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The Government Bears Some Responsibility For Certain FCPA Enforcement Actions

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Many Foreign Corrupt Practices Act enforcement actions do not occur in a vacuum. In certain instances, the road to FCPA violations is laid years, in some cases decades, earlier by government policy encouraging certain companies to do business in certain countries to accomplish certain political objectives.

An analogy would be a parent telling a child to go play in the playground frequented by”bad” kids and then, after a few weeks, the child swearing and telling dirty jokes around the house. In other words, don’t be surprised by the end result, the parent sent the child to the playground in the first place.

In light of the recent FCPA enforcement actions concerning business conduct in Libya (see here and here) in which the U.S. government explicitly encouraged companies to do business in the country upon the lifting of sanctions in 2004, it is worth pausing to consider whether the government bears some responsibility for certain FCPA violations.

While some are likely to view this as a controversial statement or being a corporate apologist, this basic fact has always been relevant to the Foreign Corrupt Practices Act and still is in the FCPA’s 40th year.

As highlighted in this prior post, one of the more insightful things found in the FCPA’s extensive legislative history is an October 1975 article by Milton Gwirtzman published by the New York Times Magazine.  At this point in time, Congress was in the midst of its investigations into the so-called foreign corporate payments problem and Gwirtzman noted:

“If corporate bribery abroad has offended the post-Watergate morality, the companies implicated have nevertheless taken a greater share of the blame than they deserve.  […]  The responsibility for present practices must also be shared by our Government,  which not only encouraged investment in countries whose ethical standards differ  from ours, but also in many respects set the pattern for the graft under censure today.  […]  The rapid acceleration of American private investment in foreign lands, which began in the mid-nineteen-sixties, was seen by our foreign policy makers as a welcome opportunity.  If U.S. firms could build a nation’s infrastructure, supply its consumer goods and hire a portion of its workers, the greater the likelihood the nation would be bound to ours by the safest and strongest of ties, economic self-interest.  As a result, our Government wrote the foreign investment laws of several developing countries and urged our multinationals to make use of them.  New programs were established to insure foreign investment against the risks of war and expropriation.  Embassy personnel were ordered to scout out export possibilities for American firms, which were published in Commerce Business Daily, the Government’s daily list of business opportunities.”

Gwirtzman then stated as follows.  “For all these reasons, it would be unwise, as well as unfair, simply to write off bribery abroad to corporate lust.  It is a symbol of far deeper issues that really involve America’s role in the world.”

Relevant to the recent Libya enforcement actions, in 2004 the U.S. government lifted various sanctions against Libya after Moammar Kadafi agreed to abandon a nuclear weapons program.  The White House encouraged “Libya’s reintegration with the global market” and a White House statement read:  “U.S. companies will be able to buy or invest in Libyan oil and products. U.S. commercial banks and other financial service providers will be able to participate in and support these transactions.”

As I told a Foreign Policy reporter back in 2014 in connection with the Libya inquiries.

“There is an irony of course in the U.S. government encouraging companies to do business in certain countries because it serves U.S. interests.  Then when the company does business in that country and encounters business conditions that the U.S. government no doubt knew it was going to encounter, the company then becomes the subject of a U.S. law enforcement inquiry.”

Whether its leading trade missions, providing export financing or provide support through diplomatic channels, in certain instances the U.S. government encourages companies (for foreign policy and other strategic interests) to go to the edge of the cliff.  As the passage of time occasionally shows, when the footing on the cliff becomes a bit loose, and the market participants fall over the edge, other segments of the U.S. government then launch a criminal inquiry seeking to discover why.

Part of the answer is fairly obvious: the business organizations were acting pursuant to government policy and Gwirtzman’s words from 40+ years ago remain relevant today:

“[I]t would be unwise, as well as unfair, simply to write off bribery abroad to corporate lust.  It is a symbol of far deeper issues that really involve America’s role in the world.”

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