During his distinguished career, Sporkin was, among other things, the general counsel at the CIA, a federal court judge, and as relevant to these pages the head of SEC enforcement in the mid-1970’s – as Congress set about the multi-year task of enacting the FCPA – and thereafter during the FCPA’s early years. In the FCPA’s modern era, Sporkin advocated for certain FCPA reforms.
This post highlights various Foreign Corrupt Practices Act relevant aspects of Sporkin’s career.
In this video, Sporkin explains what sparked his interest in the then so-called foreign corporate payments problem in the mid-1970’s
Not surprising given his position at the SEC, during the multiyear deliberation of Congress as to this problem Sporkin testified at Congressional hearings. Set forth below is one of my favorite exchanges from the FCPA’s legislative history in 1976 between Sporkin, Roderick Hills (Chairman, SEC) and Senator William Proxmire.
Senator Proxmire: “[Y]ou stress the fact that … the corporate abuses were accompanied by false or inadequate corporate books and records and that most of the cases involved illegal or improper domestic and foreign payments. Does such falsification of corporate books and records constitute a violation of SEC’s laws or regulations and do they constitute criminal violations?
Hills: I can’t say in all cases.
Sporkin: There is no provision that prohibits just what you stated.
Sporkin: There is no provision that provides, with respect to the kinds of companies we are talking about, that that could be a violation of law.
Senator Proxmire: Well, then, it would seem to me that maybe we ought to consider, as the legislative body for our Government, making it a violation of the law.”
Although some have called Sporkin the “Father of the FCPA,” (see here and here), this title with all due respect always struck me as a bit misplaced. While Sporkin most certainly played a key role in what would become the FCPA’s books and records and internal controls provisions, Sporkin’s SEC was not in favor of what would become the FCPA’s anti-bribery provisions and wanted no part in enforcing the anti-bribery provisions.
I had the pleasure of appearing on several panels with Sporkin over the years. Given his background, he appeared to me to think that the FCPA’s books and records and internal controls provisions were the panacea to corporate bribery. This too always struck me as a bit misplaced given that the vast majority of business organizations subject to the FCPA’s anti-bribery provisions are not even subject to the FCPA’s books and records and internal controls provisions (which only apply to issuers – a relatively modest slice of the overall business landscape).
As highlighted in this prior post – when the DOJ’s new program to offer advice on the FCPA went live very (what has come to be called the FCPA Opinion Procedure Release) – Sporkin (still the SEC’s enforcement chief) stated:
“We do not have guidelines for rapists, muggers and embezzlers, and I do not think we need guidelines for corporations who want to bribe foreign officials.”
On the FCPA’s 20th anniversary, Sporkin wrote this article titled “The Worldwide Banning of Schmiergeld: A Look at the Foreign Corrupt Practices Act on its Twentieth Birthday.” (In case you are wondering Schmiergeld is the German word for bribe].
As highlighted in this previous post, 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 talked 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:
“[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.”
Sporkin called it the “FCPA Immunization-Inoculation Program” and 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.”
As I stated back in 2011 when FCPA reform was a hot topic:
“While Sporkin’s FCPA reform proposals are, in certain ways, different from many of the proposed FCPA amendments being discussed at the moment, … [Sporkin’s reform proposals] demonstrate that the screams of some – that FCPA reform is solely a Chamber [of Commerce] 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.”
This is how I will choose to remember Sporkin – that someone who played a key role in certain aspects of the FCPA nevertheless believed that certain reforms were needed in the FCPA’s modern era.
Rest in Peace Mr. Sporkin.