The former chairman of the Securities and Exchange Commission said yesterday that some proposed changes in a law prohibiting bribery of foreign officials by American corporations would amount to wiping out the law.
If eliminating the sanctions against bribery is what Congress has in mind, it should do so explicitly instead of cloaking its actions in the guise of clarifying the law, said Harold M. Williams, testifying before a Senate Banking subcommittee. Williams was chairman of the SEC in the Carter administration.
However, Williams conceded that some aspects of the law have proved confusing, even "among men and women of utmost good faith," and he suggested alternatives for removing ambiguities in the law without making it meaningless.
"The effort -- as we've said repeatedly -- is not to condone bribery," said Sen. John H. Chafee (R-R.I.) who introduced a bill that would make substantial changes in the law. Chafee indicated that he is willing to modify some language in the bill that has attracted criticism.
Williams concerns centered on two particular provisions of the proposed bill. One would impose a "materiality" standard on the degree in which company books and records must be kept. The standard as originally proposed would set a dollar threshhold that might allow significant expenditures in large corporations to go unreported, critics including Williams have said.
The Foreign Corrupt Practices Act, which the Chafee bill would amend, was adopted in 1977 after disclosures of widespread corporate corruption, including slush funds kept for the purpose of paying off foreign officials. The act requires that corporations to a "reasonable degree" keep "accurate and fair" records and internal controls. Critics of the law have characterized those provisions as unnecessarily onerous.
Williams noted that the SEC has made it clear that it will not go after inconsequential or inadvertent accounting failures. Sen. William Proxmire (D-Wis.) suggested that such sentiments might be incorporated into the law to relieve corporate anxieties.
Williams also expressed concern about a proposal to remove a provision that would make corporations and their officials liable when they had "reason to know" that a bribe was being paid.
Eliminating that language means that "to show a violation under the bill, it must be proved that the company actually directed or authorized the bribe -- a standard that is extremely difficult, if not almost impossible, to satisfy," said Williams.
If the language is removed, "it would be possible for management to adopt the 'shut-eyed' approach whereby liability would be avoided by remaining oblivious to the actual facts and circumstances underlying the subject transactions," he said.
"I have no doubt that over time it would result in a culture where management says, 'I'm not going to direct, I'm not going to authorize, and don't tell me," he said. 'I would rather have the antibribery provisions repealed," Williams declared.
Later Williams said it might be possible to get around the problem of willful ignorance by adding language to Chafee's amendment that would hold firms accountable in cases where misdeeds were authorized or directed "directly or indirectly."
Williams agreed with corporate witnesses who said that business has been lost because of the strict antibribery law.