Crackdown on foreign bribery grows in US

September 21, 2005
By Kevin Drawbaugh
Reuters

Foreign bribery cases are gaining prominence on the U.S. regulatory docket due partly to a surge in corporate acquisitions and the dirty dealings they expose, lawyers and officials said on Wednesday. Amid growing concern with bribery overseas and a U.S. crackdown, corporate acquirers are voluntarily bringing more potential violations of America's Foreign Corrupt Practices Act, or FCPA, to the notice of authorities.

"We certainly have seen an increase in the number of companies coming forward to discuss issues with respect to the FCPA," said Paul Berger, associate director of the U.S. Securities and Exchange Commission's enforcement division. Berger said at the SEC "there are a fair number of investigations under way" dealing with FCPA. Any increase in FCPA cases means progress in a global war on official corruption. But there is still a long way to go in leveling the playing field for companies that prohibit using bribes to gain competitive advantage, lawyers said.

"It's often said that there are countries where bribery is a way of life, and that's still the case," said Laurence Urgenson, partner at the law firm of Kirkland & Ellis. Official corruption is a major problem for reconstruction efforts in places such as war-torn Iraq and post-tsunami Indonesia. Money and resources needed to help people in distressed areas are often wasted on official bribes.

Transparency International, a British anti-bribery group, recently said corruption was rampant in 60 countries, noting the worst are often the poorest, such as Bangladesh and Haiti. The United States adopted the FCPA in 1977 after hundreds of companies admitted paying bribes in the mid-1970s. The law bans U.S. citizens from bribing foreign officials for the purpose of keeping or obtaining business opportunities.

Only about 100 FCPA cases have been brought, but the tally is rising fast, due partly to recent international agreements to combat bribery and partly to renewed M&A activity, lawyers said. If the current M&A spurt continues, deal volumes in 2005 will come near levels not seen since the 1990s boom years, Wall Street investment bank J.P. Morgan Chase said last week.

Corporate buyers are increasingly keen to wash acquisitions clean before closing on deals to avoid future liability, lawyers said. As a result, some are bringing FCPA problems to the SEC and the Justice Department. Both have new powers and a new vigor for tackling white-collar crooks.

One recent high-profile case was Titan Corp., a U.S. defense communications and intelligence group that pleaded guilty earlier this year to making illegal payments to government officials in the West African nation of Benin. The payments came to light when defense contractor Lockheed Martin Corp. was reviewing Titan's books as part of a planned acquisition of the company. The deal later fell apart. Titan was acquired this summer by L-3 Communications, but not before agreeing to a record-setting $28.5 million settlement with the SEC and Justice Department.

Another recent case arising from an M&A context involved bomb detection gear maker InVision Technologies Inc.. It agreed to fines in a case in which the Justice Department decided not to prosecute under FCPA, clearing the way for General Electric Co. to acquire InVision.

Automaker DaimlerChrysler AG has said it is being investigated by the SEC over possible FCPA issues, as have several energy companies linked to scandals at Riggs Banks and in the United Nations' Oil for Food program in Iraq.

Labels: bribery, DaimlerChrysler, Department of Justice