POLITICS

Foreign Corruption Laws Might Be The Final Nail In The Gupta Coffin

Evidence of graft piling against multinational companies named in the Gupta emails might have more to answer to than just local laws.

19/07/2017 12:09 SAST | Updated 19/07/2017 12:38 SAST

ANALYSIS

Despite mounting evidence of global, networked corporate corruption with the Gupta family at the centre of the web, South Africa's public unit responsible for investigating organised crime -- the Hawks -- is yet to announce progress into its investigation into the Gupta emails.

Damning as evidence contained in the emails might be, the might of foreign rather than local laws and prosecuting bodies might be the nail in the coffin for the Guptas and their corporate cliques in light of seemingly slow -- or possibly no -- progress by the South African state's penal bodies.

Bribery beyond borders and the possibility of foreign prosecution

One of the most significant changes in the past two decades for international corporates is the expanded reach of countries' legislation in overseas jurisdictions, executive director of Africa Risk Consulting Tara O'Connor told HuffPost SA.

The most important example, she said, was the United States' Foreign Corrupt Practices Act (FCPA). This legislation "prohibits bribe payments to foreign officials to assist in obtaining or retaining business". It applies to such conduct anywhere in the world where companies have jurisdiction in the United States, extending to their officers, directors, employees, stockholders and third-party agents.

This legislation, if used to successfully prosecute offenders, is neither toothless nor forgiving. Companies in violation of the FCPA may have to "disgorge their ill-gotten gains" and pay "prejudgement interest and substantial civil penalties", says the US Securities and Exchange Commission.

On Friday last week, the US's Department of Justice filed a civil complaint seeking to impose forfeiture of approximately US$144 million laundered "in and through the US", following evidence of bribes paid by Nigerian businesspeople to that country's former petroleum resources minister and overseer of Nigeria's state-owned oil company, Diezani Alison-Madueke.

Germany-based company, SAP, could potentially be next to face the wrath of US regulators based on evidence revealed by amaBhugane and Scorpio last week showing the company paid R100 million to Gupta-affiliated 3D-printing front company, CAD House. SAP operates and trades stocks in the US, potentially subjecting the company to penalties under US law. SAP has denied being involved in any kickback scandal.

"I bet you any money that KPMG, SAP, McKinsey and all of the international risk management committees [of companies implicated in the Gupta leaks] will now be scrambling to look at where they are exposed internationally," O'Connor said.

Meanwhile, local anti-graft organisation Corruption Watch -- in addition to placing pressure on South African authorities -- is bringing allegations of wrongdoing on the part of US-based company McKinsey & Co. to the doorstep of US regulators.

"We have made an announcement that has been widely publicised that we are currently preparing a submission to the US in relation to US-based company McKinsey's conduct around their exposure to the FCPA", executive director David Lewis confirmed to HuffPost SA.

'UK Bribery Act goes much further than the FCPA'

The most stringent anti-money laundering and anti-corruption legislation that requires worldwide compliance of companies, according to O'Connor, is the UK Bribery Act (2011) that came into effect in mid-2011.This legislation is "extremely strict in its application" and "goes further than the US's FCPA which has been in effect since 1977", she said.

"If multinationals have even a single director in the UK", which many of the companies implicated in the long list of Gupta-affiliated instances of bribery, they are "potentially at risk" of facing legal action in terms of the Act, O'Connor said.

In addition to criminalising bribery of foreign public officials, the Act also makes it an offence for a commercial organisations to prevent a bribe being paid to obtain or retain business or a business advantage.

UK Bribery Act (2010)

According to Transparency International UK, directors and senior officials can be held personally liable if they know bribery is taking place, or "turn a blind eye" to wrongdoing. Further, companies can be liable if a third party pays a bribe, even if the company was not aware of the bribe, and it cannot demonstrate it has "adequate procedures in place to prevent bribery".

Transparency International UK

But, the Act was only put into effect in 2011. According to O'Connor, this lack of precedent in law over its usage and reach means the applicability and effectiveness of the Act remains largely to be discovered.

A new offence in the Act -- failure by a company to prevent a bribe being paid in their favour -- could nevertheless potentially be used against UK-based PR firm Bell Pottinger. This could potentially be used for its alleged knowledge of or complicity in an attempted bribery of at least one South African public official -- then deputy finance minister Mcebisi Jonas.

In the interim, the Democratic Alliance said on Thursday Bell Pottinger would face a disciplinary hearing by the Public Relations and Communications Association in the United Kingdom, following the party's complaint that it sowed racial divisions in South Africa.

'SA's laws and institutions are crucial for its long term peace and security'

The colossal repository of damning evidence investigated by amaBhungane and Scorpio continues to grow, along with the list of implicated multinational corporates and Gupta affiliates.

On Monday, two more companies -- headquartered in Switzerland and China -- are now embroiled in allegations of kickbacks in Transnet contracts, again with Gupta companies at the centre of the sticky web.

O'Connor said South Africa's first and best option "for long term security and the country's future" is to use our own laws to deal with corruption.

"Unfortunately, one of the first things President Jacob Zuma did was attack and get rid of the most capable anti-corruption force, which was the Scorpions. This basically paved the way for everything else that has come since," she said.

O'Connor said that perhaps, in five years time or more, there might be a "political transition in South Africa, which will bring back real scrutiny of what has gone on in the past".

She said spending 10 to 15 years on one anti-corruption investigation is not as long as one might expect. But there might be scope for new leadership to rejuvenate the local institutions tasked with ensuring clean corporate and political governance.

How does the international law work?

While the UK Act hasn't been tested to a large extent yet, it's crucial it exists, says O'Connor.

"The important thing is third party corruption is outlawed and companies have to take steps [to prove it has adequate procedures in place to prevent bribery]," she said, and that sentences for bribery are harsh.

A businessperson involved in bribing Ugandan officials to win a contract was recently sentenced to 10 years in prison, she said. The UK's Serious Fraud Office (SFO) in February 2016 successfully secured its first conviction based on the Act, in which a UK-based construction company was convicted for failing to prevent another company from paying bribes on its behalf in the United Arab Emirates.

O'Connor said the UK's Serious Fraud Office, although "stretched financially and with little political support from the ruling Conservative Party", has recently taken much greater interest in supporting high profile international cases of corruption.

"I expect this to continue," she said.

Although the US's Foreign Corrupt Practices Act stands out as the "grandfather" of anti-bribery laws globally according Transparency International UK, the addition of the country's Bribery Act and equivalent legislation recently passed in China might give reason for multinational corporations, and in this case the Gupta family, to panic.

The UK's National Crime Agency (NCA) in July also opened the International Anti-Corruption Coordination Centre, bringing together specialist law enforcement officers from several countries to tackle allegations of grand corruption internationally. Interpol, the US Department of Homeland Security and agencies from Australia, Canada, New Zealand, Singapore and the UK are all on board.