Former New York Attorney General Eliot Spitzer. Photo by Timothy Krause.In the United States, we have passed many laws on the principle that gifts of value either will influence or appear to influence the actions of their recipients.
This principle underlies the general statutes against bribery, of course. It also explains why the rules for lobbying are so complex. And it underpins the Foreign Corrupt Practices Act, a 1977 law that bars U.S. companies from bribing foreigners to secure favors or business.
A recent article in The New York Times described how businesses and their lawyers have reached out with favors, opportunities and company-paid high-end travel to a class of individuals who can protect, or profoundly damage, their interests. But these people are not foreign dignitaries to whom the Foreign Corrupt Practices Act would apply. The objects of this corporate bounty are attorneys general.
Lobbying rules that cover legislators, governors and other policymaking officials often don’t cover attorneys general, and we do not have the equivalent of the Foreign Corrupt Practices Act for domestic politicians. That leaves attorneys general open to attempts to curry favor via campaign contributions and personal benefits, such as sponsored trips to conferences at luxury resorts. Further, most bribery prosecutions related to elected officials are brought by attorneys general themselves, or by the Justice Department, which typically works closely with them. In this situation, a bribery case would probably be brought only if there was an explicit quid pro quo, and both the attorneys general and the lawyers courting them are way too smart to enter into such an agreement.
The attorneys general, not surprisingly, broadly deny that personal connections to corporate lawyers or lobbyists affect their ability to do their job. Pam Bondi, the attorney general of Florida, attracted criticism by dropping a high-profile case against online travel sites before the court even officially took it up. The law firm that represented several of these sites invited Bondi to appear at a Washington event and arranged for a cover article in a legal trade publication, among other gestures of support. In a statement, Bondi said that “absolutely no access to me or my staff is going to have any bearing on my efforts to protect Floridians.”
That’s nice to hear, but not particularly reassuring.
Financial favors to attorneys general should be banned - and if necessary, we should have a domestic version of the Foreign Corrupt Practices Act to do it. But that alone will not address the full scope of the issue. The underlying problem is that many attorneys general are ambitious and not above using corporations alternately as public whipping boys and piggy banks, which allows them to tap shareholders’ money to fund their own future campaigns and to make contributions to their state treasuries. The jump from that to the sort of gift-giving and favor-currying The Times describes is not large. Corporate officers and directors in this country have gotten far too accustomed to cutting deals in which they mostly roll over and hand company money to prosecutors and regulators in order, ostensibly, to get back to business, and sometimes to avoid personal lawsuits and prosecutions that can be career-ending or worse.
It is easy to see why corporate interests might prefer the carrot to the stick when you consider the experiences of those who did otherwise. Former American International Group Chairman and Chief Executive Maurice “Hank” Greenberg filed a defamation lawsuit against former New York Attorney General Eliot Spitzer. Spitzer’s office began proceedings, continued by the current attorney general, Eric Schneiderman, which is scheduled for a trial this January to settle allegations that Greenberg committed fraud personally. (AIG has already paid $1.6 billion as an organization to settle regulators’ claims.) Greenberg’s suit against Spitzer hinges on comments made, after Spitzer left office, suggesting inaccurately that Greenberg was charged criminally. Wall Street was Spitzer’s punching bag of choice; it remains to be seen how Greenberg will fare pushing back against him.
Richard Grasso also pushed back against litigation from Spitzer. Grasso was pushed out of his position as chairman of the New York Stock Exchange after a controversy arose over the size of his compensation package. Spitzer subsequently sued Grasso, along with another former NYSE director, seeking the return of a large portion of their compensation. (The attorney general had standing to sue under New York statutes governing not-for-profit corporations, which included the NYSE at the time.) Grasso fought Spitzer’s objections, which were all eventually dismissed.
Corporate leaders need to grow some backbone and stand up against unwarranted litigation. If more followed the examples of Grasso and Greenberg, attorneys general would eventually get the message that corporations are not the targets of convenience to which they have become accustomed.
Shareholders and the public at large would both be better served, the former by not having their pockets picked, and the latter by having their “people's lawyers” actually do legal work that benefits the public without reference to whether it benefits themselves.
Posted by Larry M. Elkin, CPA, CFP®
Former New York Attorney General Eliot Spitzer. Photo by Timothy Krause.
In the United States, we have passed many laws on the principle that gifts of value either will influence or appear to influence the actions of their recipients.
This principle underlies the general statutes against bribery, of course. It also explains why the rules for lobbying are so complex. And it underpins the Foreign Corrupt Practices Act, a 1977 law that bars U.S. companies from bribing foreigners to secure favors or business.
A recent article in The New York Times described how businesses and their lawyers have reached out with favors, opportunities and company-paid high-end travel to a class of individuals who can protect, or profoundly damage, their interests. But these people are not foreign dignitaries to whom the Foreign Corrupt Practices Act would apply. The objects of this corporate bounty are attorneys general.
Lobbying rules that cover legislators, governors and other policymaking officials often don’t cover attorneys general, and we do not have the equivalent of the Foreign Corrupt Practices Act for domestic politicians. That leaves attorneys general open to attempts to curry favor via campaign contributions and personal benefits, such as sponsored trips to conferences at luxury resorts. Further, most bribery prosecutions related to elected officials are brought by attorneys general themselves, or by the Justice Department, which typically works closely with them. In this situation, a bribery case would probably be brought only if there was an explicit quid pro quo, and both the attorneys general and the lawyers courting them are way too smart to enter into such an agreement.
The attorneys general, not surprisingly, broadly deny that personal connections to corporate lawyers or lobbyists affect their ability to do their job. Pam Bondi, the attorney general of Florida, attracted criticism by dropping a high-profile case against online travel sites before the court even officially took it up. The law firm that represented several of these sites invited Bondi to appear at a Washington event and arranged for a cover article in a legal trade publication, among other gestures of support. In a statement, Bondi said that “absolutely no access to me or my staff is going to have any bearing on my efforts to protect Floridians.”
That’s nice to hear, but not particularly reassuring.
Financial favors to attorneys general should be banned - and if necessary, we should have a domestic version of the Foreign Corrupt Practices Act to do it. But that alone will not address the full scope of the issue. The underlying problem is that many attorneys general are ambitious and not above using corporations alternately as public whipping boys and piggy banks, which allows them to tap shareholders’ money to fund their own future campaigns and to make contributions to their state treasuries. The jump from that to the sort of gift-giving and favor-currying The Times describes is not large. Corporate officers and directors in this country have gotten far too accustomed to cutting deals in which they mostly roll over and hand company money to prosecutors and regulators in order, ostensibly, to get back to business, and sometimes to avoid personal lawsuits and prosecutions that can be career-ending or worse.
It is easy to see why corporate interests might prefer the carrot to the stick when you consider the experiences of those who did otherwise. Former American International Group Chairman and Chief Executive Maurice “Hank” Greenberg filed a defamation lawsuit against former New York Attorney General Eliot Spitzer. Spitzer’s office began proceedings, continued by the current attorney general, Eric Schneiderman, which is scheduled for a trial this January to settle allegations that Greenberg committed fraud personally. (AIG has already paid $1.6 billion as an organization to settle regulators’ claims.) Greenberg’s suit against Spitzer hinges on comments made, after Spitzer left office, suggesting inaccurately that Greenberg was charged criminally. Wall Street was Spitzer’s punching bag of choice; it remains to be seen how Greenberg will fare pushing back against him.
Richard Grasso also pushed back against litigation from Spitzer. Grasso was pushed out of his position as chairman of the New York Stock Exchange after a controversy arose over the size of his compensation package. Spitzer subsequently sued Grasso, along with another former NYSE director, seeking the return of a large portion of their compensation. (The attorney general had standing to sue under New York statutes governing not-for-profit corporations, which included the NYSE at the time.) Grasso fought Spitzer’s objections, which were all eventually dismissed.
Corporate leaders need to grow some backbone and stand up against unwarranted litigation. If more followed the examples of Grasso and Greenberg, attorneys general would eventually get the message that corporations are not the targets of convenience to which they have become accustomed.
Shareholders and the public at large would both be better served, the former by not having their pockets picked, and the latter by having their “people's lawyers” actually do legal work that benefits the public without reference to whether it benefits themselves.
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