Aligning Emerging Global Strategies to Combat Corporate Corruption: From a 'Two Thrust Approach' to a 'Two Swords One Thrust Strategy' of Compliance, Prosecutorial Discretion, and Sovereign Investor Oversight in China

• Author: Larry Cat´a Backer
• Position: W. Richard and Mary Eshelman Faculty Scholar Professor of Law and International Affairs, Pennsylvania State University, University Park, Pennsylvania. My great thanks to Zhang Lei of Beijing Normal University who has been an inspiration for this article. Great appreciation to my research assistant GAO Shan for his usual excellent work and for...
• Pages: 1-45

Aligning Emerging Global Strategies to Combat

Corporate Corruption: From a “Two Thrust

Approach” to a “Two Swords One Thrust

Strategy” of Compliance, Prosecutorial

Discretion, and Sovereign Investor Oversight

in China

L

ARRY

C

AT ´

A

B

ACKER

*

I. Introduction

Who cares about corruption?

1

In September 2017, the media reported

that parliamentarians at the Council of Europe had been bribed by

Azerbaijan to mute criticism of their government within the Council’s

human rights organs.

2

Also in September 2017, France’s financial

prosecutor announced the commencement of a corruption investigation

against the son of the former president of the International Association of

Athletics Federations for payments to influence the choice of host cities for

the largest global sporting events.

3

At the same time, authorities in Brazil

launched a probe into vote buying for the 2016 Olympics, a criminal

* W. Richard and Mary Eshelman Faculty Scholar Professor of Law and International

Affairs, Pennsylvania State University, University Park, Pennsylvania. My great thanks to

Zhang Lei of Beijing Normal University who has been an inspiration for this article.

Great appreciation to my research assistant GAO Shan for his usual excellent work and for

the Chinese translation of the article. This article is an expanded version of an article originally

published as

58(2),

58(2):17-30

— [Sword One Thrust Strategy” to Combat Criminal Corruption: Corporate

Compliance, Prosecutorial Discretion, and Sovereign Investor Oversight, J

ILIN

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NIVERSITY

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OURNAL OF

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. S

CI

.]S

OCIAL

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] 58(2): 17-30 (2018).

1. See Alvaro Cuervo-Cazurra, Who Cares about Corruption, 37 J. I

NT

’

L

B

US

. S

TUD

. 807, 807-

822 (2006) (arguing that anti-bribery laws abroad may act as a deterrent against engaging in

corruption in foreign countries, but that corruption results in relatively higher FDI from

countries with high levels of corruption).

2. See Jennifer Rankin, Azerbaijan Revelations Spark ‘Great Concern’ at Council of Europe: News

of Country’s $2.9bn Lobbying and Money-Laundering Scheme Could Herald Shake-Up at Rights Body,

T

HE

G

UARDIAN

(Sept. 5, 2017), https://www.theguardian.com/world/2017/sep/05/azerbaijan-

revelations-could-herald-shake-up-at-council-of-europe?CMP=share_btn_fb (“The details of

the payments came as an independent panel began confidential hearings into alleged corruption

at [the Parliamentary Assembly of the Council of Europe] Pace in Strasbourg, one of the

world’s oldest human rights bodies.”).

3. See French Prosecutor Pins Corruption in IAAF on Son of Ex-President, F

RANCE

24 (Sept. 5,

2017), http://www.france24.com/en/20170905-france-french-prosecutor-pins-corruption-iaaf-

son-ex-president?ref=fb.

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offense.

4

In January 2016, the Norwegian Pension Fund Global intensified

its efforts to engage in more aggressive anti-corruption investment

strategies.

5

In December 2013, Vietnam reported that it had sentenced

bankers to death in connection with embezzlement from a state owned

bank.

6

It’s a message to those in this game to be less greedy and that business

as usual is getting out of hand,” said Adam McCarty, chief economist

with the Hanoi-based consulting firm Mekong Economics. “The

message to people in the system is this: Your chances of getting caught

are increasing,” McCarty said. “Don’t just rely on big people above

you. Because some of these [perpetrators] would’ve had big people

above them. And it didn’t help them.

7

It is noteworthy that Colombia, shortly after the peace settlement ending

fifty years of civil war, turned its attention to the control of criminal

corruption in response to corruption scandals involving transnational

corporations that reached to the office of the president of the republic.

8

“Already seven people have been jailed in the case, including a former

senator and an ex-vice minister of transport. The attorney general also

asked the Supreme Court of Justice to investigate five other members of

congress.”

9

In China, Ding Ning, the chairman of Yucheng Group, was recently

sentenced to life in prison for his role in an online lending fraud scheme.

10

In August 2017, “[t]he Supreme People’s Procuratorate said China would

4. See Brazil Police Launch Raid to Probe Vote-Buying for 2016 Olympics, F

RANCE

24 (Sept. 5,

2017), http://www.france24.com/en/20170905-brazil-police-launch-raid-probe-vote-buying-

2016-olympics?reffb.

5. Norway Fund Blacklists China’s ‘Corrupt’ ZTE, L

OC

. (Jan. 7, 2016), https://www.thelocal.no/

20160107/norway-fund-blacklists-chinas-zte-over-corruption/ (“The world’s biggest sovereign

wealth fund, Norway’s public pension fund, has divested from Chinese telecom equipment

maker ZTE because of corruption fears, the Norwegian central bank which manages the fund

said on Thursday.”); see also Decision on Exclusion of Company from the Government’s Pension Fund

Global, N

ORGES

B

ANK

(Jan. 7, 2016), https://www.nbim.no/en/transparency/news-list/2016/

decision-on-exclusion-of-company-from-the-government-pension-fund-global/.

6. See Patrick Winn, Vietnam Is Sentencing Corrupt Bankers to Death, by Firing Squad, PRI

(Apr. 3, 2014), https://www.pri.org/stories/2014-04-03/vietnam-sentencing-corrupt-bankers-

death-firing-squad (“In March, a 57-year-old former regional boss from Vietnam Development

Bank, another government-run bank, was sentenced to death over a $93-million swindling

job”).

7. Id.

8. Juan Manuel Bedoya-Palacio, Colombia Enters the Age of Enforcement, T

HE

FCPA B

LOG

(Aug. 31, 2017), http://www.fcpablog.com/blog/2017/8/31/juan-manuel-bedoya-palacio-

colombia-enters-the-era-of-enforc.html.

9. Id.

10. See Ding Ning: China’s Biggest Ponzi Scheme Mastermind Sentenced to Life in Prison, T

HE

I

NDEPENDENT

(Sept. 12, 2017), http://www.independent.co.uk/news/business/news/china-

ponzi-scheme-ding-ning-yucheng-group-prison-sentence-ezubo-beijing-a7941811.html.

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2019] CHINESE STRATEGIES TO COMBAT CORPORATE CORRUPTION 3

strictly crack down on any crimes that seriously damaged financial security

and that destroyed financial orders.”

11

Corruption, especially bribery, has become a matter of international

concern. The United Nations (U.N.) Global Compact, a voluntary

initiative between large enterprises under the leadership of the U.N.

committed to implement universal sustainability principles and to take steps

to support U.N. goals, is built around ten principles.

12

Its tenth principle

states that “[b]usinesses should work against corruption in all its forms,

including extortion and bribery.”

13

The U.N. Global Compact has

expressed the view that “[c]orruption is a considerable obstacle to economic

and social development around the world. It has negative impacts on

sustainable development and particularly affects poor communities.”

14

In

that respect, the U.N. Global Compact highlights a “two thrust” attack on

corruption. “New and tougher anti-corruption regulations continue to

emerge worldwide. All companies need robust anti-corruption measures

and practices to protect their reputations and the interests of their

stakeholders.”

15

These “two thrusts”—the first consisting of national legislation (criminal

and civil) and the second consisting of corporate self-regulation against

corruption—have become the foundation of contemporary measures to

combat corruption, especially when committed by individuals within the

largest public or private enterprises.

16

The extent of national legislation and

international efforts to make national legislation coherent is well known.

17

National efforts continue to develop. For example, in 2017, the government

of the United Kingdom adopted the Criminal Finances Act of 2017.

18

In

addition, the range of international agreements respecting corruption

11. Stella Qiu & Vincent Lee, China’s Top Prosecutor to Intensify Crackdown on Financial Crimes,

R

EUTERS

(Aug. 22, 2017), https://www.reuters.com/article/china-finance-crime/chinas-top-

prosecutor-to-intensify-crackdown-on-financial-crimes-idUSL4N1L841V (“This year, high

profile regulators who have been caught up in President Xi Jinping’s anti-corruption drive

include the former head of the insurance regulator, former vice chairman of the securities

regulator and former assistant chairman of banking regulator.”).

12. The Ten Principles of the UN Global Compact, U.N. G

LOBAL

C

OMPACT

, https://

www.unglobalcompact.org/what-is-gc/mission/principles (last visited Oct. 7, 2018) (“The ten

principles are derived from: the Universal Declaration of Human Rights, the International

Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio

Declaration on Environment and Development, and the United Nations Convention Against

Corruption”).

13. Id.

14. Anti-Corruption, U.N. G

LOBAL

C

OMPACT

, https://www.unglobalcompact.org/what-is-gc/

our-work/governance/anti-corruption (last visited Oct. 7, 2018).

15. Id.

16. See, e.g., D

IMITRI

V

LASSIS

, The U.N. Convention Against Corruption Origins And Negotiation

Process in 66 R

ESOURCE

M

ATERIAL

S

ERIES

126 (2005).

17. See, e.g., id.

18. Criminal Finances Act 2017, c. 22 (U.K.). The Act made provisions in connection with

terrorist property and created corporate offenses for cases where a person associated with a

corporate body or partnership facilitates a tax evasion offense.

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