Forecasting Essay ⋆ Business Essay Examples ⋆ EssayEmpire

The Foreign Corrupt Practices Act (FCPA) of 1977, amended in 1988 and 1998, prohibits companies or their personnel and agents from paying, or arranging to pay through intermediaries, bribes to foreign officials and certain other recipients. The FCPA criminalizes such bribery. As amended, the statute applies to all businesses organized under U.S. law and to all foreign businesses issuing securities within the United States. The statute, amending the Securities Exchange Act of 1934, also subjects those businesses and even purely domestic enterprises to accounting and internal control requirements for maintaining accurate records and financial statements.

The anti-bribery provisions cover U.S. securities issuers (including foreign firms), domestic concerns, or any person acting on behalf of any of the preceding who uses any means or instrumentality of interstate commerce to offer or transfer anything of value in virtually any form to foreign officials or certain other recipients inside or outside the United States in order to influence corruptly favorable policy action. Under some circumstances, minor “facilitating” payments (i.e., “grease”) to expedite otherwise required clerical action by low-level officials are exempted by the FCPA. The U.S. Department of Justice maintains an informative Web site.

The FCPA was a by-product of the Watergate scandal investigations. In an amnesty program, over 400 U.S. firms admitted to the U.S. Securities and Exchange Commission (SEC) to having made “questionable payments” abroad. Congress passed, and President Jimmy Carter signed, the FCPA. The Ford administration opposed criminalization and favored a purely disclosure approach.

Although in 1977 nearly all countries prohibited bribery of their government officials, the FCPA was the first statute to prohibit business bribery or bribery efforts (including offer or authorization) concerning another country’s officials. Only Sweden, in 1978, followed the U.S. lead. A lively controversy concerned whether U.S. firms were placed at a competitive disadvantage when other firms could bribe with impunity. A number of European countries effectively permitted tax deductibility of such bribes. The empirical evidence on this issue arguably remains mixed. The controversy led to 1988 amendments relaxing some aspects of the original FCPA. These amendments permitted certain affirmative defenses concerning promotional or marketing expenses (such as entertainment), payments permitted under foreign laws such as certain political contributions, and use of agents.

The FCPA 1988 amendments instructed the U.S. president to marshal international anti-corruption cooperation in order to reduce the near uniqueness of the U.S. posture. A set of international conventions emerged in the late 1990s. The Organization of American States (OAS) adopted the first anti-bribery convention in 1996; the Organisation for Economic Co-operation and Development (OECD) acted in 1997. The FCPA 1998 amendments implemented U.S. adherence to the OECD convention and also expanded scope of coverage. The UN Convention Against Corruption was adopted in 2003. There are other regional conventions, such as those of the European Union, the Council of Europe, and the African Union. Member states of these conventions are at various stages of adopting implementing legislation and carrying out enforcement activities.

The FCPA provides severe penalties for firms and individuals violating anti-bribery and accounting provisions. The latter can receive prison sentences. U.S. enforcement has increased following the 2002 Sarbanes-Oxley Act and the UN Oil for Food Program scandal. In 2004 the Department of Justice and SEC reportedly initiated five new actions. In 2005 the number was 12; in 2006, 15. In the first half of 2007, there were about 100 active investigations. U.S. actions included Volvo and Baker Hughes. Enforcement is increasing overseas. Statoil in Norway, Siemens in Germany, and BAE in the United Kingdom have faced major corruption investigations.

Bibliography:

Sharie A. Brown and Brian S. Chilton, Foreign Corrupt Practices Act (National Legal Center for the Public Interest, 2007);
Richard L. Cassin, Bribery Abroad: Lessons from the Foreign Corrupt Practices Act (Lulu.com, 2008);
Alvaro Cuervo-Cazurra, “The Effectiveness of Laws Against Bribery Abroad,” Journal of International Business Studies (v.39/4, 2008);
Robert W. Tarun, The Foreign Corrupt Practices Act: A Primer for Multinational General Council (Baker & McKenzie, 2008);
Duane Windsor, “The Development of International Business Norms,” Business Ethics Quarterly (v.14/4, 2004).

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