Frezza
WASHINGTON (Legal Newsline) - Violations of the Foreign Corrupt Practices Act have been expanded to include not only what actual bribes are known to be paid but what bribes a business owner or executive "should have known" were being made.
This has some observers keeping watch over what cases the Justice Department prosecutes.
"This law is a sword of Damocles hanging over the head of anyone doing business in a foreign country," said Bill Frezza, a fellow at the Competitive Enterprise Institute. "You are subject to political and capricious enforcement attempts to govern the behavior of people and governments in foreign countries."
Frezza observed that normally when doing business in a foreign country a company has to have an in-country salesman. This salesperson probably earns a commission.
"What is the standard for what you should have known?" Frezza asked.
"How do you do a proper investigation when the U.S cannot compel discovery from foreigner countries? Any defense will be lacking if a proper discovery of evidence cannot be obtained."
Assistant Attorney General Lanny A. Breuer said late last year that he is open to amending corruption laws, but will not agree to what he perceives as attempts to weaken the Foreign Corrupt Practices Act.
Speaking at the 26th National Conference on the Foreign Corrupt Practices Act (FCPA) in Washington, Breuer said, "I am aware that there have been a number of efforts made this year to amend the FCPA, by the Chamber of Commerce and others. We in the Justice Department are always open - and I personally am - to working with Congress on ways to improve our criminal laws.
"That said, I want to be clear about one thing with respect to these proposals: we have no intention whatsoever of supporting reforms whose aim is to weaken the FCPA and make it a less effective tool for fighting foreign bribery."
Breuer is no stranger to controversy. In December 2011, Sen. Chuck Grassley (R.-Iowa) called for Breuer's resignation, outraged because Breuer allegedly deceived Congress about his knowledge of the "Fast and Furious" gun walking program.
"This was a shocking revelation..." Grassley said. "The Justice Department had publicly denied to Congress that ATF would ever walk guns. Yet, the head of the Criminal Division, Mr. Breuer, knew otherwise and said nothing."
Ronald D. Rotunda, a law professor at Chapman University Law School, Orange, Calif., said the original concern with FCPA had to do with protecting investors.
"Companies could be extorted by the foreign officials. The companies are victims not criminals," he said.
"If I am an investor in a company that has all these foreign contracts, I think it is because of savvy business but actually, it is because of bribery. The purpose of the law is to prevent misleading investors. There is logic to that. Investors want to know if an American company is obtaining business because it has a better product. That is not necessarily true if it is obtaining business by bribing the son-in-law of the local dictator."
Regarding the "should have known" FCPA prosecutions, Rotunda said, "Bribery is a criminal violation and that requires intent. What we do not want is willful blindness - the corporation's higher ups averting their eyes and not asking questions because they do not want to hear the answers.
"The corporation does not have necessary intent if the members of control group - the high level corporate officers - do not know what is going on because a low-level official who paid the bribe kept the crucial information from the higher-ups.
"The Government has to show a corrupt intent to commit a crime in order to prosecute bribery."
Rotunda provided an example of willful blindness, "Suppose a company that had no business from South Parador now finds it has a lot of government contracts after they hire an individual who has a lot of contacts with relatives of the local dictator.
"Suppose this individual asks for reimbursements for expenses but does not provide any receipts. If the high-level company executives say they do not want to ask because they do not want to know the answer, that is willful blindness."
But this is not what necessarily happens when the government prosecutes using a more lenient, "should have known" standard, Rotunda said.
Editor's note: Legal Newsline is owned by the U.S. Chamber Institute for Legal Reform.