A comment last week from Huffington Post blogger Andrew Woods asked whether the reach of the Foreign Corrupt Practices Act should be extended to ban payments to local security forces. Our post about it is here. We’ve now heard from several readers, and nearly all were skeptical. The note below (which we’ve edited slightly for context) is from a lawyer in the D.C. area. It reflects the consensus:
Dear FCPA Blog,
I don’t know, it sounds like a stretch…
The author should propose the enactment of a new statute to address the human rights abuse issue.
The best argument I can come up with for using the FCPA for this purpose is as follows:
Even ignoring the human rights abuse issue, something like this should be incorporated into the FCPA if it involves payment to a government official (was an “official” actually paid in this case?) for services for which governments are not traditionally paid. If so, the firms are in effect “bribing” the government officials for services the government would not normally provide and for which it would not normally be compensated. Those payments, then, create an unfair advantage and are therefore banned by the FCPA. But if such payments are allowed under local law, then firms can still rely on that affirmative defense.
As for the “obtaining and retaining business” objective, the statute may have to be tweaked with regards to “proximity,” if you will. The government could argue, however, that the military officials were compensated or “bribed” in order to obtain the security necessary to continue drilling to extract oil to sell. If oil companies cannot drill in Nigeria without the security forces, they therefore cannot sell oil. So ultimately their payments for security do help them obtain or retain business.
Here I would cite your October 7, 2008 post, Case Closed For Kay And Murphy. In the Kay case, you said,
the Fifth Circuit emphatically did not think enforcing the statute against Kay and Murphy would be unfair, even if the business nexus element is a bit ambiguous. ‘A man of common intelligence,’ it ruled, ‘would have understood that . . . in bribing foreign officials, [Kay and Murphy were] treading close to a reasonably-defined line of illegality. . . . Defendants took this risk, and splitting hairs . . . does not allow them to argue successfully that the FCPA’s standards were vague….’
[In light of the court’s opinion in Kay,] compliance programs need to be expansive as well, aimed not just at bribes intended to help land business directly from foreign governments but extending also to any overseas public bribery that might create a commercial advantage. That includes payments to reduce taxes or speed up refunds, jump customs queues, obtain favorable product inspections, manipulate business registrations, alter rates or delivery times of national carriers, reduce utility costs, and enhance property usage — to name just a few.
We think the debate about how far to extend the FCPA is worthwhile, and we’ll continue to post ideas from readers.
Our thanks to those who have already taken the time to voice their opinions on this provocative issue.