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Federal Corrupt Practices Act Gets a Second Look

Written by Anonymous
Edited by Greg Bartolomei

As long as business has been expanding in the United States it has traditionally been the role of government to make sure the playing field has been even. Government tries to create legislation when it deems necessary, but also repeals legislation when it finds it to be hindering. The question is how do we know when a piece of legislation is necessary? The Federal Corrupt Practices Act has been examined closely in the past few weeks in light of billions of dollars in penalties due to violation of the law. If giving bribes will help ease business transactions in foreign countries is it necessarily wrong simply because most westerners consider it immoral?

The FCPA was passed in 1977 in response to the Watergate Scandal and prohibits bribes to foreign officials in order to win business. Though the law was enacted over thirty years ago, it was never strictly enforced until recently. After the Enron Scandal in 2002, government instituted new legislation in order to prevent such an event from ever occurring again.  The Sarbanes-Oxley Act was the “Enron never again solution,” and its main components consisted of making the chief executive officers of public companies certify their financial documents.  This now meant that if the company’s financials were misrepresented in any way the CEO and CFO would be held legally responsible. Another key component of the law was that it tightened existing legislation such as the Federal Corrupt Practices Act.

briberyAs this legislation started becoming more strictly enforced companies such as Siemens, Halliburton and Johnson and Johnson soon found themselves on the chopping board. These companies all were accused of violating the FCPA and were forced to pay steep penalties to stop U.S probes. Siemen’s alone had to pay 1.6 billion dollars in penalties and other companies had to pay a total of 4 billion dollars in the past five years.  As the FCPA has grown and been more strictly enforced so has resistance from companies.
Amending the law now has become a priority for the U.S Chamber of Commerce, the largest lobbying group in Washington whose sole goal is to further the interest of business.  In a utilitarian fashion they argue, “the law has had a chilling effect, stunting U.S.  business interest abroad as companies shun deals for fear of triggering FCPA probes.” (Critics 1)  They also claim the law is not completely clear and much is left up to interpretation of what is legal and what isn’t. The law clearly bans companies from paying bribes to foreign officials in order to win business, but doesn’t completely clarify who may be considered as such. Many companies combated this fear by paying for multimillion dollar compliance programs that help their company clearly identify bribery risks in their dealings abroad; a very costly  consequence of an unclear piece of legislation.

The justice department and anticorruption agencies take a deontological approach as they are completely opposed to any changes to the FCPA.  They say, “there is no argument for becoming more permissive when it comes to corruption.”(Critics 1) They also claim it would a bad message to countries that recently passed bans on foreign bribery including China, Russia, and the U.K.  Though, the justice department doesn’t seem to be compromising at any time they are planning to introduce a new detailed guidance on the FCPA next year.

For now the U.S Chamber of Commerce is likely to continue fighting for deregulation of the FCPA as they say a change in the law is the best solution.  Whether or not the U.S. Chamber of Commerce can gain any ground is yet to be seen. In matters like these, sometimes a Deontological grip on government can’t allow change. Even realizing the unlikelihood of compromise, the Chamber of Commerce has to be somewhat pleased with the justice department committing to introduce detailed new guidance of the law that can clarify some of the loose ends and make for easier foreign business practices.

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 **Due to technical difficulties we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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“Critics Target Bribery Law.” Wall Street Journal. 27 Nov. 2011. Web. 29 Nov. 2011. <http://online.wsj.com/article/SB10001424052970204753404577064061604755308.html&gt;.

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