Friday Roundup
I didn’t think so, China SOE developments, additional material for the reading pile, and the best part of the Olympics starting. It’s all here in the Friday roundup.
I Didn’t Think So
Will tinkering with advisory guidelines that are only implicated when a business organization pleads guilty to or is convicted of a crime best incentivize FCPA compliance, best advance the FCPA’s objective or reducing bribery, increase public confidence in FCPA enforcement actions and allow the DOJ to better allocate its limited prosecutorial resources to cases involving corrupt business organizations and the individuals who actually engaged in the improper conduct?
I didn’t think so, but see here for a recent post on Corruption, Crime and Compliance by Michael Volkov.
What will better achieve each of the above desirable objectives? See here for my scholarship “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”
China SOE Developments
Probably one of the most unhelpful statements ever made by an enforcement official concerning the “foreign official” / “instrumentality” issue was when SEC Chairman Mary Schapiro stated (see here for the prior post) that “given the various forms of government found around the world, it would be impractical to articulate each of the myriad of ways that one could use to identify a foreign official in particular countries or cultures.” Two developments this week concerning China SOEs reminded me of Schapiro’s statement.
First, as numerous financial publication headlines indicated, China’s state-owned Cnooc Ltd. announced a $15.1 billion takeover offer for Canada-based Nexen Inc. Should the transaction close, the acquisition would give Cnooc “operational control of a significant Canadian oil-sands field operator” and “catapult it into the driver’s seat in some of the Western world’s richest frontiers, from the U.S. Gulf of Mexico to the North Sea.” (See here for the WSJ article).
Second, earlier this week China Investment Corporation released its annual report (here). Notably, the annual report begins as follows. “In 2011, China Investment Corporation continued to invest on a commercial basis to seek long-term returns and prudently manage our fully deployed portfolio.” (emphasis added). The annual report highlights direct investments in Canada, the U.K., France, Russia, Trinidad & Tobago, Brazil, South Africa, Vietnam and Australia.
For the Reading Pile
If this recent Summer Reading Spectacular post wasn’t enough to quench your thirst for FCPA information, there is more.
This recent FCPA Update from Debevoise & Plimpton contains a timely article in the aftermath of the dramatic collapse of the Africa Sting cases and the Lindsey Manufacturing prosecutions titled “The Difficulty of Recovering Damages From the Government When an FCPA Prosecution Misfires: Sovereign and Official Immunity and Their Impact on FCPA Compliance.” The conclusion states as follows. “Although success in an FCPA litigation is obviously a relief for corporate and individual defendants, FCPA defendants face enormous obstacles when it comes to recovering the significant costs associated with defending themselves against government enforcement actions.”
Arnold & Porter recently published this “FCPA, Bribery Act & Other Global AntiCorruption Insights.” The comprehensive nearly 50 page document contains key enforcement and investigative developments, global enforcement and investigative developments, as well as a focus on FCPA reform.
Olympics
The best part of Olympics starting?
No more client alerts, marketing material, etc. warning of the Bribery Act / FCPA risks of entertaining clients or prospective clients at the Olympics.
Keep an eye out for the Rio Tinto sponsored Mongolian Olympic team (see here for the prior post).
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A good weekend to all.
For Your Listening Enjoyment
On June 5th, 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 sponsored a program titled “The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases: Time to Reevaluate?”
I was pleased to participate along with John Buretta (Deputy Assistant Attorney General, Criminal Division, Department of Justice); Charles Cain (Deputy Chief, FCPA Unit, Securities and Exchange Commission); France Chain (Senior Legal Analyst, Anti-Corruption Division, OECD); Stanley Sporkin; and Eric Bruce (Partner, Kobre & Kim LLP). The program was moderated by Thomas Gorman (Partner, Dorsey & Whitney LLP) and Frank Razzano (Partner, Pepper Hamilton LLP).
An audio version of the 90 minute program can be downloaded here. Below is a breakdown of topics discussed along with the approximate minute mark(s) of the discussion.
4 – 11 minutes – Eric Bruce (defense counsel in the Africa Sting case) provides an inside view of the case.
11 – 13 minutes – discussion of 78dd-3 jurisdictional issues, including in the Africa Sting case
13 – 19 minutes – discussion of various issues including corporate FCPA resolutions, whether the DOJ is more of a regulator than prosecutor in FCPA cases, and the DOJ’s view of the Africa Sting cases including whether it learned anything from the cases
19 – 24 minutes – Stanley Sporkin weighs in as to the origins of the FCPA’s books and records and internal control provisions, says that the DOJ was hunting in the wrong place in the Africa Sting cases and says that FCPA enforcement needs to get back to the basics of “blocking and tackling”
25 – 30 minutes – discussion of the “foreign official” issue in which the DOJ says that “no one really conveys that they are confused” about what “foreign official” means
30 – 38 minutes – discussion of facilitation payments and whether the enforcement agencies have ignored this statutory exemption
38 – 41 minutes – I raise the question of whether the FCPA has morphed into an all-purpose corporate ethics or governance statute and discussion regarding what is the best way to expand the FCPA – through charging decisions or through Congressional action
42 – 50 minutes – discussion of compliance issues and how best to reward corporate compliance as well as the recent Garth Peterson / Morgan Stanley case in which I pose to the DOJ and the SEC the question of whether the outcome would have been any different if the FCPA had a formal compliance defense
50 – 55 minutes – discussion of miscellaneous issues including transparency in enforcement, cooperation issues and self-reporting
55 – 67 minutes – further discussion of compliance issues, including whether a compliance defense would be a “race to the bottom” or a “race to the top,” whether there is a Washington D.C. beltway view on FCPA compliance, and whether the increase in FCPA enforcement is doing anything to properly incentivize business conduct
67 – 71 minutes – discussion of whether there is any practical difference in the corporate liability standards in the U.K. Bribery Act and the FCPA
72 – 76 minutes – further discussion of the Africa Sting cases
77 – 79, 83 – 86 minutes – DOJ responds to a question regarding FCPA guidance, including timing and specifics
80 – 83 minutes – discussion as to whether it is acceptable not to self-report if the company otherwise implements a variety of internal remedial measures
87 – 89 – once again the issue of whether the DOJ has learned anything from the Africa Sting cases
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If you are aware of other FCPA video or audio programs and would like to provide a similar annotation as to issues, please consider this an open invitation to do a guest post as many could benefit.
Survey Says
If FCPA and related statistics are your thing, this post is for you as it summarizes two recent surveys – the first by Ernst & Young, the second by Dow Jones.
Ernst & Young
Ernst & Young Fraud Investigation and Dispute Services recently released (here) its 12th Global Fraud Report.
The foreword section of the report states as follows. “Though many companies have intensified their efforts to combat bribery and corruption, especially given the aggressive enforcement environment, our research shows that much remains to be done. Executives, especially those in many mature markets, must overcome a certain degree of institutional fatigue about anti-corruption compliance initiatives. This is especially critical given that this year’s survey shows that tolerance for unethical conduct has increased in the last two years.”
Findings of note from the report include the following.
“Bribery and corruption remain pervasive. On a global basis, 39% of respondents reported that bribery or corrupt practices occur frequently in their countries. The challenge is even greater in rapid-growth markets, where a majority of respondents believe these practices are common.”
Survey respondents were asked – “which of the following can be justified if they help a business survive an economic downturn.” 30% said that “entertainment to win / retain business” can be justified; 15% said that “cash payments to win / retain business” can be justified; and 16% said that “personal gifts to win / retain business” can be justified.
“As many as 42% of respondents had not received training on ABAC (anti-bribery / anti-corruption) policies. Without adequately trained employees, the ability of companies to identify issues or robustly investigate and act on allegations is also likely to be diminished.”
“[D]espite the significant risks and specified demands of regulators [as to third parties], our survey suggests that the corporate response to mitigating third-party risks is still inadequate. Many companies are failing to adopt even the most basic controls to manage their third-party relationships.” “Effective third-party management does not end at the performance of due diligence. Third parties also should be monitored on an ongoing basis, including regular compliance assessments and audits. It is therefore worrying that only 45% of respondents identified audit rights or regular audits of the third party as a process in place to monitor the relationship.”
The report also contains a specific section regarding CFO responses.
Findings of note from this section include the following.
CFO survey respondents were asked – “which of the following can be justified if they help a business survive an economic downturn.” 34% said that “entertainment to win / retain business” can be justified; 15% said that “cash payments to win / retain business” can be justified; and 20% said that “personal gifts to win / retain business” can be justified.
“Only 46% of CFO respondents had attended ABAC training” “16% of CFO respondents do not know that their company can be held liable for the actions of third-party agents.”
As to corporate governance issues, the report states as follows.
“Our survey respondents suggest that not all boards are seen to be doing enough to properly understand the way their company is conducting business. Globally, 52% of c-suite interviewees think that the board needs a more detailed understanding of the business if it is to be an effective safeguard against fraud or corrupt practices.”
As to methodology, the report states as follows. “We interviewed chief financial officers and heads of legal, compliance and internal audit, to get their views of fraud, bribery and corruption risk and how their organizations are mitigating them.” “More than 1,700 interviews were conducted in 43 countries between November 2011 and February 2012.”
Ernest & Young Fraud Investigation and Dispute Services (here) provides, among other things, anti-fraud and corporate compliance services.
I note in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) that amending the FCPA to include a compliance defense will advance certain policy objectives such as better incentivizing more robust corporate compliance, reducing improper conduct, and thus best advancing the FCPA’s objective or reducing bribery. In the article, I cite various survey data and note that despite current incentives to implement robust FCPA policies and procedures (namely the DOJ’s Principles of Prosecution and the Sentencing Guidelines) business organizations are not sufficiently implementing comprehensive FCPA policies and procedures. I argue that these present incentives thus represent “baby carrots” when what is needed to better incentivize more robust FCPA compliance are real “carrots.” An FCPA compliance defense is a real “carrot” that will better incentivize compliance across the business landscape. Organizations with existing FCPA compliance policies and procedures will be incentivized to make existing programs better. Likewise, organizations currently without stand-alone FCPA policies and procedures will be incentivized to spend finite resources to implement FCPA compliance policies and procedures.
An FCPA compliance defense will surely not cause all FCPA survey data to yield 100% outstanding results, but I do think it is reasonable to conclude that an FCPA compliance defense will cause various FCPA survey responses, such as those discussed above from the Ernst & Young report, to yield higher positive results, help reduce improper conduct, and thus best advance the FCPA’s objective of reducing bribery.
Dow Jones
Dow Jones Risk & Compliance recently released (here) its 2012 State of Anti-Corruption Survey.
A finding of note is the following.
“The survey revealed an increase from 2011 in the percentage of companies that have stopped or delayed … entrance or expansion in emerging markets (48% and 47% of those surveyed, respectively) due to concerns about violating regulations.”
As noted in Dow Jones graphical summary, the 48% breaks down as follows (17% stopped; 31% delayed); the 47% breaks down as follows (14% stopped; 33% delayed). As noted in Dow Jones graphical summary, the issue posed was “impact of concern about breaking regulations.” It is unclear from the survey results what is meant by “regulations” – for instance, survey respondents are from North America, Western Europe and Asia-Pacific meaning some respondents are likely to work for companies not subject to the Foreign Corrupt Practices Act.
Previously on the FCPA Blog (here), Professor Andy Spalding responded to the above finding from the Dow Jones survey.
As to methodology, the Dow Jones survey states as follows. “The survey is based on interviews with more than 300 compliance professionals at companies across key industries worldwide.”
Dow Jones Risk & Compliance (here) provides anti-corruption compliance services.
A Focus on Korea
Today’s post is from Nathan McMurray (an attorney with Barun Law in Seoul, South Korea). In the post, McMurray discusses “Korea’s FCPA” and an important recent case in which the court held that the prosecution failed to meet its burden and prove beyond a reasonable doubt that China Eastern Airlines was a state owned enterprise, and, therefore, the president of the Korean subsidiary was a foreign public official. McMurray previously touched upon these issues on his Korea Law Today website (see here).
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Korea’s FCPA
In 1999, the Republic of Korea (South Korea) enacted the Act on Preventing Bribery of Foreign Public Officials in International Business (FPBA) (see here for the English translation). It is Korea’s version of the Foreign Corrupt Practices Act (FCPA). But unlike the FCPA, not many people gave much attention to the FPBA, at least until recently.
As Korea has taken steps to increase transparency and stamp out corruption, Korean prosecutors have started pursuing those who have allegedly violated the FPBA. In particular, in May, the Incheon District Court (Incheon is an important port city close to Seoul) heard a case involving two men who were charged with violating the FBPA. This was the first trial ever under the FPBA, but it is not likely to be the last.
Because of the sudden interest in the FPBA and the passage of the U.S. – Korea Free Trade Agreement, it seems like this is the right time to take a closer look at the act and at this recent case. Focusing first on the text of the act, you may notice that its long name belies its brevity. The FBPA is only a short five articles long (two pages).
What’s in the FPBA.
Article 1 summarizes the purpose of the act, namely “the establishment of sound practice in international business transactions” and “criminalizing the act of bribery of foreign public officials.” In other words, the act prevents you from bribing foreign public officials to gain an improper business advantage.
Article 2 defines the term “foreign public official.” Specifically, a foreign public official is any person who:
- is engaged in a legislative, administrative, or judicial work for a foreign government (including local government);
- conducts official business on authority delegated by a foreign government;
- conducts the business of a public organization or agency established by a foreign government to engage in a specific business;
- is an executive or employee of an enterprise into which a foreign government has contributed more than 50% of the paid-in-capital or a foreign government exercises substantial control over the management (not including enterprises that operate on a competitive basis in the private economy without preferential treatment); or
- conducts the business of a public international organization.
Article 3 specifically defines the crime under the FBPA. It says that any person (meaning a natural person) may be liable for offering a bribe to a foreign official in relation to their official business to gain an improper advantage for the conduct of international business. The penalty for the crime may be up to 5 years’ imprisonment and a fine of up to 20 million Korean Won (KRW). If the profit obtained through the offense exceeds 10 million KRW, the penalty may be higher: up to five years’ imprisonment and a fine of up to twice the amount of profit.
There are a few exceptions in Article 3, which are similar to the FCPA exceptions. Payments that are lawful under the law of the foreign public official’s home country are permitted as well as facilitation or grease payments used to speed up the process of obtaining something from a foreign official that a person is already entitled to receive, such as (depending on the circumstances) getting a utility turned on.
Article 4 addresses the responsibility of the company (legal person) for which the person offering the bribe either works or represents. The company may be subject to a fine of up to 1 billion KRW. If the profit obtained through the offence exceeds 500 million KRW, the fine may be up to twice the amount of the profit. But there is another exception, if a company has “paid due attention or exercised proper supervision to prevent the offence” (i.e., reasonable care), it can escape liability.
Article 5 says that the authorities can confiscate any bribe amount still in the possession of the person who committed an offence. There is also a short addendum to the FBPA that says it came into force at the same time as Korea’s OECD obligations under the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which indicates when and how the FBPA was originally enacted.
What the Recent Case Teaches About the FPBA.
As referred to above, last year the Incheon Prosecutor’s Office charged two individuals with bribing a foreign public official under the FBPA. The president of the Korean subsidiary of China Eastern Airlines was offered the bribes. The two men charged were the president of a shipping company and the president of a travel agency. The shipping company president wanted more favorable rates, and the travel company president wanted China Eastern Airlines to assign it more tickets for sale.
A key issue in the case was whether the Korean president of China Eastern Airlines was a “foreign official” under Article 2 of the FBPA. The prosecution argued the government of the People’s Republic of China controls China Eastern Airlines. Apparently, the key evidence it offered for this claim was certain documents linking China Eastern Airlines to the Chinese government. The defense used employee testimony to challenge the truth, accuracy, and relevance of the documents.
The court held that the prosecution failed to meet its burden and prove beyond a reasonable doubt (or more precisely the Korean equivalent, which is the relevant standard in criminal trials in Korea) that China Eastern Airlines was a state owned enterprise, and, therefore, the president of the Korean subsidiary was a foreign public official. The court based its reasoning in part on the exception in Article 2 of the FBPA regarding enterprises that operate on a competitive basis in the private economy without preferential treatment.
The Ruling and Its Aftermath.
Because the prosecution was unable to prove that the president of China Eastern Airlines was a foreign public official, the two men were found not guilty under the FBPA. But unfortunately for all three men, they were found guilty of bribery under Article 357 of the Korean Criminal Code. The prosecutors, perhaps looking to establish a precedent, have appealed the court’s ruling on the FBPA charges.
This was a test case involving small companies and a prosecution team that seemed unprepared to prove a key element of the crime. But as we await the appeal and anticipate additional cases, what seems clear is that this once overlooked law is not going vanish into obscurity once again.
Many in the business community here are uncomfortable about where this may eventually lead. Korea is an exporting nation with limited natural resources. Major Korean companies (chaebols) have invested in nearly every corner of the world. You cannot help but wonder if Korean prosecutors are contemplating eventually applying the FPBA to these big fish, rather than smalltime operators looking for petty favors and extra tickets.
Also, it is unclear why in the China Eastern Airlines case the prosecution decided to focus on the individuals only and not the companies involved. Does their decision mean that the reasonable care exception for company liability applied, that the two companies were simply too small to focus on, or that the prosecution was concerned that the applying the FBPA to the companies would not withstand court scrutiny for some other reason? We can only speculate.
About Korean Court Precedents.
This post was produced with the help of my Korean colleagues, and the information about the court case summarized above was obtained from publically available sources. The case, however, was never officially published by the court, so we cannot verify all of the facts. Indeed, only Supreme Court cases are regular published in Korea. Lower court cases are sometimes published, but not always. This is in part because Korea is a civil law country. So although court precedent is an important source of law, it is still not treated the same way as it is in the U.S or other common law countries.
Still, court precedents are increasingly important to lawyers trying to understand the application of law. The courts have an internal record keeping system, and there are legal databases like West Law or Lexis Nexis in Korean. The website www.scourt.gov.kr is run by the Korean Supreme Court and is considered official. The site www.lawnb.com is a commercial reporter that provides more data than the official site. You can read more about this and many other issues in English on my blog at www.korealawtoday.com.
Wal-Mart And FCPA Reform
A hot topic of late is what impact Wal-Mart’s FCPA scrutiny will have on FCPA reform efforts.
Last week, in an editorial (here) USA TODAY stated as follows. “Supporters of weakening the act argue that the Justice Department has become too powerful and arbitrary. Some Chamber proposals, such as clearer enforcement guidelines, are relatively non-controversial. But others would seriously undermine the law. The most troublesome would give companies an automatic defense merely for implementing internal compliance programs to prevent and police bribery. The proposal would amount to giving companies a get-out-of-jail-free card. It’s not hard to imagine corporations drawing up a set of cookie-cutter guidelines designed to meet the letter of the law, which might or might not reflect their commitment to thwarting corruption.”
[Dear USA TODAY Editorial Board, as noted in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) an FCPA compliance defense would not eliminate corporate criminal liability under the FCPA or reward “fig leaf” or “purely paper” compliance programs. A compliance defense would not apply to corrupt business organizations, activity engaged in or condoned by executive officers, or activity by any employee if it occurred in the absence of preexisting compliance policies and procedures. A growing chorus of former Department of Justice officials, including those who used to enforce the FCPA, support an FCPA compliance defense and a compliance defense will better incentivize more robust corporate compliance, reduce improper conduct, and thus best advance the FCPA’s objective of reducing bribery. As noted in this prior post, that’s not weakening the FCPA, that is strengthening the FCPA and best advancing its objective of reducing bribery.]
In an opposing view (here) also published by USA TODAY, former U.S. Attorney General Michael Mukasey (who represents the U.S. Chamber Institute for Legal Reform with regard to the Foreign Corrupt Practices Act) stated as follows. “Some suggest that increased FCPA enforcement has proved the law’s utility without the need for changes. But the opposite is true: Aggressive enforcement has alerted business and the courts alike to its flaws. That is why clarifying the FCPA has drawn bipartisan support.”
[I agree that high-profile instances of FCPA scrutiny such as News Corp.’s and Wal-Mart’s has shined a much needed light on FCPA enforcement and caused those who do not ponder FCPA issues every day to take notice. See here and here for prior posts. And indeed, Mukasey is right, as noted in this previous post, certain aspects of FCPA reform share bipartisan support.]
This Wall Street Journal Corruption Currents post by Samuel Rubenfeld titled “Wal-Mart Bribery Allegations Stir Up FCPA Debate Anew” contains the views of many including a statement I liked from Ian Koski, a spokesman for Sen. Chris Coons (D., Del. who has been open to amending the FCPA) that the Wal-Mart investigation is ongoing and that the senator wouldn’t decide legislative policy based on a news story.
In this post Tom Fox (FCPA Compliance and Ethics Blog) said that Wal-Mart’s FCPA scrutiny “will sound the death knell for any efforts to amend” the FCPA. Fox also penned a guest post on the FCPA Blog (here) titled “How Wal-Mart Killed The Compliance Defense.” Also on the FCPA Blog, (here) Professor Andy Spalding penned a post titled “The Good Faith Compliance Defense, Unscathed.” Professor Peter Henning, writing on the New York Times DealBook page (here), stated as follows. “The investigation of Wal-Mart has brought the Foreign Corrupt Practices Act to the attention of the public in a way not seen since the 1970s scandals that led to its adoption. Congress may find it politically impossible to adopt changes to the statute that would arguably make it more difficult to pursue cases as long as the allegations of foreign bribery by a leading American company remain in the headlines.” Likewise, Michael Volkov (Corruption, Crime and Compliance Blog) stated (here) that “Congress is not going to amend the FCPA anytime soon, and especially not in an election year” and yesterday he stated (here) that “FCPA reform is dead — not just for this year but for years to come.”
What to make of all this?
For starters, let’s observe what I submit are facts. The reason Wal-Mart has dominated the news cycle the past few weeks is not because the company is under FCPA scrutiny, this was known in December 2011 when Wal-Mart disclosed its FCPA scrutiny, becoming one of approximately 100 companies known to be under FCPA investigation. Rather, the reason Wal-Mart has dominated the news is because of how the company acted, or failed to act, since learning of potential FCPA issues in approximately 2005. This is a corporate governance issue, not an FCPA issue, and thus should not impact limited and sensible FCPA reform.
However, many people, including politicians who are ultimately responsible for reform, are unlikely to make this critical distinction and thus the recent news regarding Wal-Mart could impact FCPA reform.
Exhibit A and B in the politicization of FCPA reform are nearly identical letters here and here from Elijah Cummings (Ranking Member of the House Committee on Oversight and Government Reform) and Henry Waxman (Ranking Member of the House Committee on Energy and Commerce) to the Chairman of the Board of Directors of the Retail Industry Leaders Association and the President of the U.S. Chamber of Commerce. The letters state as follows. “We are concerned about the role that Wal-Mart officials may have played in the Chamber’s Institute for Legal Reform. It would appear to be a conflict of interest for Wal-Mart officials to advise on ways to weaken the Foreign Corrupt Practices Act at a time when the leadership of the company was apparently aware of corporate conduct that may have violated the law.”
Regardless of any impact Wal-Mart’s FCPA scrutiny may have on FCPA reform, FCPA reform was unlikely to happen this year even before the recent coverage of Wal-Mart. When the DOJ in November 2011 promised FCPA guidance in 2012 (see here for the prior post), this forestalled introduction of an actual FCPA reform bill. Guidance has still not been released and when it is, there is likely to be an absorption period that flows into the election season.
Honestly debating and considering changes to a statute titled the “Foreign Corrupt Practices Act’ is a political hot potato. It always has been and will always be. For instance, several reform bills in the 1980’s sought to change the name of the law to the “Business Accounting and Foreign Trade Simplification Act” so that an honest and considered debate could occur.
Certain FCPA amendments occurred in 1998, but the last period of major substantive FCPA reform occurred in the 1980’s. Those reform efforts took approximately eight years.
FCPA reform is not dead, nor should it be. But it is likely going on a summer vacation. For more on my views on FCPA reform see this recent video (with many thanks to Levick Strategic Communications for the opportunity).
I conclude this post with guiding words from key players during the FCPA reform debates in the 1980’s.
In 1981, Senator Alfonse D’Amato opened Senate hearings on a bill to amend the FCPA. He stated that the bill “provides us with a good opportunity to assess the effect of recently enacted legislation and its implementation.” Senator D’Amato noted as follows. “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.”
In an opening statement during Senate hearings, Senator John Chafee, a leader in the FCPA reform movement stated: “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.” During the hearing, Senator Chafee further stated as follows: “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.”
During Senate hearings, Senator D’Amato also noted as follows: “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 D’Amato further stated as follows. “I think it is very important that in the committee’s work that we not create the attitude that this committee is making it easier for businesses to engage in illegal activity. That has, in fact, been suggested, not only by our distinguished colleague from Wisconsin [Senator Proxmire, a Senate leader in enactment of the FCPA who generally opposed the reform efforts], but also by certain journalists, who are questioning the need for proposed changes. I think that rather than hampering prosecution of illegal acts, [the reform bill at issue] would clarify and make possible just prosecution of those who engage in bribery. It would eliminate any ‘gray area’ by clearly spelling out the limits of the law.”
During Senate hearings, Senator John Heinz stated as follows. “… 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?”
During the Senate hearing, William Satterwhite (Senior VP, General Counsel and Chief Legal Officer of Enserch Corp.) testified. He began his testimony as follows: “Before I begin my comments, I would like to state for the record, Enserch Corp. is not in favor of bribery. It is a sad commentary on the political atmosphere surrounding this legislation that those who support the bill feel compelled to make clear that they do not condone corruption.”
My favorite quote from the FCPA reform debates of the 1980’s and one that rings true today is from William Brock (U.S. Trade Representative) who observed, during a 1982 FCPA reform hearing, as follows. “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. [… ] Is there any U.S. law that ought to be above such review and clarification – especially one as complex as the FCPA.”