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FCPA Blog Daily News

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Friday
Mar072014

From Robert Gates's memoir: A positive business case for the FCPA?

As our most recent political book of the moment, former Secretary of Defense Robert Gates's memoir, Duty, has been dutifully dissected for its political "winners" and "losers." One big winner that seems to have gone unnoticed, though, is the FCPA.

Many American business people view the Foreign Corrupt Practices Act as a well-intentioned handicap on their ability to compete with less scrupulous foreign operators.

Certainly, few of those bound by it see the FCPA's presence as creating a bona-fide business advantage, let alone a tool for business development.

But buried in Gates's tome is an anecdote that might alter these perceptions. 

Gates recounts a private meeting in March 2010 between himself and Saudi Arabia’s King Abdullah. At that meeting, King Abdullah committed to a $60 billion purchase of American military aircraft. 

Gates explained:

[King Abdullah's] ministers and generals had pressed him hard to buy either Russian or French fighters, but I think he suspected that was because some of the money would end up in their pockets. He wanted all the Saudi money to go toward military equipment, not into Swiss bank accounts, and thus he wanted to buy from us.

If this isn't the first documented instance of a positive business advantage being generated by America's strict anti-corruption laws, it's certainly the largest. 

King Abdullah allegedly chose to "buy American" to prevent corruption within his own government, and to the tune of $60 billion.

This story provides a refreshing change from the standard "business case for FCPA compliance." That business case (as opposed to the moral or ethical one) is usually similar to the reason one buys insurance: because terrible things can happen if you don't.

Gates's anecdote indicates that there may really be a carrot to go with this stick. 

Foreign officials who don't like promoting corruption at home (and there surely are more than just one), may "buy American" because of the FCPA, and the perception it creates that American companies are the most reliably ethical in the world.

Because they have to be.
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Andrew George is an associate at Baker Botts LLP in Washington, D.C.