The Senate voted yesterday to soften the provisions of the Foreign Corrupt Practices Act because American firms claimed they have been losing business abroad as a result of the law.
The act, passed in 1977 in the wake of bribery scandals involving several major U. S. corporations, still would prohibit bribery of foreign government officials. But company executives no longer would be subject to possible criminal prosecution on the basis only that they had "reason to know" their firm was paying bribes. Instead, they could be hit with criminal penalties only if they authorize bribes "expressly or by a course of conduct."
Sen. John Heinz (R-Pa.), chairman of the Senate Banking Committee, said there have been cases of U. S. corporations turning down millions of dollars worth of business in countries because they were afraid of prosecution under the "reason to know" clause. A U. S. company, for example, may not know for sure than an agent it hires in another country would not use bribery to make sales.
One purpose of the changes is to draw a clearer line between what types of payments are illegal and what types are permitted.
The FCPA amendments, which passed the Senate on a voice vote, would allow companies to make so-called facilitating payments--small-scale bribery of low level government employes, such as customs officials, which is a common part of doing business in some nations.
In addition, the new legislation also would exempt from antibribery provisions "courtesies, tokens of esteem, hospitality, travel and lodging, and expenses associated with the demonstration or explanation of products and customary expenditures associated with the performance of a contract."
The Senate bill also would change the name of the act to the "Business Practices and Records Act."
At a House Energy and Commerce subcommittee meeting last week, Assistant Attorney General John Rose testified that since 1977 the Justice Department has completed 29 investigations of alleged violations of the act, two of which resulted in prosecutions. In one, a civil injunction was granted, and in the other, a criminal action, a fine of $50,000 was paid in connection with bribery of officials in the Cook Islands. Rose said the Justice Department has 57 investigations in progress.
The bill also eases some of the detailed record-keeping requirements in the FCPA. Under present law, even inadvertent mistakes conceiveably could lead to prosecutions, backers of the amendments said.
But the new lanaguage does allow the government to sue firms to collect civil fines if the businesses fail to make a good-faith effort to obey the record-keeping rules.