Financial Transparency Coalition

U.S. Attorney General Eric Holder | U.S. Dept of Justice

On Sunday U.S. Attorney General Eric Holder announced the Kleptocracy Asset Recovery Initiative at the African Union Summit in Uganda.  The new policy aims to take on public bribes by recovering public money and returning it to its intended use.  While the Obama administration has, so far, shown a greater propensity to tackle the thorny problem of foreign bribery than his recent predecessors, the new policy does not exist in a historical vacuum.  In fact, the U.S. has had one of the world’s longest and strongest histories of action against foreign bribery.  This is an abbreviated story of that history.

1975-1977. Lockheed bribery scandal

In late 1975 a Securities and Exchange Commission (SEC) investigation into Lockheed Corporation revealed that the aircraft manufacturer had paid at least $22 million (about $90 million in current dollars) in bribes to foreign government officials and political organizations.  At the time, this was not illegal. In other such cases, however, it had become customary for the corporation to reveal to the SEC which foreign officials had received the bribes and then to agree not to make more of these types of payments.  This case was different.  Lockheed refused to disclose its beneficiaries or to promise not to make future payments and even stated bribes were normal, necessary and “consistent with practices engaged in by numerous other companies abroad.”

1977. Foreign Corrupt Practices Act (FCPA)

In response to the Lockheed scandal, and the revelation that hundreds of other businesses were routinely involved in this practice, Congress enacted the Foreign Corrupt Practice Act.  In an effort to “bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system,” the FCPA makes it unlawful for persons and entities to “make payments to foreign government officials to assist in obtaining or retaining business.”  Jimmy Carter signed the act into law on December 19, 1977.  It remained unique worldwide for almost 20 years.

1980s and 1990s. U.S. pressure on the OECD

Given concerns from domestic businesses, U.S. lawmakers realized American companies may be at a disadvantage when competing internationally with foreign companies who legally paid bribes and, “in some countries, were permitted to deduct the cost of such bribes as business expenses on their taxes.” In 1988 the U.S. commenced negotiations in the Organization of Economic Cooperation and Development (OECD) seeking agreement from major trading partners to enact legislation similar to the FCPA.

In 1997, almost ten years later, thirty-four countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, committing to put in place legislation that criminalizes the act of bribing a public official.

1998. International Anti-Bribery Act

In an effort to implement the anti-bribery conventions of the OECD, the U.S. amended the FCPA with the International Anti-Bribery Act of 1998. Among other changes, this Act made the rules of the FCPA also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.

2000s. Trends in Sanctions.

According to an OECD study, over the last ten years, the U.S. has sanctioned 40 individuals and 20 companies, which represents almost 30% of the world’s sanctions. But in recent years the U.S. has been more actively pursing criminals under FCPA.  In fact, between 2006 and 2009 the number of FCPA prosecutions rose from 2 to 26

Acknowledging this trend, Mark Mendelsohn, the Justice Department’s lead criminal prosecutor for violations of the FCPA, noted recently he believes the U.S. government “is going to focus on international corruption in a more comprehensive and even more rigorous way than it has in the past.”