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The Economist Publishes Misleading Article on FCPA; Heather Lowe Responds

September 15, 2011

By Clark Gascoigne

Clark Gascoigne is the Communications Director at Global Financial Integrity in Washington, DC.

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It pains me to report that The Economist published a shoddy piece of journalism today on the U.S. Foreign Corrupt Practices Act.   The article can be read in full here.

Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity, has responded to the article by publishing the following comment on The Economist’s website:

I am quite surprised by both the tenor and lack of critical analysis in this particular piece. It is important that Economist readers understand the following:

1. The UK Bribery Act has (i) an offence that is bribery per se, with absolutely no intent element of the crime (often called “strict liability”), and (ii) and offense that is bribery with intent. The UK compliance defense is ONLY available to defend the first charge, the strict liability offense. The FCPA does not have a strict liability offense – to be found guilty for bribery under the FCPA there had to be intent to pay off a foreign official to make a decision in the company’s favor. Therefore, to say that the UK Bribery Act has a defense that is lacking under the FCPA is misleading – the defense is only available in the UK to defend a much more extreme offense than exists under the FCPA.

2. Before readers cower in the shadow of the idea that no multinational can compete in China without engaging in bribery, I call your attention to this recent Harvard Business Review Case Study “Culture Clash in the Boardroom”: http://hbr.org/2011/09/culture-clash-in-the-boardroom/ar/1.

3. The author of this article seems to be suggesting that companies do not generally inherit “the sins of a company it buys,” and that FCPA liability is some sort of special liability that is transferred in an acquisition. This suggestion is also seriously misleading. Except under very specific circumstances, when a company acquires another it acquires its assets and liabilities. That means all of its sins. As a result, companies do thorough due diligence on entities that they are purchasing – after all, the liabilities can significantly affect the purchase price and a company should do its best to understand what it is purchasing. Pre-acquisition due diligence will never be a perfect art and will inevitably not uncover every potential liability, FCPA related or not. This concept is also built in to purchase prices. There is no rational reason why potential FCPA liabilities should be treated differently from other liabilities.

4. The FCPA is not a confusing statute, as statutes go. If you ask any person responsible for FCPA compliance in a company, he or she will be able to tell you each of the elements of an FCPA violation and what companies and persons are subject to it. What is confusing is figuring out how to interpret the provisions so that an act of bribery can somehow be found not to be in violation of the statute. I appreciate that that may be confusing.

5. The author has not provided the reader with any context as to what acts of bribery and corruption led to the significant fines against BAE and ENI. All of the charging and settlement documents can be found on the Department of Justice website and I encourage you to look at the underlying cases. Consider whether the penalties were in fact egregious based on the evidence of bribery and corruption that was uncovered.

There are other points I could make with respect to the surprisingly skewed article, but we all have other important things to turn to, I am sure. The world is making great strides forward in the battle against bribery and corruption and the US government and US companies are leading that fight. If Congress legislates to remove the significant corporate liability that exists under the FCPA, we will be giving US companies a license to bribe and telling the world that we no longer value the rule of law or the creation of truly competitive global markets.

As a personal subscriber to The Economist, it appalls me to read such a misleading and unbalanced story.

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

  • Mrfur

    Silly to say that the fcpa does not have strict liability. Of course, the person paying the bribe must have the requisite intent. But if they do, then even if nobody back at headquarters approved, sanctioned, or even knew about it, the company is on the hook, regardless of how robust the company’s compliance program is. The company is strictly liable for the actions of the bribe payor. Why shouldn’t a company get credit in that instance for having a strong compliance program, as provided for in the ukba?

    • http://www.financialtransparency.org/author/ahollingshead/ Ann Hollingshead

      I’m so glad you brought up this argument. I actually was going to address it in my own blog post in response to the Economist article, but didn’t have space, so I’d love to talk about it here.

      Let me flip your question on its head. Why should a company get credit for having a compliance program if an employee still violated the FCPA? If a company violated the FCPA, then the existence of that company’s compliance program must not have prevented the acts of bribery.

      Substitute another federal law and ask yourself the same question. If a company has sexual harassment policies in place, does that mean its employees can’t be held accountable under federal laws governing workplace discrimination like the Title VII of the 1964 Civil Rights Act? 

      No. 

      Why should the standards of accountability be any different for bribery?

  • Mr fur

    Silly to say that the fcpa does not have strict liability. Of course, the bribe payor abroad must have the requisite intent, but assuming that he does, then the company is on the hook — even if nobody else at the company authorized or was even aware of the payment. Why shouldn’t a company with an otherwise robust compliance program get credit for it — or, put another way, why should that company be on the hook for potentially millions for the actions of a rogue employee (or third party)?

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