Federal anti-bribery efforts have increased
Given President Donald Trump’s recent attempt to breach Justice Department ethical guardrails erected in the aftermath of the Watergate scandal, it might come as no surprise if his administration soon proposes that U.S. companies be allowed to bribe — yes, bribe — foreign governments to do business overseas.
According to a new book by Pulitzer Prize-winning reporters Philip Rucker and Carol Leonnig, Trump in 2017 asked Secretary of State Rex Tillerson “to get rid of ” a 1977 law, known as the Foreign Corrupt Practices Act (FCPA), that forbids American companies from paying off foreign governments to keep or gain business.
“It’s just so unfair that American companies aren’t allowed to pay bribes to get business overseas,” Trump is reported to have said. “We’re going to change that.” Tillerson subsequently advised the president that he had no power to act unilaterally, at which point Trump threatened to sign an executive order abolishing the FCPA.
No such order has been forthcoming — and one would have no legal standing anyway — but Leonnig and Rucker’s reportage in their new book, “A Very Stable Genius,” is credible. In a May 2012 appearance on CNBC’s Squawk Box, Trump asserted that “every other country goes into these places and they do what they have to do … we are like the policeman for the world. It’s ridiculous.”
Actually, not all countries do what Trump claims, but such illicit payments are widespread.
Currently, the United States is one of only 11 nations that have active or moderate enforcement of corporate antibribery laws, according to a 2018 report from Transparency International. Meanwhile, 22 nations — a list that includes such notables as China, Japan, South Korea and Russia — have no enforcement whatever. Combined with countries that have only limited enforcement, 51.9% of global exports come from countries that allow their companies to suborn foreign officials.
Despite the president’s apparent preference for allowing American businesses to bribe foreign governments, there is no evidence that U.S. enforcement of the FCPA has lapsed. On the contrary, enforcement actions have increased in recent years.
Still, the Trump administration’s chief economic adviser Larry Kudlow said last month that the White House is “looking at” proposing changes to the law, which he said has drawn “some complaints” from executives of U.S. companies.
Watergate-era reform
Federal securities legislation passed in the 1930s failed to address issues relating to foreign bribery, and it was not until Watergate-related investigations in the 1970s that the extent of such payments became known.
In a March 1976 letter to Wisconsin Sen. William Proxmire, the head of the Senate Banking, Housing and Urban Affairs Committee, the Securities and Exchange Commission wrote that “millions of dollars of funds have been inaccurately recorded in corporate books and records to facilitate the making of questionable payments ... the most devastating disclosure that we have uncovered in our recent experience with illegal or questionable payments has been the fact that, and the extent to which, some companies have falsified entries in their own books and records.”
According to the international law firm Gibson Dunn, there have been over 500 enforcement actions undertaken by the DOJ/SEC over the lifespan of the FCPA, with the vast majority occurring since 2007.
Taking the high road
Currently, the United States is one of only 11 nations that have active or moderate enforcement of corporate anti-bribery laws, according to a 2018 report from Transparency International.
Perhaps out of frustration over the anemic pace of growth in most developed economies compared with the last half of the 20th century, global enforcement of anti-bribery laws has stalled in recent years. Taking into account the four-fold increase of trade since 1980, the Transparency International report warned that the heightened “risk of cross-border bribery and corruption … has enormous negative consequences for people in affected countries, by threatening foreign investment, diverting resources and undermining the rule of law.”
Meanwhile, the American economy is growing at close to its sustainable long-run (albeit reduced) potential, and unemployment remains near a record low. The value of the U.S. stock market — a proxy for the corporate sector — is roughly equal to that of all international equity markets combined despite the U.S. accounting for only 15% of global GDP. According to a joint report by the Associated Press and Equilar, the median pay for CEOs of Fortune 500 companies (the group most likely to compete for overseas business) is $11.5 million.
There is rarely, if ever, a reason to breach ethical guardrails, but doing so now would seem especially ill-advised.
Tom Saler is an author and freelance journalist in Madison. He can be reached at tomsaler.com.