USA Corruption Report

Corruption in the judiciary is a moderately low risk for companies, but ideological influences permeate the US justice system. Companies express confidence in the independence of the judiciary (GCR 2017-2018). Companies also express general confidence in the efficiency of the legal framework pertaining to settling disputes and challenging regulations (GCR 2017-2018). Judicial favors in return for irregular payments and bribes are uncommon (GCR 2015-2016). Three-quarters of Americans express confidence in the court system in their state (NCSC 2016). Three out of five Americans considered the state courts to be ‘political’ (NCSC 2016). The adversarial legal system has several negative consequences; administrative discretion is reduced, causing delays in decision-making, and increasing reliance on the judiciary to help design policies (SGI 2017). New decisions are often appealed by multiple parties, causing lengthy uncertainty as to what the obligations are for firms under the regulation (SGI 2017). The US has expansive judicial review procedures for legislative and executive decisions (SGI 2017). However, judicial review is not limited to merely ensuring compliance with the law (SGI 2017). The decisions of the courts are heavily influenced by ideological tendencies; there is a lack of structures or practices that ensure stability or moderation in constitutional doctrine (SGI 2017). The Securities and Exchange Commission, an independent government organ tasked with enforcing FCPA regulations, protecting investors and regulating the securities markets, has increasingly come under attack for its use of internal administrative procedures and in-house judges instead of Federal Courts (WSJ, Aug. 2015). The Supreme Court is likely to rule on whether using these internal administrative procedure is appropriate before the end of 2018 (New York Times, Sept. 2017).

Enforcing a contract in the US court system is slightly faster than the OECD high-income average, but in Los Angeles courts the costs involved are double the OECD high-income average (DB 2018). The US is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and it is also a state party to the International Centre for the Settlement of Investment Disputes (ICSID).

Former Tennessee Judge Casey Moreland is facing five felony counts in relation to trying to bribe and frame a woman who alleges he offered judicial favors in exchange for sex (Tennessean, Apr. 2017). Moreland is also accused of trying to bribe the woman with USD 6,000 in cash in exchange for her signing a statement that she never received special treatment (Tennessean, Aug. 2017). The case was still pending at the time of review.

There is a moderately low risk of corruption in the US land administration. Companies report that property rights are adequately protected (GCR 2017-2018). Due to deficiencies in the law, particularly in terms of the transparency required in transactions, the real estate sector in the United States is vulnerable to money laundering (TI 2017). The US Treasury has taken some steps to detect money laundering in the real estate sector by requiring title insurance companies to report the identities of all-cash buyers in parts of a number of states (Reuters, Jul. 2016). Registering property takes 12 days in New York City and 20 days in Los Angeles, both require less time than the OECD high-income average (DB 2018).

In one corruption case, Argentina’s President Cristina Fernández has been accused by Argentina’s top anti-corruption official of using ‘dirty money’ to acquire more than 60 properties in Miami (Miami Herald, Oct. 2017).

Corruption in the tax administration is a moderately low risk in the US. Surveyed businesses report that irregular payments and bribes when making tax payments are uncommon (GCR 2015-2016). Complex corporate tax laws present a challenge for companies and require a high degree of vigilance (pwc 2017-2018). Business executives consider tax rates and regulations to be among the most problematic factors for conducting business in the US (GCR 2017-2018). The US tax agency, the Internal Revenue Service, estimates that tax evasion costs the federal government an estimated USD 458 billion a year (Fortune, Apr. 2016). Several US companies practice inversion, a widespread tax evasion scheme that allows companies to reincorporate abroad (Economist, Feb. 2015).

The number of payments and the time required to make tax payments are in line with the OECD high-income average (DB 2018).

There is a moderate to low risk of corruption in the public procurement sector. Businesses perceive that favoritism in the decisions of government officials and the diversion of public funds are fairly uncommon (GCR 2017-2018). Bribery and irregular payments and irregular payments are uncommon in the process of awarding government contracts (GCR 2015-2016). More than one in five businesses indicate they have experienced procurement fraud (pwc 2016). Business opportunities, regulations, resources, and training are available on Acquisition Central. State agencies collect and report data on public procurement through the Federal Procurement Data System – Next Generation (FPDS-NG).

An expansive case in the US Navy dubbed the ‘Fat Leonard’ case has launched investigations into 30 admirals and 170 others over corruption investigations (San Diego Union Tribune, Jul. 2017). The case revolves around a Malaysian businessman dubbed ‘Fat Leonard’ who bribed ‘scores’ of navy officials with prostitutes and luxury items into giving him classified information which he subsequently used to manipulate the US Navy into using his port services for which his company GDMA significantly overcharged (San Diego Union Tribune, Jul. 2017). A number of officials, including an active U.S. Navy commander have been found guilty in the case (FCPA Blog, Aug. 2017). The case is ongoing. Companies are recommended to use a specialized public procurement due diligence tool to evaluate and avoid corruption risks related to procurement in the US.