Economic Analysis Of Damages Under FCPA
15 June 2011
By Dr. Patrick Conroy and Dr. Graeme Hunter
If a company pays a bribe to secure a project, what is the gain to the company from the bribe? With international bribery emerging as a regulatory enforcement priority based on the US Foreign Corrupt Practices Act (FCPA) and the soon-to-be-implemented Anti-Bribery Act in the UK, millions of dollars may depend on the correct answer to this deceptively simple question. Given this increasing enforcement, it is now necessary to apply greater precision to the evaluation of the benefits and costs of bribery.
In this article from Law360, NERA Senior Vice President Dr. Patrick Conroy and Vice President Dr. Graeme Hunter discuss a number of factors that potentially make the gain from a bribe, and thus the resulting fine, significantly different from a simple calculation of project profits. Dr. Conroy and Dr. Hunter argue that, to properly determine the effect of bribes for alleged FCPA violations, it is necessary to construct a but-for world -- the world in the absence of the alleged conduct. Two concepts are important in thinking about the benefit received from a bribe and how the but-for world would look: the effect the bribe has in securing the project, and the evaluation of the true economic profits of a project, including opportunity cost.
This article outlines some considerations based on the incremental probability of winning generated by the bribe and the opportunity cost of the project won that will lead to a more realistic, and sometimes lower, calculation of the gain from the bribe.
