Congress Cracks Down on Bribery - Corporate Bribery, That Is

A law that had passed in response to the Watergate scandal may be coming back to bite US corporations doing business overseas.

Congress passed the Foreign Corrupt Practices Act in 1977, but the Justice Department made little use of it for decades. That changed with the passage of Sarbanes-Oxley in 2002 - a law intended to hold top executives accountable for their company’s actions.

The Foreign Corrupt Practices Act bars US corporations from paying or offering to pay officials of a foreign government or employees of a government-owned company in an effort to secure a contract or business advantage. It covers non-cash gifts or offers in addition to under-the-table money.

The Foreign Corrupt Practices Act, known as FCPA in the trade, appears to be loosely worded, and may therefore be used to cover a multitude of alleged sins. As a result, there's a new wave of pricey consultants employed to interpret the law, the Wall Street Journal reports.

The FCPA raises basic questions:
 

• Does enforcing a wobbly, rarely used law now make sense as US companies and their foreign counterparts struggle to recover from a worldwide recession?
  
  
• Does limited use of the FCPA in the past leave the Justice Department open to charges of selective prosecution?
  
  
• If gift-giving is a tradition in a foreign country, can the law accommodate local practices without making the Justice Department look inconsistent?

 
The short answer: We’ll see.

The FBI now has 8 agents handling investigations into overseas bribery cases, up from 5 last year. US companies take the law seriously. Sun Microsystems (JAVA) -- preparing for a $7.4 billion takeover by Oracle (ORCL) -- said in a recent regulatory filing that it may have violated the law in an unnamed country. Weatherford International (WFT), an oil and gas company, said in 2007 it might have a bribery problem with a European subsidiary

Lucent Technologies agreed to pay a $2.5 million fine in 2007 after it picked up the tab for sightseeing trips for about 1,000 officials at telecommunications companies controlled by the Chinese government. Siemens AG (SI) agreed in December to pay an $800 million fine to settle investigations into alleged payments to government officials around the world.

In February, Kellogg Brown & Root and Halliburton (HAL), its former parent, agreed to pay $579 million for alleged illegal activity in Nigeria. KBR pleaded guilty, and as part of the deal, the Justice Department agreed not to prosecute Halliburton.

No one suggests that bribery is just the cost of doing business and should be ignored. But it’s unclear that the added legal costs of complying with the dusty FCPA -- a law that grew out of alleged dirty dealing in President Nixon’s reelection fund -- will halt real corruption and foster competition.

The bottom line, therefore, may be: Power to the bureaucrats!