Fight brews over anti-bribery law as fines jump
(Reuters) - The Chamber of Commerce has put reshaping a U.S. anti-bribery law near the top of its legislative wish list, setting up a battle pitting the powerful business lobby group against supporters of the statute who say it helps fight corporate corruption abroad.
The 34-year-old Foreign Corrupt Practices Act was lightly enforced in its first two decades but has become a favorite tool of federal prosecutors in recent years. FCPA enforcement hit an all-time high last year as eight companies, including BAE Systems and Daimler AG, reached settlements in separate cases together totaling $1.6 billion.
Lobbying is intensifying amid the prospect that legislation may soon be introduced in Congress to amend the law, possibly as soon as next month. Anti-corruption and human rights groups are opposing changes sought by the Chamber.
"They're trying to take the teeth out of the FCPA," said Heather Lowe, legal counsel at Global Financial Integrity, a nonprofit organization focused on the cross-border flow of illegal money.
The FCPA makes it illegal to bribe foreign officials to obtain business. It's unclear what specific changes to the law will be proposed, though the Chamber of Commerce has argued that the law needs to better define a "foreign official" and companies that form compliance programs should not be held responsible for acts of a rogue employee.
The business lobby group has enlisted some legal heavyweights to help make its case to legislators, including a former U.S. attorney general and a leader of the government task force that investigated Enron.
Critics have argued that the law is an economic drag on U.S. companies and puts them at a competitive disadvantage to foreign rivals that do not face the same exposure.
Supporters say the law does not harm competitiveness. They point out that more than half of the top 10 FCPA fines assessed by the U.S. government were against foreign companies. The FCPA helps level the playing field for American companies, they say.
"We think reducing bribery actually lowers the costs of doing business," said Stefanie Ostfeld, policy advisor for Global Witness, an anti-corruption group.
A group of nonprofit organizations that support the law, including billionaire financier George Soros's Open Society Foundations, are hosting a Congressional briefing on Friday. Panelists are expected to defend FCPA enforcement and criticize changes sought by the Chamber of Commerce.
The panelists will include David Kennedy, director of the Institute for Global Law and Policy at Harvard Law School, and Dan Danielsen, of Northeastern University School of Law. They are expected to frame the debate in terms of whether the United States will continue to lead the world in setting global anti-corruption standards. The Chamber is trying to make the debate in part about jobs and the economy.
Last year, the Chamber's Institute for Legal Reform issued a policy paper, called "Restoring Balance," in which it said some companies were forced into unfair settlements.
The paper proposed five amendments to the FCPA, including a defense for companies that institute anti-bribery compliance programs, a new definition of a "foreign official," and a "willfulness" requirement for corporate criminal liability.
Andrew Weissmann, a partner at the law firm Jenner & Block who served as the director of the Enron Task Force, coauthored the white paper and former U.S. Attorney General Michael Mukasey appeared on behalf of the Chamber before a Congressional panel in June.
In written testimony, Mukasey, now a corporate lawyer at the law firm Debevoise & Plimpton, said the FCPA had many merits but that it had been unfairly used to prosecute companies that had little to do with any wrongdoing. When he was attorney general, Mukasey's Justice Department oversaw 20 FCPA actions in 2008, more than double the amount in 2006.
Mukasey, who was also a federal judge, said the statute gives too much power to prosecutors since most of the cases are rarely tested in court. He cited the government's expansive definition of a "foreign official" under the FCPA, which has come to include employees of state-owned companies.
Without a more clear definition, Mukasey said "companies have no way of knowing whether the FCPA applies to a particular transaction or business relationship," particularly in countries like China where many companies are under state control.
U.S. Rep. Jim Sensenbrenner, a Wisconsin Republican who presided over a hearing on the FCPA in June, said at the time he planned to introduce legislation addressing the Chamber's concerns about the law.
A spokeswoman for Sensenbrenner said on Thursday there was no timetable to introduce a measure.
The website Anti-Corruption reported that a Chamber-retained lobbyist cohosted a fund-raiser for Sensenbrenner a little more than a month before he announced his intention to introduce the legislation. Sensenbrenner's office didn't comment about the chamber lobbying.
The Justice Department and the Securities and Exchange Commission have used the law more frequently and aggressively to obtain billions in fines. In 2010, the Justice Department initiated 48 FCPA actions, according to a report by the law firm Gibson, Dunn & Crutcher, dwarfing the 26 actions brought in 2009, which was a record itself.
Fines in FCPA cases have also hit record highs. Eight of the top 10 largest settlements reached through 2010 were reached last year, according to the Gibson Dunn report.
The uptick in government enforcement has been accompanied by an increase in follow-on civil litigation by plaintiffs' lawyers, which critics complain has exposed companies to even more costs. So far, trial lawyers have not taken high-profile roles in lobbying over possible reform of the FCPA.
Concerns over the economic effects of FCPA are not new. Soon after the law was passed, Congress sought to amend the FCPA out of fear that the law was hurting exports. But the law was not amended until 1988, when more defenses for companies were added.
Michael Koehler, an FCPA scholar at Butler University who has long criticized enforcement of the law, said he thinks that the changes being considered will likely not be enacted any time soon.
Regardless of the merits of the proposed amendments, Koehler said it will be hard to find the political will to change a law that makes it illegal for companies to bribe.
"The politics make it a difficult issue," said Koehler.
(Reporting by Andrew Longstreth in New York; Editing by Phil Berlowitz)
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