Fear And Greed And The FCPA

We’ve noticed that when prices for energy and other commodities climb, there’s more public corruption. Spiking prices, after all, mean fatter margins for producers and proportionately more insecurity for consumers. Meanwhile, middlemen see nothing but opportunities. All these inject an extra dose of fear and greed into the markets — the perfect fertilizer for public bribery. For us, that means times of economic dislocation are also times of high-alert for Foreign Corrupt Practices Act compliance.

We were reminded of all this yesterday when we read the following news report:

“Speaking in Detroit at the ninth World Energy Conference, the [U.S.] president said that in the face of clear danger, he was optimistic that oil-producing and consuming nations would cooperate to find a solution, and the United States would reach its goal of energy independence.

“In a gloomy speech to the United Nations General Assembly, meanwhile, the secretary [of state] said the ‘early warning signs of a major economic crisis are evident.

“‘Rates of inflation unprecedented in the past quarter century are sweeping developing and developed nations . . . . The world’s financial institutions are staggering under the most massive movements of reserves in history. And profound questions have arisen about meeting man’s fundamental needs for energy and food.'”

That report, you might have guessed, isn’t recent. It appears on page 1085 of the 20th Century Day by Day, and it’s dated September 23, 1974. The president in question was Gerald Ford, and his secretary of state was Henry Kissinger.

When they issued their warnings in 1974, there was no FCPA. Just two years later, however, in a post-Watergate investigation, the Securities and Exchange Commission found that “over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million [$2.5 billion in today’s dollars] to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payments . . . . Congress enacted the FCPA [in 1977] to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.” See the Department of Justice’s “Lay Person’s Guide to FCPA” here.

Did rocketing energy and food prices in the mid-1970s contribute to enactment of the FCPA? Indirectly, yes. Rising prices then, as now, injected more fear and greed into the world markets. That’s what President Ford and Secretary Kissinger were talking about. And an astounding number of U.S. companies responded with illegal conduct overseas. The Foreign Corrupt Practices Act is intended to prevent history from repeating itself.