The SEC And FCPA Enforcement
It has been a while since the last SEC FCPA enforcement action in December 2024.
What is interesting though, is that the SEC never wanted any part in enforcing the FCPA’s anti-bribery provisions.
This post rewinds the clock back to the mid-1970’s when Congress held numerous hearings about the so-called foreign corporate payments problem resulting in the FCPA becoming law in 1977.
As told in the “The Story of the Foreign Corrupt Practices Act,” the SEC played a prominent role during Congress’s multi-year investigation, deliberation, and consideration of the foreign corporate payments problem.
Yet, the SEC’s role was also the most curious as the Commission was a reluctant actor in Congress’s quest for a new and direct legislative remedy to the problem.
Looking Back At The Senate’s FCPA Hearing
Fifteen years ago this month, the Senate held a hearing titled “Examining Enforcement of the Foreign Corrupt Practices Act.”
(See here for the full hearing transcript, here for the video).
It was the first congressional hearing on the FCPA during its new era of enforcement (to be followed by a June 2011 FCPA hearing in the House) and the first FCPA hearing in Congress since the FCPA was amended in 1998.
In opening the hearing, Senator Arlen Specter (who passed away in 2012) noted that “oversight is a major function of Congress,” but that Congress does “not do very much of it.”
“Even Angels Will Differ On The Answers”
Buried deep in the thousands of pages of FCPA legislative history, one will find a July 1976 article by Theodore Sorensen (a lawyer who spent a substantial portion of his career with Paul Weiss) authored for Foreign Affairs titled “Improper Payments Abroad: Perspective and Proposals.”
It is a great article and Sorensen certainly had a way with words (one stop on his professional journey was serving as President Kennedy’s speechwriter).
July 1976 was a mid-point of sorts in the nearly three year journey of Congress in investigating and addressing the foreign payments problem. President Ford, whose administration favored a disclosure regime, would soon lose the November 1976 election to Jimmy Carter and Carter’s administration favored a prohibition regime, which came to be embodied in the FCPA signed by President Carter in December 1977.
Counterpoints …
In a recent Substack post, Richard Cassin (the former editor of the defunct FCPA Blog) writes – in reference in to a June DOJ memo titled “Guidelines for Investigations and Enforcement of the Foreign Corrupt Practices Act” that “overnight, the FCPA became less about corporate graft and more about foreign policy objectives.”
Cassin’s assertion ignores that foreign policy has always been a major theme of the FCPA.
In fact, foreign policy concerns is the main reason why Congress passed the FCPA in 1977. The FCPA’s extensive legislative history is clear on this issue.
Amusing Commentary
Some FCPA commentary is amusing.
Such as this assertion that the Foreign Corrupt Practices Act provides “bright-line rules.”
Nothing could be further from the truth.
For starters, the FCPA contains two sets of provisions: the anti-bribery provisions and the books and records and internal controls provisions (often collectively referred to as the accounting provisions).
The FCPA’s accounting provisions are entirely principle-based, the opposite of a bright-line rule.