The pressure is only increasing on companies that get caught up in bribery cases, making it unlikely that efforts to soften United States laws will occur anytime soon.
Despite overtures from the United States Chamber of Commerce and other business organizations for a more lenient approach to the application of the Foreign Corrupt Practices Act, the Justice Department and Securities and Exchange Commission continue to aggressively pursue investigations of bribery abroad.
Information made public last week about two prominent investigations are more evidence of how mindful companies need to be about the law, which has taken on new relevance for global business.
The Las Vegas Sands Corporation disclosed Friday that its internal investigation into dealings related t its casino properties in Macau showed “that there were likely violations of the books and records and internal controls provisions†of the act. It tried to soften the blow by noting “that in recent years, the company has improved its practices with respect to books and records and internal controls,†but that does not insulate the company from potential criminal and civil penalties for violations.
In addition, the Kimco Realty Corporation, a real estate investment trust specializing in shopping centers, disclosed on Wednesday that it received a subpoena from the S.E.C. as part of the investigation into foreign bribery by Wal-Mart in its Mexican subsidiary and elsewhere. That investigation came about after extensive reporting in The New York Times related to bribes paid to officials to gain approval to build stores in Mexico.
Wal-Mart has already spent more than $100 million co! nducting a global review of its operations. It is not clear how Kimco might be involved, but the latest subpoena is a signal of a potentially widened investigation on the part of government officials.
Foreign Corrupt Practices Act cases were a centerpiece of the term of the former assistant attorney general, Lanny A. Breuer, who until Friday had led the Justice Department’s criminal division. His return to private practice is unlikely to have changed the focus on foreign bribery.
As the corruption investigations have ramped up, the United States Chamber of Commerce has pushed back against the law by arguing that it hampers American businesses because of how broadly it can be applied. Recent cases against pharmaceutical companies, like Pfizer for payments to foreign doctors who are part of state-controlled health systems show how the law can be used in areas once thought to fall outside its purview.
In response to citicisms about how the law was being applied, the Justice Department and S.E.C. issued a resource guide last November that outlines their views about the scope of the law. Companies hoped that the guidance would take a more restrictive view of the Foreign Corrupt Practices Act by providing clearer guideposts on when the statute does â€" and more important does not â€" apply to a transaction.
Unfortunately, the government did not provide the kind of definitive guidance that companies sought. In a previous article, I noted that business organizations like the Chamber of Commerce would probably undertake a “reinvigorated effort to change the statute and provide brighter lines for companies doing business abroad.â€
That effort arrived with a letter to the Justice Department and the S.E.C. dated Feb. 19 on behalf of more than 30 business organizations. In it, the business lobbying group reiterated many of its criticisms of the Foreign Corrupt Practices Act and suggested changes to the law and guidance.
The letter recommended amending the statute to give a “compliance defense†to insulate from harm a company whose employees engaged in foreign bribery to by circumventing internal measures intended to prevent such misconduct. This is the same proposal offered in 2011 by a former attorney general, Michael B. Mukasey, on behalf of the Chamber of Commerce, an effort that was stymied by the revelations in The New York Times about Wal-Mart’s Mexican bribery.
A compliance defense may not truly protect a company against criminal charges. As I wrote in a recent article published in The Ohio State La Journal, prosecutors may engage in an even broader investigation of a company’s practices if there is a concern about countering such a defense, which could be even more intrusive than current inquiries that are limited to just the foreign bribery.
The Chamber of Commerce also complained about the lack of concrete guidance on who is a “foreign official†and what is an “instrumentality†of the government. While other parts of the resource guide give examples of the types of conduct that comes within the statute, the section dealing with these terms is much shorter and contains no examples. The letter states that this perpetuates “uncertainty in the business community regarding the meaning of these terms and make it more difficult for businesses to determine when they are interacting with ‘foreign officials.’â€
American businesses continue to express frustration with the Foreign Corrupt Practices Act, but more countries are adopting or expanding their antibribery laws to! follow t! he United States model. For example, a bill introduced in February in the Senate of Canada would expand the foreign bribery law to reach conduct by any Canadian company or citizen throughout the world, and establish that it is a violation to make false entries in corporate accounting records to cover up illicit payments. These provisions are almost identical to the United States law.
Whether American companies will be able to gain much traction in Congress to revise the foreign bribery statute remains questionable. Apart from the various budget battles on Capitol Hill that will be a top priority, there is the issue about what message revising the law would send if Congress gives companies greater leeway to avoid punishment for corrupt payments by employees.
