Foreign Corrupt Practices Act 1977 prohibits Any individual

Foreign Corrupt Practices Act, 1977, prohibits • Any individual, firm, officer, director, employee, agent of firm, stockholder acting on behalf of firm, from • acting with corrupt intent, to make payment to a foreign official (regardless of rank), foreign political party or official, candidate foreign political office, • To induce the recipient to misuse his official position or wrongfully direct business.

Sanctions • Criminal – Up to 5 years in prison and up to $2 million fine. • Civil – AG or SEC or Competitor may bring action to enjoin or punish. • Those in violation may be barred from doing business with the Federal govt.

Foreign Corrupt Practices Act of 1977 • Causes of Bribery (Group Misconduct) – – – – – A few bad apples Banality of evil Narrow Focus on insiders and on short term Failure of leadership Dilution of personal responsibility in groups Organizational process, structure and culture Lack of Oversight Political Environment Prisoner’s dilemma

FCPA as a response • Bad apples/ banality of evil/ Dilution of personal responsibility in groups – Individuals can be fined up to $100, 000 and imprisoned for up to 5 years. • Narrow Focus, Failure of leadership, Organizational process, structure and culture – Organizations can be fined up to $2 million, individuals can be fined up to $100, 000 and imprisoned for up to 5 years. • Prisoner’s dilemma – International Agreements • Political Environment – Ongoing struggle

History of FCPA • 1977: President Carter signs in response to SEC investigation – 400 American companies had spent hundreds of millions of dollars bribing everyone from prime ministers to police overseas. • 1978 -1998: Organization for Economic Cooperation and Development adopts ban on bribery. 38 countries sign on.

Recent DOJ Enforcement • In 2004, two individuals charged and $11 million in criminal fines. • In 2005, 5 charged and $16½ million in fines. • 2009 -10, 50 individuals charged and nearly $2 billion in fines. • Today: 35 defendants awaiting trial on FCPA charges in the United States – in Houston, Miami, Los Angeles, and Washington, D. C. – http: //www. justice. gov/criminal/pr/speeches/2010/crmspeech-101116. html

Objections to FCPA • Bad for business – DOJ response: “FCPA enforcement is not bad for business; it is, instead, vital to ensuring the integrity of our markets. Our FCPA enforcement program serves not only to hold accountable those who corrupt foreign officials, but in doing so it also serves to make the international business climate more transparent and fair for everyone. ” http: //www. justice. gov/criminal/pr/speeches/20 10/crm-speech-101116. html

Objections to FCPA • Puts American business at a competitive disadvantage. – DOJ response: • “First, we do not only prosecute U. S. companies and individuals under the FCPA. Indeed, over the last five years, more than half of our corporate FCPA resolutions have involved foreign companies or U. S. subsidiaries of foreign companies. • Second, the United States, through its FCPA enforcement efforts, leads by example; and other countries are following. ”