Allegations that Wal-Mart Stores suppressed an internal inquiry
into bribery in Mexico in 2005 have put renewed attention on how
enforcement of the U.S. Foreign Corrupt Practices Act has changed.
A decade ago, the U.S. Foreign Corrupt Practices Act, which bars
companies in the United States from bribing officials overseas, was
rarely enforced or discussed. Today, it strikes fear in the
executive offices of companies with overseas operations, generating
huge fees for law firms and large fines for the U.S. government.
The transformation of the once-obscure law has been thrown into
sharp relief by the allegations that one of the world's largest
companies, Wal-Mart Stores, had suppressed an internal inquiry into
bribery in Mexico in 2005. After details of the case were reported
by The New York Times on Sunday, Wal-Mart's stock tumbled.
The prominent case is likely to lead to more disclosures, said
Paul Pelletier, a former Justice Department prosecutor who worked on
Foreign Corrupt Practices Act investigations.
"The impact could be huge," Mr. Pelletier said. "Wal-Mart's
having lost billions in market capitalization over these last few
days is going to make companies in close cases more likely to err on
the side of promptly self-reporting" when they uncover evidence of
possible overseas bribery.
Enacted in 1977 as part of a series of overhauls after the
Watergate scandal, the law bars companies that operate in the United
States from bribing officials overseas to obtain or retain business -
- though it makes an exception for low-level payments necessary to
achieve a ministerial action that confers no unfair advantage. For
its first few decades, the law was enforced only rarely.
"It always had teeth," said Rachel Brewster, who teaches
international trade law at Harvard. "The United States government
just was never interested in biting."
That started to change in more recent years as the business world
became increasingly globalized and as other countries gradually
adopted similar laws, undermining complaints by American
corporations that enforcing the law vigorously would give an edge to
The collapse of Enron, the energy company, a decade ago also led
to tougher financial laws -- including requirements that top
executives at publicly traded companies certify that their
companies' books were accurate, forcing them to keep track of
overseas money flows -- and to greater energy in enforcing them.
Another factor was that U.S. Justice Department prosecutors
developed more expansive theories of the act's jurisdiction and the
types of graft it covers. At the same time, they drove up fines by
requiring companies to disgorge profits as a condition of settling
cases without indictment through so-called deferred or
Criminal enforcement under the act has soared, to 48 enforcement
actions in 2010 from just two in 2004. The dollar amount of fines
imposed by the Justice Department and the U.S. Securities and
Exchange Commission has increased even more, including a record-
setting $800 million paid by Siemens, the engineering company, in
2008. There are at least 100 open investigations, specialists
"It used to be three or four cases a year, and so the F. …