Legislative bribery cuts to the quick--critically undermining government integrity and destroying public trust. So when it happens, prosecutors pull out all the stops. That's the current storyline in Alabama, where 11 people were indicted Oct. 1 for their roles in an alleged bribery scheme intended to buy votes that would legalize gambling in the state.
The classic graft, reminiscent of Tammany Hall tactics, is notable in that it allegedly involved not just the payment of bribes by businesses and lobbyists, but also the active solicitation of corrupt payments by four state senators.
Although such behavior is always shocking, it's by no means anything new or unusual.
"History shows that anytime there is a lot of money involved, there is a temptation for this kind of conduct," says Dan Purdom, who leads the white-collar crime practice at Hinshaw & Culbertson.
Beyond the obvious object lesson in the perils of such blatant corruption, the case suggests in-house counsel scrutinize government-relations practices, and examine the point where legitimate and legal lobbying efforts cross the line into criminal behavior.
According to the indictment, two prominent Alabama businessmen--Milton McGregor and Ronald Gilley--offered money and other things of value to legislators in exchange for votes on gambling legislation that would advance their business interests. On the other side, the four state senators allegedly demanded and agreed to accept the bribes in exchange for their votes.
The indictment also charges three lobbyists and an employee who worked for the businessmen, as well as an employee of the Alabama legislature, in what it describes as a corrupt network during the 2009 and 2010 legislative sessions.
"What stands out about this is the fact that they actually lumped the bribe givers and the bribe takers into the same indictment," says Bruce Maffeo, a partner at Cozen O'Connor. "The government focus typically is on the public officials who are receiving the bribe. If there's any message that comes through loudly with this, it's that the Justice Department is going to come down equally hard on the businesses that are offering the bribes."
In announcing the 39-count indictment, DOJ Criminal Division Assistant Attorney General Lanny Breuer called the scheme astonishing in scope and described the shifty methods the network employed in an attempt to hide its communications, including the use of what it perceived to be "safe" phones.
"Despite these efforts to obscure and conceal their conduct, the indictment alleges that the defendants' tactics became increasingly brazen as a vote on the corrupted legislation drew near," Breuer said. "Ultimately, we allege, in the scramble to secure the necessary votes to pass the pro-gambling legislation, McGregor and Gilley authorized their lobbyists and other co-conspirators to give the legislators whatever they wanted, as long as it secured their vote."
The prosecutors' case appears strong. Still, such high-profile corruption cases are always a challenge for the Justice Department. The election-year timing of the indictment has already led to accusations of political motivations. One of the defendant senators has gone as far as to say prosecutors are "in cahoots" with Alabama's governor.
Despite the fact that bribery seems like it should be the ultimate cut-and-dried offense, there actually are some gray areas--and that can create real problems for companies in their lobbying efforts.
Bribery cases often hinge on what exactly is being communicated to the public official. The behavior alleged in the Alabama case is particularly bald faced, but oftentimes companies get in trouble for more nebulous exchanges.
"Anytime you're in a political arena, there's always the potential that someone's looking for palm grease," Maffeo says. "If you're dealing directly with a public official, then you've got a way of assessing what's being suggested. But if you're operating through some sort of intermediary, a lot of this stuff gets muffled."
It's kind of like the old game Telephone. On one hand, there's nothing wrong with making a legal contribution to a sympathetic politician. On the other, an explicit quid pro quo is clearly illegal. But the more people the message passes through, the more one can start to look like the other.
"You really need to make sure that you've got a good handle on the message that's being delivered," Maffeo says. "The theoretical distinction is easily digested, and it boils down to whether or not something is being given in return for specific action. It becomes much more difficult to apply in the context of a specific official. There can be fine distinctions in what's being said."
Keeping intermediaries out of the communication chain may be possible when it comes to dealing with administrative officials, clerks, inspectors and the like, but when it comes to legislative affairs, companies rarely deal with elected officials directly.
Lobbyists are retained for their contacts as much as their expertise, and the closeness of their connections, coupled with their third-party status, can make it easier for companies to cross the line.
"It's entirely fine to go to a lobbyist who's known to have strong ties with a particular politician--no one's going to get locked up for that," Maffeo says. "But if the lobbyist or representative is having specific conversations with the public official where it is clear that the donations are being swapped for a vote, then you've jumped the track."
Layers of intermediaries also make it more difficult for companies to keep track of exactly what happens to their government relations budget.
"You need to know where your money is going," says Chris Clark, a white-collar crime partner at Dewey & LeBoeuf. "If there are big charges for lobbyists or entertainment, you need to have internal controls on that so you can tell what that's being used for."
Sentencing guidelines for companies implicated in public corruption provide breaks for self-policing, albeit contradictory ones.
"The Catch-22 there is that the guidelines will lessen the penalty if there is an effective corporate compliance program, period," Purdom says. "It's been my experience that prosecutors will argue that if you had an effective corporate compliance program, you would have caught the problem, and therefore you aren't entitled to the break under the guidelines."
As in so many aspects of corporate crime, a merely perfunctory compliance effort does little to prevent violations or mitigate penalties. Only a robust effort with a clear focus on a clean corporate culture is likely to have an effect.
"Look, it would be the rarest of U.S. companies that didn't have a policy at this point against paying bribes like this, but it still happens," Clark says. "Obviously just having the policy doesn't get it done."