US curb on overseas bribes: to prim, or simply proper?
Businessmen say it is a stern Puritan preacher of a bill -- vague, unnecessarily restrictive, a harsh disincentive to exports. Its supporters claim corporations just want their slush funds and payoffs back.Skip to next paragraph
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The Foreign Corrupt Practices Act, passed in 1977, was designed to regulate the overseas conduct of American business. It has been controversial since the day it became law.
Now, a congressional move to amend the bill is raising difficult questions about the cost of legislating morality.
"This issue gets blown up in rhetoric," a congressional staff member says. "It's not just sanctioning bribery. It's much more complex than that."
The original bill was a child of the Watergate era. In 1975 the Securities and Exchange Commission (SEC) compiled evidence detailing $300 million in illegal payoffs, involving 450 corporations. Congress, aghast, eventually passed the Foreign Corrupt Practices Act to close the spigot. ("How can you vote against a title like that?" one critic asks.)
The FCPA provided for a two-pronged attack on bribes: overt antibribery provisions, and accounting laws that require corporations to keep more detailed records.
Over the intervening years many groups have found the act too prim.
"The law is causing a loss of US exports, mainly because of uncertainties in the business community about the meaning and application of various provisions of the law," President Carter's Export Council concluded last December.
In a General Accounting Office survey published this spring, over 30 percent of exporting companies responding said they had lost business because of the legislation.
"This belief is neither supported nor rejected by hard verifiable data," the survey concluded."Due to the sensitivity of the foreign bribery issue and the numerous factors affecting overseas business, conclusive evidence may never be forthcoming. However, the perception by itself is important."
Corporations complain the act's accounting provisions are unclear and onerous. Since enforcement responsibility is split between the SEC and the Justice Department, companies also say they can't get a clear picture of what they can and cannot do.
But the antibribery provisions spark the most intense complaints. Critics say there is no distinction between extortion and bribery, and that the distinction between a payoff (illegal) and a "grease" payment made to speed along normal duties (legal under the act) is unclear.
The most irritating thorn of all, to business, is the clause that prohibits payments to overseas representatives if the company has "reason to know" its representative will turn around and use the money to bribe foreign officials.
Consider the fictional Amlox Company, which hires a resident of Nameria to sell its shower curtains. If the agent turns out to be a well-known bounder, famous far bribing any government official he can take out to lunch, Amlox is liable for any bribes he offers on its behalf -- even though it didn't authorize the payoffs. Under FCPA, it has "reason to know" such a thing will occur.
A Senate bill sponsored by Sen. John H. Chafee (R) of Rhode Island would change all that. S708 would excuse Amlox from liability unless it specifically approved a bribe. The bill would also modify the accounting provisions, clarify the definition of "grease" payments, and exempt from its coverage payments that are legal in the recipient country.
Special Trade Representative Bill Brock has indicated the Reagan administration's support for the bill, saying it remains "faithfull to the objectives sought by Congress in 1977 in attempting to prohibit illicit payments overseas."
To put mildly, not everyone agrees.
"If you like to see a law drawn, quartered, and butchered, S708 and what it does to the Foreign Corrupt Practices Act will suit you fine," said Sen. William Proxmire (D) of Wisconsin at a hearing on the proposed amendment.
Critics of the amendment say it essentially guts the act, leaving nothing but loopholes swathed in vague protestations of morality.
"By and large, the complaints about the FCPA have little merit and less substance," says William Dobrovir, a lawyer and author of a book on the subject.
As an example, Mr. Dobrovir and others point to what would become of the "reason to know" clause. To be liable, company officials would have to "corruptly direct or authorize" bribes.
"Surely that invites a wide-open return to the knowing wink and the pregnant nod," Theodore Sorensen, the lawyer and former White House aide, said at a hearing.
Supporters of the present law also snipe at the clause that would legalize payments "customary in the country where made."
"Now how can you interpret that happy provision in the law any way except that if other countries bribe the prime minister or have bribed the prime minister, our corporation officials can do the same?" Senator Proxmire asked.
If Congress intends to clear up legal ambiguities by enacting moral ambiguities, observers suggest, they would be better off to unmask their intent and simply abolish the FCPA.
"If we cut through all the circumlocution, it is clear that many American businessmen, who cannot say so openly, feel very strongly, as a practical matter in the real world, that they must be free to authorize the payment of bribes abroad," Mr. Sorensen said, adding that he is not "wholly unsympathetic" to this point of view.