Murky U.S. bribery law gets a dose of clarity
By Reynolds Holding
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Americaâs murky bribery law is finally getting a dose of clarity. Morgan Stanley showed last month how to avoid legal charges for infractions by one of its executives, and an appeals court will soon define whose palm cannot be greased. Thatâs good news for multinationals sweating unpredictable enforcement of a confusing statute.
The problem isnât the Foreign Corrupt Practices Act so much as how broadly prosecutors have been interpreting it. And with few companies willing to risk an indictment by testing that interpretation in court, it becomes the law by default.
The definition of âforeign officialsâ is Exhibit A. The FCPA says theyâre employees of a foreign government or its âinstrumentalityâ and canât be bribed. While the Department of Justice insists âinstrumentalityâ includes private companies owned in part by the state, accused bribers say only firms that perform government functions qualify. Legislative history supports the accused. But a federal judge sided with DoJ last year – until he tossed the case for prosecutorial misconduct.
A federal appeals court will soon weigh in for the first time, deciding whether to uphold the bribery convictions of U.S. telecommunications executives who paid employees of Haiti Teleco, partially owned by the National Bank of Haiti. The courtâs ruling will be the most authoritative statement yet on what constitutes âforeign officials.â
Most companies, of course, try to dodge trouble before it happens, often by creating costly FCPA compliance programs. But prosecutors have never said what sort of programs might forestall charges. That changed last month, when DoJ and the Securities and Exchange Commission let Morgan Stanley off the hook for a managing directorâs bribes because its anti-bribery policy was so strict and comprehensive. By listing the policyâs features, the watchdogs finally gave firms a blueprint for avoiding liability for the actions of a few bad apples.
But it shouldnât be up to prosecutors to make the law. Thatâs Congressâ job. It still needs to amend the FCPA to define âforeign officialsâ more precisely and, like the UK and other countries, make top-notch compliance programs a defense to bribery charges. Unfortunately, legislation to that effect has stalled and is even less likely to pass since bribery allegations emerged against Wal-Mart in Mexico. Lawmakers say they donât want to appear soft on bribery. They prefer, apparently, to look merely irresponsible.