On the Threshold of the Adoption of Global Antibribery Legislation: A Critical Analysis of Current Domestic and International Efforts toward the Reduction of Business Corruption

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I. INTRODUCTION

As never before, current socio-political, economic, and technological changes are having an impact on domestic and international attitudes toward business corruption. This has precipitated a recent dramatic increase in anti-corruption activities within the United States and by international government and non-governmental organizations. A relevant question to consider is what factors have caused the current change in attitude. An answer to this question is found through an evaluation of a multiplicity of significant changes in the environmental framework for international business.

As the first antibribery legislation of its kind worldwide, it is necessary to start the examination of environmental changes with the 1977 Foreign Corrupt Practices Act (FCPA or the Act),(1) which, in response to criticisms from the U.S. business community,(2) was amended in 1988.(3) Few legal actions were ever brought under the provisions of the 1977 FCPA by either the Department of Justice (DOJ) or the Securities and Exchange Commission (SEC) from the initial passage of the Act to the time of its 1988 amendments.(4) Until recently no other country was willing to consider following the lead of the United States in adopting prohibitions against bribery. In fact, some countries continued their practice of allowing the tax deductibility of bribery payments.(5)

Only since 1989 has the interplay of various dynamics led to a more negative global perspective regarding corrupt business practices and a marked increase in anti-corruption activity domestically and by international governmental and nongovernmental organizations. Such dynamics include: the model provided by the FCPA since its adoption in 1977 and the more aggressive enforcement of it in the last decade; the transition of many former socialist countries to market economies at the end of the Cold War; the increased integration of Europe; the proliferation of international mergers; the advent of a borderless global market enhanced by technological advances; and a developing worldwide awareness of the economic costs of corruption.(6)

This Article will 1) briefly discuss domestic U.S. anti-corruption efforts through a review of the substantive content of the 1977 FCPA and its 1988 amendments; 2) evaluate indicators of changes in domestic attitudes and policies toward business corruption as evidenced by the breadth and scope of recent increased enforcement activities of DOJ and the SEC; 3) analyze the factors causing recent changes in international attitudes and policies toward business corruption; and 4) examine the resulting international efforts to combat business corruption by governmental and non-governmental organizations, financial standard setting organizations, and financial institutions.

II. DOMESTIC EFFORTS TO ERADICATE BRIBERY

A. Domestic Legislative History

It is important to examine the legislative history of the FCPA in order to fully understand the current domestic efforts--since the 1988 amendments--to eradicate bribery, as well as to analyze the statute's impact on international anti-corruption efforts.

U.S. attention first focused on business corruption with the discovery of massive bribery by the U.S. business community during the "Watergate" scandal in the early 1970s. During the investigation of illegal campaign contributions made to Richard Nixon's campaign for a second presidential term, it was discovered that at least twenty-five of America's largest companies were making illegal contributions, including American Airlines, Ashland Oil, Exxon, General Motors, Gulf Oil, International Telephone and Telegraph, Lockheed Aircraft, and United Brands.(7)

In addition to the discovery of illegal campaign contributions, the U.S. government(8) discovered that the practice of offering kickbacks and making cash gifts in exchange for business was simply part of the modus operandi.(9) When the Watergate scandal occurred, the United States had no laws prohibiting multinational companies from bribing foreign officials to obtain favorable consideration on contracts and other business transactions. …