The FCPA was enacted in 1977, amended in 1988, and amended again in 1998.
It is widely expected that an FCPA reform bill will be introduced this month. Who will introduce the reform bill, what specific amendments will it seek, will hearings be held, will the reform bill succeed? All interesting issues to monitor.
Against the backdrop of expected FCPA reform, several articles have been written in recent weeks. In this Politico article, Assistant Attorney General Lanny Breuer stated, “I don’t really accept the fact that the FCPA is truly a burden on American business.” Several former DOJ officials (not to mention many others) disagree. One of the more vocal proponents of FCPA reform has been former U.S. Attorney General Michael Mukasey who testified at the June House hearing on behalf of the U.S. Chamber of Commerce. (See here for links to his prepared statement as well an overview of the hearing). In the Politico article, Mukasey states that “nobody is looking to slacken in cases involving real bribery of public officials.”
Former Deputy Attorney General George Terwilliger, who also testified at the June hearing, is in favor of reforming the FCPA as well. Terwilliger recently penned a client alert (here) titled “Can the FCPA Be Good for Business?” Placing FCPA reform in the context of current economic conditions, Terwilliger stated as follows. “Those responsible for making and enforcing our laws are in a position to adopt laws and policies that can help foster, rather than inhibit, business growth. At the heart of that analysis, asking whether broad-ranging laws like the FCPA are functioning as an impediment to a restored economy is worthwhile.” Terwilliger adds that “because of its global impact on the expansion of U.S. businesses abroad, it is worth looking specifically at the FCPA as a case study for worthwhile reform initiatives.”
Continuing a theme he discussed during the June hearing, Terwilliger writes as follows. “One of the surest methods for US businesses to expand globally is through the acquisition of existing foreign companies. In many emerging markets, most acquisition targets are beyond the purview of the FCPA and thus unlikely to employ anti-corruption compliance policies. But these companies have become attractive targets because of their position in growth markets. Those markets are also noted as typically more corrupt than other, more established markets subject to closer scrutiny by governments. Preacquisition due diligence, looking specifically at indicia of potential FCPA compliance issues, can be an asset to decision making. But in most circumstances, the opportunity for the kind of in-depth examination that is likely to reveal potential FCPA compliance issues is quite limited. As a result, any acquisition abroad, and particularly those in emerging markets, can carry a ticking time bomb of FCPA compliance issues. I have advocated in congressional testimony that Congress amend the statute to provide a period of repose under the FCPA following an acquisition. The idea is that US companies, with notice to US enforcement authorities, would have a defined period after an acquisition in which to perform a rigorous FCPA compliance review of the acquired entity. If FCPA compliance issues were uncovered, the acquiring company would remediate them, and disclose both the existence of the problem and its remediation to the government. The acquiring company would be immune from civil or criminal enforcement as to matters uncovered during the review period, which could be on the order of 90 to 120 days. At its most elemental level, this procedure would serve the fundamental objectives of the FCPA, which are to root out and eliminate corruption in the global marketplace. That it may also tip the balance toward overseas expansion by reducing the risk of hidden FCPA liability is good for business and good for the US economy.”
Terwilliger’s acquisition period of repose concept has merit, however it would seem that such a concept could easily be embedded within a compliance defense rather than a separate FCPA amendment.
Other recent articles regarding FCPA reform include here from David Hilzenrath at the Washington Post and here from Dan Froomkin at the Huffington Post. Froomkin’s article is lengthy and contains views on both sides of the issues including those of Harvard Law Professor David Kennedy who correctly notes that the FCPA has “led to a quite remarkable network of measures across the world.” However, coverage regarding other OECD member countries that have adopted FCPA-like measures lacks any mention (as noted in this prior post) that many of those countries have embedded compliance-like defenses in their domestic laws. In addition, coverage regarding the U.K. Bribery Act also lacks any mention of the Act’s adequate procedures defense, a defense that undermines the foolish rhetoric that the Act is somehow the “FCPA on steroids.”
Terwilliger concludes his alert by rightly putting part of burden for FCPA reform on U.S. business. He states as follows. “US businesses can help themselves by advocating for reform of the FCPA’s terms and its enforcement. Until such reforms gain momentum, these companies will have to be prepared to face greater FCPA risk than is necessary as part of the price of moving businesses forward and bringing sustained growth to US companies and the economy—which is so dependent on them for job creation and expansion.”
However, what business or industry sector is going to step up to the plate and advocate for FCPA reform? The atmosphere is just too toxic to do so. Indeed, Froomkin begins his piece by noting that the U.S. Chamber is “taking on something as seemingly unassailable as an anti-bribery law.”
And therein lies the problem.
So I leave you with some guiding words from some of the major players the last time Congress undertook substantial FCPA reform in the 1980’s.
“The discussion which takes place during these hearings is not a debate between those who oppose bribery and those who support it. I see the major issue before us to be whether the law, including both its antibribery and accounting provisions, is the best approach, or whether it has created unnecessary costs and burdens out of proportion to the purposes for which it was enacted, and whether it serves our national interests.” “The thing that bothers me about this kind of a debate is that we tend to posture this thing as if somebody were for or against bribery. I think it is important to state for the record that bribery of any foreign official by any U.S. concern is bad for our national health, and it is something that we have got to stop, we have got to deal with, and we have, I think, gone a long way with the FCPA. What we proposed to do is to simplify that law and to make it workable so that we can set that standard in concrete from now on and not have the abuses that occurred prior to 1977, but not by stopping exports, but by stopping bribery. That is the objective.” (Senator Alfonse D’Amato – 1981).
“We’ve learned a great deal about the Foreign Corrupt Practices Act in the last three years. We’ve learned that the best of intentions can go awry and create confusion and great cost to our economy.” “Critics have attempted to characterize my bill as a signal to U.S. companies that they can return to the ‘bad old days’ of foreign bribery. That is not my intent, nor should it be the signal. I abhor bribery, whether domestic or foreign, but I also dislike confusion. Thus, my bill will eliminate uncertainty while maintaining strong prohibitions against bribery. The ambiguities and murkiness of the bill’s language have caused U.S. companies to withdraw from legitimate markets and contributed to the decline in the U.S. share of world exports. We need to end this confusion.” (Senator John Chafee – 1981).
“… There are many people that are extremist, and there are others who get carried away by their enthusiasm who are going to argue that even if we change the provisions in the present act, that are unnecessary or ambiguous or uncertain, that even though we are not doing so, we are legalizing bribery. That strikes me as the worst kind of demagoguery, because it implies that everything that Congress has done in the past is perfect. And does anybody believe that?” (Senator John Heinz – 1981).
And my personal favorite.
“Just because the Foreign Corrupt Practices Act spotlights a sensitive subject, some people wish to turn a ‘blind eye’ to its shortcomings rather than risk being accused of being ‘soft on bribery.’ That is too easy a way out. Retreating from controversy will not cure the law’s deficiencies. Such inaction will no more eliminate the need for FCPA reforms today than it can eliminate the criticism of the Act brought over the past several years. After five and on half years experience with this law, after legitimate problems have been identified and examined, we have a responsibility to respond. Is there any U.S. law that ought to be above such review and clarification – especially one as complex as the FCPA.” (Honorable William Brock – U.S. Trade Representatives – 1983).
It will be an interesting Fall. Feel free to make your voice heard on FCPA reform issues on this site. E-mail me at email@example.com.