a few countries that have not reached the standard yet, that are struggling. ...
So let me understand: Now it's illegal in almost every country in the world to bribe someone in your national government, right?
Why for so long was it not illegal to bribe someone in another government?
There were all sorts of strange legal reasons given. It was said, "Well, it's not really our business to see to it that Thailand is looking after its laws, and we wouldn't want to get involved there." Behind it, obviously, was a very clear economic and political agenda. It was about wanting to allow your export industry to just make another deal.
It was a way to free your citizens or the companies that come from your country to do more business overseas?
Yes. You could even deduct, in most countries, bribery from taxes, because they were considered necessary payments. ...
... In an interview, Prince Bandar bin Sultan of Saudi Arabia says: "Look, it's all relative. We spent $400 billion developing our country; you can see the development. So what if $50 billion went to corruption?" Isn't that the way the world is?
Well, that was certainly the old attitude. ... The change that happened after 1997 with the OECD Convention and with other conventions had nothing much to do with moralizing. I think there's a very, very clear economic rationale behind it. ... If you work under the conditions of rampant bribery, you have to make sure that you are really good, you have the best connections, and that you have the cash available to pay your bribes. You exist more on your capability to bribe than on your product. It distorts competition; it distorts the mind-sets of people. ...
... How prevalent is bribery?
Let's face it: very prevalent. Even though we've been working for 20 years on reducing bribery, the World Bank is still talking about $1 trillion being paid And that's not even counting the damage that it produces; that's just the payments. I have no way of controlling whether the figure is right. What I do sense, though, is that it's very, very big. And so we are not necessarily making the headway that we were planning to. ...
You have to distinguish between small bribery, everyday bribery -- if you would use the example of Mexico, the problem in Mexico is that, as a normal family, you pay about 20 percent of your income every year, on top of taxes, for bribery purposes just to get through everyday life. ... That's a hell of a nuisance. It's very bad for the local economy.
Then there's a totally different bribery system that's transnational, large-scale bribery by companies in order to obtain contracts or licenses; oil contracts, oil licenses, for instance. That's usually in the millions or up to billions of dollars.
Billions of dollars?
Billions, yes. If you go to the arms trade, you're suddenly in the billions. And it's very concentrated. It goes to a few people, and these people are then in a position to distort -- well, if there is democracy, to pay off everybody. ...
And we're not talking here about the local Mafia boss; in the United States it would be Tony Soprano. What kind of people are we talking about who are doing this bribing?
... We're talking about corporations, managers in corporations on the one side, and we're talking about officials, elected heads of state and so on, on the other side.
It's not about people who are on the margins. Mafia bosses are marginal. They want to be powerful, they're struggling to be powerful, but frankly they're still on the margins. If you're a drug runner, you don't belong with legitimately powerful people.
That's one of the very big problems with combating bribery: You're talking about the center of legitimate power.
Let me just make sure I understand: We're talking about bribery involving the heads of major corporations?
Or the corporations as such. Frequently the decisions there are decentralized and taken by some senior-management level, but the very head usually doesn't want to know any details.
They want deniability.
And we're talking about hundreds of millions, millions of dollars in some cases?
Yes. A regular situation would be millions. You certainly have tens of millions in occasional cases; that's relatively rare. Take, however, a look at specific areas, like oil and gas. You would have hundreds of millions, that's possible, for the permits, for instance, to use oil wells for ten years. That's worthwhile. But if you go into arms, you've suddenly hit the billion-dollar threshold.
So is this a kind of extra tax on all of us?
Well, it might amount to that in some context, in some areas, but it shouldn't. It's not something that you would want to take for granted and accept it. That's one of the reasons why we're trying to get away from it.
... What caused the change that other countries were interested in, let's say, having a law like the United States, or having a similar kind of regime in place?
It's a very interesting story. It's very difficult to understand why in 1977 the U.S. actually drafted the FCPA, the Foreign Corrupt Practices Act in the first place. They were the first country in the world to do so, and there are different interpretations. ...
What I think is essential [is] the U.S. tried to internationalize this approach immediately. They went to the U.N. and wanted to have a convention drafted by the U.N. And the U.N. went through the motions, but East-West/North-South rifts impeded any decisive step in 1979. They simply dropped the project.
Nothing more happened much until 1988, when under the Republican administration there was a discussion [about] whether to change the FCPA, water it down, maybe even quash it. And then people said, well, why don't we do another try? Why don't we go to the OECD, go to our major competitors? ... Why don't we ask our competitors, especially the G7 at the time, "Are you ready go to along?"
This is, you know, 1989. It was already clear that there were going to be changes with the East. In 1990, the East opened up. ... Suddenly the whole system of allies fell to pieces, so you could sell Coca-Cola, to put it drastically, in the former Soviet-influence zone worldwide. Now everybody was faced with the redistribution of markets, ... so they suddenly developed an interest in making sure that their competitors were not uncontrollably going to enter their influence zone. ...
So, they decided, OK, we will do something against corruption. But frankly, I mean, these things take time, and people distrust each other. So in 1994, there was a fundamental decision to say, yes, let's do it.
But obviously companies didn't believe in it. ... We're in 1994, and nobody believed that the laws would come or the convention would come. I've been giving many talks between '94 and '97, for instance, to heads of corporations in France, and they ask me: "Are you mad? What do you think you're doing?" And more than that, they want to know, is it going to happen? Is it real? Do we really have to bother about this?
Imagine a breakfast room with so-called PDG[s] [présidents-directeurs généreaux] -- that's the CEOs -- of 20 or 25 [of] the top-listed French companies sitting there in a hotel, looking at me. I didn't eat breakfast, they had breakfast, and they're saying: "You must be a madman. You are messing up the way we do business. ... You're basically the slave of the Americans." They were using words like that.
You, a Swiss prosecutor?
Yes. Even the French minister of justice, a very charming lady at the time, approached me. Madame [Elisabeth] Guigou walked up to me and said, "You're just doing this thing for the Americans."
What did she mean?
She thought I was, in a way, helping American companies to get a benefit. Now, she might have been right, in the sense that the American companies had a trade advantage, because they had learned to live with the Foreign Corrupt Practices Act since 1977. ... So American companies had been changing their attitude, whereas French, Japanese, British companies, German companies were at a different point. They had to learn how to live under these circumstances.
And even more, once the convention of the OECD in 1997 came into place ... and all these countries suddenly adopted laws, the companies found themselves in a very awkward situation, because in a democracy, you cannot control police or law enforcement.
Easily, yes, well, that's right. ... Suddenly the element of risk rose, and there's a double risk. On the one hand, you might be caught; on the other hand, you might lose out, because your competitors are not playing the game. ...
... Many ordinary people ... would say, give me a break: A corporation is going to try to make money any way it can. Maybe not break the law at home, but if they're operating in Western Africa or India or in places where bribes are expected, why would they want to support a law that would put them in jeopardy?
... It depends whether you have a short-term or a long-term perspective, basically. If you really have to make the next job, ... you'll be tempted to pay. If you want to be sure to live to survive the next 10 or 20 years as a sound company, it's a different issue. You have to stop bribing.
Because you might get caught under this convention?
You get caught; you have to pay huge fines; you have legal fees. ... Look at what happened to Siemens. It's not about those massive fines alone -- they are obviously a big argument; they cut into the profits -- but it's about the fallout, the reputational consequences. People decide, shall we take this company, or shall we take another company? And if it's close, they might choose the company that has a better reputation. ...
... But you're competing in the marketplace today with companies in countries that have no rules.
Yes, we have an additional problem, obviously, with newcomers. We have people who are desperate to get access to natural resources, for instance. And it's kind of understandable if they cannot get access the ordinary way, the way former colonial powers had their access, they might come in using desperado methods.
I'm thinking of a country like China or India. I'm not accusing them directly of any concrete activity; I think the European Union has been pretty outspoken on that. They've been seeing events of bribery or situations where countries have been receiving huge amounts of money, with no strings attached, in order to obtain access to oil and gas, for instance. And that, of course, causes huge problems. It distorts, again, the competitive situation. ...
... [You've said] China has now expressed interest in combating bribery?
Yes. ... One can say, "Well, are they serious?" That's the situation with everybody. We have, in the last 20 years, questioned everybody's resolve: Are they really serious? And sometimes people change.
We've had various serious questions put to Germany in the past: Are you really serious about running cases? In the meantime, Germany is one of the most serious, at least from a law enforcement point of view. They have about 60 cases running and have some very big cases, some big convictions. So this is a change that has taken place over the last five years. Obviously, with China, it will take more time, but I wouldn't be so pessimistic.
I'm told that of the major German companies that are listed on the New York Stock Exchange, somewhere around a half a dozen of the biggest companies are under investigation in Germany for bribery.
That's right. And you can say this has two sides to it: One is [the] dramatic waking up to see [that] reputedly clean companies are so corrupt; on the other hand, the effectiveness of law enforcement and that they do not shy away, even in politically sensitive territory. ...
We hear from the Justice Department there are going to be more fines, more prison sentences, more people going to jail. And it seems to be they have gotten some assurances from the Germans that that's going to happen in Germany as well: more criminal prosecutions, people going to jail.
That's right. ... Frankly, from my personal liking, I'm not really interested in managers going to prisons in big numbers. It does help from time to time, just to show you're not immune, but I'm more interested in fines against corporations, because you can easily get rid of a manager.
The mid-ranking guys who are now going to prison in the Siemens case, the company can say, "Well, they were bad apples." It's more essential that you concentrate on big fines, because that cuts into the earnings and makes shareholders nervous.
The shareholders say to us: "Why are you fining us? ... We didn't do it. We're the shareholders. It's the managers. Put them in jail."
The shareholders are responsible for electing the board, and if they do not take their responsibility, it would be right that they are fined indirectly.
... You believe it's better for these corporations to, in a sense, get religion than it is for the CEOs to be put in jail?
Absolutely. Look, this is such an expensive and a wasteful process to put people [in] prison, and effectiveness is uncertain. If people rather decide to be perceived as positive, as a good company of good reputation and so on, and actually those who are shaky, to convince them that their competitors are making an effort, if you can do that, that's far better.
Do you run kind of psychotherapy sessions for these CEOs?
Well, we have for sometime had what I call industry groups. ... So you usually have general counsels or you have compliance bosses plus general counsels speaking to each other. It's very delicate, because you can't go into any risk of antitrust; you have to steer very, very clear from that. ...
The first group we started off was not corruption. It was money laundering; that was 60 percent of the banking sector worldwide. Still exists, that group. And then we moved into the anti-corruption area. ... The aim is actually that they ... are able to say to each other, "We'll compete, but we'll not compete on bribery." ...
... Since the convention [was ratified], how many cases are there going on in the world?
Well, I have a collection that has been distributed to everybody every time we meet, and it's now got, I would say, about 300 cases. ... And that's gradually grown from, like, 20 to 300 over those years.
... And this is because it increases the ability of countries to cooperate in these cases?
It's cooperation, and it's also [that] you embolden the prosecutors. They increasingly know about this. ...
There may be two answers. On the one hand, it's very normal, but a big case. The real difficulty for us is that the case has been stopped -- has been stopped technically by the prosecution agency, but under advice by politicians and --
Advice? Is that the right word?
You can put it different ways, I think. [Former British Prime Minister] Tony Blair would probably call his letter (PDF file) an advice. You can make of it what you want. ... The question is how big the pressure is, obviously.
But I think that's not the essential point. The point is that there is something that could be seen as interference by the political level with the decision of the technicians. And that was the point why we, the OECD, took this very seriously. ...
... Didn't they go after your job?
That was the U.K., yes.
Their reaction to your statement saying they were putting the treaty in jeopardy was to try to get you fired?
Yes. Well, this is not the first time. That was [Berlusconi's] reaction. ... I have no grudge there, because I think it's not the very intelligent way. And I think it's quite interesting that in Britain somebody leaked it to the media, ... and The Guardian made a front page out of it, which was the end of the story. ...
... In the documents that were released in Britain, it's clear that the government had two major concerns. One was a national economic concern, ... and the other is, they say, a national security concern: There will be blood on the hands of the prosecutors if this goes forward and the Saudis decide not to cooperate with the British about counterterrorism information. Not a legitimate concern?
Yes, well, we had a problem exactly because of the mixed bag of considerations. Under our rules, it's absolutely outlawed to stop a case for economic reasons. That's fundamental. You cannot say jobs are at risk. That is a centerpiece of our convention; otherwise our convention doesn't work. And exactly one of the problems was, there was a mix-up of these issues in all the declarations that the prime minister made, in the early days especially.
Now, turning to the second point, I think you have a point. If it's true that it's so dangerous -- "blood on the streets" I think was the quote -- who are we to say you're not allowed to stop the case under extreme necessity, even if there is no provision in the convention for such a situation? ...
Frankly, I don't know if the situation was that dramatic in this case. I don't have the means, because the OECD is not a court of law. I cannot subpoena British officials, or I cannot subpoena MI6, ask James Bond to explain what exactly they knew. That's not the issue. I think this is maybe something quite new, a quite new consideration. ...
I have no problems with that. My problem is a different one: As soon as the threats go away, the case has to be picked up immediately. That is absolutely clear under the legal reasoning. If the state of necessity is lifted, the case continues.
But the threat of terrorism isn't likely to go away anytime soon.
What are we talking about here? We're not talking about Saudi Arabia bombing the U.K. The threat is that because the officials might be exposed in such a case, they would feel less inclined to lend their help in detecting Al Qaeda people. Now, at the moment, everything that needs to be known in this case is known, basically. ... I think British courts need to interpret whether these payments are bribes or whether they're legitimate. ...
... When I asked [the Serious Fraud Office's former director] Robert Wardle about this, ... he said it was blackmail. The implication seems to be that one country, in this case Saudi Arabia, because it didn't like the nature of the investigation and what it might expose about its own royal family, rulers, took it upon itself to threaten another country with severe consequences, and the case was killed.
Well, you probably have to take these things apart, really. You have to ask yourself: Is it true that Saudi Arabia would have stopped its cooperation and that this would have really put Britain's public at a serious risk? That's one issue. And this I can't answer. That's simply a difficult question, and I think Mr. Wardle couldn't answer that question, either. He was just told it's the case.
So he accepted it and said, "I've got to stop it."
Yes. I frankly have sympathy for him. That's putting him in an impossible situation. And the decision of the House of Lords that came out recently saying the decision was defensible is probably a vindication for him. ...
The other question is, though, did the government do the right thing? Did they really exhaust their possibilities? Let's say an underground army, take the IRA [Irish Republican Army], threatens to bomb the courthouse or would have said, "We will blow up your prison if you continue to these court cases." I'm sure the U.K. would have gone ahead.
So the question and the point I'm making here is, what do you do if you're challenged in this way? And if you're challenged by another country, it's not a declaration of war, but it's a very, very unfriendly act, especially amongst allies, if you want. So what you would do is you have international possibilities, possibilities of international law; you can appeal to the U.N. In a more realistic and more subtle way, you can use your allies, the U.S. and other people who are cooperating, to exert pressure on a country that's blackmailing you.
So the question would have been, legally, from our side, from the OECD: Are there other alternatives to stopping the case? Could you have used other measures? And frankly, legally, they would have had to prove that they have used such means. ...
... The U.S. asked the British for cooperation in this case, not just in the Saudi part but in the whole case. A mutual legal assistance letter [has been] sitting at the Home Secretary for over 14 months.
Where is the OECD Convention? Where is the mutual cooperation?
Well, that's part of the same problem. If you accept that it is dangerous to run the case, you probably would also have to accept that it's dangerous to seek or give mutual legal assistance. That's at least the argument, I think, that is made.
I'm less concerned by that, because I think that is the same problem. I would say what is more interesting is what's going to happen, especially in the U.S. and in Switzerland on these cases. They're advancing quite quickly, and obviously the company is rightly saying, "Present us with the evidence." They are saying, "We want to know, where have we done something wrong?" ...
The company has outright denied that it's done anything wrong.
I think the newest answer is rather, "Prove to us that we've done something wrong." Now I think there should be the possibility to prove this. ...
... That could go on for years and years and years.
I doubt it. I think it's going to be ultimately not a question of years, but probably there's going to be something decisive happening in the next year.
This is based on a hunch or --?
A combination of informations.
... So in the wake, for instance, of the BAE decision, I would assume some companies called you up and said: "What is this? No longer the rule of law. No longer the convention. You can get out of it if you have enough clout."
Well, that's, in fact, the real risk. Imagine a chief compliance officer of a large defense corporation ... comes to you and says, "How can I continue to convince my people ... to abstain from bribery in the face of this case?" So what I'm seeing is the perception of competitors that you get away with bribery if a country wants to help you. ...
... When you see other countries acting in ways that close down these kinds of cases, doesn't the BAE case sit out there as justification?
Well, I'm not going to go into the details of any one of these specific cases, but I can assure you we're giving everybody a really hard time that has such an issue. Talking about South Africa, we actually came out with an assessment of South Africa expressing very, very serious concern about the abolition of the Scorpions -- ...
The anti-corruption unit in South Africa.
Yes. We've just come out with a report. Similarly, we have criticized the Italian government for abolishing its high commissioner against corruption in a way that made them bring him back again; they've re-created that unit after our criticism.
But you haven't seemed to be able to get the Canadians, for instance -- who have never enforced the law, except in a very, very minor way -- to do anything.
Well, we all have our problems. Nothing is black or white. ... The mechanism of the OECD is not bullying people, not necessarily exposing them in the first place. It's actually trying to motivate them to do something. It's only when something really doesn't work that you would come out bullying.
Well, we had some very rough exchanges with Japan. ... We subjected Japan to three continuous rounds of evaluation, focusing every time more closely on the capability to run a case. And they are still under very close observation. We have done similar things with countries that were lacking the necessary awareness.
Take Luxembourg. Luxembourg basically said, "We have no export industry to talk about, so we don't have a problem." And we said, "Well, we are here because you're a financial center." And financial centers are crucial in bribery; they play a very specific role. And if you do not have the awareness in your banks, we have a huge loophole. ...
And so people out there understand, ... the methods used look a lot like money laundering by organized crime organizations, don't they?
Yes, absolutely. ... This is also one of the reasons why we're increasingly finding large-scale bribery, because up to now, it was relatively easy to detect the brown-bag situation. It's much more difficult --
You mean just a bagful of money.
Yeah, a bagful of money being handed over. ... It's much more difficult if you have a large corporation, because even banks don't usually understand what all these money flows are about in a large international corporation. ...
In the Siemens case, it's been absolutely crucial that somebody -- a financial intermediary in Liechtenstein in the first place -- said, "This looks strange; it doesn't fit the pattern for this company," and then somebody picking it up in Switzerland, saying, "Yes, we have the same problem," and then gradually building up a case, going back to Germany, asking: "What are they doing? Why do they need this? Why would a company like Siemens need offshore accounts with shell corporations of this type?" ...
That's what we are increasingly seeing, and it's going to boost the volume of bribery cases. ...
... In the United States, we've had this pending case called the TSKJ [Technip, Snamprogetti, MV Kellogg and Japan Gas Corp.] case, the Halliburton case. The Japanese are involved in that as well, right, with bribery?
... I think it's an interesting case, because you have all these multiple jurisdictions. And the challenge would be, how are they going to cooperate? Where do you run the case? What part of the case is run where? And what do you do if you have multiple jurisdictions? ...
... What's likely to happen in that case now that Jack Stanley, the CEO of KBR, has pled guilty?
It's going to be quite difficult not to continue in other countries. Obviously there are rules of international double jeopardy; I mean, he would not be taken to court again as an accused, but he could be used as a witness against other people in these countries. ...
... The place where most of the conspiracy went on, or the alleged conspiracy, was London, and British citizens were directly involved, as well as a subsidiary of Halliburton and its predecessor. Would this be another test for the British, whether or not they bring a case?
Yes. The situation is that the U.K. and its law enforcement agencies are obviously facing increased scrutiny, are still to be tested whether they're able to run such cases. And we've been concentrating a lot on BAE and so on, but one shouldn't be so focused. One has to see what happens to other major corruption cases. ...
With the economic downturn that's going on and the ongoing competition for resources becoming more intense, there are many who think that this is going to threaten the development of an anti-bribery regime worldwide, because countries, companies are going to get more desperate.
It's true to some extent that people are more short-term oriented in their perspective, that a CEO is thinking about his balance sheet under his term. And it is also true, if you look at, for instance, companies that could very easily be doing far more against corruption. Take the oil sector: ... You have one interesting development that they are far less interested in the topic over the last two years. The topic is dropping from their radar screen, because they have other issues at the forefront. ...
... So you are seeing some impact in the global economic downturn and increasing competition at the same time for resources. Is that across the board? [What does] the future look like?
It's a mixed picture, but I'm seeing an awful lot of activity that is going in the right direction. I mean, all these cases we've been talking about --
Now hundreds of cases.
Yes, they are all a sign that something is moving. Now, the challenge is to pick up China and India -- India especially -- or to see what is going to happen, let's say, [with] access to resources in Angola. That's a place where everybody wants to get a contract, and clearly the government is asking for bribes left, right and center. Everybody who is getting a job there probably will be asked for a bribe. I'm not saying they are bribing; I don't know. But they certainly are going to be exposed to requests, and the question is, how do they get around it?
My point would be, beyond us doing rules in the OECD, the [business] sectors really would have to get their act together. So coming back to the question, why are the big guys not ready ... to talk about doing a coalition against bribery? I think they're making a mistake. They are keeping a door open to do it, and they could find themselves in a very difficult situation someday.
Yes, I think the U.S. has not necessarily the most resources but the most effective way of doing things. The U.S. has found a way of pushing people to plea agreements in a very effective manner, using private resources paid by the company itself. ... You have lots of investigative teams you don't have to pay for.
One reason why Mark Mendelsohn with his team is really effective, he is crucial because he keeps things boiling, and his colleagues are encouraged around the world to join ranks. Obviously the U.S. also generates a big market in corporate social responsibility and companies going around providing for compliance systems and so on. ... The big consulting companies and so on, they go hand in hand together with [the Securities and Exchange Commission and the Justice Department]. ...
But I hear a difference. You're into understanding group therapy, if you will; gentle compliance. And what I'm hearing from Washington is, particularly with the entry of the FBI in a more forceful way into the cases, we need to give people jail time; we need to teach them a lesson if they're going to take us seriously.
Well, the whole system is complicated, and it's got multiple aspects. I'm the nasty guy in a different framework. My role is to be rough and tough with countries in the OECD. On the other hand, I believe we have to be convincing companies.
Obviously, what the DOJ, maybe the FBI [do] helps to frighten them, and what we're doing in our group therapy is kind of picking them up again and saying, "Look, before you get into trouble or if you've been in trouble, why don't you get together?" And there are still people who do not understand; especially the very, very big ones don't seem to sufficiently understand. They seem to believe, we can get around it politically. ... If you're the biggest oil company in the world, you really believe nothing can happen to [you].
Now, I think they're totally wrong. Everything can happen to them, as examples prove. But that's, I think, how it comes together. As a psychotherapist, if you want, I'm dependent on DOJ and FBI being rough. ...