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

American Business Law Journal, Vol. 60, Forthcoming

44 Pages Posted: 28 Jul 2022

See all articles by Brian D. Feinstein

Brian D. Feinstein

University of Pennsylvania - The Wharton School

William R. Heaston

University of Pennsylvania, The Wharton School

Guilherme Siqueira de Carvalho

University of Pennsylvania - The Wharton School

Date Written: July 1, 2022

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 ideologically aligned with Justice Department officials. This behavior is consistent with a strategy of marshaling affective polarization—i.e., the psychological tendency for individuals to view more favorably those that share their political beliefs—to defendants’ advantage. Alternatively, it may reflect defendants’ related belief that they benefit from retaining counsel that share social or cultural ties with prosecutors, where these ties happen to aligned with political orientation. Under either explanation, the strategy of hiring aligned counsel 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 during Democratic administrations and more conservative attorneys during Republican presidencies. They also are more likely to hire liberal attorneys when Justice Department prosecutors lean left and conservative ones when prosecutors lean right.

These findings are consistent with our theory that FCPA defendants select counsel based on perceived benefits of their alignment with government officials. That possibility is noteworthy given the importance of shielding anti-corruption enforcement from even the perception of improper influence. 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

Suggested Citation

Feinstein, Brian D. and Heaston, William R. and Siqueira de Carvalho, Guilherme, In-Group Favoritism as Legal Strategy: Evidence from FCPA Settlements (July 2022). American Business Law Journal, Vol. 60, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4171352

Brian D. Feinstein (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

William R. Heaston

University of Pennsylvania, The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104
United States

Guilherme Siqueira de Carvalho

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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