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FCPA Blog Daily News

Entries in A.A. Sommer (3)

Sunday
Mar302008

Why Do We Need (Or Want) The FCPA?

In these pixels, we're fond of quoting A. A. Sommer, Jr. (1924-2002). During his years of public service, his perspective on the markets and their regulation was always influential, and is still worth studying. He was a commissioner of the Securities and Exchange Commission from 1973 to 1976 -- during the lead up to enactment of the Foreign Corrupt Practices Act. Although he was a lawyer and not a CPA, he also served in the 1980s and 1990s as chairman of the Public Oversight Board and as a board member of the Financial Accounting Standards Advisory Council.

Here, from a speech he delivered on April 2, 1976 called “Business Ethics and the Free Enterprise System ,” are some of his thoughts about public corruption and its impact on global markets and ordinary citizens:

"[E]ven apart from the scandalous cases that have caught the headlines, there is something deeply troubling to me when business is done in the manner in which it is apparently done in some countries.

“All of us have been schooled in the notion that competition in price and quality among sellers is the surest road to the most efficient use of resources and maximum benefit to consumers. When business is bought by payments to gain official favor, this desirable competitive process is, somewhere in the world, subverted.

“And while we in this nation may not be the direct victims of this, nonetheless, such activity runs contrary to our heritage, our ideologies, our modes of thinking, and we therefore feel constrained to condemn it wherever it occurs and no matter what justification may be asserted.

"I think all of us would much prefer if all business, not just that done by American companies, were done in accordance with high ethics and strict adherence to the law. Regrettably, in some countries, apparently, the abortion of the competitive process is not seen as the evil that it is in this country and practices, repugnant to us, but which are ancient in origin and woven into the very structure of society, are accepted ways of doing business. This cultural clash, this conflict of ideologies, is a part of a total reality we cannot ignore and it is one that I would suggest we have not yet begun to understand fully or deal with effectively."

He concluded by urging his listeners to ponder the harm to a country and its citizens when payments land in the pockets of corrupt officials instead of the national treasury: "This is surely a dimension that most people have not consid­ered, and yet, I think is a most important one for it may well involve an ethical consideration that is perhaps more meaningful and more important than the legal problems associated with the bribe itself."

As we've said before, Commissioner Sommer's words always remind us why the FCPA matters.

Thursday
Oct182007

Counting Corruption

A friend from Nigeria, which appears on these pages for the wrong reasons all too often, visited us this week. He gives a face and a voice to the human cost of his country's terrible twins, red tape and corruption.

The statistics are bleak. An entrepreneur starting a new warehouse business in Nigeria will spend at least 350 days obtaining necessary licenses and permits, completing required notifications and inspections, and securing utility connections. If the business gets off the ground, the entrepreneur will need to make at least 35 separate tax payments every year, and spend a staggering 1,120 hours preparing, filing, and paying his or her annual taxes, compared to 183 hours on average in the OECD (roughly speaking, the world's 30 most developed economies). Imports for the entrepreneur's business will require 46 days, compared to 10.4 in the OECD. Exporting a product will take 26 days, almost three times longer than the OECD average. It's no wonder Nigeria ranks 147th out of 179 countries on Transparency International's Corruption Perception Index.

The economy can't move forward, and real people like our friend and his young family are victimized. Schools deteriorate, electricity is an occasional luxury, roads are ruled by bandits. Far worse, new generations of Nigerians -- a country of more than 140 million people -- come to believe their condition is unchangeable. They gradually see themselves the same way many foreign business people do -- the ones who show up with a business plan based on nothing more than greasing the system at every opportunity. An irony, our friend says, is that he gets things done simply by making sure the paperwork is in order and treating regulators and bureaucrats with a normal measure of respect. It takes patience, he says, but the strategy has never failed in nearly ten years of professional life.

In 1976, a year before the U.S. Foreign Corrupt Practices Act became law, A. A. Sommer, Jr., a Commissioner of the Securities and Exchange Commission, said we should ponder the harm to a country and its citizens when payments land in the pockets of corrupt officials instead of the national treasury. "This is surely a dimension that most people have not consid­ered, and yet, I think is a most important one for it may well involve an ethical consideration that is perhaps more meaningful and more important than the legal problems associated with the bribe itself."

As we listen to our friend talk about the damage corruption inflicts on ordinary people in Nigeria, Commissioner Sommer's words come to mind, and we're reminded again why the FCPA matters.

View the World Bank's "Doing Business Project" Here.

Thursday
Aug232007

There Are Moral Problems . . .

"There are moral problems as well as legal problems that go far beyond simply the question of illegal payoffs to foreign officials.

"There are questions concerning the role of multi­national corporations, the extent to which they have obligations to the countries in which they conduct their business, the extent to which they should seek to raise the standards of conduct there, the respect which they should show the laws of other countries.

"Indicative of the complexity of this problem was the suggestion by one clergyman stated in a New York Times article -- that perhaps the gravest sin of a company, which had been exposed as making a multimillion dollar payment to the head of a Central American country to secure a reduction in tax level, was the harm inflicted upon the people of that country by channeling money into the hands of the ruler at the expense of tax revenues which would hopefully have been expended to alleviate the terrible poverty in that country.

"This is surely a dimension that most people have not consid­ered, and yet, I think is a most important one for it may well involve an ethical consideration that is perhaps more meaningful and more important than the legal problems associated with the bribe itself."

From a speech by A. A. Sommer, Jr., Commissioner, Securities and Exchange Commission, “Business Ethics and the Free Enterprise System ,” April 2, 1976.