The first time we heard from Andy Spalding (left), a lawyer on a year-long Fulbright Research Grant in Mumbai, India, he floored us with the idea that the Foreign Corrupt Practices Act causes corruption and hurts poor people. We just heard from him again, this time about the way the Justice Department explains the purpose of the FCPA and approaches enforcement. We’ll let Andy speak for himself (because he does it so well). Here’s what he said:
Dear FCPA Blog,
I was recently reading the DOJ’s “Lay-Person’s Guide to the FCPA,” available here, which provides a helpful overview of the FCPA, including a brief reference to its legislative history. I am generally grateful for any effort on Justice’s part to make the statute transparent and user-friendly; the more that can be done in that area, the better. But I must take issue with Justice’s brief but telling account of the statute’s legislative history, particularly the political events of the 1970s that precipitated the bill’s enactment. The guide is telling, not for what it says, but for what it does not say — that is, for what the DOJ has seemingly forgotten. And as Edmund Burke famously warned, “those who don’t know history are destined to repeat it.”
The guide refers to the SEC report, well known to your readers, which disclosed that hundreds of companies had engaged in overseas bribery. The guide further implies that recognition of the need for anti-bribery legislation occurred mainly in response to this report. But the report was not released until mid-1976, and Congress had begun deliberating on the need for anti-bribery legislation as early as August of 1975. What, then, was Congress talking about in 1975, if not the SEC report?
Look to the transcripts of the earliest testimony. Congress was concerned with the conduct of one company in particular — Lockheed — which was publicly known at the time to have bribed officials from several overseas governments, particularly Japan, the Netherlands, and Italy. Scandals erupted in these countries, and public officials were shamed or forced to resign as a result. That much remains in our memory, but we forget the rest of the story. Particular attention was paid in congressional testimony to Italy, whose parliament at the time was divided roughly in half between the democrats and, yes, the communists.
Witnesses and congressmen alike, from both sides of the political aisle, expressed concern that revelations of bribery would confirm the stereotype of the corrupt capitalist that was widely promoted in communist propaganda. This, in turn, would weaken our political ties to unstable countries, and open the door to further influence from countries that we believed were hostile to the values of a liberal democratic society. The FCPA, then, was designed not only to promote business ethics, but to serve as an instrument of foreign policy. Ample support for this account in the legislative history may be found at your post here.
Although the Cold War is over, the FCPA nonetheless operates today in an international political context that is only slightly less delicate than in the 1970s. As Congressman Stephen Solarz (D-NY) stated in 1976, “it is important to examine the problem of overseas payments in broader terms than simply a matter of economics or even morality.” I would ask, does the DOJ heed the congressman’s warning today? Does it consider the impact of FCPA enforcement on delicate international political relationships? I see absolutely no evidence that it does. Indeed, I would politely throw down the gauntlet and challenge anyone to provide an account of Justice’s foreign policy vision of FCPA enforcement that requires more than just a couple sentences to articulate.