The Foreign Corrupt Practices Act (discussed on this page in a May 20 article by U.S. trade representative Bill Brock) prohibits American business from bribing officials of foreign governments and is an extraordinary member of the family of post-Watergate laws. On the one hand, its existence is hardly surprising. Practically no politician or businessman will openly defend bribery of officials, even abroad. But on the other hand, it reaches only American businessmen, leaving their foreign competitors to reap the advantages of corruption at our expense. No one really knows how prevalent or necessary bribery is in various countries, because it is carried out secretly everywhere. What it costs us in exports can only be a guess, although it must have real costs. No one really knows whether our efforts to reduce corruption are effective in, and appreciated by, Third World countries. But the response of Egypt, Mexico, Algeria and a dozen other countries suggests there are real benefits.
Against this background, one would expect heated debate about the statute, and we've had that. What has been surprising is that the arguments never address the primary question: whether we should be forbidding our businesses from engaging in forms of corruption open to their foreign rivals. Debate has instead centered on alleged ambiguities of the statute and uncertainties about interpretation for two reasons. This has protected politicians and businessmen from having to defend corruption. And what at first seems like a sensible compromise -- allowing bribery only if it is an absolutely necessary defensive response to a situation that would otherwise provide crucial and unfair advantages to foreign competitors -- is probably unworkable (for bribery is far more often suspected than seen) and likely to result in damaging our foreign relations by branding buying countries tolerant of corruption and competitors corrupt.
This is the context for hearings last week on S 708, a bill introduced by Sen. John H. Chafee (R-R.I.) to amend the Foreign Corrupt Practices Act to eliminate "interpretive problems," "ambiguities" and "confusion" for business people and regulators. It goes much further and opens the doors for bribery by American companies. The present act is, I think, unduly harsh in holding a company criminally responsible when it has "reason to know" that a foreign national, acting as its agent, intends to bribe to get the business and his commission. Crimes generally require more than a "reason to know" of wrongdoing. But foreign bribes are frequently handled by well-known agent-bagmen and a bill, like S 708, that allows the company to ignore even the clearest indications of prospective bribery in selecting its agent and arranging his commission and funding -- so long as it does not affirmatively authorize or openly approve bribery -- will do wonders for the business of agents known for bribery. If the statute is to mean anything, the corporation should be responsible, at least for sizable civil penalties, if it recklessly aided or encouraged bribery.
The same gap appears for employees. The bill frees companies from their normal responsibility for acts their employees take on their behalf, so long as the company didn't "authorize" the corruption. Then another provision of S 708 apparently operates as a "catch 22" to immunize the bribing employee if the corporation can't be convicted, although this is less than clear in the present drafting. These immunities cover not only the Foreign Corrupt Practices Act but also any other statutes violated in furtherance of the effort to bribe.
If any danger of prosecution remains, it is reduced by the ambiguous wording of exemptions for payments, unlimited in amount, intended to be a "token of esteem" or to "facilitate" in customary ways performance of official duties. The exemptions should at least be limited in the dollar amounts permitted. And the bill creates a new uncertainty as to whether bribing an official to give a contract he is authorized to award is bribing him to act "in violation of the recipient's legal duty as a public servant."
If there is something to be said for, and against, having a statute like the Foreign Corrupt Practices Act, maybe there is something to be said for having one so full of loopholes that it is half like having an act and half like not having one. But I doubt it. An act full of loopholes will, for a while, reward the more unscrupulous American companies at the expense of the more scrupulous. In the long run, it will turn into little more than the pious homage that vice pays to virtue, and that is how La Rochefoucauld defined hypocrisy.