borders, such as the illegal trafficking of people, weapons, and drugs.‘ International corruption also undercuts good governance and impedes USS. efforts to promote freedom and democracy, end poverty, and combat crime and terror- ism across the globe.’
Corruption is also bad for business. Corruption is anti-competitive, leading to distorted prices and disadvan- taging honest businesses that do not pay bribes. It increases the cost of doing business globally and inflates the cost of government contracts in developing countries.® Corruption also introduces significant uncertainty into business trans- actions: Contracts secured through bribery may be legally unenforceable, and paying bribes on one contract often results in corrupt officials making ever-increasing demands.’ Bribery has destructive effects within a business as well, undermining employee confidence in a company’s manage- ment and fostering a permissive atmosphere for other kinds of corporate misconduct, such as employee self-dealing, embezzlement,* financial fraud,? and anti-competitive behavior.'° Bribery thus raises the risks of doing business, putting a company’s bottom line and reputation in jeop- ardy. Companies that pay bribes to win business ultimately undermine their own long-term interests and the best inter-
ests of their investors.
Historical Background
Congress enacted the FCPA in 1977 after revela- tions of widespread global corruption in the wake of the Watergate political scandal. SEC discovered that more than 400 US. companies had paid hundreds of millions of dol- lars in bribes to foreign government officials to secure busi- ness overseas.'! SEC reported that companies were using secret “slush funds” to make illegal campaign contributions in the United States and corrupt payments to foreign offi- cials abroad and were falsifying their corporate financial records to conceal the payments.”
Congress viewed passage of the FCPA as critical to stopping corporate bribery, which had tarnished the image of US. businesses, impaired public confidence in the financial integrity of U.S. companies, and hampered
the efficient functioning of the markets.’ As Congress
No problem does more to alienate citizens from their political leaders and institutions, and to undermine political stability and economic development, than endemic corruption among the government, political party leaders, judges, and bureaucrats.
— USAID Anti-Corruption Strategy
recognized when it passed the FCPA, corruption imposes enormous costs both at home and abroad, leading to mar- ket inefficiencies and instability, sub-standard products, and an unfair playing field for honest businesses.’* By enacting a strong foreign bribery statute, Congress sought to minimize these destructive effects and help companies resist corrupt demands, while addressing the destruc- tive foreign policy ramifications of transnational brib- ery.’ The Act also prohibited off-the-books accounting through provisions designed to “strengthen the accuracy of the corporate books and records and the reliability of the audit process which constitute the foundations of our system of corporate disclosure.’!®
In 1988, Congress amended the FCPA to add two affirmative defenses: (1) the local law defense; and (2) the reasonable and bona fide promotional expense defense.” Congress also requested that the President negotiate an international treaty with members of the Organisation for Economic Co-operation and Development (OECD) to prohibit bribery in international business transactions by many of the United States’ major trading partners.'* Subsequent negotiations at the OECD culminated in the Convention on Combating Bribery of Foreign Officials in International Business Transactions (Anti-Bribery Convention), which, among other things, required parties
to make it a crime to bribe foreign officials.”
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