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The False Narrative That Prior To The FCPA Foreign Bribery By U.S. Companies Was Rampant

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A common narrative about the Foreign Corrupt Practices Act is something along the following lines: before the FCPA was enacted in 1977 foreign bribery by U.S. companies was rampant. (See here for instance: “Congress enacted the FCPA in the 1970s to address the rampant bribery of foreign officials by U.S. companies.”)

Even though certain problematic corporate foreign payments were unearthed in the mid-1970s, the notion that foreign bribery by U.S. companies was rampant prior to the FCPA is a false narrative. Indeed, extensive efforts were made during the legislative process to place the conduct in the proper context.

For instance, Gerald Parksy, Assistant Secretary for International Affairs, Department of the Treasury, stated during a 1976 House hearing as follows:

“Although I do not wish to minimize the seriousness of the problem, the situation can be put in the proper light by noting that the approximately 200 firms [the subject of questionable payment inquiries] come from a total of more than 9,000 that regularly file with the Commission. . . . Only a relatively few firms appear to have engaged in making questionable payments abroad. The vast bulk of our firms conduct their businesses ethically and completely in accord with the laws of the United States. We should not let the activities of a minority of U.S. firms operating abroad cast doubts on the nature or conduct of U.S. business generally.”

Even as to the companies implicated in the questionable conduct, the SEC Report noted that “[t]he conduct reported varies significantly, and the companies included can by no means universally be characterized as wrongdoers.” In a June 1975 speech included in the legislative record, SEC Chairman Raymond Garrett stated as follows:

“All improper foreign payments, of course, are not big bribes. Many of them are small and in the foreign community where made possibly not really regarded as improper at all. If the local plant manager in a foreign country has to slip a weekly mordita of modest amount to the postman in order to get regular mail deliveries, or to the customs inspector, the fire inspector or the tax collector, is that something for us to get excited about? In our public statements, individual members of the Commission have said no, at least where these payments conform to custom and usage. Similar payments, at the local level, anyway, are not unknown in the United States. That is certainly my current view, even though there is some difficulty in formulating the rationale for the distinctions implied.”

Likewise, SEC Chairman Hills stated during a House hearing as follows:

“It is, of course, important . . . to make distinctions among these companies. It is quite true that in some cases the payments were cynically and arrogantly made by top corporate officials who knew they were acting contrary to existing laws and regulations and without the authority of their board of directors. Indeed, many went to great lengths to conceal their conduct from the outside auditors, outside directors, and of course, the shareholders. But it is equally true that in a very large number of cases, the sums of money that have been involved are relatively small and were made by persons at a much lower level of management who went to great pains to conceal their own activities from their superiors. Unfortunately, the distinctions between these different types of corporate misconduct have not been made sufficiently clear to the public.”

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