One of the federal government’s few success stories when it comes to policing corporate crime in recent years comes from a post-Watergate law called the Foreign Corrupt Practices Act, or FCPA.
Prosecutors have used the law to get more than $1 billion in bribery fines out of huge companies like Siemens and DaimlerChrysler.
But now the U.S. Chamber of Commerce is pushing back: It has hired former Justice Department leaders to make the case that the law is out of date.
Critics: Law Has Huge Consequences
The FCPA dates back to the 1970s, a time when American executives carried briefcases stuffed with cash to win lucrative contracts from foreign governments. The FCPA was supposed to put an end to all that by making it a crime for U.S. companies to offer money to employees of foreign governments to secure a business advantage there.
More than 30 years later, the law is open for debate all over again, in corporate board rooms and the halls of Congress.
Former Attorney General Michael Mukasey says the law needs to be narrowed because being charged with a crime has huge consequences for business.
Individual employees should be punished for violations, Mukasey says, “but not the company, which is in effect the death knell for the company and for a whole lot of employees and stockholders who didn’t do anything wrong.”
Mukasey, now a partner at the law firm Debevoise & Plimpton, is working with the U.S. Chamber of Commerce to convince members of Congress to overhaul the foreign bribery law. And he’s attracted support from both Democratic and Republican lawmakers, including Rep. James Sensenbrenner, R-Wis., who has said he wants to introduce a bipartisan update later this year.
Why Amend It Now?
For decades, the Justice Department took the FCPA out of its toolbox every once in a while.
But over the past few years, foreign bribery investigations have made up a more important and high-profile part of prosecutors’ caseloads. For instance, Rupert Murdoch’s News Corp. is one of the companies currently under investigation for alleged violations of the law because reporters in the U.K. may have paid policemen there for tips.
“American companies and foreign companies should be competing based on the quality of their goods, the quality of their services, and not because they’re committing crimes,” says Lanny Breuer, who runs the criminal division at the Justice Department.
The law applies to both U.S. companies and foreign businesses that have operations in this country. Breuer says that levels the playing field.
“At the end of the day, I don’t want jobs lost because some foreign company or someone else was able to bribe an official and so they got a contract, and an American company, for instance, did not,” he says.
But executives at the Chamber of Commerce, which represents American business, say the law is producing a lot of confusion and big legal bills.
Harold Kim, a senior vice president at the chamber’s Institute for Legal Reform, is urging Congress to amend the law in a handful of ways.
That includes a provision to cut back on legal liability for companies that acquire other businesses with foreign bribery troubles and another, even more controversial provision making clear that companies that require employees to behave on the up and up can use those compliance programs as a defense to fight possible criminal charges.
“Providing more clarity as to what the law means is really the aim and purpose of this, while ensuring that the enforcement agencies can still go after the bad guys,” Kim says.
Would Changes ‘Gut’ The Law?
Sarah Pray follows Africa policy for the Open Society Foundations, an advocacy group that gives grants to organizations that promote democracy. The foundations give money to NPR. Pray says the U.S. Chamber is being “disingenuous.”
“What would result … would be a gutting of the Foreign Corrupt Practices Act and would all but eviscerate the Department of Justice’s ability to adequately enforce the law,” she says.
Pray says carving out a so-called compliance defense for companies, as the Chamber of Commerce favors, could encourage businesses to develop “fig leaf” programs to cover themselves legally, even though they promote bribery behind the scenes. The chamber disputes that interpretation.
As for claims the Justice Department is too aggressive, Pray says there’s been an average of 14 settlements a year for the past decade, and eight of the 10 biggest settlements have come in cases against foreign companies, not American businesses.
Mukasey, the former attorney general and retired federal judge, says that misses the point.
“I don’t think it’s so much the number of actual enforcement actions as it is the effect of possible enforcement actions on people’s behavior,” says Mukasey. (Full disclosure: His law firm is working for the board of directors of News Corp., which is under scrutiny for alleged FCPA violations.)
Mukasey, who started studying the foreign bribery law well before the News Corp. inquiry began, says companies are spending millions of dollars in legal fees to investigate possible bribes, even though they may amount to small-potatoes issues such as gifts on a business contact’s birthday.
Implications On The World Stage
David Kennedy, a law professor at Harvard University, studied enforcement of the foreign bribery law and wrote a recent report funded by Open Society Foundations. He says lawmakers back in the ’70s had something very clear in mind.
“The goal of Congress was precisely to avoid the situation where U.S. corporations undermined the stability and credibility of governments abroad,” Kennedy says.
Kennedy and other supporters of the bribery law say the United Kingdom, Germany and other European allies are all stepping up their enforcement, and now, they say, is no time for the U.S. to step back.