In-Group Favoritism as Legal Strategy: Evidence from FCPA Settlements

Abstract

Anti-corruption laws aim to bolster public integrity by punishing attempts to illegitimately curry favor with government decision-makers. These laws, however, can generate integrity risks of their own. This Article examines one such risk: that firms subject to scrutiny under the Foreign Corrupt Practices Act (FCPA) may attempt to influence prosecutors by exploiting shared political leanings or related socio-cultural ties. Drawing on social psychology, we theorize that FCPA defendants retain defense attorneys that are aligned with government officials. This behavior is consistent with a strategy of marshaling in-group favoritism—i.e., the psychological tendency for individuals to view more favorably those that they perceive as members of the same group—to defendants’ advantage. This strategy may be particularly auspicious in FCPA matters, in which prosecutors engage in subjective, trust-based assessments of defendants’ self-investigatory efforts, typically with minimal judicial oversight.

We test this theory by matching attorneys listed on court filings for all FCPA matters over eighteen years with a database of individuals’ political views based on their patterns of political donations. This analysis reveals that defendants tend to hire more liberal attorneys to represent them on these filings when prosecutors lean left and during Democratic administrations, and more conservative attorneys when prosecutors lean right and during Republican presidencies. In light of these findings, we offer policy prescriptions aimed at increasing transparency and judicial oversight of FCPA matters to mitigate integrity risks.

Keywords: FCPA, foreign corrupt practices, affective polarization, in-group favoritism, public integrity, revolving door, political sorting, corporate crime, settlements

JEL Classification: H11, D73, K14, K33, K40, K41, K42