“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.
In The Words Of J.T. Smith
Future posts will discuss the recently enacted Foreign Extortion Prevention Act (FEPA) and how it turns U.S. anti-corruption enforcement into a muddy mess when the much more practical and simple solution to capture the so-called “demand” side of foreign bribery was to amend the FCPA (see here for suggested FCPA amendments).
Nevertheless, the purpose of this post is to go back approximately 45 years to highlight the policy gap filled by FEPA – a policy gap that has long been recognized.
In the mid-1970’s Congress held numerous hearings over several years to address the so-called foreign corporate payments program. (“The Story of the Foreign Corrupt Practices Act” provides a detailed overview of the FCPA’s legislative history).
The FCPA Turns 46
Our favorite statute, the Foreign Corrupt Practices Act, turns 46 today.
In signing the FCPA into law, President Jimmy Carter stated:
“I am pleased to sign into law S. 305, the Foreign Corrupt Practices Act of 1977 and the Domestic and Foreign Investment Improved Disclosure Act of 1977. During my campaign for the Presidency, I repeatedly stressed the need for tough legislation to prohibit corporate bribery. S. 305 provides that necessary sanction. I share Congress’s belief that bribery is ethically repugnant and competitively unnecessary. Corrupt practices between corporations and public officials overseas undermine the integrity and stability of governments and harm our relations with other countries. Recent revelations of widespread overseas bribery have eroded public confidence in our basic institutions.
What Congress Intended The Third-Party Payment Provisions To Capture As Well As Not Capture
Call me old-fashioned, but sometimes it is prudent to take a step back and ponder what Congress actually intended to capture, and not capture, by enacting the Foreign Corrupt Practices Act.
Indeed, a common thread in most FCPA judicial decisions is judges consulting the legislative history in interpreting the FCPA.
Most FCPA enforcement actions concern, in whole or in part, the conduct of various third parties.
Tax Law And The FCPA’s Legislative History
To commemorate tax season, this post looks back to the FCPA’s legislative history and the tax implications of what Congress was investigating.
Upon discovery of the foreign corporate payments problem, Congress’s first task was to determine if the payments were adequately captured by existing law or whether a new law was needed. While certain existing laws did indirectly deal with various aspects of the problem, the prevailing view was that existing laws were deficient and that a new and direct legislative remedy was needed.
The primary focus of Congress’s investigation was whether the existing securities laws, tax laws, and/or antitrust laws adequately addressed the foreign corporate payments problem.