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A Critical Juncture for the FCPA

June 15th, 2011

Rep. Jim Sensenbrenner (R-WI) and the U.S. Chamber of Commerce are trying to gut the world’s flagship anti-corruption legislation, but “we must stand firm in our values, our principles, and our promises,” writes Ann Hollingshead

I’m a little annoyed. I say “a little” only out of a desire to stay civil.

Today the House Judiciary committee held a hearing on the Foreign Corrupt Practices Act (FCPA), the flagship U.S. legislation that makes it illegal to bribe a foreign official. The Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have jurisdiction over the FCPA, which was unique worldwide for almost 20 years until 1997 when thirty-four OECD countries committed to put in place similar legislation. And now the House Judiciary Committee, after months of lobbying from the Chamber of Commerce, wants to “provide greater clarity” to U.S. businesses complying with the law.

I’m all for a healthy discussion about the pros and cons of certain legislation. I’m all for reform, clarification, and efficiency in our legal system. And I am absolutely in favor of intelligent discussions of how to make the FCPA work better.  But this hearing wasn’t about “providing clarity.” Such a label is downright laughable. It was a one-sided conversation about dismantling the FCPA and rendering it ineffective.

The Chamber, which retained former U.S. Attorney General Michael Mukasey on its behalf, advocates limiting the liability of a parent company for the actions of its subsidiaries. As Raymond Baker, director of Global Financial Integrity (GFI), has pointed out, “in a world where so much of global business is done by companies via hundreds, even thousands, of subsidiaries, gutting the FCPA in this way would subject the United States to ridicule.” The Chamber is also seeking to define “foreign official,” to give companies “great certainty.” Greater certainty of what, exactly? Exactly who you can and can’t bribe? Try this: don’t bribe anyone.

Finally the Chamber wants to allow companies with compliance programs to escape liability. As Heather Lowe, GFI’s Legal Counsel and Director of Government Affairs, points out, “If a company is found to be in violation of the FCPA, then the existence of a company’s compliance program must not have prevented the acts of bribery. So why should [that] be a defense to the charge of bribery?” If a company has sexual harassment policies in place, does that mean its employees can’t be held accountable under federal laws governing workplace discrimination like the Title VII of the 1964 Civil Rights Act? No. Why should the standards of accountability be any different for bribery?

Yet today’s Judiciary Committee hearing could only pay attention to one side of the issue. Of the four panelists, only one represented the Department of Justice (the other three were proponents of changes to the FCPA) and none represented civil society. Rep. Jim Sensenbrenner (R-Wi), who is leading the charge to amend the FCPA, sought to frame the issue as an economic one, claiming these amendments are needed to provide companies more certainty about enforcement. Which makes me wonder if this is the “competitive disadvantage” argument all over again… but tied up in different wrapping paper.

Sensenbrenner would do well to learn a little history. Even when the U.S. stood completely alone in its legislative quest to curtail foreign bribery, no catastrophic economic scenario materialized for businesses.  As the Government Accountability Office (GAO) noted four years after the implementation of the FCPA: “claims that U.S. companies have lost sales…are difficult, if not impossible, to substantiate.”

Three years later a paper published in the Journal of International Business used recently published data to test the competitive disadvantage theory and found that the FCPA has not negatively affected the competitive position of American industry in the world marketplace” (emphasis mine).  Even at this time, when the American industry was the only one worldwide facing these kinds of restrictions, anti-bribery laws did not negatively impact their export performance or market share.

We stand at a dangerous crossroads here. If the Judiciary Committee moves forward on these amendments—at the request of the Chamber of Commerce and on the heels of this utterly biased hearing—it will be a monumental loss for our country and anti-corruption efforts worldwide. We would be giving up on our ideals and on our commitments, for the sake of these specious arguments. We must not let this happen. We must stand firm in our values, our principles, and our promises.

Written by Ann Hollingshead

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