Foreign Firms Most Affected by a U.S. Law Barring Bribes

A law intended to prohibit the payment of bribes to foreign officials by United States businesses has produced more than $3 billion in settlements. But a list of the top companies making these settlements is notable in one respect: its lack of American names.

The companies that have reached the biggest settlements under the law, known as the Foreign Corrupt Practices Act, include Siemens, the German engineering giant; Daimler, the maker of Mercedes-Benz vehicles; Alcatel-Lucent, the French telecommunications company; and the JGC Corporation, a Japanese consulting company. The lone American company in the top 10 is KBR, the former Kellogg Brown & Root, a subsidiary of Halliburton, the Texas services company. As a group, they have paid nearly $3.2 billion in settlements.

Since the law was enacted in 1977, the definition of “American” has expanded greatly to include foreign companies that are listed on United States stock exchanges, sell securities in the country or do business here. At the same time, foreign companies that turn to “facilitation payments” and other forms of under-the-table dealings with local officials in far-flung places have run afoul of the act, either because of cultural differences in business dealings or because of failure to recognize the breadth of the law.

“These big settlements are with sprawling, multinational companies,” said Andy Spalding, a law professor at the University of Richmond and a contributing editor to the F.C.P.A. Blog, which tracks the top settlements. “Yet they are based, in part, in the United States. A culture of compliance may be slower to take in other countries, and many are not aware of the rapid escalation of F.C.P.A. cases or its broad jurisdictional scope.”

The best-known case is that of Siemens, which paid $800 million to the United States and another $800 million to Germany to settle a corruption investigation. Even though the financial settlements took place in 2008, the criminal case against eight former executives continues. In December, they were charged with paying $100 million in bribes to Argentine officials, including former President Carlos Menem, to secure a $1 billion contract for Siemens. All eight executives live in Argentina, Germany or Switzerland, and none have been arrested or extradited - a long and complicated process.

The Siemens case is illustrative. The bribery took place in Argentina. The people offering the bribes were not American, and the people demanding them were Argentine officials. Siemens is a German company. The hook for the United States was that Siemens's securities traded in the United States.

In the Daimler case, the company admitted that its subsidiary in Russia had bribed local officials, that a German subsidiary had made payments to Croatian officials using an American shell company and that improper payments had been made to Chinese officials in an effort to persuade the officials to buy Daimler vehicles. Some of the money flowed through United States bank accounts, and Daimler has extensive operations in the United States.

Peter Y. Solmssen, general counsel at Siemens, said European companies were only now becoming aware that the law applied to them. This is in part because of the attention given to his company's case.

“U.S. companies have been living with this law a lot longer than European companies,” Mr. Solmssen said. “It's been part of their awareness. Our case was a real watershed. It woke up a lot of people in Europe. There had not been a lot of headline cases before that to make people sit up and take notice.”

There is a “culture in many northern European companies that they have to do these things to get business,” he said. “Our message is that they don't have to.”

It some ways, the foreign cases were easy pickings for the Justice Department: the behavior was obvious, and the cases fairly clear-cut. Many of the settlements involved events that took place a decade ago, before companies, especially foreign ones, were fully aware of the extent of the law or realized that it applied to them.

Given the many years it takes to develop and prosecute these cases, some of them are reaching the settlement stage only now, even if the companies have since halted the practices that landed them in trouble.

“Many of these are ‘cash cow' cases for Justice,” said Michael Koehler, an assistant professor at the Southern Illinois University School of Law who also writes the F.C.P.A. Professor blog. “It's a government program that is profitable to the U.S. Treasury. Even more, the U.S. feels that if the home countries are not going to prosecute, the U.S. has a moral obligation to do so.”

Moreover, in a world where businesses operate in an almost borderless fashion, it is often hard to determine what is domestic and what is foreign.

“The world is flat,” said Matthew T. Reinhard, a lawyer at Miller & Chevalier in Washington who represents corporations in cases brought under the law. “You could be based on Mars and Justice will come after you. There was a period before Siemens when the culture of compliance was not as prevalent in foreign-based companies as those in the U.S. But there is a cultural shift, and the U.S. is on the crest of this wave.”