FCPA: A Stumbling Block For U.S. Ability To Compete Globally

Friday, July 1, 2011 - 01:00

Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform (ILR), issued the following statement regarding the House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security's hearing on June 14 to examine the Foreign Corrupt Practices Act:

"Today's hearing was an important step toward modernizing the Foreign Corrupt Practices Act, a 34-year-old law that has become a stumbling block for America's ability to compete in today's global economy. The FCPA, though well-intentioned, is a relic of a time before globalization transformed the U.S. economy and, until updated, the Act will continue to hurt U.S. businesses.

"Among reforms discussed were adding a compliance defense, clearly defining a 'foreign official' under the statute, limiting a company's criminal liability for prior acts of a company it has acquired, and adding a 'willfulness' requirement for corporate criminal liability.

"In an economy where nearly one-third of U.S. business revenue comes from foreign trade, Congress must advance FCPA reforms that will provide clarity and guidance to the business community while continuing to enforce unethical practices that undermine our free market system. This will help grow jobs during a time when millions of U.S. citizens are looking for one."

Judge Michael B. Mukasey testified at the hearing on behalf of the ILR. He is a partner at the law firm of Debevoise & Plimpton LLP in New York. He served as Attorney General of the United States from November 2007 to January 2009.He also served for more than eighteen years, from January 1988 to September 2006, as a United States District Judge for the Southern District of New York, including as Chief Judge from 2000 to 2006.

In his testimony, Judge Mukasey outlined how the outdated FCPA is hurting businesses and needs reforms that will provide clarity and guidance to the business community. He says, "For all the merits of the FCPA in curbing corrupt business practices, 34 years of experience have revealed ways in which the statute itself and its enforcement could be improved. In particular, while the past decade has seen an extraordinary increase in the level of FCPA enforcement and investigation by the Department [of Justice] and the Securities and Exchange Commission ('SEC'), judicial oversight of such enforcement remains minimal."

"Instead of serving the original intent of the statute, which was to punish companies that participate in foreign bribery, actions taken by the government under more expansive interpretations of the statute may ultimately punish corporations whose connection to improper acts is attenuated or, in some cases, nonexistent. The result is that the FCPA, as it is currently written and enforced, leaves corporations vulnerable to civil and criminal penalties for a wide variety of conduct that is in many cases beyond their control or even their knowledge."

Judge Mukasey outlined six reforms of the FCPA that will enable businesses to have a clearer understanding of what is and is not a violation of the FCPA, provide more certainty to businesses when trying to comply with the FCPA, and ensure that the statute and its enforcement are consistent with the fundamental principles of our criminal justice system. These reforms are: (1) adding a compliance defense; (2) clarifying the meaning of "foreign official"; (3) improving the procedures for guidance and advisory opinions from the DOJ; (4) limiting a company's criminal liability for the prior actions of a company it has acquired; (5) adding a "willfulness" requirement for corporate criminal liability; and (6) limiting a company's liability for acts of a subsidiary not known to the parent.