Odious Debts Online
December 12, 2007

Passed by U.S. Congress three decades ago in the wake of the Watergate scandal, the Foreign Corrupt Practices Act has become a powerful tool in the last five years for prosecuting domestic and overseas companies suspected of bribing foreign officials to secure business.

Nelson D. Schwartz and Lowell Bergman, authors of “Payload: Taking Aim at Corporate Bribery” for The New York Times – a recent commentary on the escalation in American investigations under the act – say U.S. Justice Department officials estimate there are now roughly 60 cases under investigation or prosecution in the United States, backed by a five-member FBI team dedicated to examining possible violations of the act.

Currently, the authors note all eyes are on a Justice Department investigation of BAE Systems, an influential British-based arms giant, which is considered by many as a “watershed moment” for how “aggressively anti-corruption initiatives will be pursued globally.”

BAE Systems is at the center of a controversy involving billions of dollars in clandestine and questionable payments to Saudi royals over the last 20 years as part of an $80 billion contract to supply the kingdom with fighter jets and other military hardware. The Blair administration drew fire earlier this year for dropping a probe by Britain’s Serious Fraud Office into the allegations. Now the British High Court has ordered a full judicial review of Blair’s decision.

The discovery of alleged payment money deposited by BAE in Washington bank accounts led the U.S. Justice Department to “enter what analysts describe as the highest-profile Foreign Corrupt Practices Act case to date.”

Despite tensions, say the authors, between the U.S. and Britain over the matter, Swiss law enforcement authorities have decided to cooperate with the Justice Department investigation and are expected to begin sharing records of financial transaction and bank accounts with American prosecutors. (The Swiss authorities’ assistance in 1999 was crucial in disclosing bank records that helped lead to the conviction of prominent engineering firms that had paid bribes for contracts on the Lesotho Highlands Water Project. See https://journal.probeinternational.org/1999/08/20/foreign-aid-corruption-case-puts-canada-on-trial/)

Alice Fisher, the assistant attorney general and head of the Justice Department’s criminal division, reports that her Foreign Corrupt Practices Act caseload this year is running at twice last year’s pace, and she predicts that the upward trend will continue in 2008.

“Corruption undercuts democracy, stifles economic growth and creates an uneven playing field for U.S. companies overseas,” says Fisher, adding, “we are facing transnational crime all over the place.”

Any company with an American connection – a listing on the New York Stock Exchange, for example, or the use of an American bank account to transfer suspect payments – opens the door for prosecution under the act, report Schwartz and Bergman.

They say the threat of an indictment under the Foreign Corrupt Practices Act, more than financial penalties, is what worries most companies that may come under scrutiny as part of the Justice Department’s crackdown on bribery.

David Zornow, a leading white collar crime and government investigations lawyer, says, “No publicly traded company wants to be branded with the stigma of an indictment. It’s potentially ruinous.” Read source [PDFver here]