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KSA’s anti-graft drive is not a shakedown, but a big shake-up

What are the differences between a “shakedown,” a “plea bargain,” and a “deferred prosecution agreement”?
After consulting several dictionaries and talking to a few lawyers, I came to the conclusion it is largely a question of degree, sophistication and origination, and they are all pretty similar in practice.
A shakedown is US slang for demanding money with menace, and is obviously unacceptable and illegal, with shades of the gangster Al Capone: “Give me the money or I’ll break your arm.”
A plea bargain is a legal process by which a person accused of a crime agrees with the law to accept his or her guilt on a lesser charge, in the expectation that more serious offenses will be overlooked when it comes to sentencing. 
There is a degree of menace there too. “If you don’t agree to this, you’ll spend a long time in prison.” That’s menacing enough.
A deferred prosecution agreement is rather more nuanced. The practice has become commonplace in the US and elsewhere, when big financial institutions came under the legal spotlight as never before. But a bit of background is necessary to fully understand it.
It may be true that very few individual bankers took any responsibility for their negligence in the run-up to 2009, when they led the world to the brink of economic collapse. But their banks, as institutions, certainly have.
They — JP Morgan, Citigroup, Bank of America, Goldman Sachs, Morgan Stanley, Deutsche Bank and Credit Suisse being the most prominent — have paid an estimated $60 billion to US and other authorities to make up for the mis-selling of toxic mortgage-backed securities.
Others handed over tens of billions for a variety of crimes including money laundering, sanctions busting, narcotics funding and interest rate and forex fraud.
Executives at these institutions did not just wake up one morning, realize they had done wrong, and make the decision to hand over billions of their shareholders’ money in atonement and repentance. 
What happened was that the banking and legal authorities let them know that they had been rumbled, there was evidence against them of serious crime, and asked them would they like to come to discuss the matter — in a friendly way, of course.
The US Department of Justice (DoJ) led the way in this technique. 
They had the evidence, they could use it in court to impose huge fines and even prison sentences on banking executives, but if the “accused” (never formally) would agree to pay a multibillion-dollar fine and agree to be monitored to ensure illegalities did not recur, that would be more or less the end of the matter.

The techniques being used in the Saudi anti-corruption drive are the Kingdom’s version of a widely accepted and sophisticated legal process which has the blessing of the US legal system.

Frank Kane

“Pay back the money, say you’re sorry, by paying a bit more, and don’t forget we’re watching you in future,” was the DoJ message. There is a subtle degree of menace there too. And it is, more or less, the same formula that is being adopted in the anti-corruption campaign launched a couple of weeks ago in Saudi Arabia.
One lawyer said that the detained culprits are being asked to agree to a statement along these lines: “My misconduct, combined with others, hurt the Saudi economy and threatened the livelihood and well-being of Saudi citizens. My payment of ‘x’ billion dollars will resolve claims against me and my corporation, but I agree to cooperate with the Saudi authorities in any further investigation into misconduct. I also agree to a period of oversight and supervision of my business activities until such time as the Kingdom sees fit to release me from this obligation. I am sorry for my past misconduct.”
(This is actually a broad paraphrase of the Department of Justice’s statement on its $7.2 billion settlement with Deutsche Bank earlier this year, the biggest of the penalties under the deferred prosecution agreement procedure imposed by the US authorities for selling “toxic” mortgages and other offenses).
So, rather than being a “shakedown” along Chicago gangster lines, the techniques being used by the Saudi anti-corruption drive are the Kingdom’s version of a widely accepted and sophisticated legal process which has the blessing of the US legal system and which has won many billions of dollars back from self-confessed offenders. 
No less than the misconduct which brought the world to the brink of financial meltdown in 2009, the effects of corruption on an economy and society at large can be disastrous. The Saudi government estimates that corruption costs the national economy as much as 10 percent of gross domestic product (GDP) per year; that hundreds of billions of dollars could be recovered in the course of the anti-graft drive; and that the measures will stop the flight of Saudi capital from the Kingdom.
The broader message — aimed at the public sector as much as the traditional private sector — is that the authorities will not tolerate corruption in the new Saudi Arabia being shaped under Vision 2030, in which graft, bribery and backhand deals will be a thing of the past.
So, it’s not a shakedown at all — but it is a very big shake-up.
• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai