Today is Presidents’ Day.
This post highlights the roles of the Gerald Ford, Jimmy Carter, Ronald Reagan, and William Clinton administrations in enactment and subsequent development of FCPA legal authority.
The article “The Story of the Foreign Corrupt Practices Act” also contains a detailed overview of the roles of the Ford and Carter administrations.
After watching Congress investigate and hold hearings on the foreign payments problem for approximately nine months, in March 1976 President Ford issued a “Memorandum Establishing the Task Force on Questionable Corporate Payments Abroad” (see here).
The great debate at this time was whether the foreign payments problem should be addressed through a disclosure regime or through a criminalization regime. The Ford Administration favored the former and in June 1976, President Ford released “Remarks Announcing New Initiatives for the Task Force on Questionable Corporate Payments Abroad.” (see here). As noted in the remarks, President Ford directed the task force “to prepare legislation that would require corporate disclosure of all payments made with the intention of influencing foreign government officials.”
Certain bills were introduced in Congress consistent with Ford’s vision and in August 1976 President Ford issued “Foreign Payments Disclosure – Message From the President of the United States Urging Enactment of Proposed Legislation to Require the Disclosure of Payments to Foreign Officials.” (see here).
Neither Ford’s proposal, or any other, was enacted by Congress prior to the 1976 elections in which Ford was defeated by Jimmy Carter.
Unlike the Ford Administration, the Carter administration favored the criminalization regime that was under consideration in the prior Congress. When Congress reconvened in January 1977 after the election, the movement to adopt a criminalization regime soon picked up speed again.
Certain members of the Carter administration testified at Congressional hearings throughout 1977 in favor of the criminalization regime and in December 1977, S. 305 (the Foreign Corrupt Practices Act of 1977 and the Domestic and Foreign Investment Improved Disclosure Act of 1977) was presented to President Carter.
On December 20, 1977, President Carter signed S. 305 into law – see here for his signing statement.
One irony though is that in 1980 the Carter administration sent a report to Congress prepared by the Secretary of Commerce and the U.S. Trade Representative titled “Report of the President on Export Promotion Functions and Potential Export Disincentives.”
In pertinent part, the report stated:
“The [FCPA] is identified by businessmen and attorneys as one of the most significant export disincentives. […] The Act inhibits exporting because of uncertainty within the business community about the meaning and application of some of its key provisions.
“Uncertainty about the meaning of key provisions of the FCPA and how it will be applied is having a negative effect on U.S. exports. Many of the businessmen and attorneys consulted expressed the view that this uncertainty has a far greater impact than the actual prohibition against bribery. The problem described, in essence, is that what conduct is prohibited and what conduct is not prohibited under the Act is often unclear. In order to avoid possible violations of the Act, attorneys often give such cautious guidance that their clients simply forego any transactions where the FCPA could possibly become an issue.”
“The effects of these uncertainties reportedly manifest themselves in various ways. Consultations with the private sector revealed instances in which U.S. companies: withdrew from joint ventures for fear they later could be held responsible for the acts of their foreign partners; incurred substantial legal and investigative costs to check the backgrounds of their sales agents abroad; were unable to obtain the services of effective sales agents; lost contracts simply because of the time needed to investigate sales agents abroad and institute safeguards; withdrew from existing markets; and declined to enter new markets.”
“Finally, companies point out that the extent to which companies have been successfully prosecuted under the FCPA does not define the extent of the disincentive. Uncertainty can be a disincentive without any prosecutions and, moreover, exports are inhibited merely by the possibility of public charges and the adverse publicity surrounding them. Even where a company is totally convinced that a court would find that it had not violated the FCPA, it nonetheless may forego the export opportunity for fear that an enforcement agency could publicly charge it with a violation of the Act.”
As noted in this previous post, President Reagan’s administration very soon sought decriminalization of foreign payments subject to the FCPA. During the Reagan administration, numerous efforts were made in Congress to amend the FCPA. Soon after the FCPA was enacted, it was widely recognized that while the FCPA had addressed a serious problem, the statute created much uncertainty and was, in the minds of many, unworkable.
Among other things, the FCPA antibribery provisions enacted in 1977 contained a broad knowledge standard (“reason to know”) applicable to indirect payments to “foreign officials”; (ii) did not contain any affirmative defenses; and (iii) did not contain an express facilitating payments exception. Beginning in 1980, various bills were introduced – either as stand alone bills or specific titles to omnibus trade and export bills – that sought to amend the FCPA. This legislative process took eight years.
In August 1988, President Reagan signed H.R. 4848 the Omnibus Trade and Competitiveness Act of 1988. Title V, Subtitle A, Part I of the Act was titled “Foreign Corrupt Practices Act Amendments.” President Reagan’s signing statement does not refer to the FCPA amendments buried in the omnibus trade bill. Among the amendments were a revised knowledge standard applicable to indirect payments and the creation of affirmative defenses and an express facilitating payment exception.
In November 1998, President Clinton signed S. 2375, the “International Anti-Bribery and Fair Competition Act of 1998.” Among other things, the Act amended the FCPA by (i) creating a new class of persons subject to the FCPA – “any person” not an issuer or domestic concern to the extent such person’s bribery scheme has a U.S. nexus; and (ii) creating a new alternative nationality jurisdiction test for U.S. issuers and domestic concerns.
See here for President Clinton’s signing statement.
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