Congress is about to decide whether to change the rules against U.S. firms using bribes to obtain foreign business.
The Senate and House have passed starkly different amendments to the Foreign Corrupt Practices Act and a conference panel is trying to work out a compromise.
The controversy centers on the standards under which executives become criminally liable if they either know, or have "reason to know," of violations.
The law's antibribery provisions make it illegal for an executive seeking to get or retain business to try "corruptly" to influence the official acts of a "foreign official," whether directly, or indirectly via "any person."
The provisions exclude foreign government employes with essentially clerical duties. The effect is to allow "grease payments" to, say, a dockside customs clerk without whose prompt action a cargo of fruit would rot.
But many business executives have complained that the standards are vague, and could leave them responsible for the unauthorized acts of their agents.
"U.S. exporters have stated that such concerns have had a chilling effect on their ... efforts to compete for sales abroad, resulting in lost business opportunities," the Senate Banking Committee said.
In April, the House approved amendments that, according to Rep. Howard L. Berman (D-Calif.), a leading sponsor, include "some important clarifications, which should help American business to understand its obligations under the act."
In addition, he said, the House amendments would strengthen the FCPA by barring payments to foreign officials for "procurement of legislative, judicial, regulatory or other action."
Largely because the amendments were part of the omnibus trade bill, which has immense implications for the domestic and world economies, they created few ripples off Capitol Hill.
Then, in July -- as part of a different version of the trade bill -- the Senate approved FCPA amendments that lighten the burdens on business.
The main sponsor, Sen. John H. Chafee (R-R.I.), declined to be interviewed, but the Banking Committee report said the FCPA has been "effective," and "most U.S. companies have not engaged in slush-fund bookkeeping nor used bribery as a way to win sales abroad."
Referring to complaints from exporters, the committee said its amendments would "clarify its provisions and alleviate such burdens and concerns while not weakening its effectiveness in preventing bribery... . A clearer law will assist U.S. businessmen to police their own actions with greater confidence and will reaffirm our national policy against using bribes to obtain, retain or direct business."
But Berman contends the Senate version "sends the message that bribery of foreign officials in order to get business is okay. That is a message that the U.S. must not send to American business or to the world," he said in an interview.
He recalled hearings in which "we asked, we begged, the business community to come forward with any evidence at all that business had been lost because of the FCPA. And, of course, we never received an answer."
Instead, he said, business critics of the FCPA argued "that people were reluctant to come forward... . Because they had a possibility of getting business through illegal activities, they just didn't want to talk about it."
If the arguments for the Senate amendments are assumed to be valid, Berman said, "then the more appropriate congressional response would be to repeal the act and not to gut it, as the Senate version does."
He said the Senate version's "terrible potential for loopholes" would create a situation in which top corporate officers could tell subordinates, "Don't bribe. But don't come back without that contract -- do anything you can to get it."
He offered the hypothetical example of an executive who hires an agent "known throughout the trading community as a briber," who gets cables saying "the agent needs $50,000 more," and who "doesn't ask any questions."
Under the Senate version, Berman said, "the executive can say truthfully, 'I didn't know what he was doing with that money.' " But, he asserted, the law should be built on the assumption that "if it looks and it smells and it talks" like bribery, it should be treated as such.
Berman said the House version responds "to the reasonable concerns" of business, giving the government "every right to spell out a code of conduct for American business doing business abroad. It is simply unacceptable for American companies to pay bribes to foreign officials... . The FCPA is vital to American foreign policy and to sound and ethical American business practices."
Sen. John Heinz (R-Pa.), a leading sponsor of the Senate version, said, "I do not believe the Senate bill would permit the kind of activities Congressman Berman is talking about."
Sen. William Proxmire (D-Wis.), who led the fight for the original legislation, said that the Senate amendment was "much improved" en route to passage, and that he and his allies were able to block foes "who wanted to pull the teeth" of the FCPA. Still, he said in an interview, he doesn't see any reason to change the law.
The FCPA stems from events that began in 1974, when United Brands Co. paid a $1.25 million bribe to a Honduran official to get a decrease in the tax Honduras imposed on banana exports.
In February 1975, company chairman Eli M. Black killed himself in a plunge from a 44th-story window. A Securities and Exchange Commission investigation revealed the bribe.
That revelation, and others linked to the Watergate scandal, led the SEC to make an offer that some large public corporations couldn't refuse: Admit past bribes and off-the-books slush-fund payments voluntarily, and the SEC will seek no penalties.
More than 450 companies volunteered admissions of questionable or illegal domestic and foreign payments. These and related disclosures in congressional investigations caused global turmoil and damaged U.S. foreign relations.
Lockheed Corp.'s $1.6 million payment to Prime Minister Kakuei Tanaka, for example, led first to his resignation and then to a criminal conviction.
Prince Bernhard of the Netherlands solicited and received payments from Lockheed and was officially disgraced. An Exxon affiliate paid more than $50 million to Italian political parties and politicians -- including $86,000 to the Communists.
In 1976, a troubled President Ford said that "corrupt business practices strike at the very heart of our own moral code, and our faith in free enterprise."
In December 1977, a unanimous Congress passed the FCPA -- the Senate by voice vote, the House by a recorded vote of 329 to 0.
Once the FCPA took effect, however, many large exporters chafed under it, contending that it forced them to compete with an arm tied behind their backs, and that this country shouldn't try to impose its ethical values on other nations.
Business lobbies, such as the Emergency Committee on American Trade, some exporters and the Reagan administration pressed to weaken the law -- although most of 250 major corporations surveyed by the General Accounting Office, the congressional auditing agency, in 1981 said the FCPA had little or no effect on their business.