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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

For New Year’s Eve, we visit with the ghost of the FCPA past

President Jimmy Carter signed the Foreign Corrupt Practices Act into law on December 19, 1977. In adopting the bill that would become the FCPA, the Senate listed its reasons for wanting to outlaw corrupt payments to foreign officials to obtain or retain business. We think those reasons are as valid today as they were then.

Today we know more about bribery and the harm it does, so we’d add more reasons for having the FCPA. But in 1977, no one was talking about the link between bribery and terrorism, or environmental degradation, fake medicines, failing schools, contaminated drinking water, dangerous roads, unreliable power grids, and so on. Bribery wasn’t yet known as a gateway crime, and the victimology of corruption hadn’t emerged as part of the discussion, and wouldn’t for about 25 more years.

Still, a group of senators from both parties got a lot right 38 years ago. Here’s what they had to say back then. Every word is from the May 2, 1977 official report of the Senate committee on banking, housing, and urban affairs.

Recent investigations by the SEC have revealed corrupt foreign payments by over 300 U.S. companies involving hundreds of millions of dollars. These revelations have had severe adverse effects.

Foreign governments friendly to the United States in Japan, Italy, and the Netherlands have come under intense pressure from their own people.

The image of American democracy abroad has been tarnished.

Confidence in the financial integrity of our corporations has been impaired.

The efficient functioning of our capital markets as been hampered.

Corporate bribery is bad business. In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet.

Corporate bribery of foreign officials takes place primarily to assist corporations in gaining business. Thus foreign corporate bribery affects the very stability of overseas business.

Foreign corporate bribes also affect our domestic competitive climate when domestic firms engage in such practices as a substitute for healthy competition for foreign business.

Managements which resort to corporate bribery and the falsification of records to enhance their business reveal a lack of confidence about themselves.

Secretary of the Treasury Blumenthal, in appearing before the committee in support of the criminalization of foreign corporate bribery testified that: “Paying bribes — apart from being morally repugnant and illegal in most countries — is simply not necessary for the successful conduct of business here or overseas.”

The committee concurs in Secretary Blumenthal’s judgment. Many U.S. firms have taken a strong stand against paying foreign bribes and are still able to compete in international trade.

Unfortunately, the reputation and image of all U.S. businessmen has been tarnished by the activities of a sizable number, but by no means a majority of American firms.

A strong anti-bribery law is urgently needed to bring these corrupt practices to a halt and to restore public confidence in the integrity of the American business system.

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Report No. 95-114 Foreign Corrupt Practices and Domestic and Foreign Investment Improved Disclosure Acts of 1977, 95th Congress 1st Session, Report of the Committee on Banking, Housing, and  Urban Affairs United States Senate to accompany S. 305 together with Additional Views May 2 (legislative day, March 28), 1977 is here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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2 Comments

  1. Thanks for this Richard!

    A review of how we got where we are today with respect to the FCPA is a healthy excercize. Those involved in the technical and legal aspects of the FCPA on a day-to-day basis often forget about why the legislation was promulgated in the first place.

    I especially like the statement: "Managements which resort to corporate bribery and the falsification of records to enhance their business reveal a lack of confidence about themselves."

    Too many times I've heard the statement, often from a senior manager, that "we can't operate in this country without bribing someone".

    I respond by saying "you are partially correct…. we can't operate in this country…..with managers like you". After 15 years of experience in high risk jurisdictions it has become abundantly clear to me that it's all about having the right people and ethical standards.

    Is it hard work? Absolutely!

    Is it impossible work? Not at all!

  2. Mr. Cassin- Alas, your ghost of the FCPA past is a mere chimera of the core rationale underpinning the US government's move to implement its path-breaking anti-bribery law. I suggest diving a little deeper into the relevant hearings in both Houses for clear and convincing evidence as to why this law was essential in the US, but nowhere else for decades (not a memo that's been lawyered to death at State).

    Regardless of its objective historical rationale, the FCPA today is now justified according to a failed ideology founded in neo-liberal idealism. This story fits the narrative of being a "force for good", while also serving as a powerful form of US economic statecraft that enables US economic hegemony and dominance, even among purported allies and "friends".

    Beware the precedent of the FCPA's expansive jurisdictional claims as the Europeans, and other regions, threaten to collude against US interests. US MNC's today risk being foisted on their own petard by their own government in a misguided crusade to export US problems, and its "solutions", to the rest of the world.

    In other words, foreign bribery was, and is, a US government problem – not a problem of all governments – stemming from the conduct of its MNC's. Creating rules for the world based on problems in my own home is a prescription for failure, regardless of my current power projection abilities and the apparent "universality" of the problem and its moral ambiguities.

    Watch this space


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