An earlier version of this article incorrectly referred to Prime Minister George Papandreou as Greece's president and incorrectly gave his first name as Andreas.
Obama administration gets tough on business corruption overseas
Among the more underreported developments of the Obama administration is the ramp-up in international "anti-bribery" enforcement. The surge in investigations and prosecutions regarding the Foreign Corrupt Practices Act (FCPA) has produced real buzz that the days of doing business with a wink and a nod are over and that even decisions made years ago may result in serious punishment.
The effort is motivated in part by the principle that business shouldn't be conducted one way in modern countries and another way in developing nations. In a May 4 speech at the Council on Foreign Relations, Lanny Breuer, chief of the Justice Department Criminal Division, framed the goal as "the creation of a global consensus that corruption is unacceptable, that it harms the least well-off of us the most." The administration also links corruption with national security challenges such as terrorism and trafficking in people, guns and narcotics.
Ten years ago there were roughly eight federal investigations at any time regarding foreign bribes. Today, the Justice Department has more than 130 open investigations. More FCPA-related indictments were brought in the past year than over the previous seven years combined. Justice's Criminal Division has set up a task force and has requested additional funding for fiscal 2011 to beef up its workforce. The Securities and Exchange Commission, which enforces accounting provisions of the act, has also set up a task force.
Those charged have included CEOs, CFOs and other senior corporate, sales, marketing and finance executives, intermediaries and, where jurisdiction exists, even some foreign officials. No business is immune; some in Hollywood were prosecuted in September for bribes made in connection with Thailand's film festival. Charging individuals is part of the strategy. Nothing focuses the mind like personal accountability.
This leaves executives more focused than ever on what distant salespeople and consultants are doing to land business, because executives are being held accountable even if they were never alleged to have personally engaged in improper payments. "Willful ignorance" of business partners paying bribes is enough to incur liability, as a founder of fashion accessories firm Dooney & Bourke learned last July as a passive investor in a scheme to privatize Azerbaijan's oil industry. One successful case may cause the government to focus on an entire industry, as is happening with pharmaceuticals.
No longer does the Justice Department rely solely on tips from whistle-blowers or business competitors to build cases. Today, officials are turning the tools of organized-crime investigations to anti-bribery. They are setting up sting operations, as took place in a recent investigation in which defendants from the United States, Britain and Israel allegedly tried to bribe a country's defense minister to provide access to outfit the country's presidential guard. While the FCPA is subject to a five-year statute of limitations, the government is effectively stretching that period in some cases by tacking on conspiracy charges where appropriate. So companies are looking beyond the past five years to determine their vulnerability.
For there to be true deterrence, the United States can't be the only jurisdiction enforcing anti-bribery laws. That would only take American companies out of the game and give corrupt companies overseas a competitive advantage. Other jurisdictions must enact and enforce their own laws. For example, Britain's Bribery Act of 2010 expands beyond the FCPA by criminalizing failure to prevent bribery and creating no exceptions for "facilitation payments." New agreements between the European Union and the United States make it easier to extradite individuals and share information.
But in key markets, while there is high-level recognition of problems, little change has followed. Greek Prime Minister George Papandreou said last December that his government was "riddled with corruption." The Chinese government revealed in December that China lost approximately $35 billion to fraud and corruption last year.
As the United States seeks to match and coordinate efforts bilaterally and multilaterally, we should think about several things:
-- What if other governments -- beyond Britain -- pass similar laws and try to enforce them against us? Suppose Chinese prosecutors went after a U.S. company operating in China that had paid bribes in Russia? Would we view this as a positive or troubling development?
-- The FBI is deploying "legal attaches" in more than 75 embassies worldwide, partly to focus on bribery investigations. But how can FBI agents prepare for this kind of work? Corruption in Paris is different from corruption in Kabul. There is no single, useful definition.
-- How can governments work together to achieve coordinated and effective punishment of those who offer bribes and those who take them, and advance real deterrence?
As the United States claims the moral right to pursue corruption around the world, we are obliged to remember that our own record is not beyond reproach. The Justice Department has been appropriately humble in this regard. As Breuer said when discussing rule-of-law promotion and sustainable partnership: "Whether they be problems of corruption, organized crime or narcotics we must be candid that we . . . still have these issues in the United States as well."
The writer is an attorney at McGuireWoods and counsels companies on compliance with the Foreign Corrupt Practices Act.