A law intended to prohibit the payment of bribes to foreign officials by United States businesses has produced more than $3 billion in settlements. But a list of the top companies making these settlements is notable in one respect: its lack of American names.
Assistant Attorney General Lanny Breuer says overseas
companies are starting to comply better with an anti-bribery law.
The companies that have reached the biggest settlements under the law, known as the Foreign Corrupt Practices Act,
include Siemens, the German engineering giant; Daimler, the maker of
Mercedes-Benz vehicles; Alcatel-Lucent, the French telecommunications
company; and the JGC Corporation, a Japanese consulting company. The
lone American company in the top 10 is KBR, the former Kellogg Brown
& Root, a subsidiary of Halliburton, the Texas oil services company. As a group, they have paid nearly $3.2 billion in settlements.
Since the law was enacted in 1977, the definition of “American” has
expanded greatly to include foreign companies that are listed on United
States stock exchanges, sell securities in the country or do business
here. At the same time, foreign companies that turn to “facilitation
payments” and other forms of under-the-table dealings with local
officials in far-flung places have run afoul of the act, either because
of cultural differences in business dealings or because of failure to
recognize the breadth of the law.
“These big settlements are with sprawling, multinational companies,”
said Andy Spalding, a law professor at the University of Richmond and a
contributing editor to the F.C.P.A. Blog,
which tracks the top settlements. “Yet they are based, in part, in the
United States. A culture of compliance may be slower to take in other
countries, and many are not aware of the rapid escalation of F.C.P.A.
cases or its broad jurisdictional scope.”
The best-known case is that of Siemens, which paid $800 million
to the United States and another $800 million to Germany to settle a
corruption investigation. Even though the financial settlements took
place in 2008, the criminal case against eight former executives
continues. In December, they were charged
with paying $100 million in bribes to Argentine officials, including
former President Carlos Menem, to secure a $1 billion contract for
Siemens. All eight executives live in Argentina, Germany or Switzerland,
and none have been arrested or extradited — a long and complicated
process.
The Siemens case is illustrative. The bribery took place in Argentina.
The people offering the bribes were not American, and the people
demanding them were Argentine officials. Siemens is a German company.
The hook for the United States was that Siemens’s securities traded in
the United States.
In the Daimler case, the company admitted that its subsidiary in Russia
had bribed local officials, that a German subsidiary had made payments
to Croatian officials using an American shell company and that improper
payments had been made to Chinese officials in an effort to persuade the
officials to buy Daimler vehicles. Some of the money flowed through
United States bank accounts, and Daimler has extensive operations in the
United States.
Peter Y. Solmssen, general counsel at Siemens, said European companies
were only now becoming aware that the law applied to them. This is in
part because of the attention given to his company’s case.
“U.S. companies have been living with this law a lot longer than
European companies,” Mr. Solmssen said. “It’s been part of their
awareness. Our case was a real watershed. It woke up a lot of people in
Europe. There had not been a lot of headline cases before that to make
people sit up and take notice.”
There is a “culture in many northern European companies that they have
to do these things to get business,” he said. “Our message is that they
don’t have to.”
It some ways, the foreign cases were easy pickings for the Justice
Department: the behavior was obvious, and the cases fairly clear-cut.
Many of the settlements involved events that took place a decade ago,
before companies, especially foreign ones, were fully aware of the
extent of the law or realized that it applied to them.
Given the many years it takes to develop and prosecute these cases, some
of them are reaching the settlement stage only now, even if the
companies have since halted the practices that landed them in trouble.
“Many of these are ‘cash cow’ cases for Justice,” said Michael Koehler,
an assistant professor at the Southern Illinois University School of Law
who also writes the F.C.P.A. Professor blog.
“It’s a government program that is profitable to the U.S. Treasury.
Even more, the U.S. feels that if the home countries are not going to
prosecute, the U.S. has a moral obligation to do so.”
Moreover, in a world where businesses operate in an almost borderless
fashion, it is often hard to determine what is domestic and what is
foreign.
“The world is flat,” said Matthew T. Reinhard, a lawyer at Miller &
Chevalier in Washington who represents corporations in cases brought
under the law. “You could be based on Mars and Justice will come after
you. There was a period before Siemens when the culture of compliance
was not as prevalent in foreign-based companies as those in the U.S. But
there is a cultural shift, and the U.S. is on the crest of this wave.”
In addition, the United States law is much tougher and broader in scope than anticorruption laws in many other countries. Typically, laws to root out corporate bribery elsewhere in the world apply only to top corporate officials, not to all employees, as the United States law does.
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Justice Department officials argue that it is in the United States’s
interest to prosecute corporate bribery wherever it takes place.
American executives have long complained that they are at a disadvantage
when competing for overseas business against bribe-paying foreign
competitors. Department officials say that by prosecuting foreign
companies, they are seeking to level the playing field — and to end the
grumbling from American executives.
Lanny A. Breuer, an assistant United States attorney general who has
made such cases one of his signature efforts, said he maintained an
evenhanded approach in his pursuit of corporate bribe-payers. It is just
that foreign companies are only now beginning to catch up to their
American counterparts in altering their behavior, he said.
“Over all, we have pursued cases against American and foreign companies
equally,” Mr. Breuer said in an interview. He acknowledged that the top
10 settlements were skewed toward foreign companies, but said: “I am
convinced that we are calling it down the middle. Some years we are
criticized for it being too much American, other years that it is too
much international. It is usually from the very same critics.”
Of the 78 companies now under investigation for suspected violations of
the law, most are American — among them Alcoa, Goldman Sachs, Pfizer and
Wal-Mart. Avon disclosed in a regulatory filing last month that it was
in talks to settle an investigation into whether it had paid bribes to
foreign officials.
Jeffrey M. Kaplan, a lawyer in Princeton, N.J., who specializes in cases
brought under the corruption act, said there was “something strange”
about the fact that nine of the top 10 settlements involved foreign
companies. But he added that when the specifics of the cases were
examined, “no one would feel sorry for these companies.”
The biggest settlements on the list stemmed from the Bonny Island
bribery case, one of the biggest corruption cases in American history.
It accounted for four of the top 10 companies: KBR; Technip, of France;
JGC; and Snamprogetti Netherlands and its parent company, Eni, of Italy.
The bribery, sweeping in scope and decades in duration, involved a $6
billion plan to bribe Nigerian officials to obtain engineering,
procurement and construction contracts for a liquefied natural gas
facility on Bonny Island in Nigeria.
These settlements accounted for more than $1.6 billion in fines and
penalties to the Justice Department and the Securities and Exchange
Commission. On top of that, American and foreign executives involved in
the bribery scandal faced criminal sentences. In February, Halliburton’s
former chief executive, Albert J. Stanley, was sentenced to two and a
half years in prison for his role in the scheme.
“There are a lot of multinational corporations that are operating in
high-risk environments,” Mr. Reinhard, the Washington lawyer, said. “In
many of these countries, companies that are involved in oil or telecom
or pharma are more likely to encounter foreign officials on a regular
basis. They are your customers. That presents an opportunity in ways
that dealing with other businessmen doesn’t.”
A New York Times article
Published: September 3, 2012
