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Spotlight: History of the FCPA

How a tough U.S. anti-bribery law came to pass

February 13, 2009
Spotlight: History of the FCPA
Each week, "Spotlight" explores the vast maze of international bribery and corruption by previewing selected interviews from the upcoming FRONTLINE documentary "Black Money," which airs April 7 on PBS.
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Up until 1977, no country in the world considered the bribing of foreign officials for business purposes to be illegal. That changed with the passage of the Foreign Corrupt Practices Act, when the United States became the first country to explicitly outlaw the practice.

It all started in the wake of the Watergate scandal, when an investigation into illegal contributions to President Nixon's re-election campaign lead to the discovery of cash slush funds in hundreds of U.S. corporations. The Securities and Exchange Commission (SEC), which regulates publicly traded companies, revealed that 400 American companies had spent hundreds of millions of dollars bribing everyone from prime ministers to police overseas.

It turned out, however, that bribing foreign government officials to obtain or retain business was not illegal. In some European countries, a foreign bribe could be deducted from corporate tax returns as an expense. It was simply considered the cost of doing business in the international market.

Despite protests from the business community that this would put U.S. companies at a competitive disadvantage, in late 1977, Congress passed the Foreign Corrupt Practices Act. President Carter signed it into law.

The FCPA makes it illegal for any company or person in the U.S. to bribe or even offer to bribe a foreign official with anything of value to gain or retain business. The law also gives the Justice Department the ability to prosecute a company -- domestic or foreign -- that uses the U.S. financial system in any way in furtherance of a bribe, even if the infraction takes place entirely outside of territorial U.S. The law targets only those who give bribes, not the foreign officials who take them.

It was more than 20 years before other countries followed suit and outlawed foreign bribery through the creation of the Organization for Economic Cooperation and Development's Anti-Bribery Convention. Today, 37 countries have ratified the OECD agreement. There are currently 245 active cases being pursued worldwide.
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REACTIONS

David Allred - Redding, California
Another great FRONTLINE production. If we listen to Bandar of Saudia Arabia and others of the show, we should accept secret corporate and government corruption as a legitimate, beneficial human trait since most confronted with temptation will succumb to it. Let's put that proposition to democratic vote and see what support Bandar gets.

Richard Hajinlian - Billerica, MA
One of the best shows on PBS!
Keep up the great work.Rich

 

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