[I will be participating in this program today in Washington D.C. sponsored by The American Bar Association Criminal Justice Section and the ABA Center for Continuing Legal Education in cooperation with Dorsey & Whitney & LLP, and Pepper Hamilton, LLP. The program is from 12:00 – 1:30 (eastern) and can also be attended online and via telephone. Titled “The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases: Time to Reevaluate?” the program will include panelists from the DOJ, SEC, and OECD, Stanley Sporkin, and noted FCPA practitioners.].
The views of the Chamber of Commerce on FCPA reform are well known. See here for the Chamber sponsored white paper “Restoring Balance”, here for Andrew Weissman’s testimony (on behalf of the Chamber) at the November 2010 Senate FCPA hearing, and here for Michael Mukasey’s testimony (on behalf of the Chamber) at the June 2011 House FCPA hearing.
This post highlights the views of the Chamber in 1977 as Congress was in the midst of considering legislation to address the various foreign corporate payments Congress learned of during the mid-1970’s.
By way of background, one of the first issues faced by Congress was whether new legislation was needed to address the foreign corporate payments or whether existing law was sufficient. As to new legislation, various bills were introduced in Congress between 1975 and 1977 to address the foreign corporate payments. See here for my “foreign official” declaration which provides a chronology as to the legislative efforts. Two main competing legislative approaches soon emerged: (i) a criminalization approach as to certain foreign payments; and (ii) a disclosure approach as to a broader category of foreign payments. The Ford administration endorsed a disclosure approach, but various key legislators endorsed a criminalization approach, as did the Carter administration which took office in January 1977.
In the spring of 1977, the Chamber submitted substantively identical statements to the Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Interstate and Foreign Commerce in connection with hearings as to pending bills.
Drafted by J. Jefferson Staats (Staff Associate, Chamber of Commerce) the statement reads as follows.
“The Chamber condemns the payment, solicitation or extortion of bribes, payoffs or kickbacks, and supports the disclosure of such acts and the prosecution of violations of national laws. The Chamber has long endorsed the highest standards of professional conduct of American business people operating in the United States or overseas. The overwhelming majority of U.S. firms operating abroad conduct their activities in accordance with the legal requirements of host countries and refrain from unlawful intervention in the domestic affairs of host countries. The recent controversy surrounding questionable payments has resulted in much confusion concerning the commercial propriety of commissions and fees related to business transactions. Commission or fees paid on sales, or for services rendered, are part of conducting business world-wide. They are generally determined by the market place and, in and of themselves, are entirely legitimate.
The Chamber believes that disclosure has proved to be an effective deterrent against the offering or solicitation of various forms of questionable payments. U.S. securities law already requires public disclosure of material payments. This reporting requirement, embodied in the Securities and Exchange Commission’s ‘Voluntary Disclosure Program,’ has prompted voluntary disclosures by many corporations over the last two years. This voluntary disclosure approach, taken with existing SEC rule-making authority and the SEC’s recommended stock exchange listing requirements, should adequately respond to public, corporate and investor-related concerns. It is important to note, as well, that misrepresentations to the Internal Revenue Service of certain payments may constitute violations of the Internal Revenue Code.
The Chamber, therefore, is not convinced that new legislation is needed to confront the problems caused by questionable overseas business payments. (emphasis in original).”
In the statement, the Chamber opposed the criminal payment provisions included in certain bills under consideration. The statement reads as follows.
“The National Chamber is particularly troubled by [the criminalization approach] for the following reasons:
(1) The criminalization of questionable overseas business payments would contribute little to deterring such payments beyond that which is already accomplished by existing securities, tax and criminal law. Aspects of the payments problem which cannot be directly remedied by existing domestic law, such as the conduct of foreign government officials, also cannot be directly met by [the various bills]. The inherent limits of domestic law in dealing with all facets of the payments problem can only be overcome through the negotiation and implementation of bilateral, or preferably multilateral, agreements.
(2) Legislation which would impose criminal penalties for making questionable business payments would be very difficult to adminster and enforce. [The various bills] attempt to compensate for poor or reluctant enforcement by some foreign governments of their own laws by, in effect, doing it for them. In order to prosecute successfully under these provisions, much evidence located outside of the United States would be required. U.S. prosecutors investigating the activities of foreign government officials will be totally dependent on the foreign government for sufficient information. Conversely, the accused could easily be prejudiced by an inability to obtain production of documentary evidence or attendance of witnesses located outside the jurisdiction of U.S. courts.
(3) [The various bills] coud lead to conflicts between the United States and foreign government. Decisions taken at any point in the development and prosecution of a case could involve the United States in sensitive diplomatic problems. The use by the Government or a defendant of certain evidence could cause embarassment to a foreign government and create foreign policy problems for the United States stemming from our ‘meddling’ in another country’s internal affairs, even though such revelations should have come about through effective enforcement of domestic laws in the host country.”
Under the hearing “Multilateral Efforts” the statement states as follows.
“In has become apparent that a substantial number of questionable payments on the part of multinational firms are the result of demands from officials of, and others purporting to represent, governments in some countries. Such demands are frequently made in a context in which the company’s refusal to comply may result in extreme economic penalties. The Chamber is encouraged that the private sectors and governments of some countries have expressed interest in multilateral efforts to eliminate all such improper practices by businesses and by governments.
The conclusion of a multilateral agreement among the largest possible number of industrialized and developing countries could establish standards of ethical and equitable conduct of international business, provide that these same standards would apply to all businesses, create pressures or impose obligations on governments to vigorously enforce relevant domestic law, and establish a mechanism to resolve the diplomatic, commercial and legal problems associated with such problems. The Chamber endorses the efforts of the U.S. Government to bring about a treaty in this area under the auspices of the United Nations Economic and Social Council (ECOSOC).” (emphasis in original).
The above post is further to my forthcoming article, “The Story of the Foreign Corrupt Practices Act” to be published in the Ohio State Law Journal.