The FCPA Blog

We're saying thank you today for an unexpected New Year's gift from Jay Varkey. What did he give us? The perfectly named twitter.com/FCPA. He's had the page for a while and gathered quite a few followers. But he thought of us.

In our world, his donation is roughly equivalent to the Louisiana Purchase with Alaska and Hawaii thrown in. We're overwhelmed. The only condition Jay placed on the gift: Put it to good use to promote the FCPA and related topics. We'll do our best.

Jay is based in Washington, D.C. as a Managing Consultant with Navigant. He conducts FCPA investigations in the U.S. and Europe and other compliance work in the Middle East and Asia. His colleague and our frequent rescuer, Cody Worthington, handled arrangements for the transfer -- the smoothest toss since Tinker to Evers to Chance.

To those already following the FCPA page on Twitter, hello and thank you. And we look forward to others joining the discussion here.

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How powerful is Twitter in the world of compliance? The story is still being written. By coincidence, Rochelle Meddoff's article today for the Global Graft Report explores the world-changing potential of 140 characters. She writes about India's SMS / text messaging anti-corruption campaign. From the start, she says, it put enormous power in the hands of  . . .  everyone. In the same way that Twitter has. Her story is here.

Christmas! 'Tis the season for kindling the fire of hospitality in the hall, the genial fire of charity in the heart.  -- Washington Irving

We're warmed by the generosity of those who support this project. Our readers let us know what they like, our sponsors provide financial and moral support, and many of you send hints, tips and ideas that eventually become posts.

Cody Worthington has been here since the beginning, lending a hand many times when we were stuck in deep snow. Marc Bohn, whom we haven't mentioned before, has been another stalwart -- with at least a dozen ideas and corrections (despite his own busy practice and publication schedule).  Among others who were an important part of the blog this year are Elizabeth Spahn, Rebecca Walker, and Andy Spalding.

We just heard from Andy. Writing from India, he said:

Dear FCPA Blog,

I hope this email finds you well. I thought you might be glad to know that the FCPA Blog has now become, among many other things, a social networking site! When I came to India to do my FCPA research I first went to the Blog and found the names of Mayur Joshi, CEO of Indiaforensic, and his then-colleague Pradeep Akkunoor. Mayur and Pradeep sponsored India's first FCPA conference back in 2007, which you generously covered on the Blog. As a result of these introductions, two wonderful things happened.

First, I discovered that Pradeep is now an MBA student at Sasin Business School in Bangkok, and he invited me out to the school to do a presentation on the FCPA, which I did on Dec. 4th. Then Mayur and I decided to organize our own conference in Pune, India, which was held on Dec. 18th. It was a tremendous success -- many of the biggest Indian companies attended, and we received ample coverage in the press. 

I wanted to thank you for making these connections possible. As you know, I am concerned about the sanctioning effect of the FCPA in developing countries, and I have come to believe that the most effective remedy is education. To the extent that we can raise awareness of the statute's provisions among potential business partners in historically bribery-prone countries, companies subject to the FCPA's jurisdiction will be less uneasy doing business there. And in my view, when that happens everybody wins. 

This effort would not be nearly as effective without a central repository of information on all things FCPA related, and in all seriousness, your blog is serving this purpose extraordinarily well.

Merry Christmas,

Andy Spalding

Now it's our turn to thank Andy and all of you for your countless gifts that simply couldn't be greater.

The deep-thinking Kevin LaCroix at the D&O Diary had a post last week called On Blogging. Concerning the use of technology, he had this to say:

It is easy to set up a blog. About two minutes on Blogger.com is enough to get started. But to get a blog set up the way you want and to deal with all of the problems that inevitably arise, a willingness to futz around with technology is indispensable. Fee-based services such as LexBlog reduce – but do not eliminate – the need to directly confront the technological beast. I would not recommend blogging to anyone who is uncomfortable troubleshooting technological issues.

We thought of Kevin's warning many times during the past few days after our blog's template suddenly scrambled itself and much of our information vanished. Through pure serendipity, everything was eventually restored. But because both the cause of the problem and the solution were so accidental, we can't say we learned a thing, except that Kevin LaCroix is right again.

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We received an email this week that made us laugh:

Hello -

Recognizing that filling a 4-hr block later today for a post-conference workshop on "Overcoming FCPA Compliance Challenges in the Middle East Gulf Countries" may be difficult, I'm doing a last minute scramble for extra material. Of course, being a religious reader of the blog, I've used a few of your posts to frame my notes, in particular on Opinion Release 08-01 (01/15/08) and on potential for a Saudi local law exception in the BAE scandal (11/27/07). I would like to use your posts where necessary, with full credit being given to fcpablog.com of course.

Please let me know if you have any objections.

Thanks, and great job on the blog.

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Speaking of conferences, some readers have asked about our next workshops in Asia. The brochure with the schedule can now be downloaded here.

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Stock market behavior is always fascinating and about as easy to understand as blogging technology. While we can grasp somewhat the idea of panic selling and panic buying (i.e., fear and greed), we're surprised that so many investors would decide to bet against Warren Buffett at this point in history. Based on the man's past performance, does that bet really seem prudent?

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One part of Thanksgiving we always look forward to is the Wall Street Journal's annual publication (since 1961) of Vermont Royster's essay, "And the Fair Land / Let's give thanks for America." Mr. Royster, who died in 1996, left behind some wonderful work. Here's how "And the Fair Land" opens:

Anyone whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful.

This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.

And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.

The entire essay is available from the Journal here.

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Enjoy the weekend.

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Aside from the villa on Lake Como and the Aston Martin in the garage, the greatest perk that comes from tending this garden is hearing from so many talented experts in the field of the Foreign Corrupt Practices Act. Last week, for example, a generous reader shared with us a soon-to-be published paper about Facilitating Payments. Seeing our favorite FCPA topic treated with such thorough scholarship, and wrapped in a truly eloquent presentation, was genuinely exciting. It made our day.

We mention the incident, first, to express our gratitude to that particular reader and to all who contribute to the FCPA Blog in so many ways. We also mention it because the paper in question made copious use of the FCPA's rich legislative history -- stimulating us to revisit some of Washington's original debate about the law. Indeed, the Congressional record is still a deep well of meaning and inspiration for FCPA practitioners, judges and scholars.

Among the goodies in the legislative history are the reasons given in 1977 for why the country needed the FCPA. Thirty years on, we think those reasons still ring true.

Here's what the House Committee on Interstate and Foreign Commerce said:

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More than 400 corporations have admitted making questionable or illegal payments. The companies, most of them voluntarily, have reported paying out well in excess of $300 million in corporate funds to foreign government officials, politicians, and political parties. These corporations have included some of the largest and most widely held public companies in the United States; over 117 of them rank in the top Fortune 500 industries.

The abuses disclosed run the gamut from bribery of high foreign officials in order to secure some type of favorable action by a foreign government to so-called facilitating payments that allegedly were made to ensure that government functionaries discharge certain ministrial [sic] or clerical duties. Sectors of industry typically involved are: drugs and health care; oil and gas production and services; food products; aerospace, airlines and air services; and chemicals.

The payment of bribes to influence the acts or decisions of foreign officials, foreign political parties or candidates for foreign political office is unethical. It is counter to the moral expectations and values of the American public. But not only is it unethical, it is bad business as well. It erodes public confidence in the integrity of the free market system. It short-circuits the marketplace by directing business to those companies too inefficient to compete in terms of price, quality or service, or too lazy to engage in honest salesmanship, or too intent upon unloading marginal products. In short, it rewards corruption instead of efficiency and puts pressure on ethical enterprises to lower their standards or risk losing business.

Bribery of foreign officials by some American companies casts a shadow on all U.S. companies. The exposure of such activity can damage a company's image, lead to costly lawsuits, cause the cancellation of contracts, and result in the appropriation of valuable assets overseas.

Corporate bribery is also unnecessary. The Secretary of Treasury testified before the Subcommittee on Consumer Protection and Finance: Paying bribes. . . is simply not necessary to the successful conduct of business in the United States or overseas. My own experience as Chairman of the Bendix Corp. was that it was not necessary to pay bribes to have a successful export sales program.

Nor is Secretary Blumenthal's experience unique. Former SEC Chairman Hills testified: Indeed, we find in every industry where bribes have been revealed that companies of equal size are proclaiming that they see no need to engage in such practices.

Despite the fact that the payments which this bill would prohibit are made to foreign officials, in many cases the resulting adverse competitive affects are entirely domestic. Former Secretary of Commerce Richardson pointed out that in a number of instances, "payments have been made not to "outcompete" foreign competitors, but rather to gain an edge over other U.S. manufacturers."

Corporate bribery also creates severe foreign policy problems for the United States. The revelation of improper payments invariably tends to embarrass friendly governments, lower the esteem for the United States among the citizens of foreign nations, and lend credence to the suspicions sown by foreign opponents of the United States that American enterprises exert a corrupting influence on the political processes of their nations. For example, in 1976, the Lockheed scandal shook the Government of Japan to its political foundation and gave opponents of close ties between the United States and Japan an effective weapon with which to drive a wedge between the two nations. In another instance, Prince Bernhardt of the Netherlands was forced to resign from his official position as a result of an inquiry into allegations that he received $1 million in pay-offs from Lockheed. In Italy, alleged payments by Lockheed, Exxon, Mobil Oil, and other corporations to officials of the Italian Government eroded public support for that Government and jeopardized U.S. foreign policy, not only with respect to Italy and the Mediterranean area, but with respect to the entire NATO alliance as well.

Finally, a strong antibribery statute would actually help U.S. corporations resist corrupt demands. According to former Gulf Oil Co., Chairman Bob Dorsey: If we could cite our law which says we just may not do it, we would be in a better position to resist these pressures and refuse those requests.

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On the Senate side of the Hill in 1977, the problem of improper payments to foreign officials by American corporations was on the agenda of the Committee on Banking, Housing and Urban Affairs. Its final report contained a more concise although no less articulate (and even passionate) description of the need for the legislation. By the way, the working title of the bill, before it became the FCPA, was the "Unlawful Corporate Payments Act of 1977."

Here are the Senate's words:

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Recent investigations by the SEC have revealed corrupt foreign payments by over 300 U.S. companies involving hundreds of millions of dollars. These revelations have had severe adverse effects. Foreign governments friendly to the United States in Japan, Italy, and the Netherlands have come under intense pressure from their own people. The image of American democracy abroad has been tarnished. Confidence in the financial integrity of our corporations has been impaired. The efficient functioning of our capital markets has been hampered.

Corporate bribery is bad business. In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet. Corporate bribery of foreign officials takes place primarily to assist corporations in gaining business. Thus foreign corporate bribery affects the very stability of overseas business. Foreign corporate bribes also affect our domestic competitive climate when domestic firms engage in such practices as a substitute for healthy competition for foreign business.

Managements which resort to corporate bribery and the falsification of records to enhance their business reveal a lack of confidence about themselves. Secretary of the Treasury Blumenthal, in appearing before the committee in support of the criminalization of foreign corporate bribery testified that: "Paying bribes - apart from being morally repugnant and illegal in most countries - is simply not necessary for the successful conduct of business here or overseas.''

The committee concurs in Secretary Blumenthal's judgment. Many U.S. firms have taken a strong stand against paying foreign bribes and are still able to compete in international trade. Unfortunately, the reputation and image of all U.S. businessmen has been tarnished by the activities of a sizable number, but by no means a majority of American firms. A strong antibribery law is urgently needed to bring these corrupt practices to a halt and to restore public confidence in the integrity of the American business system.

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View House Report No. 95-640 (September 28, 1977 - Ordered to be printed) here.

View Senate Report No. 95-114 (May 2 (legislative day, March 28), 1977 - Ordered to be printed) here.

The White Collar Crime Prof Blog published its 2007 White Collar Crime Awards in December. It's an entertaining list that makes some serious points as well. A few of the Collars, as the awards are called, are of particular interest to us. Here's one that went to our favorite subject, the Foreign Corrupt Practices Act:

The Collar for Hottest 30-Year Old . . . Statute -- To the Foreign Corrupt Practices Act, which has come into its own as a "mature" criminal statute, even being noticed by the New York Times. And get your minds out of the gutter, this is a family-friendly blog!

Two Collars dealt with the appointment of monitors under deferred prosecution agreements. The cases involve domestic bribery by the leading orthopedic device makers. We've written about them here because they're being investigated for possible FCPA violations based on their overseas practices. The two Collars say this:

The Collar for Nice Work If You Can Get It -- to former AG John Ashcroft, appointed by a former subordinate as a monitor under a deferred prosecution agreement that will require the monitored company to pay him between $29,000,000 and $52,000,000.

The Collar for Biggest Bang From a Deferred Prosecution Agreement-- to U.S. Attorney Christopher Christie (the subordinate mentioned in the preceding Collar) for also getting three former colleagues appointed as monitors in the same case, and this comes after his law school alma mater happened to receive a chaired professorship in 2005 pursuant to a deferred prosecution agreement (surprise!!). Three guesses who may run for Governor of New Jersey in 2009?

The final Collar on the 2007 list mentions us. We have enormous respect for The White Collar Crime Prof Blog. Its authors -- Peter J. Henning of Wayne State University Law School and Ellen S. Podgor of Stetson University College of Law -- are the top white collar crime pundits around. So this recognition is a real honor. Congratulations also to our co-mentionee, Kevin LaCroix, whose blog, The D & O Diary, is an unequaled resource for news and commentary about directors and officers liability and related securities class action litigation. Here's the item:

The Collar for Blogs That Should Be Nominated for Some Award -- To The D & O Diary (written by Kevin LaCroix) and The FCPA Blog (written by Dick Cassin), both outstanding for their thorough, balanced posts that are uniformly informative -- they deserve recognition for the service they provide to readers but probably won't win various popularity contests.