Covid-19 requires increased focus on political contributions

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Juan Francisco González
Pérez Bustamante & Ponce, Quito
jgonzalez@pbplaw.com

Arturo Griffin
Pérez Bustamante & Ponce, Quito
agriffin@pbplaw.com

Introduction

Financing political campaigns can always pose corruption risks in any democratic country. This is because political contributions can become mechanisms through which unethical entities and individuals seek to obtain undue benefits from political parties and candidates once they reach public office. Taking into consideration the Covid-19 health crisis, this risk may become even more significant because companies that have suffered great economic impact during the health crisis may try to finance political campaigns with the aim of obtaining a benefit without having thoroughly considered the consequences of such acts.

While financing political campaigns can have a legitimate purpose and is a right that can be exercised in most democratic jurisdictions, it is necessary to evaluate the legal and reputational impact that such contributions may have for any company or individual. At a moment in time when financial resources are limited and businesses reputation are vulnerable, financing political campaigns must be thoughtfully considered.

Ecuadorian law provisions on political campaign financing

In Ecuador, the political organisations registered before the National Electoral Council are authorised to receive lawful economic contributions in accordance with the Organic Electoral Law: Democracy Code. Under the Democracy Code, political organisations are prohibited from directly or indirectly receiving financial contributions from: state-owned companies; state-owned public services concessionaires; religious entities of any denomination; individuals or entities that are government contractors; and foreign entities or states. People and entities that are not subject to these prohibitions can make contributions to political organisations. Such contributions must be registered and may be reviewed by the National Electoral Council.

Political organisations must declare, register and justify the origin and amount of the resources and assets obtained from third parties. The contributor and the political organisation which receives a contribution must not acquire any commitment that is contra legem or public service as retribution for such contribution. Likewise, individuals who make contributions of any kind to political organisations with the purpose of financing a political campaign, must register them with the National Electoral Council.

Companies which have contracts with government entities are forbidden from making contributions to political organisations. The purpose of this prohibition is to avoid conflicts of interest between government contractors and political individuals that may reach position of power that could result in the allocation of additional government contracts or undue benefits.

From a criminal law perspective, there are several types of offences that may be applicable to situations in which individuals or entities make contributions to political campaigns for the purpose of obtaining an unlawful benefit or are forced to do so by political decision makers. These are: embezzlement, bribery, influence peddling and extrusion. Individuals who are found guilty of committing such crimes can be imprisoned, ordered to compensate the Ecuadorian State and society in general, lose their political rights and property acquired by illegal or unfair means will be confiscated. At the same time, as of February 2018, when corporate criminal liability for corruption-related offences was implemented, private entities found guilty of bribery or influence peddling may be subject to dissolution and liquidation, in addition to fines and the obligation to compensate the Ecuadorian Government and society in general, and the confiscation of illegally obtained property or termination of benefits.

The 2012–2016 Bribes case in Ecuador

On 26 April 2020, the Supreme Court of Ecuador convicted a former president, his vice-president and other government officials, as well as private individuals in the construction business, for bribery. According to the Court’s decision, these government officials created a corruption scheme by which the private individuals in the construction business funded the ruling political party’s political campaigns in exchange for public contracts and other benefits.

Most of the individuals who were prosecuted were sentenced to eight years in prison, including a former president, vice-president, and several private individuals. The total amount of funds paid in bribes in this scheme was estimated at approximately US$8m. The Court ordered the guilty individuals to pay compensation of approximately US$14.7m in favour of the Ecuadorian government. The sentence is not final and will be subject to appeal and then to a cassation appeal.

Because the offences in question in the 2012–2016 Bribes case took place before February 2018, that is, before corporate criminal liability for bribery was implemented, no companies were found guilty.

The implication of political contributions for companies and private individuals during and after the Covid-19 crisis

Recent history demonstrates that Ecuadorian companies should establish clear rules regarding political contributions. If companies decide not to ban political contributions, they should design and implement robust controls, which should form part of their compliance programmes. The possible legal and reputational impact of not managing these specific risks is particularity grave in Ecuador, where financing a political campaign with the intention of obtaining undue benefits could result in the dissolution of the company and imprisonment of the individuals involved.

Making contributions to political campaigns always presents a significant risk of corruption that must be adequately managed and appropriately mitigating these risks is all the more necessary given the current context. Indeed, because companies and individuals have suffered a significant economic crisis due to the Covid-19 crisis, they might be more inclined to financial misconduct because of economic distress. Transparent and ethical business practices are more necessary than ever.

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