Stanley Sporkin, as Director of the SEC’s Division of Enforcement in the mid-1970’s, played a key role in addressing the foreign corporate payments issues being investigated by Congress and in shaping what would become the FCPA’s books and records and internal control provisions. Calling Sporkin the “Father of the FCPA” (as many have) is, in all due respect, a bit of an overstatement as Sporkin’s SEC was not in favor of what would become the FCPA’s anti-bribery provisions and wanted no part in enforcing those provisions. Nevertheless, Sporkin was a key participant, and has remained a key player, on FCPA issues throughout his storied career.
Sporkin has been talking about FCPA reform for years – long before the U.S. Chamber released its FCPA reform proposals in October 2010.
Thanks to a reader, we can all read some of Sporkin’s early FCPA reform speeches.
In a 2004 speech (here), Sporkin spoke of the SEC stumbling upon the foreign payments issue in connection with its Watergate-related investigations. The FCPA was not a singular outgrowth of Watergate – Congress was already actively investigating allegations of overseas bribery and corruption separate and apart from the Watergate scandal – yet Watergate is nevertheless relevant to the FCPA’s origins. In his speech, Sporkin also talks about the relationship between the FCPA and Sarbanes-Oxley Section 404 (a hot-button issue in 2004 when Sporkin delivered the speech). As to “Next Steps,” Sporkin stated as follows. “[W]e need more than Congress passing new statute, and the SEC requiring strict compliance with existing legislation. We need a comprehensive assault on the problem. This means we need the assistance of our government and indeed all the countries of the world along with the world business community, to provide a climate which enables our corporations to compete honestly and fairly throughout the world. There is a way to fix this problem if there is a will to do so.” Among other things, Sporkin proposed – no doubt in recognition that most FCPA issues arise from use of foreign agents – the “establishment of a country-by-country list of agents that have been properly vetted and have agreed to be examined and audited by an independent international auditing group.”
In 2006, Sporkin returned to the podium (see here) as the FCPA neared its 30th year. He stated as follows. “What I envisioned when the law was enacted was a new corporate regime where bribery of foreign officials would be almost completely extinguished at least as it pertained to major U.S. corporations. As all of us here have observed, the wild-eyed-do-gooder predictions never occurred. Instead statistics indicate that bribery of foreign officials has maintained a steady pace over the years.” [Counterpoint – perhaps bribery of foreign officials, as envisioned by Congress and indeed Sporkin’s SEC, has largely been extinguished, but the issue (in 2006 and still today) is that the goalposts have been moved … and not by Congress].
In his 2006 speech, Sporkin did not advocate the FCPA’s repeal, but he did “think the Department of Justice and the SEC can do something forward-looking which would be win-win for both the government and the private sector.” He called it the “FCPA Immunization-Inoculation Program.” Sporkin stated that the “quasi-amnesty program” would consist of the following: (i) “agreement by participating firms to conduct a full and complete review [conducted jointly by a major accounting firm or specialized forensic accounting firm and a law firm] of the company’s compliance with the FCPA for the previous 3 years; (ii) the company would agree “to disclose the results of the legal-accounting audit to the SEC, its investors, and the public; (iii) “if any violations turned up in the process of the audit, the participating [company] would agree to take all steps to eliminate the problems and implement the appropriate controls to prevent further violations; (iv) participating companies “would agree to subject themselves to a similar audit on an annual basis for at least 5 years to ensure that compliance was being maintained; (v) participating companies “would be required to create the position of FCPA compliance officer, whose sole responsibility would be to ensure the company’s compliance with the FCPA” and make an annual certification; and (vi) “in exchange … the SEC and DOJ would give qualified assurances that no actions would be brought for violations exposed by the review.” As envisioned by Sporkin, the “limited amnesty would not apply if violations rose to flagrant or egregious level.”
According to Sporkin, the “immunization-inoculation program would serve the dual purpose of: (1) creating suitable incentives to compliance-minded companies to adopt and maintain high ethical standards in the conduct of their business; and (2) reducing the case load and investigative burden of governmental agencies that enforce the FCPA while reassuring regulators that companies are taking active steps to limit corruption in their foreign contracting and other activities.” Sporkin conceded that “some adjustments may be necessary” but he believed that his proposal “would provide the right-thinking corporate community with the necessary assurances that it needs to develop a vibrant overseas business without having to defend itself against very costly and time consuming investigations.”
At the November 2010 Senate FCPA hearing, FCPA practitioner Michael Volkov (here) resurrected Sporkin’s proposal – see here for Volkov’s prepared statement. [By the way, for those of you looking for the complete transcript of that hearing, along with the prepared statements, and post-hearing Q&A’s – see here].
While Sporkin’s FCPA reform proposals are, in certain ways, different from many of the proposed FCPA amendments being discussed at the moment, the point of this post – other than to highlight Sporkin’s reform proposals, is to demonstrate that the screams of some – that FCPA reform is solely a Chamber issue or somehow akin to waving the white flag of surrender to corporate bribery – are off-base.
What various FCPA reform proposals through the years have in common is experienced and knowledgeable individuals (including many former DOJ and SEC enforcement attorneys who helped shape the FCPA and FCPA enforcement) sharing a belief that the current ad hoc, inconsistent, arbitrary, and largely opaque enforcement only climate is in need of reform.