The Senate Banking, Housing and Urban Affairs Committee yesterday approved modifications in a law that prohibits American corporations from bribing foreign officials, but the panel sidestepped a fight over one major proposed change.
At the same time, on the other side of Capitol Hill, a House subcommittee was applying the brakes -- at least temporarily -- on efforts to change the law.
The Foreign Corrupt Practices Act was enacted in 1977 in reaction to reports that hundreds of American corporations had maintained millions of dollars in slush funds used to bribe officials here and abroad. This year both corporate and administration officials have called for modifications in the law, which they have described as confusing and costly to American business.
Critics of the changes have accused supporters of taking advantage of fading outrage to gut the measure.
The bill reported yesterday would rename the legislation the Business Practices and Records Act and would eliminate one of the most controversial features of the old act, a provision that would hold corporations liable for violations that they had "reason to know" were occurring, even if the violations were committed by a third party.
The committee agreed on compromise language drafted by Sen. John Heinz (R-Pa.) that makes it unlawful to direct or authorize a third party to make a payment, gift, offer or promise of something of value "expressly or by a course of conduct."
Heinz added language to be included with the report with the bill that indicates that the phrase "by a course of conduct" is aimed at closing the look-the-other-way type of loophole that "reason to know" was aimed at, but spells out situations that would not be covered.
The bill also consolidates enforcement of the antibribery provisions of the act in the Justice Department rather than splitting it between the Justice Department and the Securities and Exchange Commission, and allows businesses to weigh the costs of beefing up mandated accounting controls against the prospective benefits.
Business officials avidly sought both the cost-benefit test for accounting controls and the change in the "reason to know" language.
Dropped from the bill originally introduced by Sen. John H. Chafee (R-R.I.) was a "materiality" standard to be applied to the detail in which transactions must be accounted. Critics had argued that such a standard suggested a strictly quantitative test that might allow large payments by the biggest corporations to escape detection.
Still unresolved is whether the act will apply a standard that requires that books and records be knowingly falsified for the purpose of concealing a violation of the antibribery provisions to prove both civil and criminal liability or whether that higher standard will be applied only to criminal liability.
Sen. William Proxmire (D-Wis.), the sharpest critic of proposals to change the law, suggested that it be applied only to criminal liability but that the act make it clear that civil action would not be taken against inadvertent or minor infractions.