What does herring fishing have to do with anti-corruption? A lot. If the U.S. Supreme Court agrees with a challenge brought by fishing companies against a doctrine requiring courts to defer to federal regulators, the floodgates could open to thousands of legal challenges by kleptocrats and others subject to sanctions.
This past January, the Supreme Court heard oral argument in two related cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce which were filed by commercial fishing groups challenging a regulation of the National Marine Fisheries Service requiring fishing boat operators to pay for monitors who conduct federally mandated compliance reviews of fishing vessels. The cases put the viability of Chevron USA v. Natural Resources Defense Council, 467 U.S. 837 (1984), a Supreme Court decision requiring courts to defer to administrative agencies in interpreting ambiguous statutes, squarely at issue. As a leading expert on the Supreme Court wrote after the oral arguments “it seemed unlikely that …the Chevron doctrine will survive in its current form. A majority of the justices seemed ready to jettison the doctrine or at the very least significantly limit it.”[1]
The Treasury Department’s Office of Foreign Assets Control (OFAC) which implements sanctions imposed under the International Emergency Economic Powers Act (IEEPA) and the Global Magnitsky Act, among others, could be severely affected. Courts routinely rely on Chevron in adjudicating (and almost always, denying) challenges to OFAC decisions. As one court recently wrote “[a] review of a decision made by OFAC is extremely deferential because OFAC operates in an area at the intersection of national security, foreign policy, and administrative law. Indeed, OFAC is entitled to Chevron deference in its interpretations of IEEPA.”[2]
At least one federal court has already noted the potential impact of a Chevron reversal on sanctions litigation. According to OFAC, Delyan Peevski “is an oligarch who … has regularly engaged in corruption, using influence peddling and bribes to protect himself from public scrutiny and exert control over key institutions and sectors in Bulgarian society.”[3] When he filed suit in federal court challenging his Global Magnitsky Act designation, the government moved to dismiss, relying on Chevron. However, shortly after the oral arguments in Loper Bright and Relentless, the presiding judge, Tanya Chutkan (of January 6 case fame) noted what a reversal of Chevron could mean for his challenge and stayed the case pending the Supreme Court’s decision.
It is not clear what would replace Chevron, but one possible candidate is the Skidmore doctrine.[4] Unlike Chevron, Skidmore does not require courts to defer to federal agencies and instead requires them to assess agencies’ decisions in terms of thoroughness, validity of reasoning and consistency. The adoption of such a standard will make it much easier for litigants like Peevski to challenge their designations and harder for OFAC to impose and defend sanctions.
Partner, Squire Patton Boggs
[2] https://www.dcd.uscourts.gov/sites/dcd/files/22mj00067CriminalOpinion.pdf (internal citations and punctuation omitted).
[4] Skidmore v. Swift & Co., 323 U.S. 134 (1944)
No compliance team can be everything everywhere all at once. An effective compliance program is truly an organization-wide effort. As a compliance officer, ensuring that your internal stakeholders know what to do is fundamental – as in, it is fun to meet colleagues in person to help them develop a compliance mentality and best practices.
A key compliance force multiplier is mid-level management. These unsung heroes often are reliable compliance partners especially when gently reminded that it is career enhancing to be an ethical manager who cares about protecting the organization. Now that you have their attention, offer coaching on ways they can use their ethical voice to provide that important ‘tone from the middle’. Here are a few suggested points to consider raising:
Know where to find policies online, especially those relevant to the team’s work, and remind employees about them.
Be aware of all touchpoints with government officials or entities in any country and ensure employees follow the approval process.
Request employees to complete their online training and policy acknowledgement(s) before the deadline. Make it part of your performance criteria.
Direct an employee who raises a potential or actual conflict of interest to the relevant system or internal team. Remember that your consideration and approval as the manager may be needed.
Apply a trust-but-verify approach to employee expense reports and procurement requests by taking time to check them, including the receipts.
Contact Compliance or HR immediately if you become aware of possible fraud or employee misconduct. Do not investigate allegations on your own.
Set the example by complying with policies, and always treating everyone and organization assets with respect.
In conducting these conversations, be mindful of body language – it can say a lot. And importantly, listen for concerns the manager raises even if outside of your talking points. Follow up on those with a sense of urgency. More work, yes, but consider it a compliment that the manager feels it’s safe to confide in you.
Finally, be sure to send a follow-up email to say thanks, reiterate your key points, provide links to policies, etc., and, as always, your contact information.
Presto, you have just increased the power and reach of your compliance program.
Independent Compliance and Ethics Attorney
With the U.S. Department of Justice’s recent emphasis on using data analytics to root out corrupt actors, it’s worth remembering that simple observation can sometimes be just as revealing.
Anti-corruption activist Aleksey Navalny was well aware of this, using Instagram and other public sources to reveal in 2015 that a watch worn by Russian President Vladimir Putin’s press secretary Dmitry Peskov was worth more than $600,000 – or four times the official’s declared annual income. Weeks later, Navalny and his team of investigators used photos, geotagging data, and ship tracking records to provide strong evidence that Peskov vacationed on a yacht that cost more than $380,000 to charter.
Perhaps the self-styled “Rich Kids of Instagram” should have thought about this before they posted pictures on social media of their over-the-top lifestyles, which sometimes included their parents’ ill-gotten gains. Posts showing off yachts and private jets have been used to identify assets for recovery, and their geotagging data allowed litigants to bring suit in venues where the rule of law is more consistent.
Then again, you don’t have to be selfie-prone to get in trouble. It was during a government photo shoot that Thailand’s Deputy Prime General Minister Prawit Wongsuwon shielded his eyes from the sun – and revelated a luxury watch on his wrist, prompting an investigation by the country’s National Anti-Corruption Commission. Netizens then combed through older photos and identified him wearing dozens more luxury watches, worth more than $1 million combined. The Commission, which is governed by political appointees and was headed by Prawit’s former secretary-general, cleared him of wrongdoing in 2018, accepting the explanation that he had merely borrowed them from a friend who had since died. However, Thailand’s Supreme Administrative Court recently ordered the Commission to disclose further details of its findings.
Perhaps it is safer to just keep illicit cash stashed away, but that has its unforeseen drawbacks.
When Chinese police arrested Lai Xiaomin, a former Communist Party secretary and the former chairman of distressed lender Huarong Asset Management in 2018, they reportedly found so much idle cash – around $40 million worth – that it was collecting mold. Perhaps, like former U.S. Congressman William Jefferson, he should have kept the cash in his freezer.
FCPA Compliance Consultant, TRACE