CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL BUSINESS TRANSACTIONS

Congressional Documents

105th Congress Exec. Rpt.
SENATE
2d Session 105-19
_______________________________________________________________________
CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN
INTERNATIONAL BUSINESS TRANSACTIONS
_______
July 16, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. Helms, from the Committee on Foreign Relations, submitted the
following
R E P O R T
[To accompany Treaty Doc. 105-43]
The Committee on Foreign Relations, to which was referred
the Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions, adopted at Paris on
November 21, 1997, by a conference held under the auspices of
the Organization for Economic Cooperation and Development
(OECD), signed in Paris on December 17, 1997, by the United
States and 32 other nations, having considered the same,
reports favorably thereon with one understanding, one
declaration and three provisos, and recommends that the Senate
give its advice and consent to the ratification thereof as set
forth in this report and the accompanying resolution of
ratification.
CONTENTS
Page
I. Purpose..........................................................1
II. Background.......................................................2
III. Summary..........................................................2
IV. Entry Into Force and Termination.................................7
V. Committee Action.................................................7
VI. Committee Comments...............................................8
VII. Explanation of Proposed Convention..............................14
VIII.Text of the Resolution of Ratification..........................14
IX. Appendix........................................................19
I. Purpose
The primary purpose of the Convention on Combating Bribery
of Foreign Public Officials in International Business
Transactions (``Convention'') is to require Parties to the
Convention to criminalize bribery of foreign public officials
in order to obtain or retain business or other improper
advantage in the conduct of international business.
II. Background
On November 21, 1997, negotiators from thirty-three
countries (the twenty-eight Organization for Economic
Cooperation and Development (``OECD'') member states plus
Argentina, Brazil, Bulgaria, Chile and Slovakia) signed the
Convention at the OECD in Paris.
At the urging of the United States, the OECD adopted in
1994 a Recommendation on Combating Bribery in International
Business Transactions, and in 1996 adopted a Recommendation on
the Tax Deductibility of Bribes of Foreign Public Officials. A
Revised Recommendation on Combating Bribery in International
Business Transactions was approved at a May 1997 meeting of
OECD Ministers. Included was an annex of agreed common
elements, which was the basis for convention negotiations.
Three rounds of negotiations were held in July, October, and
November. The Convention was signed in Paris on December 17th,
1997, and was submitted to the Senate on May 4, 1998.
III. Summary
a. general
The Convention obligates the Parties to criminalize bribery
of foreign public officials. This is defined to include
officials in all branches of government, whether appointed or
elected; any person exercising a public function, including for
a public agency or public enterprise; and any official or agent
of a public international organization. A public function
includes any activity in the public interest delegated by a
foreign country. A public enterprise is any enterprise over
which the government or governments may, directly or
indirectly, exercise a dominant influence. An official of a
public enterprise shall be deemed to perform a public function
unless the enterprise operates on a normal commercial basis in
the relevant market, i.e., on a basis which is substantially
equivalent to that of a private enterprise, without
preferential subsidies or other privileges.
The Convention does not specifically cover political
parties. Some persons who are not formally designated as public
officials but who may in fact perform a public function (e.g.,
political party officials in single party states) may, under
the legal principles of some countries, be considered as
foreign public officials. In addition, under the legal systems
of some countries, an advantage promised or given to a person
in anticipation of that person becoming a foreign public
official may fall within the Convention's scope.
The negotiators agreed to apply ``effective, proportionate
and dissuasive criminal penalties'' to those who bribe foreign
public officials. Countries whose legal systems lack the
concept of criminal corporate liability must provide for
equivalent non-criminal sanctions, including monetary
penalties. The Convention requires that countries be able to
seize or confiscate the bribe and bribe proceeds (e.g., net
profit), or property of similar value, or apply monetary
sanctions of comparable effect.
The Convention requires Parties to take necessary measures,
within the framework of their relevant laws and regulations,
that prohibit the establishment of off-the-books accounts and
similar practices used to bribe foreign public officials or to
hide such bribery. Parties shall make bribery of foreign public
officials a predicate offense for purposes of money laundering
legislation on the same terms as bribery of domestic public
officials.
Parties are to establish jurisdiction over offenses that
are committed in whole or in part in their territories. Parties
may rely on the general jurisdictional principles--nationality
or territoriality--recognized by their legal systems. The
territorial basis for jurisdiction is to be interpreted broadly
so that an extensive physical connection to the act of bribery
is not required. The Convention provides that Parties will
review their current bases for jurisdiction and take remedial
steps if they are not effective in the fight against the
bribery of foreign public officials. Parties shall consult when
more than one party asserts jurisdiction. Participating
governments pledged to work together to provide legal
assistance relating to investigations and proceedings within
the scope of the Convention and to make bribery of foreign
public officials an extraditable offense.
At the May 1997 OECD Council meeting, Ministers recommended
that member states submit to national legislatures by April 1,
1998, legislation to criminalize bribery of foreign public
officials and seek the enactment of such laws by the end of
1998. The Convention requires the Parties cooperate in a
follow-up program, within the framework of the OECD, to monitor
and promote full implementation.
The Convention will enter into force when five of the ten
largest OECD exporting counties, which by themselves represent
60 percent of the combined total exports of those ten
countries, deposit their instruments of ratification. If this
has not occurred by the end of 1998, the Convention will enter
into force when at least two signatories have deposited their
instruments of ratification and declare their willingness to be
bound.
b. key provisions
The Offense. Article 1 of the Convention requires each
Party to take measures to establish that it is a criminal
offense under its law for any person intentionally to offer,
promise, or give any undue pecuniary or other advantage to a
foreign public official, for that public official, or for a
third party, in order that the official act or refrain from
acting in the performance of official duties so that an
international business will obtain or retain business or any
other improper advantage. Each Party to the Convention is also
required to criminalize complicity in an act of bribery of a
foreign public official.
``Foreign public official'' is defined to include persons
holding legislative, administrative, or judicial office of a
foreign country, whether appointed or elected; any person
exercising a public function for a foreign country, including
for a public agency or public enterprise, regardless of form,
over which a government, or governments, may, directly or
indirectly, exercise a dominant influence. This definition does
not include foreign political parties, officials, or
candidates. According to a summary prepared by the Departments
of Commerce, State, and Justice, although political parties are
not specifically covered, negotiators agreed that the
Convention will cover business-related bribes to foreign public
officials made through political parties and party officials.
Legal Persons. Article 2 of the Convention requires each
Party, in accordance with its legal principles, to establish
the liability of persons for the bribery of a foreign public
official. The commentaries on the Convention state that if,
under the legal system of a Party, criminal responsibility is
not applicable to legal persons, the Party is not required to
establish the criminal responsibility.
Criminal/Civil Penalties. Article 3 requires parties to
sanction bribery of a foreign public official with ``effective,
proportionate and dissuasive criminal penalties.'' If, under a
Party's legal system, criminal responsibility is not applicable
to legal persons, the Party shall make certain that legal
persons are subject to dissuasive and effective non-criminal
sanctions, including monetary sanctions. Effective measures
shall be taken to provide that the proceeds of bribery of a
foreign official or property corresponding to the value of the
proceeds may be subject to seizure.
Paragraph 4 of Article 3 states that each Party may
consider imposing additional civil or administrative sanctions
upon a person for bribing a foreign public official. The
commentaries on this paragraph provide that among the civil or
administrative sanctions which might be imposed are exclusion
from entitlement to public benefits or aid, disqualification
from participation in public procurement, placing under
judicial supervision, and a judicial winding-up order.
Jurisdiction. Article 4 requires each Party to establish
its jurisdiction over the bribery of a foreign public official
when the offense is committed in its territory. In addition,
each Party is required to establish jurisdiction to prosecute
its nationals for offenses committed abroad with respect to the
bribing of a foreign public official.
Enforcement. Article 5 requires Parties to enforce its
commitments under the Convention without regard to political or
economic interests. Specifically, the investigation and
prosecution of the bribery of a foreign public official shall
not be influenced by considerations of national economic
interest, the potential effect upon relations with another
country, or the identity of the natural or legal persons
involved.
Statute of Limitations. Article 6 requires Parties to apply
a statute of limitations to the offense of bribery of a foreign
public official that permits for an adequate amount of time to
investigate and prosecute. The Commentaries are silent on this
article, so it is not clear what such a time frame would be.
Money Laundering. Article 7 requires each Party, which has
made bribery of its own public officials an offense for
purposes of application of its own money laundering
legislation, to do the same for the bribery of a foreign public
official.
Accounting. Article 8 is an essential provision for
carrying out the requirements of the Convention. It requires
measures by each Party to prohibit off-the-books accounts,
inadequately identified transactions, the recording of non-
existent expenditures, the entry of liabilities with incorrect
identification of their object, and the use of false documents
for the purpose of bribing foreign public officials or of
hiding the bribery. Penalties for the violation of such
accounting laws must be ``effective, proportionate and
dissuasive.''
Mutual Legal Assistance. Article 9 requires each Party to
provide prompt and effective legal assistance to another Party
for the purpose of criminal and non-criminal investigations and
proceedings. The provision assumes dual criminality for
violations of the Convention, and prohibits any Party from
asserting bank secrecy as a reason to deny legal assistance.
Extradition. Article 10 requires bribery of a foreign
public official to be included as an extraditable offense under
the Parties' laws and extradition treaties. The Convention
permits, but does not require, each Party to use the Convention
as a legal basis for extradition. The Convention requires a
Party that denies extradition on the basis that the individual
is a national, to submit the case for prosecution in its own
jurisdiction. The provision assumes dual criminality for
purposes of extradition.
Responsible Authorities. Article 11 requires that each
Party establish a ``responsible authority'' for purposes of
mutual legal assistance and extradition. Parties must inform
the Secretary General of the OECD who the responsible authority
will be.
Monitoring and Follow-up. Article 12 requires the Parties
to follow-up on their commitments through a program that
monitors enforcement and promotes full implementation. Unless
otherwise agreed, the program will be carried out in the
framework of the OECD Working Group on Bribery in International
Business Transactions.
Final Clauses. Article 13, concerning signature and
accession, opens the Convention to signature by non-members of
the OECD which have become full participants in the OECD
Working Group on Bribery in International Business
Transactions. The Convention will enter into force on the
sixtieth day following the date of deposit of instruments for
such non-members. Article 14, concerning ratification and
depositary of the Convention, requires ratification under each
country's laws, and designates the OECD Secretary General as
the depositary for instruments of ratification.
Article 15, regarding entry into force, requires that the
Convention enter into force on the sixtieth day following the
date on which five of the ten largest exporting countries have
deposited their instruments of ratification. In the event that
this has not occurred by the end of 1998, the Convention will
enter into force when at least two signatories have deposited
their instruments of ratification, and declared its readiness
to be bound by the Convention.
Article 16, regarding amendments to the Convention,
requires that amendments be submitted to the OECD Secretary
General at least 60 days before he convenes a meeting of the
Parties to consider the amendment. Amendments must be adopted
by consensus, or by other means that the Parties determine by
consensus. Amendments will enter into force 60 days after
instruments of ratification are deposited with the OECD
Secretary General, or as specified by the Parties when the
amendment is adopted.
Article 17, regarding withdrawal, permits a Party to
withdraw from the Convention upon written notification to the
OECD Secretary General. The withdrawal will take place one year
after submission of the written notification. Parties must
cooperate even after withdrawal on requests for information or
extradition made prior to withdrawal.
c. the u.s. foreign corrupt practices act
During the mid-1970's investigations and legal actions
against numerous domestic corporations revealed the practice by
some U.S. corporations of making questionable or illegal
payments to foreign government officials. The legal and
regulatory mechanisms for dealing with these payments had
involved actions by the Securities and Exchange Commission
(SEC) against public corporations for concealing from required
public disclosure substantial payments made by the firm and the
potential for an antitrust action for restraint of trade or
fraud prosecutions by the Justice Department.
Government officials and administrators contended that more
direct prohibitions on foreign bribery and more detailed
requirements concerning corporate record-keeping and
accountability were needed to deal effectively with the
problem. The revelations of slush funds and secret payments by
American corporations were stated to have affected adversely
American foreign policy, damaged the image of American
democracy, and impaired public confidence in the financial
integrity of American corporations. Congress responded with the
passage of the Foreign Corrupt Practices Act of 1977.
After passage, Congress for a number of years considered
amending the 1977 Foreign Corrupt Practices Act. After a great
deal of debate through at least three Congresses, the Foreign
Corrupt Practices Act Amendments were signed into law as Title
V of the Omnibus Trade and Competitiveness Act of 1988 on
August 23, 1988. One provision of the 1988 Amendments
encouraged the Administration to negotiate a treaty at the OECD
that would require other countries to enact similar laws
prohibiting bribery of foreign government officials.
In many ways the OECD Convention on Bribery is very similar
to the Foreign Corrupt Practices Act (FCPA). However, there are
several differences which, if the OECD Convention is approved,
will necessitate changes in the FCPA in order for U.S. law to
conform with the OECD Agreement.
First, the FCPA currently criminalizes payments made to
influence any decision of a foreign official or to induce that
official to do or omit to do any act, in order to obtain or
retain business. An amendment will expand the scope to include
payments made to secure ``any improper advantage,'' the
language used in the OECD Convention.
Second, the OECD Convention requires Parties to cover
prohibited acts by ``any person.'' The current FCPA covers only
the issuers as defined in the 1934 Securities Exchange Act and
``domestic concerns.'' An amendment will expand the scope of
the FCPA to cover acts prohibited by the Convention of persons
other than the issuers or domestic concerns (i.e., foreign
natural and legal persons), committed while in the territory of
the United States, regardless of whether the mails or a means
or instrumentality of interstate commerce are used in
furtherance of the prohibited acts.
Third, the OECD Convention includes officials of
international agencies within the definition of foreign public
official. Accordingly, an amendment will expand the FCPA
definition of foreign public official to include officials of
public international organizations.
Fourth, the OECD Convention calls on Parties with
jurisdiction to prosecute their nationals for offenses
committed abroad to assert nationality jurisdiction over the
bribery of foreign public officials, consistent with national
legal and constitutional principles. Accordingly, an amendment
will provide for jurisdiction over the acts of U.S. businesses
and nationals, in furtherance of unlawful payments, that take
place wholly outside the United States.
Finally, an amendment to the penalty sections relating to
issuers and domestic concerns will ensure that penalties for
non-U.S. citizen employees and agents of issuers and domestic
concerns accord with those of U.S. citizen employees and
agents. (Under the current FCPA, non-U.S. citizen and agents of
issuers and domestic concerns are subject only to civil, rather
than criminal, penalties.)
IV. Entry into Force and Termination
a. entry into force
The Convention enters into force on the sixtieth day after
five of the ten largest exporting countries, as set out in the
Convention annex, have deposited instruments of ratification.
These countries must also represent 60 percent of exports of
those ten countries. For Parties that deposit instruments of
ratification after that date, the Convention shall enter into
force 60 days after deposit of instruments.
In the event that the Convention has not entered into force
by December 31, 1998, Parties may declare their willingness to
accept entry into force notwithstanding the failure to meet the
requirements set forth above. If two Parties make such
declarations, the Convention shall enter into force on the
sixtieth day following deposit of such declarations. For
Parties that deposit instruments of ratification after that
date, the Convention shall enter into force 60 days after
deposit of instruments.
b. termination
Parties may withdraw from the Convention by submitting
written notification to the Depositary. Withdrawal shall be
effective one year after the date of such notification. The
Convention requires that Parties continue to cooperate on
requests for assistance and extradition made before the date of
withdrawal.
V. Committee Action
The Committee on Foreign Relations held a public hearing on
the proposed Convention on June 9, 1998 (a transcript of the
hearing and questions for the record can be found in the annex
to this report). The Committee considered the proposed
Convention on June 23, 1998, and ordered it favorably reported
by voice vote, with the recommendation that the Senate give its
advice and consent to the ratification of the proposed
Convention subject to one understanding, one declaration, and
three provisos.
VI. Committee Comments
The Committee on Foreign Relations recommends favorably the
proposed Convention. On balance, the Committee believes that
the proposed Convention is in the interest of the United States
and urges the Senate to act promptly to give its advice and
consent to ratification. Several issues did arise in the course
of the Committee's consideration of the treaties, and the
Committee believes that the following comments may be useful to
the Senate in its consideration of the proposed Convention and
to the State Department.
a. implementation and enforcement
According to Under Secretary of State Stuart Eizenstat,
during his testimony before the Committee in support of this
Convention, the U.S. Government is aware of allegations of
bribery by foreign firms in the last year affecting
international contracts worth almost $30 billion. Such bribes
are not currently prohibited by criminal laws in their home
jurisdictions.
The Committee believes that simply ratifying this
Convention will not reverse this trend. Of primary import in
curbing bribery of foreign officials under the Convention will
be the commitment of Parties to implement and enforce fully
their obligations under the Convention. This will not be an
easy task, and in some cases may be politically difficult--
particularly in instances where corporations are owned by or
associated with the government of a Party. The Committee
therefore supports ratification of the Convention, but cautions
that it will be a hollow exercise if Parties to the Convention
view ratification simply as a political exercise to inoculate
them from criticism related to corrupt practices by their
companies. The Convention requires not only a political
commitment to oppose bribery of foreign public officials, but
requires that Parties take the next step to enact and enforce
tough laws prohibiting such activities.
Article 3(1) of the Convention requires each Party to the
Convention to provide for ``effective, proportionate and
dissuasive'' criminal penalties. In response to a question for
the record, the State Department defined such penalties as
those that:
``clearly apply to the offense of bribery of a foreign
public official; are proportionate (in the amount of
fine and/or length of imprisonment) to the seriousness
of the offense; are comparable to the penalties that
apply to bribery of a party's own public officials; and
provide a deterrent to such conduct.''
The Committee believes that a failure to fully apply such
penalties would in fact erode the deterrent quality of these
penalties. As such, the Committee has included in the
recommended resolution of ratification a requirement that the
Executive submit a detailed report to the Congress annually
regarding each Party's enforcement of its domestic laws
implementing the obligations of the Convention. Included in the
report will be a detailed account of each Party's efforts to
investigate and prosecute cases of bribery of foreign public
officials, including cases involving its own citizens. In
addition, the Executive must assess whether sufficient
resources have been provided to enforce a Party's obligations
under the Convention and whether each Party has shared
information relating to natural and legal persons prosecuted or
subjected to civil or administrative proceedings.
In the annual report's assessment of compliance with the
obligations of the Convention, the Committee anticipates that
the President will place an emphasis on the accounting of
business transactions, as required by Article 8 of the
Convention. Specifically, the Committee expects the President
to assess whether Parties are prohibiting off-the-book
accounts, inadequately identified transactions, the recording
of non-existent expenditures, the entry of liabilities with
incorrect identification of their object, and the use of false
documents for the purpose of bribing foreign officials or
hiding bribery of foreign or domestic officials.
The need for full and detailed reporting cannot be
overstated. In order to ensure this Convention has an impact in
reducing bribery in international business, increased
transparency will be required. The Committee was accommodating
in requiring the Executive to prepare a report on an annual
basis, rather than biannually, so as to ensure thorough and
detailed reporting. The Committee expects that the
Administration will take this reporting requirement seriously
and respond to each provision of the reporting requirement
directly.
Finally, the Convention places the obligation of
implementation and enforcement of the Convention's requirements
on each Party. The Committee supports this construct, and would
be concerned should there be an effort in the future to
transfer these responsibilities to the OECD or any other
international body. This should not, however, leave Parties
under the assumption that they may interpret provisions broadly
so as to undermine the intent of the Convention: to
criminalize, and thereby deter, the bribery of foreign public
officials in order to obtain or retain business or other
improper advantage in the conduct of international business.
b. defining ``foreign public official''
The legal definition given to the term ``foreign public
official'' by each Party will be pivotal in ensuring that the
obligations of the Convention have an impact on current
practices. According to the State Department, in response to a
question for the record:
The term ``foreign public official'' is meant to apply
to all persons in the legislative, administrative, or
judicial branch of government. ``Administrative'' as
used in this context is synonymous with our Executive
Branch. The term ``foreign public official'' also
includes any person exercising a public function for a
foreign country, including for a public agency or
public enterprise, and any official or agent of a
public international organization.
The Committee expects that the Executive will ensure this broad
understanding is shared by other Parties to the Convention. The
annual report required of the Executive in the resolution of
ratification requires a description of the domestic laws
enacted by each Party to the Convention, and an assessment of
the compatibility of the laws with the obligations of the
Convention. The Committee anticipates that the Executive will
assess each country's laws in relation its assertions to the
Committee regarding the broad definition of ``foreign public
official.''
One shortcoming of the proposed Convention is the failure
to include in the definition of ``foreign public official''
foreign political parties or party officials, and candidates
for foreign political office. The Administration has assured
the Committee, in response to a question for the record, that
it will work to include these officials in the definition:
U.S. negotiators made a concerted effort to have
political parties and party officials covered under the
Convention. Other delegations, however, were not
prepared to accept this, arguing that political parties
and party officials could not be considered ``public
officials'' as the term is generally understood.
At the Conclusion of the negotiations on the text of
the Convention in November 1997, United States
representatives insisted upon formal agreement on a
program of accelerated work on a number of issues not
adequately addressed in the Convention text. These
issues included bribery of political parties and
political party officials in international business
transactions, bribery of candidates for political
office, and aspects of the use of money laundering
legislation in the fight against illicit payments.
Accordingly, the OECD Council on December 11, 1997, in
approving the Convention text and recommending its
adoption by Ministers representing participating
countries, adopted a Decision committing member
countries to examining these issues and reporting
results to Ministers by the Spring 1999 annual OECD
Ministerial meeting. At the suggestion of France, two
additional issues were added to this accelerated work
plan on issues related to bribery of foreign public
officials: (a) the role of foreign subsidiaries and (b)
the role of offshore money centers.
Work on these issues will begin with the June 29-July 1
meeting of the OECD Working Group on Bribery. It is
expected that an experts group of representatives of
participating governments will be formed to outline
possible recommendations over the late summer and early
autumn, with formal Working Group discussions to begin
in earnest in November 1998. On political parties,
party officials, and candidates for political office,
the U.S. objective will be to secure member country
agreement to amend the Convention to include such
entities/individuals among those to whom payment of
bribes to obtain or retain business will be prohibited,
as is the case under the U.S. Foreign Corrupt Practices
Act. As in the negotiation of the Convention itself,
multilateral, bilateral and public diplomacy will be
required to achieve these objectives.
The Committee supports the Executive's efforts to include
political party officials and candidates in the definition. The
annual report required of the Executive emphasizes the
importance of U.S. leadership in negotiating an amendment to
the Convention by requiring the President to describe efforts
by the United States to amend the Convention to require
countries to expand the definition of ``foreign public
official,'' so as to make illegal the bribery of foreign
political parties or party officials, and candidates for
foreign political office.
Finally, the Committee is concerned by a potential loophole
in the definition of foreign public officials that would allow
individuals or corporations to bribe family members of foreign
public officials without penalty. In a response to a question
for the record, the State Department described the reach of the
Convention to family members:
The Convention, like the U.S. Foreign Corrupt Practices
Act, covers bribes offered or paid to a foreign public
official so that the official will take certain action,
or refrain from acting, in the performance of official
duties. Bribes to a family member of a foreign public
official are covered in circumstances where (1) a bribe
is paid to a family member as a conduit or
intermediary, who in turn passes it to the foreign
public official, the intended recipient; or (2) a
foreign public official directs that a bribe, intended
to induce that official to take certain action or
refrain from acting, be paid to a family member.
The Committee is concerned that in many instances the
connection between the payment to immediate family members and
the influence on a foreign public official will not be evident.
Payments to a family member who does not pass it on to a family
member who is a public official, yet enriches the family, would
not be covered under the proposed Convention. The Committee
directs the President to describe efforts by the United States
to amend the Convention to expand the definition of ``foreign
public official,'' so as to make illegal the bribery of
immediate family members of foreign public officials.
c. extradition and mutual legal assistance
Ratification of a bilateral extradition treaty granting the
authority to extradite individuals in the United States to
other nations generally reflects an endorsement of the judicial
system, and the level of respect for human rights in the nation
with which the United States enters into an extradition
relationship. Although the proposed Convention provides the
authority for extradition and legal assistance (should Parties
choose to use the Convention for such authority), the Committee
is concerned that nations may seek extradition of individuals
in the United States under the Convention even in situations
where there is no bilateral extradition treaty with the United
States authorizing extradition.
In order to ensure that this possibility does not arise,
the Committee's recommended resolution of ratification includes
an understanding that the United States will not use the
proposed Convention as the legal basis for extradition to any
country with which the United States has no bilateral
extradition treaty in force. In addition, the understanding
makes clear that even when the United States has a bilateral
extradition treaty in force, that bilateral extradition treaty,
not the Convention, will serve as the legal basis for
extradition of individuals for offenses covered under the
Convention.
This understanding thereby ensures that the crime of
bribery of foreign public officials will be a basis for
extradition--even in the case of ``list treaties'' that
enumerate the kinds of crimes upon which the United States may
extradite. At the same time, all of the provisions of the
relevant bilateral extradition treaty, including any Senate
conditions to ratification, will also apply so that it can be
assured that the normal extradition processes can be followed.
No legal basis for extradition of individuals in the United
States will exist when a Party to the Convention requesting
extradition is not also a Party to a bilateral extradition
treaty with the United States.
In the case of mutual legal assistance, the Committee's
recommended resolution of ratification includes a proviso that
ensures that any information shared under the proposed
Convention will be subject to the same Senate proviso that
typically is included in bilateral mutual legal assistance
treaties. Specifically, this proviso requires the United States
to deny assistance when essential public policy interests would
be violated. Essential public policy interests include when the
United States has specific information that a senior government
official who would have access to the information is engaged in
a felony. The proviso also makes clear that in cases where the
United States has a bilateral mutual legal assistance treaty in
force, that treaty will serve as the basis for sharing
information.
d. tax deduction of bribes to foreign public officials
Certain countries permit corporations and individuals to
deduct bribes paid to foreign officials as a legitimate
business expense. According to the State Department's response
to questions for the record, the following countries continue
to allow such deductions: Australia, Austria, Belgium, France,
Germany, Luxembourg, New Zealand, Sweden, and Switzerland.
In 1996, OECD Council members agreed to a Recommendation of
the Council on the Tax Deductibility of Bribes to Foreign
Public Officials. The Recommendation requires nations to ``re-
examine [tax measures which may indirectly favor bribery] with
the intention of denying this deductibility.'' Despite this
recommendation, the aforementioned countries continue to permit
tax deduction for bribes. Many countries are quick to talk
about the need to end corruption and to apply the rule of law
in developing countries. Yet, these efforts are undermined when
tax laws in developed countries encourage the very behavior
they criticize.
The Committee is concerned that the slow pace in which OECD
members have implemented this Recommendation may be an
indication of the lack of commitment to make real changes in
law and practice with regard to bribes paid by their
businessmen and women to foreign public officials. Ending the
tax deduction of bribes seems to be a clear first step, and the
Committee is somewhat astounded that this change in law has
been so difficult to attain. The Committee anticipates that the
Department of Treasury will continue to make this issue a
priority in its discussions in the OECD, particularly in the
OECD Working Group on Bribery in International Business
Transactions.
e. expanded efforts to combat bribery
The Convention was adopted and signed by 28 OECD Member
States and five non-OECD Members who are participants in the
OECD's Working Group on Bribery in International Business
Transactions. Australia, an OECD Member State, has initialed
the Convention, but has not yet signed it. The non-OECD Member
signatories include Argentina, Brazil, Bulgaria, Chile and
Slovakia.
The Committee recognizes that the OECD, a forum for the
highly industrialized nations, represents the ideal forum for
negotiating a Convention of this nature in part because most
major international companies are based in OECD Member States.
That said, the Committee commends the OECD's Working Group on
Bribery in International Business Transactions for involving
the five non-OECD Members, and encouraging their full
participation in the Convention. Such participation underscores
the potential for full globalization of the provisions of the
Convention.
As Secretary of State Madeleine Albright stated at the
December 17, 1997, signing ceremony for the Convention:
We recognize that supplier nations have a special
responsibility to stop this destructive practice. * * *
Indifference in the developed world legitimized
corruption in the developing world. It encouraged the
patronizing belief that the problem was cultural and
that we couldn't do anything about it. * * * At the
same time, as supplier nations in the OECD take these
steps, it is vital that nations in the developing world
meet their responsibility to act.
The Committee agrees with this assessment and notes that
becoming a Party to the Convention and fully implementing its
provisions would expand the Convention's goal of reducing
bribery in international business transactions worldwide. The
Committee therefore expects the Executive to work through
bilateral and multilateral fora to encourage other non-OECD
Members not only to become signatories to the Convention but to
fully implement and enforce the provisions of the Convention.
The annual report required of the Executive in the Committee's
recommended resolution of ratification requires a description
of U.S. efforts in this regard.
In addition, the Committee notes the importance of
combating bribery through multilateral fora outside the OECD,
and in the activities of these institutions. The Preamble of
the Convention welcomes actions taken by international
organizations such as the United Nations, the World Bank, the
International Monetary Fund, the World Trade Organization, the
Organization of American States, the Council of Europe and the
European Union. These organizations have begun to institute,
often at U.S. urging, policies to strengthen their anti-bribery
disciplines, such as: taking corruption into account in lending
practices; undertaking measures to ensure the rule of law and
promote good governance; establishing uniform procurement
rules; and enacting practices that promote transparency and
openness. The Committee recognizes that there is further work
to be done in these areas and expects that the Administration
will continue to make such efforts a priority.
Under Secretary of State Stuart Eizenstat, during his
testimony before the Committee in support of this Convention,
noted that the Administration is working in the World Trade
Organization and in regional fora in Asia and Latin America
``to encourage increased transparency in government
procurement.'' The Committee believes that efforts to adopt
aggressive anti-corruption strategies under the auspices of
such institutions represent important and complementary efforts
to the Convention, and should be continued. The Committee also
recommends that the Administration make a concerted effort to
pursue such goals through regional fora in Africa, where
corruption has represented a significant deterrent to U.S.
companies and to the development of the rule of law.
VII. Explanation of Proposed Convention
For a detailed article-by-article analysis of the proposed
Convention, see the letter of submittal from the Secretary of
State, which is set forth at pages V-X of Treaty Doc. 105-43.
VIII. Text of the Resolution of Ratification
Resolved, (two-thirds of the Senators present concurring
therein), That the Senate advise and consent to the
ratification of the Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions,
adopted at Paris on November 21, 1997, by a conference held
under the auspices of the Organization for Economic Cooperation
and Development (OECD), signed in Paris on December 17, 1997,
by the United States and 32 other nations (Treaty Doc. 105-43),
subject to the understanding of subsection (a), the declaration
of subsection (b), and the provisos of subsection (c).
(a) UNDERSTANDING.--The advice and consent of the Senate is
subject to the following understanding, which shall be included
in the instrument of ratification and shall be binding on the
President:
EXTRADITION.--The United States shall not consider
this Convention as the legal basis for extradition to
any country with which the United States has no
bilateral extradition treaty in force. In such cases
where the United States does have a bilateral
extradition treaty in force, that treaty shall serve as
the legal basis for extradition for offenses covered
under this Convention.
(b) DECLARATION.--The advice and consent of the Senate is
subject to the following declaration:
TREATY INTERPRETATION.--The Senate affirms the
applicability to all treaties of the constitutionally
based principles of treaty interpretation set forth in
Condition (1) of the resolution of ratification of the
INF Treaty, approved by the Senate on May 27, 1988, and
Condition (8) of the resolution of ratification of the
Document Agreed Among the States Parties to the Treaty
on Conventional Armed Forces in Europe, approved by the
Senate on May 14, 1997.
(c) PROVISOS.--The advice and consent of the Senate is
subject to the following provisos:
(1) ENFORCEMENT AND MONITORING.--On July 1,
1999, and annually thereafter for five years,
unless extended by an Act of Congress, the
President shall submit to the Committee on
Foreign Relations of the Senate, and the
Speaker of the House of Representatives, a
report that sets out:
(A) RATIFICATION.--a list of the
countries that have ratified the
Convention, the dates of ratification
and entry into force for each country,
and a detailed account of U.S. efforts
to encourage other nations that are
signatories to the Convention to ratify
and implement it.
(B) DOMESTIC LEGISLATION IMPLEMENTING
THE CONVENTION.--a description of the
domestic laws enacted by each Party to
the Convention that implement
commitments under the Convention, and
an assessment of the compatibility of
the laws of each country with the
requirements of the Convention.
(C) ENFORCEMENT.--an assessment of
the measures taken by each Party to
fulfill its obligations under this
Convention, and to advance its object
and purpose, during the previous year.
This shall include:
(1) an assessment of the
enforcement by each Party of
its domestic laws implementing
the obligations of the
Convention, including its
efforts to:
(i) investigate and
prosecute cases of
bribery of foreign
public officials,
including cases
involving its own
citizens;
(ii) provide
sufficient resources to
enforce its obligations
under the Convention;
(iii) share
information among the
Parties to the
Convention relating to
natural and legal
persons prosecuted or
subjected to civil or
administrative
proceedings pursuant to
enforcement of the
Convention; and
(iv) respond to
requests for mutual
legal assistance or
extradition relating to
bribery of foreign
public officials.
(2) an assessment of the
efforts of each Party to:
(i) extradite its own
nationals for bribery
of foreign public
officials;
(ii) make public the
names of natural and
legal persons that have
been found to violate
its domestic laws
implementing this
Convention; and
(iii) make public
pronouncements,
particularly to
affected businesses, in
support of obligations
under this Convention.
(3) an assessment of the
effectiveness, transparency,
and viability of the OECD
monitoring process, including
its inclusion of input from the
private sector and non-
governmental organizations.
(D) LAWS PROHIBITING TAX DEDUCTION OF
BRIBES.--an explanation of the domestic
laws enacted by each signatory to the
Convention that would prohibit the
deduction of bribes in the computation
of domestic taxes. This shall include:
(i) the
jurisdictional reach of
the country's judicial
system;
(ii) the definition
of ``bribery'' in the
tax code;
(iii) the definition
of ``foreign public
official'' in the tax
code; and
(iv) the legal
standard used to
disallow such a
deduction.
(E) FUTURE NEGOTIATIONS.--a
description of the future work of the
Parties to the Convention to expand the
definition of ``foreign public
official'' and to assess other areas
where the Convention could be amended
to decrease bribery and other corrupt
activities. This shall include:
(1) a description of efforts
by the United States to amend
the Convention to require
countries to expand the
definition of ``foreign public
official,'' so as to make
illegal the bribery of:
(i) foreign political
parties or party
officials,
(ii) candidates for
foreign political
office, and
(iii) immediate
family members of
foreign public
officials.
(2) an assessment of the
likelihood of successfully
negotiating the amendments set
out in paragraph (1), including
progress made by the Parties
during the most recent annual
meeting of the OECD Ministers;
and
(3) an assessment of the
potential for expanding the
Convention in the following
areas:
(i) bribery of
foreign public
officials as a
predicate offense for
money laundering
legislation;
(ii) the role of
foreign subsidiaries
and offshore centers in
bribery transactions;
and
(iii) private sector
corruption and
corruption of officials
for purposes other than
to obtain or retain
business.
(F) EXPANDED MEMBERSHIP.--a
description of U.S. efforts to
encourage other non-OECD member to
sign, ratify, implement, and enforce
the Convention.
(G) CLASSIFIED ANNEX.--a classified
annex to the report, listing those
foreign corporations or entities the
President has credible national
security information indicating they
are engaging in activities prohibited
by the Convention.
(2) MUTUAL LEGAL ASSISTANCE.--When the United
States receives a request for assistance under
Article 9 from a country with which it has in
force a bilateral treaty for mutual legal
assistance in criminal matters, the bilateral
treaty will provide the legal basis for
responding to that request. In any case of
assistance sought from the United States under
Article 9, the United States shall, consistent
with U.S. laws, relevant treaties and
arrangements, deny assistance where granting
the assistance sought would prejudice its
essential public policy interests, including
cases where the Responsible Authority, after
consultation with all appropriate intelligence,
anti-narcotic, and foreign policy agencies, has
specific information that a senior government
official who will have access to information to
be provided under this Convention is engaged in
a felony, including the facilitation of the
production or distribution of illegal drugs.
(3) SUPREMACY OF THE CONSTITUTION.--Nothing
in the Convention requires or authorizes
legislation or other action by the United
States of America that is prohibited by the
Constitution of the United States as
interpreted by the United States.
A P P E N D I X
CONVENTION ON COMBATING BRIBERY OF FOREIGN
PUBLIC OFFICIALS IN INTERNATIONAL
BUSINESS TRANSACTIONS
C O N T E N T S
----------
Page
Eizenstat, Hon. Stuart E., Under Secretary of State for Economic,
Business and Agricultural Affairs.............................. 23
Heimann, Fritz F., Chairman, Transparency International USA,
Washington, DC................................................. 50
Appendix
Responses to Additional Questions Submitted for the Record by the
Committee...................................................... 61
Letter to Chairman Helms, signed by Robert E. Rubin, Secretary of
the Treasury, Janet Reno, Attorney General, Charlene
Barshefsky, U.S. Trade Representative, Madeleine K. Albright,
Secretary of State, William M. Daley, Secretary of Commerce,
and Arthur Levitt, Chairman, Securities and Exchange
Commission..................................................... 83
Letter to Chairman Helms from William J. Hudson, Chief Executive
Officer and President, AMP Incorporated........................ 83
Letter to Chairman Helms from Stanley J. Marcuss, Partner, Bryan
Cave, LLP, Washington, DC...................................... 84
CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN
INTERNATIONAL BUSINESS TRANSACTIONS (TREATY DOC 105-43)
----------
TUESDAY, JUNE 9, 1998
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met at 10:43 a.m., in room SD-419, Dirksen
Senate Office Building, Hon. Jesse Helms (chairman of the
committee), presiding.
Present: Senators Helms, Hagel, Sarbanes, Robb, and
Feingold.
Senator Hagel. Good morning. One point of clarification. I
am not Chairman Helms. I am Senator Hagel and because I ran
into my friend Senator Sarbanes who suggested maybe I could
handle the gavel for 5 or 10 minutes as we are getting Senator
Helms here--there was, I understand some miscommunication
between Senator Helms and the keys to his car.
But nonetheless, he is on his way and I have been asked to
see if we can kick this off and get right to business. With
that, I welcome the Under Secretary of State, Mr. Eizenstat.
Secretary Eizenstat, nice to see you again.
I would now ask our friend and colleague, Senator Sarbanes,
for his statement.
Senator Sarbanes. Well, thank you very much, Mr. Chairman.
I am very pleased to welcome Stu Eizenstat back before the
committee. It is always a pleasure to see him. I have to say I
think he is one of the most effective people in our Government,
and anytime he is given an assignment, I always sort of breathe
a sigh of relief because I figure it is going to get worked
through to a successful conclusion.
I just might make reference to the incredible work he has
been doing with respect to Nazi gold, which is a very difficult
and sensitive issue. I would just note for the record there was
a very strong editorial in this morning's Washington Post with
respect to his efforts in that regard.
On the subject for today, this Convention on Combating
Bribery of Foreign Public Officials in International Business
Transactions, I think this is an extremely important measure
and one that we ought to welcome with open arms and try to move
through the Congress as quickly as we can.
Most governments consider bribery of their own public
officials a serious offense for both the payor and the
recipient. Except for the United States, however, bribery of
foreign officials has generally been treated in a more
ambiguous manner.
Now, the United States more than 2 decades ago passed the
Foreign Corrupt Practices Act. We in effect said to our
business people, well, you cannot go overseas and bribe people.
We had some instances of that occurring, and then we had very
serious political ramifications and consequences. So, we
enacted that legislation.
But other governments have refrained from imposing legal
sanctions on such activity which occurs outside of their own
country. They impose sanctions if people try to bribe their own
officials, but then they go abroad and bribe other officials,
and they just kind of shrug their shoulders about it. In fact,
some of those governments have even allowed tax deductions for
their corporations who bribe foreign officials.
Now, I am very much heartened by the fact that we have been
able to secure a treaty among OECD members that helps combat
the unacceptable practice of corporate bribery of foreign
public officials.
The impetus to move on this issue came from the Congress
which called on the executive branch in the Omnibus Trade bill
of 1988 to work through the OECD to arrive at a common anti-
bribery position. Now, some have asserted that the treaty does
not go as far as it was hoped, but nevertheless it sets us on a
course to pursue similar actions and efforts and other
international arena and to broaden anti-corruption efforts in
cooperation with our competitors.
Implementation will also help U.S. corporations enjoy a
more level playing field in their international business
transactions, something that is very important in increasing
globalization of the world's economy. Apparently what moved
some other countries was their businesses finally came to them
and said, well, we are getting shaken down everywhere we go and
we need this kind of protection. The American companies say,
well, we cannot do that because we have a law against it. So,
that was an impetus. Out of that very negative situation has
come a positive, so to speak.
I am sure that we all on this committee share a deep
interest in these international efforts to combat corruption.
In addition to dealing with this convention, we will have to
amend, in some small respects, the Foreign Corrupt Practices
Act that we enacted in order to conform it with the treaty's
provisions. That will be handled in the Banking Committee which
has jurisdiction over that legislation. I serve on that
committee. I think there is strong bipartisan support in that
committee for making the changes. I think the orderly way to
proceed is to move this convention and then move the
legislation either parallel or right behind it. So, I am very
hopeful that this committee and the Banking Committee can move
forward expeditiously to approve this treaty and then to enact
the legislation that is required to implement it.
I know Secretary Daley was very much involved in those
negotiations, some very tough negotiations. I think he did a
very good job, and I know Secretary Eizenstat has been very
intimately involved with this issue as well.
So, Mr. Chairman, this is a very important hearing. I would
hope from the perspective of all the members of the committee,
this is a very positive development, and I hope we can move it
through promptly, as we stand only to benefit from it.
Senator Hagel. Senator Sarbanes, thank you. Senator Robb?
Senator Robb. Thank you, Mr. Chairman.
I have no formal opening statement. I would just like to
associate myself with the remarks made by the Senator from
Maryland. I share both the frustrations that he articulated and
the goals that he has laid out, and I think that this is an
important hearing and I appreciate your holding it. I thank
you.
Senator Hagel. Senator Feingold?
Senator Feingold. Mr. Chairman, I do have a few remarks
about this very important subject. Mr. Eizenstat.
I appreciate the opportunity to be here today to consider
the Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions. The convention seeks to
establish worldwide standards beginning with most of the major
industrialized countries for the criminalization of the bribery
of foreign officials to influence or retain business.
Mr. Chairman, the fact that the committee is poised to
provide its advice and consent to this convention I think is an
exceptional event.
It was just 20 years ago that Congress passed the Foreign
Corrupt Practices Act, the FCPA. This landmark legislation,
which I am proud to say was sponsored by one of Wisconsin's
most respected public officials, Senator William Proxmire, was
enacted after it was discovered that some American companies
were actually keeping slush funds for making questionable and/
or illegal payments to foreign officials to help land certain
business deals.
For these 20 years, the FCPA has succeeded at curbing U.S.
corporate bribery of foreign officials by establishing
extensive bookkeeping requirements to ensure transparency and
by criminalizing the bribery of foreign officials.
Now, these very important principles do not simply define
an American sense of morality in business. I think they
actually strengthen America's trade policy, foster a faith in
American democracy, and protect our interests in requiring an
open environment for U.S. investment.
Certainly these are principles and guidelines that will
serve everyone's best interest, and as such are well worth
promoting worldwide.
But there has been, as I have been told by a number of
business people, a price for taking such a high ethical road.
U.S. companies that are trying to pursue opportunities in the
global marketplace are forced to compete with firms from
countries whose national laws take a more essentially laissez-
faire approach to this issue, and they turn a blind eye to
corruption and graft evident in many business transactions.
Even in some countries--and this is an example that I cite all
the time. In Germany, they even allow companies to take a tax
deduction for bribes paid to foreign officials as a business
expense. My business people in Wisconsin are always a little
horrified when they hear that.
Mr. Chairman, I would call such practices a corporate
welfare of the worst kind. These laws and practices by our
closest trading partners clearly put our businesses at a
disadvantage. I have heard from more than one Wisconsin company
about international contracts lost as a result of some non-
American company paying a bribe to a foreign official. These
lost contracts represent lost employment and revenue
opportunities for my State, as I am sure they do in other
States. A 1997 report by the Trade Promotion Coordinating
Committee estimates that U.S. firms lost at least 50
international commercial contracts valued at more than $15
billion in a single year.
But fortunately, with the signing of the OECD convention
last December, the rest of the industrialized world, along with
several key lesser developed countries, is finally beginning to
follow America's lead. What this convention does is initiate
several significant steps to raise the standards of our major
trading partners to the level established by the FCPA.
Mr. Chairman, I have longer remarks that I do not want to
trouble you with except to say that this is a subject that I
have been greatly interested in and have introduced legislation
on for years. So, I am just delighted that not only that the
administration is working hard on this, but I also want to
thank the chairman of the full committee and the chairman today
for giving this quick consideration. I think it is a very
important treaty for the business people in our country.
Thank you, Mr. Chairman.
Senator Hagel. Senator Sarbanes?
Senator Sarbanes. Mr. Chairman, could I just have a
unanimous consent to insert a Washington Post editorial, a
Treaty Against Bribes, discussing this convention, and also an
article in the Wall Street Journal by Secretary Daley, the
Battle Against Bribery, in the record?
Senator Hagel. Without objection, so ordered.
[The Washington Post and Wall Street Journal articles
follow:]
A TREATY AGAINST BRIBES
[Printed in the Washington Post, 5/10/98]
How's this for a level playing field? U.S. law bans the bribery of
foreign officials to win business contracts; French law makes such
bribes tax-deductible. For years, the United States has been urging
other industrialized countries to erase this discrepancy--to outlaw
foreign bribery, as has U.S. law for more than two decades. Now
Congress has a chance to help make that happen.
The instrument at hand is the Organization for Economic Cooperation
and Development's Convention on Combating Bribery of Foreign Public
Officials, which 33 leading developed nations signed last December.
Once the treaty goes into effect, every participating country will
criminalize bribery of foreign officials. in some ways, the treaty
doesn't go as far as the U.S. negotiators would have liked. It doesn't
ban payments to political parties or candidates, for example. But it's
a huge first step, and other nations have agreed to discuss extending
its reach once this treaty goes into effect.
The United Sates has nothing to lose by ratifying the covenant; it
essentially confirms U.S. law. Exactly 10 years ago Congress instructed
the executive branch to seek just such a treaty. The only question is
whether the Senate will find time to vote on it, and whether both
houses of Congress will find time to pass the necessary implementing
legislation before everyone goes home to campaign. But timing is
urgent. The signatories promised maximum effort to ratify by the end of
this year. Any delay here would only give other countries an excuse to
deviate from that schedule.
Corruption exists in all countries, and no doubt always will. But
in developing nations, and those making a transition from communism to
free market, corruption can have an especially debilitating effect.
Such countries often lack established courts and law enforcement
institutions to keep bribery in check. When ruling elites skim huge
portions of incoming investment, they impoverish everyone else while
fostering cynicism and a sense that anyone who is honest is also a sap.
It's important that all developed countries recognize, as the United
States has since 1997, that they have a responsibility to help fight
such destructive dishonesty. And once the treaty comes into force,
European bribes will not only no longer be legal--they won't be tax-
deductibe, either. That's one more reason for Congress to act fast.
______
The Battle Against Bribery
By William M. Daley
[Printed in the Wall Street Journal, 12/17/97]
Today, representatives of 34 countries will meet in Paris at the
Organization for Economic Cooperation and Development to sign a binding
agreement outlawing bribery of foreign public officials. This is a
watershed accord, designed to ensure that price and quality--not
greased palms--will determine who gains and who loses in markets
abroad.
The antibribery convention calls for strict penalties for bribery
and tight accounting procedures to make it harder to hide illegal
payments. Bribe givers will also face charges for money laundering. The
bottom line will be fines, loss of business and even imprisonment. We
will need to submit the convention to Congress by April with a goal of
ratification by the end of the year.
To enforce this agreement governments will offer mutual legal
assistance; and there will be rigorous monitoring in the OECD. Based on
this agreement, France has already announced the end of tax
deductibility for bribes. But we must make sure that our trading
partners uphold their commitments.
U.S. firms and workers will clearly benefit from this new accord.
Since mid-1994 foreign firms have used bribery to win approximately 180
commercial contracts valued at nearly $80 billion. We estimate that
over the past year American companies lost at least 50 of these
contracts, valued at more than $15 billion. And since many of these
contracts were for groundbreaking projects--the kind that produce
exports for years to come--the ultimate cost could be much higher.
As important as this agreement is, we must recognize that it only
places severe penalties on those companies and individuals who offer
bribes. It does not address the government officials who seek and
accept bribes. We must now aggressively urge countries to reform their
government procurement practices.
Greater openness and fairness in government procurement will
significantly increase opportunities for U.S. business in the global
procurement market, which has been estimated to be worth more than $3
trillion. We must begin by encouraging nondiscriminatory, timely and
transparent procedures in government procurement. There is a World
Trade Organization agreement covering government procurement, but only
25 countries have signed it. Our goal is for all countries to do so.
We must recognize the challenges that still lie ahead. We have a
new WTO working group that will push countries to adopt more open and
transparent rules. Work is also progressing in the Asia Pacific
Economic Cooperation forum and the Free Trade in the Americas Agreement
process. The U.S., like-minded countries, and the business community
must press for world-wide adoption of these procurement reforms as we
build a sound global trading system.
Senator Hagel. Thank you, Senator.
Now, Mr. Secretary, welcome again and glad you are here. We
have two panels this morning. Under Secretary of State
Eizenstat will be first to present testimony, and the second
panel is Mr. Fritz F. Heimann, Chairman, United States
Transparency International. So, if you would proceed, Mr.
Secretary.
STATEMENT OF HON. STUART E. EIZENSTAT, UNDER SECRETARY OF STATE
FOR ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS
Mr. Eizenstat. Thank you very much, Mr. Chairman, Senators.
I would like to express particular appreciation to Chairman
Helms for scheduling this hearing so promptly after we have
sent the convention and the implementing legislation to the
Senate. It is important the United States lead in the
ratification and implementation of this convention, just as we
did in the negotiation.
Ten years ago the U.S. Congress amended our Foreign Corrupt
Practices Act and, in so doing, called upon the executive
branch to negotiate with our major trading partners in the OECD
an international agreement prohibiting bribery of foreign
public officials in international business transactions. This,
by the way, had been a goal of successive U.S. administrations
since the passage of the 1977 Foreign Corrupt Practices Act, in
which I am pleased to say I played a personal role when I was
serving in the White House during that period in helping to
draft and conceptualize.
The goal has been to internationalize the principles of the
Foreign Corrupt Practices Act so that other countries would
rise to our high standard and so that U.S. businesses would not
be put at a competitive disadvantage in doing business abroad,
as we were criminalizing activity by our business people but
other countries were not.
The U.S. Government, with the support of the business
community and Members of Congress, both Republican and
Democrat, had been working steadily for years to convince our
trading partners to criminalize the bribery of foreign public
officials, and I am very pleased that today I can say we have
met this goal. We are strengthening the rule of law in
international business and will be providing for a more level
playing field for our businesses operating abroad and trying to
export.
We were right to enact the Foreign Corrupt Practices Act 20
years ago, and we have been right and Congress was right to ask
us 10 years ago to press harder for our trade competitors to
enact similar prohibitions. We have succeeded with the OECD
convention and there has been really a sea change in attitude.
I think Senator Sarbanes indicated this. Thirty-three nations
have agreed to enact criminal laws which will closely follow
the prohibitions found in our statute. This is a major
achievement for the rule of law.
Bribery damages economic development and it hinders the
growth of democracy in developing countries. It hurts U.S.
exporters and suppliers in every State and in every district in
the United States, and it impedes U.S. international trade. The
U.S. Government is aware of allegations of bribery by foreign
firms in the last year alone affecting international contracts
worth almost $30 billion, all of which would not be prohibited
by criminal laws in the home jurisdictions.
Governments that signed the convention have now pledged to
seek its approval and enactment of implementing legislation by
the end of this year. It is the product of strong American
leadership and bipartisan effort by the Congress as well, and
therefore early U.S. action is essential to spurring our major
competitors. That is again why I am particularly appreciative
that Chairman Helms would have scheduled this hearing so
promptly.
Permit me to briefly highlight what this convention does.
It obligates the parties to criminalize bribery of foreign
public officials, including officials in all branches of a
foreign government, whether appointed or elected. It includes
payments to officials of public agencies, of public
enterprises, and of public international organizations as well.
It would cover government controlled parastatals so that
publicly owned, foreign owned airlines and utilities and state
telecommunications companies, which are increasingly important
in public procurement, would be covered as well and only those
operating on a purely commercial basis would be exempt.
The parties must also apply effective, proportionate, and
dissuasive criminal penalties to those who bribe foreign public
officials. If a country's legal system lacks the concept of
criminal corporate liability, it must then provide for
equivalent non-criminal sanctions, including monetary
penalties.
The convention also requires that parties be able to seize
or confiscate both the bribe and the proceeds of the bribe, the
net profits resulting from the illegal transaction, or to
impose equivalent fines.
The convention has strong provisions to prohibit accounting
omissions and falsification, and importantly to provide mutual
legal assistance and even extradition to enforce each other's
laws. These mutual assistance provisions are particularly
important because they will enhance foreign governments in
their efforts to enforce alleged bribery, but they will also
improve our own enforcement of our Foreign Corrupt Practices
Act because we will be getting more cooperation from foreign
governments in both extradition and providing evidence that we
can use in our own prosecutions.
While the convention does not directly cover bribery of
foreign political parties, party officials and candidates for
public office, OECD members have agreed to discuss these issues
on a priority basis in the anti-bribery working group of the
OECD, which negotiated this convention, and to consider
proposals to cover such political officials by the May 1999
OECD annual ministerial. However, the convention will cover
business related bribes to foreign public officials made
through political parties, made through party officials, made
through candidates, as well as those bribes that corrupt
foreign public officials directed to them.
The greatest impact of our Foreign Corrupt Practices Act
over the years has been achieved through the business
community's own response to the law, their institution of
meaningful internal corporate controls, effective internal and
external auditing, and the adoption of codes of conduct. We
would expect to see a similar dynamic if this convention is
ratified in other OECD countries.
The convention also provides us for the first time with a
mechanism to monitor through regular peer review both the
quality of the legislation enacted by other nations and the
effectiveness of their enforcement of their legislation.
Regular comprehensive monitoring will provide us with the
ability to determine whether other nations actually do what
they have agreed to do.
I expect that soon after the convention enters into force,
we will begin to see a sharp curtailment in the practice of
bribery of foreign public officials in major international
business transactions. For the first time, our competitors will
have to weigh the risks of bribery against the supposed
benefits.
This convention does not stand in isolation. It is the
centerpiece of a comprehensive U.S. Government strategy to
combat bribery and corruption abroad. In our own hemisphere, we
successfully concluded the Inter-American Convention Against
Corruption, which has recently been submitted to the Senate for
its advice and consent. It is my hope that an early hearing can
be held at the convenience of this committee on this convention
as well. Three countries in Latin America were among the five
non-OECD members that signed the OECD Anti-Bribery Convention.
We are also working with the International Monetary Fund
and multilateral development banks to encourage those
institutions to help countries promote good governments and the
rule of law.
In the OECD as well, we are pressing our partners that
allow tax deductibility, as Senator Feingold mentioned, an
outrageous situation, to deal with this situation and eliminate
this preferential treatment. Progress is already being made in
countries like Denmark, Norway, and Portugal, and in others.
This process on tax deductibility will be accelerated with the
conclusion of the OECD convention and we hope that this will be
the next step taken.
Since the convention follows our own Foreign Corrupt
Practices Act very closely, we will need, Mr. Chairman, to make
far fewer changes to our domestic law than will other countries
who have no domestic criminal laws in this area themselves.
We have tailored for our few proposed amendments our
provisions so that our law will have a scope similar to what we
expect our major trading partners to achieve as they enact
their laws. We have been careful not to put U.S. firms at a
competitive disadvantage. My written statement outlines the
changes in more detail that we have proposed to the Foreign
Corrupt Practices Act as implementing legislation.
We and all signatories to the convention agreed to seek
approval and enactment of implementing legislation by the end
of 1998. We believe that it is essential that the U.S. meet
this schedule. If we do not, other countries will use our delay
as an excuse to avoid or delay their own implementation. The
sooner we act in ratifying the convention and enacting our
implementing legislation, the sooner others will act. That
will, therefore, level the playing field on which our companies
must compete to obtain business overseas.
The business community in the United States strongly
supports our efforts to ratify the convention as soon as
possible.
In conclusion, the successful culmination and conclusion of
this OECD Anti-Bribery Convention has been a genuine bipartisan
effort spurred by Congress over the past 10 years, and one that
several administrations have given priority to.
I welcome the committee's interest in this important issue
and I urge you to take action to approve the OECD convention
and to ensure that the benefits of the convention are realized
rapidly so that our own companies can at last play on a more
level playing field.
Thank you again and I am pleased to answer any and all
questions.
[The prepared statement of Mr. Eizenstat follows:]
Prepared Statement of Stuart E. Eizenstat
Mr. Chairman and Members of the Committee:
Ten years ago this summer, the United States Congress passed the
Omnibus Trade Act which, in part, amended our Foreign Corrupt Practices
Act. The amendments were a reaffirmation of the strong support of the
Congress for effective anti-bribery legislation.
As part of this action, the Congress called on the executive branch
to negotiate--with our major trading partners in the Organization for
Economic Cooperation and Development--an international agreement
prohibiting bribery of foreign public officials in international
business transactions.
Such action has been a goal of successive U.S. administrations
since passage of the 1977 U.S. Foreign Corrupt Practices Act. As then-
President Carter's chief domestic advisor, I was involved in
development and passage of the FCPA, and can attest to the high
priority attached to getting a commitment from the world's largest
industrial countries that they adopt strict anti-bribery laws of their
own. The goal was to internationalize the principles in the FCPA so
that other countries would rise to our high standards and so that U.S.
businesses would not be at a competitive disadvantage doing business
abroad.
The U.S. Government, with the support of the business community and
members of Congress, both Republicans and Democrats, has been working
steadily for years to convince our trading partners to criminalize the
bribery of foreign public officials. I am very pleased to inform you
today that we have met this goal. And we have done so in a manner which
will provide for freer and fairer international competition, will
strengthen the rule of law in international business and will provide
for a more level playing field for U.S. businesses overseas.
On December 17 of last year, on behalf of the United States,
Secretary of State Madeleine Albright signed the OECD Convention on
Combating Bribery of Foreign Public Officials in International Business
Transactions.
We were right to enact the Foreign Corrupt Practices Act over 20
years ago. And we have been right to press hard for our trade
competitors to enact similar prohibitions. We have succeeded with the
OECD Convention. Thirty-three nations have agreed to enact criminal
laws which will closely follow the prohibitions found in our statute.
This is a major achievement for the rule of law.
This Convention obligates the world's largest economies to outlaw
the bribery of officials of other countries in international business
transactions. This is an important issue for the United States, U.S.
businesses and workers.
Let me say, Mr. Chairman, this Convention is very much in our
national interest. Bribery damages economic development and hinders the
growth of democracy. It hurts U.S. exporters and suppliers--in every
state and district in the U.S.--and impedes international trade. The
U.S. government is aware of allegations of bribery by foreign firms in
the last year affecting international contracts worth almost $30
billion, which is not currently prohibited by criminal laws in their
home jurisdictions.
Governments that signed the Convention have pledged to seek its
approval, and enactment of implementing legislation, by the end of this
year. The Convention is the product of strong American leadership, and
early U.S. action is essential to spurring on our major competitors,
whose implementation efforts will directly benefit our international
interests and U.S. firms and their employees. I am confident that the
OECD Convention will enter into force promptly and that the Parties
will enact strong laws and enforce them effectively.
I would to like to express my thanks, Mr. Chairman, for scheduling
this hearing so promptly. It is important that we lead in the
ratification and implementation of this Convention, just as we did in
its negotiation.
THE OECD CONVENTION
Let me briefly highlight for you what this Convention does:
<bullet> The Convention obligates the Parties to criminalize bribery
of foreign public officials, including officials in all
branches of government, whether appointed or elected. This
prohibition includes payments to officials of public agencies,
public enterprises, and public international organizations.
This, therefore, would cover government-controlled parastatals,
such as airlines, utilities, state telecommunications
companies, which are increasing important in public
procurement. Only those operating on a purely commercial basis
would be exempt.
<bullet> The Parties must apply ``effective, proportionate and
dissuasive criminal penalties'' to those who bribe foreign
public officials. If a country's legal system lacks the concept
of criminal corporate liability, it must provide for equivalent
non-criminal sanctions, including monetary penalties.
<bullet> The Convention requires that parties be able to seize or
confiscate both the bribe and the bribe proceeds--the net
profits that result from the illegal transaction--or to impose
equivalent fines so as to provide a powerful disincentive to
bribery. Under our law, substantial fines have had significant
impact on corporate compliance.
<bullet> The Convention has strong provisions to prohibit accounting
omissions and falsification, and to provide for mutual legal
assistance and extradition. These mutual legal assistance
provisions, in particular, will greatly enhance cooperation
with foreign governments in cases of alleged bribery, improving
both our own enforcement of the FCPA and foreign governments'
enforcement of anti-bribery laws.
The Convention will cover business-related bribes to foreign public
officials made through political parties, party officials, and
candidates, as well as those bribes that corrupt foreign public
officials direct to them.
While the Convention does not cover directly bribery of foreign
polticial parties, party officials, and candidates for political
office, OECD members have agreed to discuss these issues on a priority
basis in the OECD's anti-bribery working group, which negotiated the
Convention, and to consider proposals to address these issues by the
May 1999 OECD annual Ministerial meeting.
WHAT TO EXPECT FROM OUR PARTNERS
The greatest impact of the FCPA has been achieved through
enforcement measures and through the business community's response to
the law: the institution of meaningful internal corporate controls,
effective internal and external auditing, and codes of conduct
requiring compliance not only with the FCPA, but also with other
federal criminal laws.
We would expect to see a similar dynamic in other OECD countries.
The OECD Convention requirements, which closely follow the FCPA,
represent a very high standard. As our OECD partners enact effective
criminal and civil laws to fully implement those requirements, their
business communities will need to take appropriate steps to comply.
The Convention also provides us with a mechanism to monitor,
through regular peer review, both the quality of the legislation
enacted by the other nations and the effectiveness of their enforcement
of their legislation. We expect this review mechanism to be modeled
after a highly successful one developed by the Financial Action Task
Force on Money Laundering. Regular, comprehensive monitoring will
provide us with the ability to determine whether other nations actually
do what they have agreed to do to prohibit their nationals and their
corporations from bribing to obtain business from foreign governments.
SEVERAL YEARS HENCE:
To be specific, what should we expect to see over the next several
years?
I expect that within the next year we will see ratification of the
OECD Convention by a majority of the OECD nations. Approval by the
U.S., Germany, France and Japan, by the target date of December 31,
1998, is key to early and effective implementation. Most ratifying
nations are expected to enact their implementing criminal and civil
legislation along with or immediately following ratification.
Over the next two years we will see the institution of regular,
comprehensive reviews of the adequacy of both implementing legislation
and enforcement efforts. We also should begin to see cases prosecuted
by Signatories to the Convention.
But of much greater significance, I expect that soon after the
Convention enters into force--and effective criminal prohibitions are
enacted into law in the ratifying nations--we will begin to see a sharp
curtailment in the practice of bribery of foreign public officials in
major international business transactions.
The demand for such bribery in some cases will still exist, but the
risks for OECD companies that are tempted to acquiesce in the payment
of bribes will be very substantial. For the first time our competitors
in the OECD countries will have to weigh those risks against the
supposed benefits of bribery. When this occurs, I am confident that our
companies will face a more level playing field as they compete for
international business on a fair basis.
RELATED ANTI-CORRUPTION INITIATIVES
The successful conclusion of the OECD Anti-Bribery Convention has
not occurred in a vacuum. It is indicative of a changing international
environment, where there is much more willingness than in the past to
address directly the problem of international corruption.
The Convention is the centerpiece of a comprehensive U.S.
government strategy to combat bribery and corruption. We are, for
example, working with the International Monetary Fund and the
multilateral development banks to focus on the debilitating effects of
corruption on economic stability and development, and to encourage
those institutions to help countries promote good governance.
In this Hemisphere, we successfully concluded the Inter-American
Convention Against Corruption, which has recently been submitted to the
U.S. Senate for its advice and consent to ratification. It is my hope
that at an early time convenient for the Committee that a hearing on
this Convention will be scheduled--and to which we would be invited to
testify. Three countries in Latin America--Argentina, Brazil and
Chile--were among the five non-OECD members that signed the OECD Anti-
Bribery Convention. The other two countries are Bulgaria and the Slovak
Republic.
We also are working in the World Trade Organization and in regional
fora in Asia and Latin America to encourage increased transparency in
government procurement, the major arena for this type of foreign
commercial bribery.
In the OECD as well, we are pressing our partners that allow the
tax deductibility of bribes as business expenses to eliminate this
preferential treatment. Since a 1996 Recommendation which called for
such action, Denmark, Norway and Portugal have completed the necessary
legislative action, and nine of ten remaining countries have begun the
process of changing their laws so as to deny the tax deductibility of
bribes. This process has accelerated with the conclusion of the OECD
Convention.
IMPLEMENTING LEGISLATION
Since the Convention follows our FCPA closely, we have submitted to
Congress only those amendments designed to bring our law into full
compliance with its obligations and to implement the Convention.
We have tailored our proposed amendments so that our law will have
a scope similar to that we expect our major trading partners to achieve
as they enact their own laws. We have been careful not to put U.S.
firms at a disadvantage.
First, the FCPA currently criminalizes payments made to influence
any decision of a foreign official or to induce that official to do or
omit to do any act, in order to obtain or retain business. An amendment
will clarify that the scope of the FCPA includes payments made to
secure ``any improper advantage'', the language used in the OECD
Convention, in order to obtain or retain business.
Second, the OECD Convention requires parties to cover prohibited
acts by ``any person''. The current FCPA covers only issuers with
securities registered with the Securities and Exchange Commission and
``domestic concerns''. An amendment will expand the scope of the FPCA
to cover acts prohibited by the Convention of persons other than
issuers or domestic concerns (i.e., all foreign natural and legal
persons), committed while in the territory of the United States,
regardless of whether the mails or a means or instrumentality of
interstate commerce are used, in furtherance of the prohibited acts.
Third, the OECD Convention calls on parties with jurisdiction to
prosecute their nationals for offenses committed abroad to assert
nationality jurisdiction over the bribery of foreign public officials,
consistent with national legal and constitutional principles.
Accordingly, an amendment will provide for jurisdiction over the acts
of U.S. businesses and nationals, in furtherance of unlawful payments,
that take place wholly outside the United States.
Fourth, the OECD Convention includes officials of international
agencies within the definition of foreign public official. Accordingly,
an amendment will expand the FCPA definition of foreign official to
include officials of public international organizations.
Finally, under the current FCPA, non-U.S. citizen employees and
agents of issuers and domestic concerns are subject only to civil,
rather than criminal, penalties. A proposed amendment to the penalty
sections relating to issuers and domestic concerns will ensure that
penalties for non-U.S. citizen employees and agents of issuers and
domestic concerns accord with those of U.S. citizen employees and
agents.
TIMING
We and all Signatories to the Convention agreed to seek approval of
the Convention and the enactment of implementing legislation by the end
of 1998.
We believe that it is essential that the United States meet this
schedule. If we do not, other countries will use our delay as an excuse
to avoid or delay their own implementation.
Certainly, we all want U.S. firms and their employees to realize
the benefits of this Convention as soon as possible. The sooner we act
in ratifying the Convention and enacting out implementing legislation,
the sooner others will act, thereby leveling the playing field on which
our companies must compete to obtain business overseas.
The business community strongly supports our efforts to ratify the
Convention as soon as possible. The U.S. Council for International
Business, the National Association of Manufacturers, the National
Foreign Trade Council and other business groups have publicly endorsed
the Convention. We have consulted closely with interested non-
governmental groups, such as Transparency International/USA, whose
Chairman, Fritz Heimann, is also scheduled to testify here today.
CONCLUSION
Mr. Chairman, and members of the Committee,
The successful conclusion of the OECD Anti-Bribery Convention has
been a bipartisan effort, with substantial actions in pursuit of a
common goal having been taken by the Congress and Administrations over
the past 10 years. Those of us here today, as well as our predecessors,
share in the credit for this accomplishment.
I welcome the Committee's interest in this important issue and I
urge you to take action--to approve the OECD Convention and to ensure
that the benefits of the Convention are realized rapidly.
Senator Hagel. Mr. Secretary, thank you.
Why do we not start with a 5-minute round of questions and
see where we go.
Mr. Secretary, reading from a recent Wall Street Journal
article which documents in some detail the corruption and
bribery, the article talks about corruption and bribes have
been getting worse in recent years, especially given recession,
high unemployment, and other economic problems in Europe.
European competitors look to overseas work to make up the
shortfall of business at home, according to the story, and much
of that work is in the form of huge infrastructure projects in
the developing world where poorly paid officials decide who
gets the business.
The story goes on to say in some cases bribes are used to
pay off local officials who control how foreign aid money is
spent on major projects. According to the Wall Street Journal--
same story--in the 1990's bribery generally ranges from 10 to
15 percent of the contract--you know that--up from, according
to this story, 5 percent previously.
Now, a couple of questions. Which European countries'
corporations spend the most annually on bribes?
Mr. Eizenstat. Well, we did a study when I was Under
Secretary of Commerce, to which actually Senator Feingold
referred, when we tried to quantify the amount of bribery which
occurred. It is quite widespread. I think it is best not in
public session to try to finger particular companies, but it is
a very widespread practice throughout Europe and one for which
there are very few countries that have any effective
enforcement.
Because it is so pervasive, it is not something that could
be dealt with other than through a multilateral agreement and
that is why this is so important.
Senator Hagel. Mr. Secretary, would you provide for the
record some more elaboration on that in written form?
Mr. Eizenstat. We will attempt to give you as many details
as we can, and if you wish to have a briefing in closed
session, we can go into more detail.
Senator Hagel. Thank you.
Following along this line of general questions regarding
European companies, how serious do you think the Europeans are,
Mr. Secretary, about having to forego this business practice
and changing their ways?
Mr. Eizenstat. Mr. Chairman, I frankly would say that 5
years ago no one would have believed that this convention would
have been possible because of the prevalence of the activities
by so many European firms.
Senator Sarbanes alluded to this and I think that there has
indeed been a sea change, and the sea change has occurred
because many of the corporations in Europe themselves
complained about the huge costs of trying to acquire these
contracts, the shakedowns that occur, the unsavory activities
through which they are required to go, and the fact that the
United States had a very positive model.
So, I think they are very serious. This is not being done
purely out of a non-pecuniary motive. They I think increasingly
feel that it is important to live up to high moral standards,
but their corporations are also telling them this has become a
very high cost of doing business to get major contracts and one
they want to avoid.
Senator Hagel. Mr. Secretary, like the U.S. Foreign Corrupt
Practices Act, I understand this treaty permits facilitation
payments. Would a 5 percent commission to a local government
official constitute a facilitation payment?
Mr. Eizenstat. Well, it would depend on the particular
factual situation. Even under our Foreign Corrupt Practices
Act, commissions obviously can be paid in appropriate
circumstances to people who facilitate the acquisition of
contracts. One has to look on a case-by-case basis to determine
that.
Senator Hagel. I understand a German official stated
recently that German companies spend an estimated $5.63 billion
a year on bribes to foreign officials, most of it added on top
of the contract price and then written off on their taxes. If
this treaty is implemented, do you believe these kinds of
bribes will be, can be eliminated?
Mr. Eizenstat. Absolutely. They will be and they can be and
I think that there will be very effective enforcement. I
believe that almost all of the major European countries will
enact penalties of a criminal nature and that there will be
effective enforcement, again not because of altruism alone, but
because I think increasingly their corporations see it in their
business interest to do so. So, we have every confidence that
there will be effective enforcement.
Senator Hagel. What about, for example, skirting around the
edges on this with political parties, bosses of political
parties? My understanding is the treaty does not prohibit
bribes to political parties?
Mr. Eizenstat. We tried very hard to have political parties
covered, and in fact when I was Ambassador to the European
Union, we had a situation involving an alleged bribe to the
Socialist Party of Belgium that typified the problem. While we
did not succeed in fully covering political parties, we made a
real start.
First, as I mentioned, we have a commitment that this issue
will be taken up in the spring 1999 session, and we hope that
this will be addressed in a serious way.
Second, the convention does make a real start in covering
political party officials in the following ways. It would
prohibit bribes involving political parties and party officials
in the following circumstances: When the party or official is
used as an intermediary for a bribe to a foreign public
official; when corrupt foreign public officials direct business
related bribes to political parties, which is often the case--
they will say, do not pay me, pay my party--and in one-party
systems where political parties are, in effect, the government
and party officials in effect carry out public functions. In
all these situations, the political parties would be covered.
So, we made a real down payment, but we do believe that this
ought to be the next effort to go even a step further.
Senator Hagel. Mr. Secretary, thank you. Senator Sarbanes.
Senator Sarbanes. Thank you, Mr. Chairman. Mr. Chairman, I
have a letter that was sent to me by the Business Roundtable,
signed by 35 of our leading and major corporations, which I
would like to include in the record as well.
Senator Hagel. It will be.
[The letter of the Business Roundtable follows:]
May 28, 1998
The Hon. Paul S. Sarbanes
United States Senate
309 Hart Senate Office Building
Washington, DC 20510
Dear Senator Sarbanes:
We are writing to express our support for the speedy ratification
and implementation of the Organization for Economic Cooperation and
Development (OECD) Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions that the
Administration has just submitted to the Congress.
The OECD Convention is a major victory for the United States in its
battle against international corruption and bribery. It creates an
international antibribery system that obligates signatory countries to
adopt domestic laws to combat foreign bribery. Since the Foreign
Corrupt Practices Act (FCPA) was adopted in 1977, the United States has
tried to persuade our major trading partners to enact comparable laws.
In the 1988 Omnibus Trade Act, the Congress directed the President to
negotiate an international agreement in the OECD on the prohibition of
overseas bribes. After years of negotiation, the United States has
succeeded in getting thirty-three other countries (all the OBCD members
and five non-members) to join the United States in the Convention.
The Congress, current and past Administrations, and the private
sector have made their fight against international bribery and
corruption a priority because international corruption undermines
important U.S. goals of (1) achieving a level playing field for those
U.S. companies and their workers that compete overseas, (2) fostering
economic development and trade liberalization, and (3) promoting
democracy and democratic institutions. The Department of Commerce has
estimated that between 1994 and 1996, there were at least 100 cases of
foreign firms using bribery to undercut U.S. firms' efforts to win
international contracts, costing our companies over $45 billion. The
OECD Convention is designed to eliminate these trade distorting
activities and make foreign bribery a crime in major trading countries.
Speedy ratification and implementation of the OECD Convention by
the Untied States is, however, an absolute imperative in order for the
Convention to succeed. Some of the other parties are not as committed
to the Convention as the United States and are likely to use a delay in
U.S. ratification to undermine it. Speedy implementation of the OECD
Convention is also necessary to show the other parties that the United
States takes its obligations under the Convention seriously and expects
other parties to do the same. Since the Convention's effectiveness
depends on the adoption of international anti bribery laws by the other
parties, implementation by the United States is necessary to lead the
way, substantively and politically, for implementation of the
Convention by other parties.
Enclosed, for your information, is background material on the OECD
Convention and a summary of the amendments necessary to bring the FCPA
into compliance with the OECD Convention.
We are committed to working with you to help protect U.S.
businesses and workers from unfair and corrupt foreign
competitionthrough the ratification and implementation of the OECD Anti
Bribery Convention by the Congress this year.
Sincerely
Peter S. Janson
President & CEO
ABB Inc.
Lawrence A. Bossidy
Chairman & CEO
AlliedSignal, Inc.
William J. Hudson Jr.
President & CEO
AMP Incorporated
Curtis H. Barnette
Chairman & CEO
Bethlehem Steel Corporation
Donald V. Fites
Chariman & CEO
Caterpillar Inc.
Robert J. Eaton
Chairman, President & CEO
Chrysler Corporation
Robert B. Palmer
Chairman, President & CEO
Digital Equipment Corporation
Charles O. Holliday
President & CEO
DuPont Company
Richard J. Swift
Chairman, President & CEO
Foster Wheeler Corporation
Michael R. Bonsignore
Chairman & CEO
Honeywell, Inc
D.T. Engen
Chairman, President & CEO
ITT Industries, Inc.
Larry D. Yost
Chairman & CEO
Mentor Automotive, Inc.
Dennis J. Picard
Chairman & CEO
Raytheon Company
Dana G. Mead
Chairman & CEO
Tenneco
James F. Hardymon
Chairman & CEO
Textron Incorporated
Tony L. White
Chairman & CEO
The Perkin-Elmer Corporation
James P. Kelly
Chairman & CEO
United Parcel Service of America
John A. Luke Jr.
Chairman & CEO
Westvaco
Harold A. Wagner
Chairman, President & CEO
Air Products and Chemicals, Inc.
Maurice R. Greenberg
Chairman & CEO
American International Group, Inc.
C. Michael Armstrong
Chairman & CEO
AT&T
Ernest S. Micek
Chairman, President & CEO
Cargill, Inc.
Michael H. Jordan
Chairman & CEO
CBS Corporation
John W. Snow
Chairman, President & CEO
CSX Corporation
William E. Bradford
Chairman & CEO
Dresser Industries, Inc.
George M. C. Fisher
Chairman & CEO
Eastman Kodak Company
John F. Welch Jr.
Chairman & CEO
General Electric Company
James E. Perrella
Chairman, President & CEO
Ingersoll-Rand Company
Raymond V. Gilmartin
Chairman, President & CEO
Merck & Company, Inc.
W. Wayne Allen
Chairman & CEO
Phillips Petroleum Company
D. H. Davis Jr.
Chairman & CEO
Rockwell International Corporation
Thomas J. Engibous
President & CEO
Texas Instruments Incorporated
Philip M. Condit
Chairman, President & CEO
The Boeing Company
Joseph T. Gorman
Chairman & CEO
TRW Inc.
George David
Chairman, President & CEO
United Technologies Corporation
Enclosures
______
WHAT IS THE OECD ANTIBRIBERY CONVENTION?
The OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions creates an
international anti bribery system that obligates signatory countries to
enact domestic laws to combat foreign bribery.
<bullet> The United States, which has had such a law since 1977, will
no longer be alone once the Convention is ratified and
implemented by the parties.
<bullet> Thirty-three countries have joined this historic Convention.
Those countries included the 29 OECD members (United States,
U.K., Japan, Canada, France, Germany, Italy, Korea, Mexico,
Switzerland, Australia, Austria, Belgium, Czech Republic,
Denmark, Finland, Greece, Hungary, Iceland, Ireland,
Luxembourg, The Netherlands, New Zealand, Norway, Poland,
Portugal, Spain, Sweden, Turkey) and five other nations
(Argentina, Brazil, Bulgaria, Chile and the Slovak Republic).
<bullet> The OECD Convention will level the international trade
playing field since our major trading partners are now
obligated to enact foreign anti bribery laws.
Similarly to the Foreign Corrupt Practices Act (``FCPA''), the OECD
Convention-
<bullet> provides that parties shall make it a crime ``for any person
intentionally to offer, promise or give any undue pecuniary or
other advantage ... to a foreign public official ... in order
to obtain or retain business or other improper advantage in the
conduct of international business;''
<bullet> applies to corrupt payments to office-holders, legislators,
and personnel of government controlled companies (so-called
``parastatals'');
<bullet> recognizes an exemption for small ``facilitating payments;''
and
<bullet> requires parties to enact accounting requirements for the
purpose of preventing false or misleading accounting practices
that can be used to bribe or to hide such bribery.
In order to ensure full and effective implementation, the OECD
Convention also requires that the parties to the OECD Convention-
<bullet> review their current basis for jurisdiction and take
remedial steps if they are not effective in the fight against
bribery;
<bullet> consult when more than one party asserts jurisdiction;
<bullet> provide legal assistance to each other relating to
investigations and proceedings and make bribery of foreign
officials an extraditable offense; and
<bullet> cooperate in a follow-up program in the OECD to monitor
compliance with the Convention
The parties to the OECD Convention have already agreed to an
accelerated work plan to address several outstanding issues related to
the Convention, including acts of bribery relating to foreign political
parties, and coverage of foreign subsidiaries.
______
THE OECD ANTIBRIBERY CONVENTION
SUMMARY OF PROPOSED LEGISLATIVE CHANGES
TO THE FOREIGN CORRUPT PRACTICES ACT
The following five amendments to the Foreign Corrupt Practice Act
(``FCPA'') are needed to implement the recently-signed OECD Convention
on Combating Bribery of Foreign Public Officials it International
Business Transactions:
First an amendment to expand the scope of the FCPA to include
payments made to secure ``an improper advantage.''
(The OECD Convention requires parties to cover payments made to
``obtain or retain business or other improper advantage in the conduct
of international business.'' While the FCPA has been interpreted
broadly to include this, the amendment is necessary to ensure that the
other parties do not doubt U.S. implementation of the Convention.)
Second, an amendment to expand the scope of the FCPA to cover
foreign persons for acts committed while in the United States.
(The OECD convention requires parties to cover prohibited acts by
``any person.'' The FCPA currently covers only issuers, as defined in
the 1934 Securities Exchange Act, and domestic concerns.
Third, an amendment to expand the FCPA definition of foreign
official to include officials of public international organizations.
(The OECD Convention, unlike the current FCPA, includes officials
of international agencies within the definition of foreign public
official.)
Fourth, an amendment to provide for jurisdiction over the acts of
U.S. persons that take place wholly outside the United States.
(The OECD Convention calls on parties to prosecute their nationals
for offenses committed abroad. The FCPA currently covers only issuers
as defined in the 1934 Securities Exchange Act, and domestic concerns
who use the mails or other means of interstate commerce.)
Fifth, an amendment to the FCPA's penalty sections relating to
issuers and domestic concerns to ensure that penalties for non-U.S.
citizen employees and agents of issuers and domestic concern accord
with those of U.S. citizen employees and agents.
Under the current FCPA, non-U.S. citizen employees and agents of
issuers and domestic concerns are subject only to civil, rather than
criminal, penalties.)
This package of amendments will bring the FCPA into conformity with
the OECD Convention and lead the way for implementation of the OECD
Convention by the other parties.
______
THE OECD ANTIBRIBERY CONVENTION A U.S. VICTORY OVER INTERNATIONAL
CORRUPTION
The OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions is a major victory for
the United States in its battle against international bribery and
corruption.
<bullet> Since the Foreign Corrupt Practices Act (``FCPA'') was
adopted in 1977, the United States alone has prohibited foreign
bribery.
<bullet> Without U.S. leadership and perseverance, 33 other countries
would not have joined the OECD Convention on December 17, 1997.
The OECD Convention is the result of bipartisan cooperation and the
collaborative efforts of the Congress, the Executive Branch and the
private sector.
<bullet> In the 1988 Omnibus Trade Act, the Congress directed the
President to negotiate an international agreement in the OECD
on the prohibition of overseas bribes.
The OECD Convention will level the international trade playing
field.
<bullet> The U.S. Department of Commerce estimates that between 1994
and 1996 there have been almost 100 cases of foreign firms
using bribery to undercut U.S. firms' efforts to win
international contracts worth over 45 billion.
Speedy ratification of the OECD Convention is needed to persuade
other parties to ratify the Convention quickly.
<bullet> Some of the other parties are not as committed to the
Convention as the United States and are likely to use a delay
in U.S. ratification to undermine the Convention.
Speedy implementation of the OECD Convention is also necessary to
show the other parties that the United States takes its obligations
under the Convention seriously and expects other parties to do the
same.
<bullet> Since the Convention's effectiveness depends on the adoption
of international antibribery laws by the other parties,
implementation by the United States is necessary to lead the
way, substantively and politically, for implementation of the
Convention by the other parties.
Because the FCPA is already in force in the United States, only
minor amendments are necessary to bring it into line with the OECD
Convention.
<bullet> A summary of proposed legislative changes to the FCPA is
attached.
Senator Sarbanes. I just want to quote briefly one
paragraph of it which says: ``Speedy ratification and
implementation of the OECD Convention by the United States is
an absolute imperative in order for the Convention to succeed.
Some of the other parties are not as committed to the
Convention as the United States and are likely to use a delay
in U.S. ratification to undermine it. Speedy implementation of
the OECD Convention is also necessary to show the other parties
that the United States takes its obligations under the
Convention seriously and expects other parties to do the same.
Since the Convention's effectiveness depends on the adoption of
international anti-bribery laws by the other parties,
implementation by the United States is necessary to lead the
way, substantively and politically, for implementation of the
Convention by other parties.''
Mr. Secretary, you touched on that, but I want to develop
that a little bit because I think we need to sort of do what we
can to sort of break the Congress out of the mode of saying,
well, we will get to it. It is not controversial. It obviously
serves our interests, and at some point we will go ahead and
approve this thing.
I think it is important--well, how important is it--let me
put it to you this way--that we act quickly and promptly and at
the head of the line as an impetus or as a motivation for
others to follow through so we really can get this thing into
place by the end of this year?
Mr. Eizenstat. It is really critically important. Every day
that we delay is another contract lost, another bribe being
paid by a foreign company to get a contract.
The way the entry into force operates is that if we are to
meet this end of 1998 target date, then 5 of the 10 largest
OECD trading partners, which themselves represent 60 percent of
the combined total exports of those 10 countries, have to
deposit their instruments of ratification. If we are to meet
this by the end of 1998 and encourage Japan, France, Germany,
Korea, and others, we have to act and we have to show
leadership. This has, after all, been our baby in a sense. We
have been pushing this for a decade so that we need to show
leadership here.
If we cannot get it done, then the entry into force would
occur in 1999 if any two countries ratify, but that would mean
the delay of a full year. Again, we would have another $15
billion to $30 billion in bribes paid, more contracts lost, and
more jobs at risk in the United States.
Senator Sarbanes. Well, I guess the point I am trying to
get at, it is not only important that we do it by the end of
1998, but we need to do it now, so to speak, so it serves as a
prompting----
Mr. Eizenstat. Exactly. If we do not do it now, then the
other countries will not even come close to meeting the end of
1998. Everyone is looking to us.
Senator Sarbanes. Right.
Mr. Eizenstat. If we do not act, they will delay.
Senator Sarbanes. Now, let me ask this question about the
plans for future expansion. We have got these OECD countries,
which are leading developed economies, but I notice there are a
fair number of fairly large economies around the world that are
not participating in it. Now, they may be somewhat less
developed, but they still are developed countries and
significant players in the international economic scheme.
Will they kind of move into what they perceive a vacuum and
start engaging in these practices in order to gain an
advantage? Or is there a possibility of expanding this to bring
in other such countries?
Mr. Eizenstat. We are going to make a major effort to
expand it, and I believe that the momentum, Senator, which is
being created, this sea change to which I alluded, is occurring
worldwide. If I may just give you some examples. There are
already five non-OECD countries who have agreed to ratify this,
three in Latin American, Brazil, Chile, and Argentina. Bulgaria
and Slovakia have also agreed to do so. We are going to put a
major multilateral effort on to get other major economies, but
the fact that we already have so early on five non-OECD
countries to go with the 29 that we have means that we will be
covering with the 34 countries about 75 percent of all the
trade in the world.
Senator Sarbanes. Well, Mr. Chairman, I see my time is
about to expire. I may not be able to stay for the second panel
to hear Mr. Heimann from U.S. Transparency International. I do
just want to say a word about the work they are doing.
This whole transparency movement worldwide is extremely
important in my judgment. What is happening is we see that this
issue of corruption I think is a looming problem on the
international scene and it undermines governments. It obviously
affects the legitimacy of political actions, and the
Transparency people, not only in this arena but in other arenas
as well, have been doing very good work in trying to develop
ways to attack this. It is really a cancer in the international
body politic, this growing corruption problem and the lack of
legitimate standards.
I will not be here for that panel but I wanted to make that
observation about the work of U.S. Transparency International.
Mr. Eizenstat. Senator, may I just say that we have worked
very closely with Transparency International for years now not
only in this area of anti-bribery, but in general, the whole
issue of rule of law and transparency, they have been really
critical in, and they deserve a major pat on the back, as you
have given them.
Senator Hagel. Senator Sarbanes, thank you.
Senator Robb?
Senator Robb. Thank you, Mr. Chairman. Again, I have the
same scheduling difficulty that Senator Sarbanes has, and I
would like to once again join him in his commendation for the
Transparency efforts because I will not be able to remain for
that.
Very briefly, Secretary Eizenstat, let me ask you a general
question first.
The difficulty, it seems to me, that we have--and we allude
to it, but I am not sure that we have discussed it
sufficiently--is the culture of bribery which we clearly see as
bribery and has frustrated U.S. companies and officials and
others who view the transparency and the rule of law that we
do, and yet there are a number of countries that, from the very
beginning of their business practices, have simply viewed it
differently. We do not agree with it all but we do not
understand it. But some view what we see clearly as bribery as
a cost of doing business, a middleman, blackmail, hush money.
There are a lot of different ways to characterize it, but it
has been so fully ingrained in the culture that it is very
difficult not to contend with that practice no matter how many
laws, treaties, or whatever we come up with.
Is it your belief that this particular treaty will make
major inroads into changing the culture so that the
international community does not have to continue to deal with
something that is culturally ingrained and viewed differently
than we see in very black and white terms here but is seen
differently in some other nations?
Mr. Eizenstat. Your question is an important one. I think
that there has been a culture which has accepted and even
encouraged this as long as the bottom line was getting a
contract.
I think one of the prime reasons we have seen the Europeans
come around on this is not only the bipartisan urging that we
have had for a decade, but it is the fact that their own
corporations realize that this is self-defeating. So, I think
that there is a change in culture and that there will be, as a
result, effective enforcement because the major corporations
there recognize that they need an external constraint so they
can say to the corrupt foreign official, look, our laws now
prevent this, do not ask us. It allows them to put a shield up.
So, I think that in many ways we are going to see a change in
culture. We are already beginning to see it and this will give
them an excuse in effect to avoid doing what they would prefer
not to do now.
Senator Robb. It seems to me that that in many ways is the
ultimate challenge that we face, and I share your hope that we
can change that culture.
One specific question has to do with foreign subsidiaries
of U.S. companies and whether or not U.S. citizens who work for
foreign subsidiaries and are in fact bound in most cases
legally by the laws of the foreign government in which their
subsidiary resides would be covered and whether or not we
should include this in the Foreign Corrupt Practices Act.
Mr. Eizenstat. The answer is yes. First of all, we are
toughening up the treatment of foreign nationals in the United
States under the Foreign Corrupt Practices Act. Now our
citizens are subject to criminal penalties if they engage in a
bribe, but a foreign national residing in the United States is
only subject to civil penalties. That would change under the
convention and under the changes we are suggesting for the
Foreign Corrupt Practices Act.
In addition, the foreign subsidiaries of U.S. firms would
be liable under the Foreign Corrupt Practices Act for acts they
committed in the United States, and U.S. nationals employed by
foreign subsidiaries could also be held liable for acts of
foreign bribery committed anywhere. So, it is quite extensive.
In that sense, if I may, Senator Hagel, you asked about the
facilitation payments. No payment to obtain or retain benefits,
regardless of what it is called, whether it is an agency, a
commission, a consulting fee, would be exempt from prosecution
either under our Foreign Corrupt Practices Act or under this
new convention.
Senator Robb. Thank you, Mr. Secretary. I see my time has
expired.
This is not a particularly hostile committee into which to
bring this, and I join others in thanking the chairman of the
full committee for his prompt effort to bring this before the
bribery and I hope before the full Senate so that we can take
appropriate action as quickly as possible.
Thank you, Mr. Chairman.
The Chairman [presiding]. Senator Feingold?
Senator Feingold. Mr. Chairman, let me begin by thanking
you for bringing this treaty so quickly before the committee.
We all agree it is very important and I am very grateful for
that.
Mr. Secretary, my thanks to you for your presentation, your
expertise, and your leadership on this issue.
I am interested in this issue of the tax deductions for
corporate bribery. You mentioned that there was every intention
to move forward to make sure the countries that we are working
with here actually eliminate the tax deductibility of these
bribes. But as I understand it, it is not actually part of this
convention.
Can you tell me what specific steps you expect to occur and
over what time frame so that this could actually be
accomplished, the elimination of the deductibility?
Mr. Eizenstat. Yes. As you pointed out, one of the grossest
and most pernicious practices is actually permitting bribes to
be deducted in some countries as a business expense. One of the
first formal actions under our anti-bribery agenda in the OECD
was the approval in 1996, Senator, of a recommendation that
OECD member countries reexamine their tax laws with a view to
denying tax deductibility of bribes.
At that time, 15 of the 29 countries indicated that bribe
payments were not tax deductible, but of those which claimed
the need for legislation to end the practice, Denmark, Norway,
and Portugal have moved quickly to end tax deductibility.
France has now passed the necessary legislation contingent on
the entry into force of this convention to do so. Nine others,
including Germany, Belgium, Luxembourg, the Netherlands, and
several others have begun the process of changing their
legislation, and several have been spurred on by the conclusion
of this convention. Now, only Iceland among OECD member
countries has yet to indicate the course it will take.
So, we think that the passage of this convention will act
as a further spur to get countries to do what they committed to
do in 1996 which is to pass legislation disallowing deductions
for bribes.
Senator Feingold. Thank you.
With regard to another point you made and that still arises
outside of the four corners of the agreement is the question of
foreign public official not including the definition of some
political party officials. Can you just say a little bit about
why the parties were unable to agree on the extent to which
political party officials would be covered and how can we make
further progress in this regard?
Mr. Eizenstat. One of the last issues as we were
negotiating this was to try to include political officials and
political parties. We pressed very hard for this, and as I
indicated, we did make a down payment. In effect, if they act
as a conduit to the public official or if they are directed by
the public official to take a bribe in lieu of the public
official getting it, they would be covered.
But quite frankly, a number of the European countries were
not willing to make the necessary change to fully cover
political parties. They did agree, again, on the down payment
that I have indicated, and they also agreed to take it up in
1999. But it was their objections that prevented this being
more fully covered and I think it is the next challenge that we
face.
Senator Feingold. Very good. I, as you know, serve on the
subcommittee having to do with African issues on this
committee, and I understand that the Organization of African
Unity is holding its annual summit this week. Have we made any
progress with respect to encouraging that organization to
establish the kind of anti-bribery standards that we are
talking about here?
Mr. Eizenstat. Not as much certainly as we have done in the
OECD or as we have done in the OAS where all the countries of
this hemisphere that are in the OAS Convention, which is also
before Chairman Helms and the Senate, have agreed not only on
anti-bribery action but much broader action in terms of the way
public officials could amass wealth through undercover methods
by money laundering and the like. I have to say with respect to
the Organization of African Unity we have not made that kind of
progress, but we are determined to do it.
Also, by working with international financial institutions,
including the African Development Bank, to make sure that their
own lending practices are such that they are not part of a
corrupt practice, this will help all countries in Africa as
well.
Indeed, one of the amendments that we will be seeking as a
result of the convention to our own Foreign Corrupt Practices
Act would for the first time cover officials of international
organizations who have heretofore not been subject. So, they
could have accepted a bribe and not been penalized. For the
first time, we will be penalizing any official from any
international organization that is party to a bribe as well,
and this will help I think set a tone in Africa.
But we need a lot more work there. There is a great deal of
corruption in many African countries, and we know that this is
something we need to work on.
Senator Feingold. I assume that I and other members of the
committee could help by raising this issue with African heads
of state when they come visit with us.
Mr. Eizenstat. Absolutely, because I think they realize
that this is a detriment to their own economic development.
Senator Feingold. Thank you, Mr. Secretary and Mr.
Chairman, very much.
The Chairman. Mr. Secretary, I think this is the first time
I have been tardy in arriving at a committee meeting, and I
will explain by expressing the opinion that perhaps the Lord
wanted to infuse me with a bit of humility this morning.
This was a day for us to have the yardman, who is a very
fine, old, retired gentleman who just does it for his friends
for a little bit of money. It was hot, and on days like this, I
carry him some ice water. I was going out with the big glass of
ice water and I heard the front door shut behind me.
Mrs. Helms is at the beach. Everybody on my street is at
the beach except for the two or three who are working. I roamed
up and down that street trying to find a telephone. Finally,
the yardman took me down to a shopping center and I called the
office and they brought me a key.
I apologize for being late, but I do thank you, Senator
Hagel for filling in for me.
Mr. Eizenstat. Mr. Chairman, if I may say, the only thing
important that you missed by being late is my profuse
compliments to you for holding this hearing so promptly.
The Chairman. Well, I will get them in print and I will
frame them.
I might say about the Secretary, he has one of the greatest
academic records at the University of North Carolina, of which
Mrs. Helms is also an alumnus. She was there a few years before
him, but she refuses to let me say what year.
But in any case, thank you for coming and I thank you
Senator Hagel for helping me in my great hour of need.
I am going to summarize a statement that I was going to
make at the start of the hearing because I want it to be a part
of the record. Obviously, this committee meeting was scheduled
to consider the Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions, signed
by the United States and 33 other nations in December and sent
to the Senate on May the 4th of this year.
Now, this being just June the 9th, I hope it is a
measurement of this committee's efforts to expedite
consideration of treaties when the administration shows a
degree of cooperation in the process. Of course, you are
responsible for that, Secretary Eizenstat, and I appreciate it.
We are having some difficulty with some other treaties that
have been hanging fire, and I am happy to use a little bait and
switch with the administration, hoping that they will send
those treaties to the Senate too. But that is neither here nor
there.
The committee's attention to this treaty reflects the
somewhat urgent need to push--and I use that word advisedly--to
push our European allies and other countries to enact laws that
criminalize bribery of foreign officials by their citizens
overseas. Now, this treaty, of course, demands enactment of
such laws by every country ratifying the treaty. We may not
have a whole lot of influence with some of those countries, but
those receiving foreign aid will certainly have an
encouragement I will say to them here--and I hope they will
notice.
For more than two decades--20 years or more--the United
States has unilaterally imposed such restrictions on its
businesses through the Foreign Corrupt Practices Act. That
legislation came into being largely because of growing
incidents of U.S. companies engaging in bribery overseas during
the 1970's that brought shame and embarrassment to the United
States. It certainly did to me.
When the Foreign Corrupt Practices Act became law, many
critics claimed it to be ``Pollyanna-ish,'' an example of the
United States enforcing its values on the rest of the world. We
always hear that when we stand up for what is right. Some
sources will say, well, ``you cannot control them, you cannot
control various things,'' but we can try and we can at least
take a position ourselves as to what is right and what is
wrong.
U.S. businesses are recognized worldwide today as among the
cleanest, and I hope that point has been made this morning. In
many cases, it also makes the United States businessmen and
women more innovative and safer because criminals around the
world now know that U.S. businesses must comply with anti-
bribery laws.
At the same time, U.S. companies have lost business to
European and other OECD member companies who continue to bribe
foreign officials to win contracts. Some estimate this amount
to be at least $100 billion. Is that correct?
Mr. Eizenstat. Well, even on an annual basis, Senator, it
is about $30 billion. So, if you multiply that by a few years,
you get up to that level.
The Chairman. So that is what U.S. businesses have lost in
sales over a period of time.
Even more objectionable than the bribery itself is the fact
that European governments, such as the French, actually
subsidize such activities by making these bribes tax
deductible.
Now, this was described in a January 8, 1998 article in the
New York Times, which said that the family of Prime Minister
Bhutto of Pakistan enriched itself through foreign payoffs by
European companies while Mrs. Bhutto was serving as Prime
Minister of Pakistan.
I was a little bit surprised and dismayed about that, I
might say parenthetically, because we had Mrs. Bhutto for a
coffee before the committee and extended hospitality to her.
She is a delicate, charming little lady, who, at the time, had
just given birth to I think her second child. Maybe it was the
first.
At that time I got a lecture every second she was sitting
next to me about you know who, India. She talked about India,
India, India so much that when I took her up to the Senate
chamber to present her to the Senate, I hate to confess this,
but I slipped in introducing her to the Senate as the Prime
Minister of India.
I corrected that quickly, but the deed was done and of
course all of the news media noticed that--and they should
have.
Well, I am going to ask that the rest of my statement be
included in the record and say that there is a problem--and
this hearing and the testimony by the Honorable Secretary
indicates that there is a problem--that we have got to face one
way or another. We can ignore it at our own peril. Bribery
affects countries that are least able to resist the appeal of
bribes, as they do not pay their workers livable wages. It is
also clear that this treaty will be scarcely more than a band-
aid on the problem of corruption if all countries ratifying the
treaty do not put in place tough laws that deter their
companies from engaging in bribery overseas.
So, as a condition to Senate advice and consent to
ratification, I am going to urge, and even demand, stringent
reporting requirements in the treaty's resolution of
ratification because I want the Senate to be constantly and
fully informed of the actions of all treaty ratifiers to both
pass and enforce tough domestic laws that criminalize bribery
overseas.
The United States has spent hundreds of billions of
dollars--when you count the fact that it has borrowed money on
which we paid interest--on foreign aid over the past half
century. Often aid is given to countries that are all the way
at the top of the list in terms of corruption and graft. Yet,
no amount of assistance can help a country whose officials
steal from their own people. As long as this corruption exists,
that we know is wrong, and we do nothing about it and even make
excuses, saying, well, we cannot do anything about it, then we
are part of the problem; we are not a part of the solution.
[The prepared statement of Senator Helms follows:]
Statement of Chairman Helms
This Committee meeting has been schedule to consider the Convention
on Combating Bribery of Foreign Public Officials in International
Business Transactions, signed by the United States and 33 other nations
in December, and sent to the Senate on May 4, 1998.
This being June 9, this is a measurement of the Committee's
efforts to expedite consideration of treaties When the Administration
shows a degree of cooperation in the process. The Committee's attention
to this particular treaty reflects a somewhat urgent need to push our
European allies, and other countries, to enact laws that criminalize
bribery of foreign officials by their citizens overseas. (This treaty
demands enactment of such laws by every country ratifying the treaty.)
For more than two decades the United States has unilaterally
imposed such restrictions on its businesses through the Foreign Corrupt
Practices Act--legislation that came into being largely because of
growing incidents of U.S. companies engaging in bribery overseas during
the 1970s that brought shame and embarrassment to the United States.
When the Foreign Corrupt Practices Act became law, many critics
claimed it to be ``Polly Anna-ish'' legislation, and an example of the
United States enforcing its values on the rest of the world. Today, 20
years later, those critics have been silenced. U.S. businesses are
recognized worldwide as among the cleanest. In many cases, it also
makes U.S. business men and women more innovative, and safer because
criminals around the world now know that U.S. businesses must comply
with anti-bribery laws.
At the same time, U.S. companies have lost business to European and
other OECD member state companies who continue to bribe foreign
officials to win contracts. Some estimate this amount to be as high as
$100 billion in lost sales. Even more objectionable than the bribery
itself is the fact that European governments, such as the French,
actually make such bribes tax deductible.
Consider the case described in a January 8, 1998, article in the
New York Times. According to this account the family of Prime Minister
Bhutto of Pakistan enriched itself through foreign payoffs by European
companies, while Mrs. Bhutto was serving as Prime Minister of Pakistan.
Specifically, the article detailed how a French military contractor
agreed to pay Mrs. Bhutto's husband $200 million in order to get a $4
billion jet fighter deal. The article also pointed to a leading Swiss
company that paid millions of dollars between 1994 and 1996 to offshore
companies controlled by Bhutto family members in order to gain business
advantages.
One need only look at recent events in Indonesia and the Suharto
family's corruption to see how such bribery and graft can ravage a
society and undermine political and economic stability. China too is
grappling with increased corruption as the old communist party regime
comes to grips with a more market-oriented economy. One recent article
in a Chinese paper cites a poll of Asian businessmen that ranked China
as first in Asia for rampant corruption. The largest growth area for
their corruption, interestingly, is in the political field, which is
not covered by the treaty pending before us today, but which is covered
by the U.S. Foreign Corrupt Practices Act. It seems that the Chinese
have taken to using the same techniques in the U.S. that foreign
businessmen use in China.
So, it's clear there is a problem. Bribery affects countries that
are least able to resist the appeal of bribes, as they do not pay their
workers livable wages. And it's also clear this treaty will be scarcely
more than a band-aid on the problem if all countries ratifying the
treaty do not put in place tough laws that deter their companies from
engaging in bribery overseas.
I must admit to some degree of skepticism as to the will of all of
the treaty's 34 signatories to implement and fully enforce commitments
made under the treaty. One need only look to the domestic laws of
countries like Germany and France that still permit their companies to
deduct bribes as a legitimate business expense. Despite the fanfare of
signing an OECD resolution last year promising to prohibit such
deductions, there's been little progress in those countries to rewrite
their laws to prohibit such deductions.
So, as a condition to Senate advise and consent to ratification, I
shall demand stringent reporting requirements in the treaty's
resolution of ratification that will fully inform the Senate of the
actions of the treaty ratifiers to both pass and enforce tough domestic
laws that criminalize bribery overseas.
Let me conclude with this observation: The United States has spent
hundreds of billion in foreign aid over the last 50 years often to
countries that rank at the top of the list in terms of corruption and
graft. No amount of assistance can aid a country whose officials steal
from their own people. If OECD nations continue to turn a blind eye to
bribery by their own companies, they not only condone such corruption,
they are party to it.
We will now hear from the Honorable Under Secretary of State, Stu
Eizenstat, who will be followed by Mr. Fritz Heimann, Chairman of the
U.S. branch of Transparency International, and counselor to the general
counsel of General Electric.
The Chairman. Let me ask a question, since I brought up
Madam Bhutto.
When the United States suspended the delivery of the F-16
fighter aircraft to Pakistan some years back, that was in
response to Pakistan's pursuit of nuclear weapons, was it not?
Mr. Eizenstat. Yes, sir.
The Chairman. Now, that of course culminated in you know
what last month, Pakistan succeeded in its nuclear test.
Now, this past January, the New York Times reported that
the Government of France not only failed to support U.S.
antiproliferation efforts toward Pakistan, France tried to win
the contract to deliver French-made fighter aircraft by giving
a $200 million bribe to the husband of Madam Bhutto. Have you
discussed that this morning?
Mr. Eizenstat. No, sir.
The Chairman. Well, I want us to ventilate that just a
little bit so it would be made a matter of unmistakable record
because we will always have Senators who are so busy with their
own committee work they do not have time to look at others, and
we are all guilty of that to some extent.
Now, because the French bribe went to the Prime Minister's
husband and not to the Prime Minister herself would that be
prohibited by this treaty?
Mr. Eizenstat. It is an important question, Mr. Chairman.
We are aware of the allegations that have been reported on
this. One of the interesting points is that in the story it
notes the apparent care taken to avoid violation of existing
French domestic corruption laws in the sense that, according to
the story, no French nationals were permitted to participate in
the bribe because that would have involved domestic French law.
When France ratifies this convention and enacts a criminal
law against the bribery of foreign officials, such a
transaction could be illegal then under French law, and that is
the value of the convention.
Now, with respect to the payment of an official spouse,
although this would not be a per se violation either of our own
Foreign Corrupt Practices Act, as it now exists, or of the
convention, it would be covered under two circumstances.
One, again if the allegations are correct--and these are
only allegations--if the official was aware of the bribe and
directed the payment to his or her spouse to try to avoid it,
that would be covered.
Second, it would also be covered if the official had
indirectly benefited, even if she or he did not directly
benefit.
So, in those two ways a spouse could be covered, and
therefore this, if it were true, might have been covered by the
convention and, if we amend our Foreign Corrupt Practices Act
accordingly, by our own act as well.
The Chairman. Do you think we ought to think about a
modification to make it unmistakable that it would be unlawful?
Mr. Eizenstat. Well, it would be I think useful in terms of
legislative record perhaps under our own law, but because the
convention did not quite go that far--it only covered spouses
in the two situations--I think rather than reopening the whole
convention, this ought to be one of the followup issues. We do
have some followup in terms of political parties which were not
fully covered, and this I think would be a good point to do as
a followup in 1999 to see if we could cover this more clearly.
I think your point is well taken.
The Chairman. I tell you what, let us both think about
that, about how we can make it applicable one way or another--
either by a sidebar or some other mechanism.
Do the French continue to allow its companies a tax
deduction for such bribes?
Mr. Eizenstat. Well, you are quite right in pointing this
out because France and Germany both do permit tax
deductibility. France has now passed the necessary legislation
to end that, and one of the values of, Mr. Chairman, your
leadership in calling such an early hearing is that that new
legislation will go into effect barring tax deductibility for
the first time as soon as this convention enters into force.
So, that pernicious practice in France would be ended.
The Chairman. Good.
Well, let us see. How many of our major trading partners
allow their companies to deduct bribes from their taxes?
Mr. Eizenstat. Well, in 1996, Mr. Chairman, when we first
began working on the tax deductibility item, there were then I
think 26 members of the OECD. It was before its expansion to
29. Fifteen indicated that bribe payments were not tax
deductible. That would have meant that around a dozen did
permit in some form or another tax deductibility.
I might also mention, in addition to France, that Norway,
Denmark, and Portugal, which evidently permitted tax
deductibility, have now ended this practice by moving quickly
to pass legislation, and nine other countries, Australia,
Austria, Belgium, Germany, Luxembourg, the Netherlands, New
Zealand, Sweden, and Switzerland, have begun the process of
ending tax deductibility. Clearly this convention, which you
have championed for so long and again which you have moved us
to negotiate so quickly, once this goes into force, it will be
a further spur to these nine countries as well.
The Chairman. I do not tell the media how to do their
business, but did you guys get all of those?
Because I want to give wide circulation to the list he just
read.
I am going to wind up and I have a few questions in writing
that I will offer because you have been here for a long time.
More than a year ago, the OECD countries signed on to a
nonbinding resolution to eliminate tax deductions for bribes.
Do you expect that these deductions will finally be eliminated
now as a result of treaty?
Mr. Eizenstat. We hope that this will be one of the things
that will be taken up in the next spring meeting in 1999. I do
believe, Senator, that we will see these nine countries and
several others in tax deductibility and that this convention
will be a true spur to it. So, I really hope that by the end of
next year, virtually all of our major trading partners and
competitors will have ended tax deductibility and will have
ratified this convention and for the first time criminalized in
their own laws the kind of bribery we have for 20 years
criminalized in ours and put our own companies at a competitive
disadvantage in doing so.
The Chairman. Well, let us make a little pact here, that
your side and our side work together in every way possible to
make it happen.
I must ask you about the State Department. Are you prepared
to monitor this situation?
Mr. Eizenstat. Yes, sir, we are. This is really one of our
highest priorities, and we have set up an anti-bribery working
group in the OECD, in which we will be very active players, to
monitor this and make sure that the necessary legislation is
passed by our European friends.
The Chairman. Good.
Now, maybe one of the other Senators did ask this. The top
five exporting countries, after the United States, are Germany,
Japan, France, United Kingdom, and Italy. Do you think they
will have fully ratified and fully implemented this treaty by
December 1998, as they pledge to do?
Mr. Eizenstat. I believe that they will if we do so.
Frankly, everybody is sitting back and waiting for us to act.
If we show the kind of leadership that you clearly want us to
show, and you are showing, I believe that they will.
The Chairman. Well, I am going to encourage the majority
leader to put this on the Senate calendar as soon as the
committee acts on the treaty.
Mr. Secretary, I often say that the best speeches I make
are made by me when I am driving home. I say, gee, why did I
not say so and so and so and so. Let me give you a chance to
close the record. Do you have anything that you would like to
add that has not been addressed?
Mr. Eizenstat. I will probably think of it when I am
driving home too. But right now none occurs to me.
The Chairman. Thank you so much for being here, and I
apologize for my tardiness.
Mr. Eizenstat. Thank you very much, Mr. Chairman.
The Chairman. I also apologize to Mr. Heimann who is the
Chairman of U.S. Transparency International. He sat patiently
and if he had a baseball bat, I suspect he would work on me.
But we will go as rapidly as you would like, and if you
will step forward, sir.
Mr. Eizenstat. Thank you, Mr. Chairman.
The Chairman. Mr. Heimann, if you will have a seat. Thank
you very much for coming this morning. I hope you will not have
a bad opinion of us because I was so tardy, but good Senators
were here.
If you have a prepared statement, I guarantee you that will
be included in the printed record and whatever you want to do
about it.
STATEMENT OF FRITZ F. HEIMANN, CHAIRMAN, TRANSPARENCY
INTERNATIONAL USA, WASHINGTON, DC
Mr. Heimann. Mr. Chairman, I am very pleased to testify on
behalf of Transparency International. TI is a coalition of
business and other groups combating international corruption
and now has national chapters in over 70 countries. The U.S.
chapter is supported by more than 30 major U.S. companies.
I am counselor to the General Counsel of General Electric
and also serve as Chair of TI-USA and have participated
actively in the anti-corruption work at the U.S. Council on
International Business, Business Roundtable, and the
International Chamber of Commerce. Thus, I have very extensive
contact not just with American but also with foreign
businessmen on the subject.
I am here to urge prompt action by the Senate to ratify the
convention. The convention would take bribery out of the
equation in international business. This would level the
playing field between U.S. companies and foreign competitors,
resulting in more orders for American companies, more jobs for
American workers. The convention would also contribute
significantly to other key U.S. objectives, helping to overcome
the effect of corruption on international development programs
and on the stability of struggling democracies in Eastern
Europe and elsewhere.
The convention has the overwhelming support of U.S.
business and of all the major business organizations, including
the Business Roundtable, the U.S. Council on International
Business, the National Foreign Trade Council, NAM, and the
ECAT.
My testimony will cover three issues: Why corruption has
finally become an international issue, why the convention
provides a solid framework for combating corruption, and what
steps we must take to make sure that the objectives of the
convention are achieved.
In the last few years, there has been a remarkable
transformation in the willingness of the international
community to confront the cancer of corruption. This is a
development of which the United States can be justly proud.
Twenty-one years ago, the Foreign Corrupt Practices Act was
passed unanimously by the Senate and by the House. This was an
historic first step, the first time any country made it a crime
to bribe foreign officials. We expected that other countries
would follow the American example. After all, the same bribery
scandals which prompted the Congress to act had created major
reverberations in Japan, Italy, and Indonesia, and other
countries. This expectation proved wrong. Not a single country
curbed foreign bribery.
Since the FCPA went into effect, American companies have
lost orders amounting to many tens of billions of dollars to
foreign competitors who remained free to pay bribes. In many
countries, including Germany and France, bribes continue to be
tax deductible business expenses. In other words, their
governments not merely condone but effectively subsidize
bribery. Notwithstanding the failure of other countries to act,
the Congress refused to repeal or water down the FCPA.
In the past 5 years, the tide has finally begun to turn.
There is now widespread recognition that international bribery
should no longer be tolerated. The changes reflect the
following factors.
First, the end of the cold war has resulted in the spread
of democratic governments around the world. Political processes
have become much more open. There is more freedom of the press,
more independent prosecutors, and judges. As a result,
corruption is much harder to cover up.
Failure of international development programs to help the
world's poorest countries is now largely attributed to
corruption.
The Asian crisis has discredited the claim that rapid
economic growth can continue notwithstanding endemic
corruption.
Massive bribery scandals in highly industrial countries,
such as Italy, Japan, France, Belgium, many others, have
demolished the argument that corruption is only a problem in
the developing world.
International business leaders have increasingly recognized
that a global economy requires common rules and that these
rules must be morally defensible.
Finally, Transparency International has grown with
extraordinary speed and has helped raise public awareness of
the costs of corruption.
These factors have produced a tidal change in public
perception around the world. There is now widespread
recognition that action against corruption is required. The
U.S. is no longer a lone voice in the wilderness.
There are, of course, entrenched groups who oppose reform.
Corruption obviously has powerful beneficiaries: Corrupt
companies, corrupt officials, and a legion of middlemen.
However, the prospects for reform have never been better.
The OECD convention is the most important achievement to
date of the international drive for reform. The OECD provides
an ideal forum for leveling the international playing field
because its members include the home bases of practically every
major international company.
The convention is the product of 4 years of very hard work.
The U.S. Government deserves great credit for diplomatic skill,
for forcefulness, and above all perseverance. In the early
years, very few of us would have expected to be sitting here
today advocating prompt action on the convention.
The convention provides a very solid framework for an
effective international system. Secretary Eizenstat has already
described the key provisions, as does my statement. Let me just
summarize very briefly.
Bribery is very broadly defined, actually more broadly than
in the FCPA.
The term ``foreign public official'' is also broadly
defined and includes administrative, legislative, and judicial
officials, whether appointed or elected. It also covers
officials of government controlled companies.
I might add that I take a somewhat more optimistic view of
the question of large gifts to spouses of Prime Ministers than
the Secretary took earlier. The language of the convention
clearly talks about direct and indirect gifts, gifts from third
parties and other intermediaries, and gifts of the magnitude,
Mr. Chairman, that you referred to I think would very easily be
covered by the terms of the convention because I do not think
anybody can reasonably argue that the Prime Minister's husband
was given very large amounts of money simply because they liked
the husband.
The convention also provides for more transparent
accounting rules, for mutual legal assistance, including
extradition, and establishes a monitoring and followup process
to which I want to come back very shortly.
Like any agreement emerging from multi-party negotiations
on a tight time schedule, the OECD convention is not perfect.
However, a followup process has been established to address
such issues as prohibition of improper payments to foreign
political parties and treatment of foreign subsidiaries.
Proposed changes will be taken up at next year's OECD
ministerial.
The convention in its present form is a first-rate document
that closely parallels the requirements of the FCPA. There is
no reason to delay bringing it into effect promptly. Further
improvements can obviously be made over time.
Agreement on the text of the convention by 34 nations
represents a major breakthrough. However, three additional
steps must be taken by national governments before the
convention will have a practical impact on the conduct of
international business: First, ratification by enough countries
to meet the entry into force provision; second, passage of
implementing legislation; and three, enforcement by national
prosecutors.
All 34 governments have committed to seek ratification by
the end of this year, a very challenging target. Prompt action
by the U.S. Senate would provide an enormously helpful signal.
Other countries are watching what we do. Any delay here would
be regarded as a ready excuse for delays elsewhere. Without
U.S. ratification, it would be practically impossible to meet
the conditions for entry into force in 1998.
Passage of implementing legislation is a much bigger step
in other countries than it is here. We only require small
changes to conform the FCPA to the requirements of the
convention. In other counties, making foreign bribery a crime
requires broad, new legislation.
After implementing laws are passed, enforcement programs
must be organized. This too is a major challenge. The history
of corruption reform is full of anti-bribery laws that are
never enforced.
It appears that most OECD members will ratify the
convention this year. The critical issue for the future will be
the quality of the implementing laws and the enforcement
program.
The OECD monitoring program must make sure that consistent
and effective results are achieved. This will not be easy
because there are substantial differences in how the 34 legal
systems work. It is important to forestall the development of
major differences in how effectively foreign bribery is
prohibited. This could lead to a lowest common denominator
trend because governments would be reluctant to impose stricter
prohibitions on their own companies than will be imposed on
their competitors. This risk can be overcome provided that the
monitoring program holds all parties to high standards.
We want to stress three issues which we consider essential
for an effective monitoring program.
First, the effort to design and organize a strong
monitoring program should proceed as quickly as possible. A
clear message that all parties will be held to high standards
must go out before any tendency to enact minimalist
implementing legislation gathers force.
Second, monitoring should begin promptly even if it starts
on an informal basis. To wait until 1999 after the convention
enters into force would run the risk that many countries will
have enacted inconsistent implementing laws, which will be
difficult to correct.
Third, we urge that the monitoring process should be open
to inputs from the business sector and from civil society. It
should not be limited to governments criticizing other
governments behind closed doors.
Because the development of a strong monitoring program is
so crucial to achieving the objectives of the convention, we
suggest that this committee ask the State Department to provide
periodic progress reports, and I am delighted, Mr. Chairman,
that you are ahead of us with respect to that proposal.
To conclude, the convention will make foreign bribery a
crime in the world's major exporting nations. It will
significantly raise the standards for global competition,
thereby improving American competitiveness and strengthening
international development, market reforms, and democratization.
The convention deserves strong support from your committee on
both practical and moral grounds, and we thank you particularly
for giving this subject such quick attention. Thank you very
much.
[The prepared statement of Mr. Heimann follows:]
Statement of Fritz F. Heimann
Mr. Chairman, members of the Committee on Foreign Relations, I am
very pleased to be invited to testify on behalf of Transparency
International. TI is a non-governmental organization committed to
combating international corruption. It was launched in 1993 and now has
national chapters in over 70 countries on every continent. TI-USA, of
which I am chairman, is supported by a broad coalition, including more
than thirty major American companies, labor, scholars, development
experts, and many distinguished individuals. I have been a lawyer for
General Electric for over four decades and serve as Counselor to the
General Counsel. I also chair the working group on extortion and
bribery of the U.S. Council on International Business.
I am here to urge prompt action by the Senate to ratify the OECD
Convention to Combat Bribery of Foreign Public Officials. The
Convention would take bribery out of the equation in international
business. This would level the playing field between U.S. companies and
foreign competitors, resulting in more orders for American companies
and more jobs for American workers. The Convention would also
contribute to other key U.S. objectives, by helping to overcome the
effects of corruption on international development programs and on the
stability of struggling democracies is Central and Eastern Europe and
elsewhere.
The Convention has the overwhelming support of a broad coalition of
major business organizations, including the Business Roundtable, the
U.S. Council on International Business, the National Foreign Trade
Council, the National Association of Manufacturers, and the Emergency
Committee for American Trade.
My testimony will cover three subjects: (1) Why corruption has
finally become a high-priority international issue; (2) Why the OECD
Convention provides a solid framework for combating corruption; and (3)
What steps must be taken to make sure that the objectives of the
Convention are achieved.
I. Why Corruption Has Become Critical International Issue
During the past five years there has been a remarkable
transformation in the willingness of the international community to
confront the cancer of corruption. This is a development of which the
United States can be justly proud, and for which the U.S. Congress
deserves particular credit.
In 1977 the Foreign Corrupt Practices Act passed the Senate 87-0
and the House 349-0. The FCPA was an historic step, the first time any
country made it a crime to bribe foreign officials. It was expected
that other countries would follow the American example. After all, the
same bribery scandals which prompted Congress to act had created major
reverberations in Japan, Italy, the Netherlands, Indonesia and
Honduras. This expectation proved wrong. Not a single country acted to
curb foreign bribery.
Since the FCPA went into effect, U.S. companies have lost orders
amounting to many tens of billions of dollars to foreign competitors
who remained free to pay bribes. \1\ In many countries, including
Germany and France, bribes continued to be treated as tax-deductible
business expenses. Foreign governments not merely condoned, but
effectively subsidized foreign bribes. Notwithstanding the failure of
other countries to act, the U.S. Congress refused to repeal or water
down the FCPA and insisted on retaining the moral high ground. In the
past five years the tide has finally began to turn. There is now
widespread recognition that international bribery should no longer be
tolerated. This changes reflects the following factors:
---------------------------------------------------------------------------
\1\ The U.S. Department of Commerce estimates that 139
international commercial contracts valued at $64 billion may have
involved bribery by foreign firms and that U.S. firms lost 36 of those
contracts valued at $11 billion. The National Export Strategy, Fourth
Annual Report to the U.S. Congress, October 1996, at 113.
---------------------------------------------------------------------------
<bullet> The end of the Cold War has resulted in the spread of
democratic governments around the world. Political processes
have become more open and corruption is harder to cover up.
There is more freedom of the press, more independent
prosecutors and judges.
<bullet> Corruption has been identified as a major obstacle to the
transition to democracy and market economies in Central and
Eastern Europe.
<bullet> Much of the failure of international development programs to
improve the economies of the world's poorest countries is now
widely attributed to corruption. The World Bank, under the
leadership of Jim Wolfensohn, has made corruption a high-
priority issue.
<bullet> The Asian crisis has discredited the claim that rapid
economic growth can continue notwithstanding endemic
corruption. The IMF is making transparency a key element in its
assistance programs.
<bullet> Massive bribery scandals in highly industrialized countries,
including Italy, Japan, Korea, Spain, France and Belgium, have
demolished the common excuse for inaction, that corruption is a
serious problem only in developing countries. This has clearly
created support for the OECD program.
<bullet> There is increasing recognition by international business
leaders that a global economy requires common rules, and that
these rules must be morally defensible. This has resulted in
the development by the International Chamber of Commerce of
strong Rules of Conduct to Combat Extortion and Bribery.
<bullet> Transparency International has grown with extraordinary
speed and has helped raise public awareness of the costs of
corruption. TI actively promotes the development of systemic
reforms such as the OECD Convention.
These factors have produced a tidal change in public perceptions
around the world. There now is widespread recognition that action
against corruption is required. There are still entrenched groups who
oppose reforms. Corruption obviously has powerful beneficiaries:
corrupt companies, corrupt officials, and a legion of middlemen.
However the prospects for reform have never been better.
II. Why OECD Convention Provides Solid Framework for Combating
International Corruption
The OECD Convention is the most important achievement to date of
the international drive for reform. The OECD is the ideal forum for
tackling the supply side of international corruption because the
industrialized countries that belong to the OECD are the home bases of
practically all major international companies.
The Convention is the product of four years of hard work. The U.S.
Government deserves great credit for diplomatic skill, forcefulness,
and above all perseverance. The Convention provides a solid framework
for an effective international system to prohibit bribery of foreign
public officials.
<bullet> Bribery is broadly defined, more broadly than in the FCPA.
The Convention prohibits not only bribes ``to obtain or retain
business'' but also to secure ``other improper advantage in the
conduct of international business.'' This makes clear that
bribery is prohibited not just in procurement of orders, but
also in environmental and other regulatory procedures, in tax
and customs matters, and in judicial proceedings.
<bullet> The term ``foreign public official'' is also broadly defined
and includes administrative, legislative and judicial
officials, whether appointed or elected. It also covers
officials of government-controlled companies. This was a big
win for the American negotiating team, over determined
opposition, because in many countries procurement in key
sectors such as transportation, telecommunications, energy and
infra-structure projects is conducted by government
corporations.
<bullet> Sanctions for foreign bribery must be comparable to those
for bribery of domestic officials, and must include effective
criminal penalties or equivalent civil sanctions.
<bullet> The Convention also calls for establishing accounting and
auditing standards, including prohibition of off-the-books
accounts.
<bullet> Mutual legal assistance, including extradition, is required.
This is important because investigations under the FCPA were
often stymied by lack of cooperation from foreign governments.
The Convention establishes a monitoring and follow-up process.
This is of critical importance to assure effective and
consistent implementation by 34 countries with major
differences in their legal systems. The monitoring program will
be conducted by the OECD's Anti-Bribery Working Group, and is
expected to be modeled on the monitoring program of the
Financial Action Task Force on money laundering. The FATF
process is widely respected.
Like any agreement emerging from multi-party negotiations conducted
on a tight time schedule, the OECD Convention has some shortcomings. A
follow-up process has been established by which the OECD Anti-Bribery
Working Group, the same body that drafted the Convention, will address
such issues as prohibition of improper payments to officials of foreign
political parties, and treatment of foreign subsidiaries. Proposed
changes will be taken up at the May 1999 OECD Ministerial.
The Convention in its present form is a first-rate document that
closely parallels the requirements of the FCPA. There is no reason to
delay bringing it into effect. Further improvements can be made over
time.
As noted before, the Convention tackles the supply side of
corruption. The demand side--corruption by public officials--must also
be addressed. The World Bank and others are working on procurement
reforms, increased transparency, and other programs to combat demand-
side abuses. The credibility of efforts from the North to promote
reforms in the developing world will be greatly strengthened by the
OECD effort to end foreign bribery by the industrialized countries.
III. Assuring Effective Implementation and Enforcement
Agreement on the text of the Convention by 34 nations represents a
major breakthrough. However, three additional steps must be taken by
national governments before the Convention will have a practical impact
on the conduct of international business: (1) ratification by enough
countries to meet the entry into force provision, (2) passage of
implementing legislation, and (3) enforcement by national prosecutors.
All 34 governments have committed to seek ratification by the end
of this year, a very challenging target. Prompt action by the Senate
would provide an enormously helpful signal. Other countries are
watching what we do. Any delay here would be regarded as a ready excuse
for delays elsewhere. Without U.S. ratification it would be practically
impossible to meet the conditions for entry into force in 1998.
Passage of implementing legislation is a bigger step in other
countries than in the U.S. Here only relatively small changes are
required to conform the FCPA to the requirements of the Convention. In
other countries making foreign bribery a crime requires new
legislation. After implementing laws are passed, enforcement programs
must be organized. This is key challenge: the history of corruption
reform is replete with anti-bribery laws that are never enforced.
Effective enforcement requires political will, plus adequate resources.
While these three steps require action by national governments, the
OECD monitoring program must make sure that consistent and effective
results are achieved. This will not be easy because there are
substantial differences in how the 34 legal systems work. It is
important to forestall major differences in how foreign bribery is
prohibited. Governments will be reluctant to impose stricter
prohibitions on their own companies than will be imposed on their
competitors. This could lead to a lowest common denominator trend. This
risk can be overcome, provided the monitoring program provides clear
assurance that all parties will be held to high standards.
The experience with the monitoring program of the Financial Action
Task Force on money laundering indicates that the challenge of
achieving effective and consistent enforcement can be met. The effort
to organize the OECD monitoring is already under way. We want to stress
three issues which we consider essential for an effective monitoring
process.
<bullet> First, the effort to design and organize a strong monitoring
program should proceed as quickly as possible. The message that
all parties will be held to high standards must go out before
any tendency to enact minimalist implementing legislation
gathers force.
<bullet> Second, monitoring should begin promptly, even if it starts
on an informal basis. To wait until after the Convention enters
into effect would run the risk that many countries will have
enacted inconsistent implementing laws, which will be difficult
to correct.
<bullet> Third, the monitoring process should be open to inputs from
the private sector and from civil society. It should not be
limited to governments criticizing other governments behind
closed doors. The monitoring process should be as transparent
as possible in order to facilitate non-governmental inputs.
<bullet> Because the development of a strong monitoring program is so
important to achieving the objectives of the Convention, we
suggest that this Committee ask the State Department to provide
periodic progress reports
IV. Conclusion
The Convention is part of on ongoing process at the OECD. This
includes not only the monitoring program and the follow-up program to
address unresolved issues, but also the implementation of several OECD
anti-bribery initiatives dealing with issues other than
criminalization, including the 1996 recommendation to terminate tax
deductibility of bribes. The success of the OECD to date, coupled with
the change in public opinion regarding corruption, provides assurance
that the challenges ahead can be dealt with successfully.
To conclude, the Convention will make foreign bribery a crime in
the world's major exporting nations. It will significantly raise the
standards for global competition, thereby improving American
competitiveness, and strengthening international development, market
reforms and democratization programs. The Convention deserves strong
support from your Committee on both practical and moral grounds.
Finally, we want to express our appreciation to the Chairman for
scheduling this hearing so soon after the Convention was transmitted,
and for placing the Convention on the agenda for action on June 23.
The Chairman. Sir, this is an excellent statement. I just
consulted with one of my bosses back here, and I find that
unless I ask, request, or stipulate that the entire text be
made available to every Senator, it would not be. But I assure
you I have just given instructions that it be made available to
every Senator.
Mr. Heimann. Thank you very much.
The Chairman.It is an excellent statement, and I commend
you on it and I thank you for coming.
Now, I want to get you on the record for two or three
things. I posed a question to Stu Eizenstat and I pose it to
you now. Which European countries' corporations spend the most
annually on bribes to foreign government officials? Is it
France or Germany or Denmark?
Mr. Heimann. TI publishes an annual index rating countries
based on the level of corruption, and I have been involved in
lots of arguments with people how accurate is this index. One
obvious problem you face in this field is that all bribery is
conducted in secrecy. So, certainly in my experience at GE,
whenever we lose a business, we run a lost business analysis.
Very often the salesmen come back with reports saying we lost
because the other guys paid a bribe. We have learned to apply a
little bit of skepticism to that. It is just a wonderful excuse
for losing business. So, my guess is that bribery is extremely
pervasive in all these countries.
If you look at the history in the U.S., after the Foreign
Corrupt Practices Act was passed, the SEC provided a period
during which companies could report on prior bribes, and 400
American companies had paid bribes and reported that to the SEC
in return for indemnity.
My best guess is the same thing is the case in the rest of
the world. Bribery, as long as it is not legally prohibited,
will be practiced very, very broadly, and that is why I think
this convention is absolutely essential.
The Chairman. I expect the real answer to it is that it is
not a question of who is paying bribes, it is a matter of who
is not paying bribes because so many people are doing it.
Do you have evidence that the European companies are
serious about foregoing business--and that their governments
will not look the other way--should this treaty enter into
force? Will they be serious about the enforcement of any laws
they pass?
Mr. Heimann. My experience through the International
Chamber of Commerce, which has a committee made up of
businessmen from many of the major OECD countries, is that the
important business leaders would be delighted to end
corruption. They do not like it. They think it has a terrible
effect within the moral climate within the company. They are
concerned, however, that they do not want to lose business as
long as other people continue to pay bribes.
The Chairman. That is encouraging.
Mr. Heimann. The beauty of the OECD approach is that it
ends this dilemma. Once all the major competitors criminalize
bribery, I think the companies are going to comply.
I think the same thing is going to happen that happened in
the U.S. GE traditionally had a policy on antitrust compliance.
After the FCPA was passed, we amended that policy to include
compliance with the Foreign Corrupt Practices Act. I was
involved in counseling our business people, and when you tell
them, look, if you pay a bribe, not merely are you not doing
the company a favor by winning an order that way, you are
likely to wind up in jail and the company is subject to a huge
fine. That made a big, big difference in how they responded,
and I am sure German Companies, French companies, Italian
companies will react exactly the same way. They will put in
compliance programs once they are legally at risk.
The Chairman. Well, I thank you, sir.
This is a step that has got to be taken, and I hope the
critics of it will let me know precisely, specifically what
they would do to improve the legislation. We are going to have
a business session this week--in 2 weeks, and this will be
prominent on the agenda for that. We will report it out and I
am going to encourage the Majority Leader to bring this before
the Senate as promptly as possible.
I will ask you, as I ask Stu Eizenstat, do you have any
further comments that you might think, gee, I wished I had
thought of that?
Mr. Heimann. I think I would like to answer exactly the way
Stu Eizenstat answered. Thank you very much.
The Chairman. Well, your statement is excellent and you are
certainly kind to come and be with us. If you have further
thoughts on the legislation or the treaty, please let me know
either by telephone or by letter because if I am sincere about
anything--and I think I am--I want to work to make everything
that comes out of this committee effective and not find out a
year later that it has this defect or the other.
But thank you again.
If there be no further business to come before the
committee, we stand in recess.
[Whereupon, at 12:08 p.m., the committee adjourned, subject
to the call of the Chair.]
A P P E N D I X
----------
Responses to Additional Questions for the Record Submitted by the
Committee
United States Department of State,
Washington, D.C.,
June 22, 1998.
The Honorable Jesse Helms,
Chairman, Committee on Foreign Relations,
United States Senate.
Dear Mr. Chairman: Following the June 9, 1998 hearing on OECD
Bribery Convention (Treaty Doc. 105-43), additional questions were
submitted or the record. Please find enclosed the responses to those
questions.
If we can be of further assistance to you, please do not hesitate
to contact us.
Sincerely,
Barbara Larkin,
Assistant Secretary,
Legislative Affairs.
Enclosure: As stated
______
Questions Submitted by Senator Helms
Question 1. In his testimony, Under Secretary Eizenstat noted that
$30 billion was lost in contracts last year as a result of bribes by
competitors. If this treaty were fully enforced, would all of the
bribes associated with these contracts be covered by the treaty? If
not, indicate the amount associated with bribes not covered by the
treaty.
Answer. The United States government is aware of allegations of
bribes in the past year for 61 international contracts worth almost $30
billion dollars. United States firms competed for some of these
contracts. If implemented and enforced by signatories, the anti-bribery
convention would have covered approximately 70% of these incidents of
alleged bribery.
The above suspected cases of bribery which would likely not be
covered by the Convention fall into two categories: (a) those cases of
bribery where the individual or firm undertaking the bribe was a
national of a signatory to the Convention or (b) those cases of bribery
where the intended bribe was a political party or a party official. It
is intended that OECD outreach efforts to countries not presently
signatories to the Convention will reduce over time cases falling under
category (a), while the OBCD's future workplan to address bribes to
political parties, party officials and candidates for political office
is intended to reduce significantly cases falling under category (b).
Question 2. Please provide a list of all cases brought under the
Foreign Corrupt Practices Act.
Question 3. Please provide a list of all penalties imposed, and
amounts paid, under the Foreign Corrupt Practices Act.
Question 4. Please provide a list of all settlements made, prior to
final decision, under the Foreign Corrupt Practices Act.
Answer. Responses to Questions 2, 3, and 4 follow:
Department of Justice
I. Pre-Act Criminal Prosecutions:
1. U.S. v. J. Ray McDermott & Co. Inc., E.D. Louisiana, 1978.
2. U.S. v. Bethlehem Steel Corporation, (80 Cr. No. 0431),
S.D.N.Y., 1980.
3. U.S. v. The Williams Companies, (Cr. No.78-00144), D.D.C., 1978
[Currency and Foreign Transactions Reporting Act].
The company paid a fine and civil penalty of $187,000.
4. U.S. v. Control Data Corporation, (Cr. No.78-00210), D.D.C.,
1978 [Mail Fraud and Currency and Foreign Transactions Reporting Act].
The corporation paid a fine and civil penalty of $1,381,000.
5. U.S. v. Westinghouse Electric Company, (Cr. No.78-00566),
D.D.C., 1978 [False statements to Export-Import Bank and Agency for
International Development]
The company paid a fine of $300,000.
6. U.S. v. United Brands Company, (Cr. No.78-538), S.D.N.Y., 1978
[Mail Fraud]
The company paid a fine of$15,000.
7. U.S. v. United States Lines, Inc., (Cr. No. ), D.D.C.,
[Conspiracy to defraud the Federal Maritime Administration].
The company paid a fine of $5,000.
8. U.S. v. Sea-Land Services, Inc., (Cr. No.78-103), D.D.C. 1978
[Conspiracy to defraud the Federal Maritime Administration].
The company paid a fine of $5,000.
9. U.S. v. Seatrain Lines, Inc., (Cr. No.78-49) [Conspiracy to
defraud the Federal Maritime Administration and Currency Transactions
Reporting Act].
The company and a subsidiary each paid fines of $260,000.
10. U.S. v. Lockheed Corporation, (Cr. No.79-00270), D.D.C., 1979
[Currency and Foreign Transactions Reporting Act, Wire Fraud, false
statements to Export-Import Bank].
The company paid a fine and civil penalties of $647,000.
11. U.S. v. Gulfstream American Corporation, (Cr. No.79-00007),
D.D.C., 1979 [False Statements to Export-Import Bank and Commerce
Department]
The company paid a fine of$120,000.
12. U.S. v. Page Airways; Inc., (Cr. No.7900273), D.D.C., 1978
[Currency and Foreign Transactions Report Act].
The company paid a fine and civil penalty of $52,647.
13. U.S. v. Textron, Inc., (Cr. No.79-00330), D.D.C, 1979 [Currency
and Foreign Transactions Report Act].
The company paid a fine and civil penalty of$131,670.
14. U.S. v. McDonnell Douglas Corporation., et al., (Cr. No.79-
516), D.D.C., [Mail Fraud, Wire Fraud, conspiracy, false statements to
Export-Import Bank].
II. FCPA Criminal Prosecutions:
1. U.S. v. Kenny International Corp., (Cr. No.79-372), D.D.C.,
1979.
The company pled to one count of violating the FCPA and
consented to a civil injunction against further FCPA
violations. The corporation was fined $50,000 and required to
pay restitution to the Cook Islands government in the amount of
NZ $337,000.
The chairman of Kenny International consented to the entry of
a civil injunction and agreed to enter a plea of guilty to
criminal charges in the Cook Islands.
2. U.S. v. Crawford Enterprises, Inc., Donald G. Crawford, William
E. Hall, Mario S. Gonzalez, Ricardo G. Beltran, Andres I. Garcia,
George S. McLean, Luis A. Uriarte, Al L. Eyster and James R. Smith,
(Cr. No. H-82-224), S.D.Tx, Houston Division, 1982.
Crawford Ent. Pled no contest--Fined $3,450,000
D. Crawford Pled no contest--Fined $309,000
W. Hall Pled no contest--Fined $150,000
A. Garcia Pled no contest--Fined $75,000
A. Eyster Pled no contest--Fined $5,000
J. Smith Pled no contest--Fined $5,000
G. McLean Acquitted
3. U.S. v. C.E. Miller Corporation and Charles E. Miller, (Cr.
No.82-788), C.D. Cal., 1982.
The corporation pled guilty and was fined $20,000. The
individual defendant pled guilty and was sentenced to three
years probation and 500 hours community service.
4. U.S. v. Marquis King, (Cr. No.83-00020), D.D.C., 1983.
The defendant pled guilty to violations of Currency and
Foreign Transactions Reporting Act and was sentenced to 14
months incarceration and required to pay prosecution costs.
5. U.S. v. Ruston Gas Turbines, Inc., (Cr. No. H-82-207), S.D.
Tex., 1982.
The corporation pled guilty to a FCPA violation and was fined
$750,000.
6. U.S. v. International Harvester Company, et al, (Cr. No.82-244),
S.D. Tex., 1982.
The corporation pled guilty to one count of conspiracy to
violate the FCPA and was fined $10,000 plus costs of $40,000.
An individual defendant also pled guilty to one count and was
sentenced to one year of incarceration (suspended)
7. U.S. v. Applied Process Products Overseas, Inc., (Cr. No. 83-
00004), D.D.C., 1983.
The company pled guilty to a FCPA violation and was fined
$5,000. In addition it consented to a permanent civil
injunction.
8. U.S. v. Gary Bateman, (Cr. No.83-00005), D.D.C., 1983.
The defendant pled guilty to 5 CFTR misdemeanors and was
sentenced to three years probation. In addition, he agreed to
pay a civil penalty of $229,512, a civil tax payment of
$300,000, and costs of prosecution of $5,000.
9. U.S. v. Sam P. Wallace Company, Inc., (Cr. No.83-0034) (PG),
D.P.R., 1983.
The corporation pled guilty to three counts of FCPA
accounting violations and was fined $30,000. In addition, it
also pled guilty to a CFTR violation and was fined $500,000.
10. U.S. v. Alfonso A. Rodriguez, (Cr. No.83-0044 (JI))), D.P.R.,
1983.
The defendant pled guilty to one count of FCPA bribery and
was sentenced to three years probation and fined $10,000.
11. U.S. v. Harry G. Carpenter and W.S. Kirkpatrick, Inc., (Cr.
No.85-353), D.N.J., 1985.
The corporation pled guilty to a FCPA violation and was fined
$75,000.
The individual defendant pled guilty to one count FCPA
bribery and was sentenced to three years probation, community
service, and a fine of $10,000.
12. U.S. v. Silicon Contractors, Inc., Diversified Group, Inc.,
Herbert D. Hughes, Ronald R. Richardson, Richard L. Noble and John
Sherman, (Cr. No.85-251), E.D. La., 1985.
The corporation pled guilty to a FCPA violation, agreed to a
permanent civil injunction, and was fined $150,000.
Hughes, Richardson, Noble and Sherman agreed to the entry of
civil injunctions.
13. U.S. v. NAPCO International, Inc. and Venturian Corporation,
(Cr. No.4-89-65), D. Minn., 1989.
The defendants pled guilty to three counts of FCPA bribery
and were fined $785,000. In addition, they paid $140,000 in
civil settlement and $75,000 to settle tax charges.
14. U.S. v. Richard H. Liebo, (Cr. No. 4-89-76) D. Minn., 1989.
The defendant was convicted of FCPA bribery and false
statements and was sentenced to 18 months incarceration
(suspended) with three years probation.
15. U.S. v. Goodyear International Corp., (Cr. No.89-0156), D.D.C,
1989.
The corporation pled guilty to one count of FCPA bribery and
was fined $250,000.
16. U.S. v. Young Rubicam Inc., Arthur R. Klein, Thomas
Spangenberg, Arnold Foote Jr., Eric Anthony Abrahams, and Steven M.
McKenna, (Cr. No. N-89-68 (PCD)), D. Conn., 1990.
The company pled guilty to one count of conspiracy to violate
FCPA and was fined $500,000.
17. U.S. v. George V. Morton, (Cr. No. 3-90-061-H), N.D. Tex.
(Dallas Div.), 1990.
The defendant pled guilty to one count of conspiracy to
violate FCPA and was sentenced to three years probation.
18. U.S. v. John Blondek, Vernon R. Tull, Donald Castle and Darrell
W.T. Lowry, (Cr. 741), N.D. Tex. 1990.
Two of the defendants were acquitted at trial. The charges
were dismissed against the two remaining defendants.
19. U.S. v. F.G. Mason Engineering and Francis G. Mason, (Case No.
B-90-29), JAC, D. Conn. 1990.
The corporation pled guilty to one count of conspiracy to
violate the FCPA, was fined $75,000, and was required to pay
restitution of $160,000.
The individual defendant also pled guilty to one count of
conspiracy to violate the FCPA, was sentenced to 5 years
probation, and was fined $75,000 (joint with Company).
20. U.S. v. Harris Corporation, John D. Iacobucci and Ronald L.
Schultz, (Cr. No.90-0456), N.D. Cal., 1990.
The court granted a motion for judgment of acquittal at the
close of the government's case.
21. U.S. v. Herbert Steindler, Rami Dotan, and Harold Katz, (Cr.
No.194-29), S.D. Ohio 1994.
One defendant pled guilty to three counts of conspiracy, wire
fraud and money laundering and was sentenced to 84 months
incarceration and required to forfeit $1,741,453. The remaining
defendants are fugitives.
22. U.S. v. Vitusa Corporation, (Cr. No. 94-253)(MTB), D.N.J.,
1994.
The corporation pled guilty to a FCPA violation and was fined
$20,000.
23. U.S. v. Denny Herzberg, (Cr. No. 94-254)(MTB), D.N.J., 1994.
The defendant pled guilty to a FCPA violation and was
sentenced to two years probation and fined $5,000.
24. U.S. v. Lockheed Corporation, Suleiman A. Nassar and Allen R.
Love, (Cr. No.1:94-Cr-22-016), N.D., Ga. Atlanta Div. 1994.
The corporation pled guilty to conspiracy to violate the FCPA
and was fined $21.8 million. In addition, it paid a $3 million
civil settlement. Defendant Nassar pled guilty to two counts
and was sentenced to 18 months imprisonment. Defendant Love
pled guilty to one count in a related case and was fined
$20,000.
25. U.S. v. David H. Mead and Frerik Pluimers, D.N.J 1998
[Pending].
26. U.S. v. Herbert K. Tannenbaum, S.D.N.Y. 1998 [Pending].
III. FCPA Civil Injunctive Actions:
1. U.S. v. Roy J. Carver and E. Eugene Holley, (Civ. No.79-1768),
S.D. Fl., 1979.
Carver and Holley consented to permanent injunctions from
future violations of FCPA.
2. U.S. v. Finbar B. Kenny, et al., (Civ. 79-2038), 1979.
3. U.S. v. Dornier GmbH.
4. U.S. v. Eagle Manufacturing, Inc., (Civil Action No. B-91-171),
S.D. Tex., 1991.
5. U.S. v. American Totalisator Company Inc., 1993.
The corporation consented to permanent injunction from future
violations of FCPA.
IV. Other Cases:
1. U.S. v. General Electric Company, (Cr. No.1-92-87), S.D. Ohio
1992.
2. U.S. v. Benjamin Sonnenschein, (Cr. No.92-680) E.D.N.Y. 1992.
3. U.S. v. Gary S. Klein, (Cr. No.1-93-52) S.D. Ohio 1993.
4. U.S. v. National Airmotive Corporation, (DKT. No. CD93-377-CAL)
N.D. Cal. 1993.
Question 5a. Please provide a detailed account of the laws enacted
in each of the countries that are signatory to the treaty of the
following:
<bullet> laws enacted that would prohibit bribery of public officials
in international business transactions (details should include
the jurisdictional reach of the country's judicial system, the
definition of ``bribery'', and the definition of ``public
official'')
<bullet> laws proposed that would prohibit bribery of public
officials in international business transactions (details
should include the jurisdictional reach of the country's
judicial system, the definition of ``bribery'', the definition
of ``public official'', and where such proposals are in the
law-making process.)
<bullet> laws enacted that would prohibit the maintenance of off-the-
book accounts, or inadequately identified transactions, the
recording of non-existent expenditures, the entry of
liabilities with incorrect identification of their object, and
the use of false documents for the purpose of bribing foreign
officials or hiding bribery of foreign or domestic officials.
<bullet> laws proposed that would prohibit the maintenance of off-
the-book accounts, or inadequately identified transactions, the
recording of non-existent expenditures, the entry of
liabilities with incorrect identification of their object, and
the use of false documents for the purpose of bribing foreign
officials or hiding bribery of foreign or domestic officials.
Answer. (Note: In our response, we have separated out the portion
of the above question which dealt with the tax deductibility of bribes,
as the OECD Recommendation on tax deductibility of bribes is on a
separate track from that of the OECD Convention. The tax deductibility
question is addressed in a new question 5b.)
Most signatory countries are still in the process of finalizing the
necessary legislative proposals to ratify and implement the OECD
Convention. Most countries will need to do considerably more than amend
an existing criminal statute, as is the case for the United States. We
expect the June 29-July 1 meeting of the OECD Working Group on Bribery
to result in specific initial information on the status of ratification
and implementation actions in member countries.
We are not aware of any signatory country which, as of June 19, has
either ratified the Convention or passed implementing legislation.
Attached is a table which summarizes the current status of
ratification and implementation actions in each of the 29 OECD member
countries and the five nonmember signatories of the Convention.
OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions--Status of Signatories'
Implementation
Attached is a chart in draft form setting out the title of each
signatory's implementing legislation and a brief description of the
status of each signatory's implementation of the convention. The chart
has been prepared by the Trade Compliance Center of the United States
Department of Commerce based on information U.S. embassies in the
signatories' capitals and the U.S. delegation to the Working Group on
Bribery of the Organization for Economic Cooperation and Development
(OECD). The chart is current through June 22, 1998, and is periodically
updated as further information is received.
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
[Trade Compliance Center, Department of Commerce, DRAFT--June 22, 1998]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Country Relevant Laws Progress Analysis Status of Implementation and Ratification of the OECD Convention
--------------------------------------------------------------------------------------------------------------------------------------------------------
Argentina Legal advisers in the Ministry of Justice are divided whether the
Convention will require amendments to the Argentine criminal code to
redefine bribery. (Buenos Aires 1284, 12 March 1998) Delegate was
unable to indicate an approximate date upon which legislation would
be presented to its Parliament. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Australia Criminal Code Amendment Australia participated in the Convention negotiations but did not
(Bribery of Foreign Public sign the Convention (it is expected to do so when domestic
Officials) Bill 1998 procedures are completed). The Convention is being considered in
(proposed) conjunction with changes in the Crimes Act which will be necessary
to implement the Convention. The Attorney-General has produced an
``exposure draft'' of the changes required. This draft, together
with the Convention is before the Standing Committee on Treaties
which is conducting hearings. (Canberra 1084, 20 March 1998) The new
criminal legislation is expected to be presented formally to
Parliament in June. The Australian delegate mentioned informally
that the Australian business community indicated a very negative
response to the Convention. She had serious concerns about
Australia's ability to meet the December 31 deadline. (Paris 7678, 6
April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Austria Criminal Code Amendment Ratification of the Convention is ``nearly'' on track. Meeting the
(Bribery of Foreign Public December 31, 1998 ratification deadline does not seem to be a
Officials) Bill 1998 problem. However, the GOA does not yet seem to have solved the
(proposed) problem of tax deductibility of bribes. (Vienna 2522, 20 March 1998)
A draft bill on criminalization has been completed, and comments by
the appropriate government agencies are due by May 10. Bribery of a
foreign public official will be criminalized, existing criminal law
provisions will be amended to prohibit ``any advantage'' and the new
offense will be made a predicate offense for money laundering
offenses. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Belgium Anti-Corruption Bill (Doc. The Belgian Minister of Justice has submitted tough new anti-
Parl., Sera:, 1-107/1,21 corruption legislation aimed at meeting Belgium's OECD and EU
September 1995) commitments to the Belgian Parliament. Debate began in the Senate on
March 24. (Brussels 1913, 26 March 1998) The OECD Convention was to
be sent to the State Council ``in the weeks to come.'' Belgium's
criminal law amendments may be in effect before the Convention is
ratified, as the two procedures are not being linked. (Paris 7678, 6
April 1998) The Belgian representative to the OECD has indicated
that Belgium will meet the end of 1998 deadline for ratification
(Letter of 2 June 1998, from OECD Rep. Pierre-Dominique Schmidt).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Brazil The Office of International Acts is currently preparing a transmittal
statement for transmission to the Brazilian Congress. There is
confidence that the Brazilian Congress will ultimately ratify the
Convention--hopefully this year. (Brasilia 1094, 19 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bulgaria The GOB is now in the process of drafting implementing legislation
and expects to meet the deadline for bringing the implementing
legislation into effect. The GOB will submit its request for
ratification to Parliament once it has made more progress on
drafting the implementing legislation. (Sofia 1950, 20 March 1998) A
final text of implementing legislation is expected to be approved
and published in the official Journal in late June or September.
(Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Canada Prime Minister Chretien made assurances that the Canadians would
ratify the Convention by the end of 1998. The package will be
submitted by the summer recess. (Ottawa 933, 16 March 1998) Draft
legislation will be table in Commons by the end of April or May.
While Canadian law generally does not allow tax deductions for
bribes, there will be some changes to ``tighten up'' the provisions.
(Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chile Consultations with the legal departments of the relevant Ministries
are almost completed. A bill should be presented to the Parliament
by the end of May or beginning of June. Chile has Parliamentary
elections at the end of the year, but it was not indicated whether
this would present a problem in meeting the December 31 deadline.
(Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Czech Republic The Czech Republic is in the process of proposing implementing
legislation. A legislative draft, prepared by the MOJ, is being
discussed and when approved will be sent to Parliament. This was
expected to occur on April 1. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Denmark The Danish general elections have delayed action on implementation of
the Convention. The Convention may not be submitted to Parliament
prior to the summer recess, but instead in the fall 1998 session.
(Copenhagen 1536, 16 March 1998) The Danish delegate indicated her
government expects the process of ratification and implementation
may take a year, which means they would not meet the December 31
1998. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Finland A bill has been drafted, but for technical reasons has not yet been
submitted to the legislature. this should happen before the summer
and the process may be completed by October. (Paris 7678, 6 April
1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
France France has prepared 2 bills to ratify the Convention and amend its
criminal code. The respective texts have been submitted to the
relevant Ministries for approval and to the State Council for its
formal opinion before being presented to the legislature. The
expectation is that the process will be completed by the end of
1998. (Paris 7678, 6 April 1998) France is unwilling to make its
draft texts public until it has completed its interministerial
process.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Germany Draft of an Act to the U.S. DOJ discussed draft The German MOJ approved draft implementing legislation on March 27
Agreement of 17 December legislation with German and submitted it to its legislature on March 30. (Paris 7678, 6
1997 Concerning the counterpart and is April 1998) Sources at the Bundestat indicated that the Bundestat
Suppression of Bribery of satisfied that the issued its formal review of the OECD Antibribery Convention on May 8
Foreign Officials in legislation meets the and raised non-substantive procedural issues. Progress towards
International Commercial Convention's requirements. ratification of the OECD Antibribery Law is still on schedule. (Bonn
Intercourse (proposed) 4531, 8 May 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Greece Draft Bill Implementing the Greece has prepared draft criminal and administrative legislation
OECD Convention of Combating which was to be sent by April 1 to the competent Ministries. (Paris
Bribery of Foreign Public 7678, 6 April 1998) GOG intends to submit a draft bill ratifying the
Officials in International Convention and containing implementing legislation to Parliament as
Business Transactions soon as its interministerial procedure are finished, e.g. probably
in July. Enactment of the new bill is expected before the end of the
year. (Letter of 5 June 1998, from OECD Rep. Spiros Lioukas)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hungary Amendment of the Act IV of Under Hungary's current legal regime, only natural persons (and not
1978 on the Criminal Code companies) are subject to the criminal code; changing the code would
(drafted) mean applying the Convention's disciplines domestically as well as
abroad. The GOH is confident it will meet the 31 December 1998
deadline to pass implementing legislation. (Budapest 2496, 18 March
1998) Two draft texts have been prepared to ratify the Convention
and amend the criminal code. The texts will be sent to the
Ministries by the end of April and May respectively. (Paris 7678, 6
April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Iceland The Icelandic Parliament has already adopted a resolution on the
fulfillment of the Convention. the Drafting of implementing
legislation has already begun and all necessary action should be
done by the end of the year. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ireland The Irish Government is confident that it will meet the deadline of
December 31, 1998, for implementing the Convention and is treating
the December deadline as a firm obligation. (Dublin 1637, 26 March
1998) The delegate was absent from the March 30-April 1 Working
Group meetings.
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Italy The Government is submitting all proposed modifications to Italian
laws resulting from recent agreements on bribery to Parliament at
the same time. Likely time frame is speculated at 5-6 months,
meaning Italy would meet its January 1, 1999 target for
Parliamentary approval. (Rome 2345, 26 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Japan Amendment to the Unfair USG has voiced its serious
Competition Prevention Law reservations about the
(proposed) adequacy of proposed
legislation. DThe GOJ
submitted the Convention
and its draft implementing
legislation to the Diet on
April 10. Parliamentary
deliberations have begun.
MITI Industrial
Organizations Division
Director relatively
confident that the
legislation will be passed
this year, probably during
the extraordinary Diet
session which is expected
to be convened in Autumn.
(Tokyo 3114, 22 April 1998)
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Korea Act on Anti-Bribery in . The GOK expects no problems in meeting the OECD's agreed upon
Transactions Overseas 1998 deadline of December 31, 1998 for legislative approval. (Seoul 1703,
(proposed) 25 March 1998) The delegate indicated every effort will be made to
submit legislation by July 1. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Luxembourg Luxembourg noted that work was being carried out in their MOJ and
that action would be taken on ratification and implementing
legislation package by the beginning of next year. (Paris 7678, 6
April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mexico The Government expects to submit the needed legislation shortly after
Congress begins its next session in September. (Mexico 3004, 25
March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Netherlands Dutch implementation of the Convention is moving more slowly than
officials had hoped due to technical drafting problems and the
labyrinth process for approval of legislation (Hague 939, 16 March
1998) Delays in preparing draft legislation and interference by a
member of Parliament are anticipated. The Netherlands delegate noted
that they would be accommodating six Conventions and protocols in
its new criminal legislation. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Zealand The GNZ expects to bring the Convention into force by December 31,
1998. Implementing legislation and the Convention itself will be
presented to Parliament. Parliament is expected to easily pass the
legislation and to pose no objection to the Convention itself. Both
are expected to be approved before the end of the year. (Wellington
280, 10 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Norway Implementation of the Convention is on track. The MOJ has drafted an
amendment to the criminal code expanding the existing ban on bribing
Norwegian public officials to include a ban on bribing all public
officials. The proposed legislation will be passed to the Norwegian
Parliament in April or May. (Oslo 1407, 12 March 1998) The
Convention is expected to be sent to Parliament by the end of June
and ratification is expected to completed by fall. (Paris 7678, 6
April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Poland The Polish Government is conducting its interministerial review of
the Convention. Subsequently, it plans to submit the Conventions to
the Parliament for ratification. Bribes are not deductible. Existing
legislation already criminalizes bribery, but the Supreme Court last
year narrowly constructed the Polish criminal code on bribery,
limiting its applicability to bribes made to Polish public
functionaries, but not to foreign ones. If the Government cannot get
the Supreme Court to revise its position, then it will have to seek
and amendment to the criminal code to reverse the court's position.
(Warsaw 2984, 18 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Portugal The Convention and draft implementation decree are on track for
Parliamentary approval by the end of July. The GOP expects the
Parliament to ``take special action, swiftly, without trouble,'' to
ratify the Convention and decree law before the end of the current
session (by end-July). (Lisbon 1318, 17 March 1998) Draft
implementing legislation will be ready for submission to Parliament
in two to three months. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Slovak Republic The GOS expects to transmit the Convention text and ratify it by the
December 31 deadline. (Bratislava 878, 13 March 1998) An advisory
body has recommended that the Convention not enter into force for
the Slovak Republic until 2000. (Working Group, 30 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Spain Modification of its penal code was to be cleared through the State
Council the week of April 1 and thereafter presented to the Council
of Ministers and Parliament. Ratification and implementing
legislation will be linked. Spain expects to complete its action by
the end of this year. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sweden The timetable for bringing the implementing legislation into force by
December 31, 1998, is still firm. (Stockholm 1399, 10 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Switzerland Draft legislation is currently being circulated for comment. This
consultative process will not be completed until May or June. If all
goes well, the Federal Council could submit the legislation to
Parliament during the final session of 1998 in December. It is
unlikely there will be any vote until the spring session of 1999.
(Bern 1107, 12 March 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turkey The Government has prepared the instrument necessary for ratification
and the implementing legislation is ``underway.'' (Paris 7678, 6
April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
United Kingdom Primarily the Prevention of The UK Home Office believes that existing UK corruption legislation
Corruption Act 1889-1916 will meet the Convention guidelines without further revision.
However, independent of the Convention's mandate, they are currently
reviewing existing corruption and anti-bribery legislation to
``update and modernize its contents,'' specifically including its
application to public and private sector corruption. Subsequently,
the Home Office will draft and propose a new statue joining related
domestic and international corruption issues into one legislative
program for debate and possible implementation by Parliament this
summer. (London 2766, 13 March 1988) The delegate stated that
implementing legislation is not necessary in order to ratify the
Convention. (Paris 7678, 6 April 1998)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Question 5b. Please provide a detailed account of the laws enacted
in each of the countries that are signatory to the treaty of the
following:
<bullet> laws enacted that would prohibit tax deductibility of bribes
to public officials in international business transactions
(details should include the jurisdictional reach of the
country's judicial system, the definition of ``bribery'', the
definition of ``public official'', the standard used to
disallow such a deduction, and the ability of taxpayers to
deduct inadequately identified expenditures.)
Answer. We can provide the following general information on OECD
member country laws denying the tax deductibility of bribes. This
information is from sources deemed reliable but is not verified.
Canada: Canadian law does not allow deductions for bribes
paid to foreign government officials when the bribe is illegal
in a foreign country.
Czech Republic: Czech law does not allow tax deductions for
bribes paid to foreign public officials.
Denmark: As of January 1, 1998, Denmark has in force a law
denying tax deductions for bribes paid to foreign public
officials.
Finland: Finnish case law and administrative practice do not
allow tax deductions for bribes paid to foreign public
officials. No statutory rule.
Greece: Greek law does not allow tax deductions for bribes
paid to foreign public officials.
Hungary: Hungary's law allows the deduction of expenses only
as specified by law, and tax laws to not specifically refer to
bribes. Therefore, Hungary's law does not allow tax deductions
for bribes paid to foreign public officials.
Ireland: No specific legislation and no litigation. However,
the tax administration view is that bribes paid to foreign
public officials are not deductible.
Italy: Italian law does not allow tax deductions for bribes
paid to foreign public officials.
Japan: Bribes are not deductible under Japanese law because
they are treated as entertainment expenses, which are not
deductible.
Korea: Korea does not allow tax deductions for bribes paid to
foreign government officials since bribes are not considered to
be business-related expenses.
Mexico: Mexico does not allow tax deductions for bribes
because they do not meet the general requirements to qualify as
deductible expenses and because, as related to illicit
activities, such payments cannot meet the requirements under
the Commerce Code of Mexico.
Netherlands: As of January 1, 1997, Dutch tax laws deny tax
deductions for expenses in connection with illicit activities
if a criminal court has ruled that a criminal offense has been
committed. (We understand that Dutch criminal law will be
amended to criminalize the bribery of a foreign public
official.)
Norway: Under tax law enacted on December 10, 1996, Norway
does not allow tax deductions for bribes paid to foreign
private persons or public officials.
Poland: Poland does not allow tax deductions for bribes paid
to foreign public officials. Bribery is illegal and an offense
for both the briber and the recipient of the bribe. Gains and
expenses connected with the offense of bribery cannot be taken
into account.
Portugal: Under a law adopted on December 20, 1997, and
effective on January 1, 1998, Portugal does not allow tax
deductions for bribes paid to foreign public officials.
Spain: Spain does not allow tax deductions for bribes paid to
foreign public officials.
Turkey: Turkey does not allow tax deductions for bribes paid
to foreign officials because there is no explicit rule allowing
deductions for bribes.
United Kingdom: U.K. law does not allow deductions for bribes
paid to foreign officials if the bribe is a criminal offense,
contrary to the Prevention of Corruption Acts. If any part of
the offense is committed in the United Kingdom, e.g., the
offer, agreement to pay, the soliciting, the acceptance, or the
payment itself, the payment would be subject to corruption laws
and a tax deduction would be denied. The U.K. Finance Act of
1993 disallows tax deductions for all payments the making of
which constitutes a criminal offense. Further, U.K. tax laws
deny deductions for all gift and entertainment expenses.
We are not able to provide information on the ability of taxpayers
to deduct inadequately identified expenditures. However, we recognize
the importance of transparency in income tax Systems. We consider that
there is no assurance that the deduction of inadequately identified
expenditures is precluded under OECD member country tax systems.
<bullet> laws proposed that would prohibit tax deductibility of
bribes to public officials in international business
transactions (details should include the jurisdictional reach
of the country's judicial system, the definition of
``bribery'', the definition of ``public official'', the
standard used to disallow such a deduction, the ability of
taxpayers to deduct inadequately identified expenditures, and
where such proposals are in the law-making process.)
Answer. We are able to provide the following information on OECD
member country proposals to prohibit the tax deductibility of bribes to
foreign public officials. This information is from sources deemed
reliable but is not verified.
Australia: The Australian Government has announced that it
will implement appropriate measures to combat bribery of
foreign public officials. The Commissioner of Taxation is
drafting legislation on the issue of tax deductibility.
Austria: The Austrian Government is waiting for the
criminalization of bribes to foreign public officials before
proposing an amendment to the tax law in order to deny tax
deductions for such bribes.
Belgium: At the end of March 1998, a bill limiting the
deductibility of so-called ``secret commissions was presented
to Parliament along with a bill criminalizing bribes paid to
foreign public officials.
France: On December 30, 1997, France enacted a change to
their tax code denying a tax deduction for payments made to
``foreign public officials'' within the meaning of article 1
section 4 (footnote 4) of the OECD Convention or to a third
party in order that this official act or refrain from acting in
the performance of his official duties, in order to obtain or
retain a contract or other improper advantage in international
business transactions. This tax provision is effective for
contracts concluded during tax years beginning as of the entry
into force of the Convention.
Germany: At the end of March 1998, the federal government
introduced legislation amending the provisions of national
criminal law in order to criminalize the bribery of foreign
officials. German income tax law will automatically exclude the
deductibility of such amounts as business expenses if either
the briber or the recipient has been subject to criminal
penalties or to criminal proceedings that were subsequently
discontinued on the basis of a discretionary decision by the
prosecutor.
Luxembourg: The Luxembourg government has prepared draft
legislation that would criminalize bribes to foreign public
officials and deny tax deductions for such bribes.
New Zealand: Officials are working on a proposal to amend
legislation for enactment in 1998 to disallow deductions for
bribery.
Sweden: A bill explicitly denying the tax deductibility of
bribes and other illicit payments is likely to be presented to
the Swedish parliament this fall, with the intention of having
the law in force as of January 1, 1999.
Switzerland: A proposal to deny a tax deduction for a bribe
paid to a foreign official has been presented to Parliament. In
October 1997, the Federal Council approved this proposal. A
change to Swiss tax legislation is expected in the near future.
Question 6. Please provide a list of each signatory's efforts to
date to ratify this treaty, and enact implementing legislation.
Answer. Available information is contained in the response to
question 5a.
Question 7. Please define ``undue pecuniary or other advantage'' as
used in Article 1(1).
Answer. A pecuniary advantage is a payment of money. It could
include outright cash payments, as well as interest-free loans,
favorable currency exchange rates, and other monetary benefits.
An ``other'' advantage is any other benefit conferred on the
foreign public official. The purpose of including ``other'' advantages
is specifically to include non-monetary gifts. Cf. 18 U.S.C. 201
(prohibiting improper offer of ``anything of value'' to a federal
public official). ``Other'' advantages could include shares or
interests in business enterprises; offers of future employment;
scholarships for the official's children; expense-paid vacations;
construction of improvements to the official's residence; etc.
The operative qualifier in this clause is ``undue.'' It would not,
for instance, be an ``undue advantage'' if the company paid the
expenses for the official to travel to the United States to visit its
manufacturing facility and, as part of its marketing activities during
that trip, paid reasonable food and lodging expenses for that official.
Similarly, it would not be an ``undue advantage'' if the official's
child earned the scholarship on his or her own merits, regardless of
whether the scholarship was funded by a company seeking to do business
with the official. It would be ``undue'' if the scholarship was created
solely to be awarded to the official's child and it was not made
available to others on a competitive basis.
Question 8. Please clarify whether bribes to a family member of a
foreign official would be considered a criminal offense under the
definition of Article 1.
Answer. The Convention, like the U.S. Foreign Corrupt Practices
Act, covers bribes offered or paid to a foreign public official so that
the official will take certain action, or refrain from acting, in the
performance of official duties. Bribes to a family member of a foreign
public official are covered in circumstances where (1) a bribe is paid
to a family member as a conduit or intermediary, who in turn passes it
to the foreign public official, the intended recipient; or (2) a
foreign public official directs that a bribe, intended to induce that
official to take certain action or refrain from acting, be paid to a
family member.
Question 9. Please define ``legal persons'' for purposes of Article
2, and list the signatories to the proposed treaty that recognize
corporations as legal persons.
Answer. ``Legal person'' is meant to cover corporations,
partnerships, associations, joint-stock companies, business trusts,
unincorporated organizations, sole proprietorships, or other juridical
entities other than natural persons.
Our understanding is that all of the signatories to the Convention
recognize corporations as legal persons.
Question 10. Please define ``effective, proportionate and
dissuasive'' as used in Article 3(1).
Answer. ``Effective, proportionate and dissuasive'' criminal
penalties are those that:
<bullet> Clearly apply to the offense of bribery of a foreign public
official;
<bullet> Are proportionate (in the amount of fine and/or length of
imprisonment) to the seriousness of the offense;
<bullet> Are comparable to the penalties that apply to bribery of a
party's own public officials; and
<bullet> Provide a deterrent to such conduct.
Question 11. Please explain what is contemplated by ``deprivation
of liberty sufficient to enable effective mutual legal assistance and
extradition'' as used in Article 3(1).
Answer. Bilateral extradition treaties generally provide that, in
order to be an extraditable offense, an offense must be punishable by
deprivation of liberty for a certain minimum period, often more than
one year. Some bilateral mutual legal assistance treaties have similar
requirements regarding the furnishing of assistance. Article 3(1)
requires that natural persons who commit bribery of a foreign public
official be subject to penalties that exceed such thresholds, so that
such persons would be subject to extradition and so that mutual legal
assistance would be available in those cases.
Question 12. Please provide an example of the situation
contemplated in Article 3(2).
Answer. Under German law, for example, corporations are not subject
to criminal liability. Therefore, under Article 3(2) Germany would be
obligated to ensure that corporations that engage in bribery of a
foreign public official are subject to effective, proportionate and
dissuasive non-criminal sanctions such as civil fines or other
administrative measures.
In addition, under Article 3(3) Germany would be obligated to
provide for the seizure and confiscation of the bribe and the proceeds
of the bribery, or to impose monetary sanctions of comparable effect.
Question 13. For purposes of Article 4(1), what action must occur
for an offense to be ``committed in whole or in part'' in a party's
territory?
Answer. The Commentaries to Article 4(1) provide that ``[t]he
territorial basis for jurisdiction should be interpreted broadly so
that an extensive physical connection to the bribery act is not
required.'' The level of activity in one's territory that is required
to trigger the exercise of territorial jurisdiction may vary from
country to country. Most signatories to the Convention would require
more than incidental contacts.
Question 14. What is an ``adequate time period'' as required in
Article 6, regarding the statute of limitations?
Answer. Under U.S. law, no special statute of limitations applies
to FCPA violations. Accordingly, the applicable statute of limitations
is five years. See 18 U.S.C. 3282. However, as many FCPA cases require
the Department to obtain evidence from foreign countries, this period
may be tolled for up to three additional years once an official request
to a foreign country is made and filed with the court. See 18 U.S.C.
3292.
The Commentaries to the OECD Convention do not provide any guidance
on this point. At a minimum, the United States would expect other
signatories to provide for a limitations period at least as long as
provided in their existing law for investigations of domestic
corruption offenses. With implementation of the OBCD Convention, it
will become easier and faster to obtain foreign evidence relating to
FCPA cases.
Question 15. To which signatory countries will Article 7, regarding
money laundering, apply?
Answer. Article 7 requires that each Party that has made bribery of
its own public official a predicate offense for the purposes of money
laundering legislation must do so on the same terms for bribery of a
foreign public officials. The requirement applies to all signatory
countries, although its practical effect depends on whether a Party has
made either the offer or receipt of a bribe (``active or passive
bribery'') a predicate offense. Concerted international action to
address money laundering issues in recent years, especially through the
Financial Action Task Force on Money Laundering, has spurred additional
countries to take such action. At present, the following countries make
either active or passive bribery of public officials a predicate
offense for the purposes of application of money laundering
legislation:
The list below outlines those offenses which constitute predicate
offenses for purposes of money laundering legislation in countries for
which we have specific information:
Argentina--offenses with at least three years imprisonment
Australia--all indictable offenses with more than one year
imprisonment
Austria--offenses with more than three years imprisonment
Belgium--all offenses
Brazil--certain offenses, including crimes against the public
administration
Bulgaria--all offenses
Canada--enterprise crimes (covers bribery)
Chile--drug trafficking only
Czech Republic--all serious offenses
Denmark--certain offenses (not bribery)
Finland--all offenses
France--all offenses
Germany--all serious and some less serious offenses
Greece--certain offenses (covers bribery)
Iceland--all offenses
Ireland--all offenses
Italy--all intentional offenses
Japan--drug trafficking; receipt of bribes
Luxembourg--drug trafficking only
Mexico--all offenses
Netherlands--all offenses
New Zealand--serious offenses with more than 5 years
imprisonment
Norway--all offenses
Portugal--range of offenses (covers corruption)
Slovakia--drug trafficking only
Spain--all serious offenses
Sweden--all serious offenses
Switzerland--all serious offenses
Turkey--most serious offenses
United Kingdom--all indictable offenses
United States--130 predicate offenses (covers bribery)
In certain of the above countries, the applicability of money
laundering legislation will depend on whether bribery of a foreign
public official will constitute a ``serious'' offense, thereby making
it a predicate offense for money laundering legislation.
We do not at the present time have information regarding Hungary,
Korea, and Poland.
Question 16. What is the effect of Article 9 on U.S. law in cases
where the United States does not have a mutual legal assistance treaty
with the other Party to the treaty. Is this provision self-executing?
Answer. This provision has the effect of requiring the United
States to provide mutual legal assistance to other Parties to the
convention in matters falling within the convention, consistent with
applicable United States law. See 28 U.S.C. 1782. The provision is
selfexecuting.
Question 17. What is the effect of Article 9 in cases in which the
United States already has a mutual legal assistance treaty with the
other party to the treaty?
Answer. Where the United States already has a mutual legal
assistance treaty (MLAT) in force, this article presumes that mutual
assistance will be provided in accordance with that MLAT.
Question 18. Article 10(2) says that a Party may consider this
treaty to be a legal basis for extradition in the absence of an
existing extradition treaty. Is Article 10(2) self executing for
purposes of bribery of a foreign public official with countries that do
not have an extradition treaty with the United States? If so, would
this include cases brought under the Foreign Corrupt Practices Act, or
only those that are also covered by the treaty? If so, would this apply
to countries that accede to the treaty in the future?
Answer. Article 10(2) is self-executing with respect to countries
that do not have an extradition treaty with the United States and
choose to consider this convention as a basis for surrender; therefore
the United States could rely on this convention in a request to such a
country to extradite a person to the United States. However, long-
standing United States practice and policy has been not to consider a
multilateral treaty like this convention to be a basis in itself for
extradition from the United States in the absence of a bilateral
extradition treaty. This policy would apply to any offenses covered by
the treaty, and would apply both to nations that already have signed
the convention and those that accede in the future.
Question 19. Which signatories to the treaty refuse to extradite
their own nationals?
Answer. An authoritative answer to this question is difficult since
(1) many countries decide whether to extradite nationals on a case by
case basis, or (2) do so only if certain conditions are present (e.g.,
exceptionally serious charges, or assurances that the extradited person
can serve his sentence in his home state). The United States strongly
believes that extradition should be granted without regard to the
nationality of the offender, and we are aggressively (and rather
successfully) urging other states to adopt this view; several nations
that have not extradited their citizens in the past are in the process
of changing their views, and more may well do so in future.
Our information suggests that the following states usually do not
extradite their nationals due to statutory or constitutional
prohibitions: Austria, Belgium, Brazil, Bulgaria, Denmark, Finland,
France, Germany, Greece, Hungary, Iceland, Luxembourg, Mexico, Norway,
Switzerland, and Turkey. Our information suggests that the following
states usually do extradite their nationals, but their laws either make
the extradition of nationals discretionary or contain other
restrictions on such extradition that must be met in individual cases:
Australia, Chile, South Korea, Ireland, Japan, and the Netherlands. The
United States, Canada, and the United Kingdom have no restrictions on
extradition of nationals.
Question 20. Please detail the role of the OECD authority cited in
Article 11. Would this override in any way the bilateral agreements on
extradition and mutual legal assistance?
Answer. For the United States, the authority for making and
receiving extradition requests would be the Secretary of State, and
such requests would continue to be transmitted via diplomatic channels,
as is the current practice. The authority for the United States for
making and receiving mutual legal assistance requests under Article 11
would be the Attorney General, who also serves as Central Authority for
all of our mutual legal assistance treaties. See 28 C.F.R. 0.64-1.
Thus, this provision would not override or alter the procedure utilized
under extradition or mutual legal assistance treaties.
Question 21. What are the expected costs of the implementation and
monitoring program described in Article 12?
Answer. The implementation and monitoring program planned in the
OECD Working Group on Bribery to evaluate progress under the OECD Anti-
Bribery Convention and other OECD bribery-related commitments will rely
almost exclusively on existing OECD Secretariat resources and on the
participation of experts from OECD member countries.
The OECD, anticipating the upcoming work, has already planned to
move an OECD Secretariat staff person - from within existing personnel
resources - to provide additional support to the Working Group. This
will occur without an increase in overall OECD budget. Some additional
expense will be incurred by the Secretariat to provide a staff person
from the Secretariat to participate in anticipated on-site inspections
in Phase II of the monitoring effort. With 6-8 trips per year
envisioned, estimated transportation and per diem expenses of $2000 per
trip would result in travel costs to the Secretariat of $12-16,000 per
year. These costs will be programmed from within the annual OECD travel
budget.
Phase II on-site visits also will likely involve participation by
experts from OECD member countries. Expenses related to the
participation of these experts will be borne directly by the
contributing country and will not affect the OECD budget. We can expect
1-3 trips per year for U.S. Government experts to participate in these
visits. These expenses would be borne by the relevant U.S. Government
agency from within existing travel budget resources.
Question 22. Please describe the OECD's plan of action for
monitoring and implementation as required by Article 12.
Answer. Article 12 of the Convention requires that signatories will
cooperate in a program of ``systematic'' follow-up to monitor and
promote the full implementation of the Convention. (An analogous
commitment to follow-up is contained in the OECD's May 1997 Revised
Recommendation on Combating Bribery of Foreign Public Officials in
International Business Transactions, which, in addition to
criminalization, addresses recommendations on bribery-related issues in
the areas of accounting/auditing, government procurement and tax
policy.)
The OECD Working Group on Bribery is in the final stages of
determining the precise process to be followed in carrying out the
monitoring and follow-up functions. A final decision is expected by
Autumn 1998, at least on the monitoring process through early 2000. In
fact, monitoring is already starting, and involves periodic reports
(beginning in late June 1998) from countries on the status of
ratification and implementation of the Convention. This current 1998
phase will include informal evaluation of draft laws as well as formal
evaluation of any enacted laws. Although a number of important details
remain to be decided, the formal post-1998 process will likely entail
two phases:
--Phase I (1999-April 2000) will entail formal legal evaluation of
the consistency of ratification and implementation actions with the
requirements of the Convention. Most likely, a detailed questionnaire
will be completed by each country, examining convention issues as well
as the areas covered by the 1997 Revised Recommendation. A report will
be prepared by the OECD Secretariat and two third-country examiners for
discussion by the Working Group in a special session with the examined
country, after which a final country assessment will be prepared for
the Spring 2000 Ministerial meeting of the OECD. There will be
opportunity for input by interested private sector and nongovernmental
organization representatives.
--Phase II (2000 on) will examine the structures put into place to
enforce the laws, the application of the laws and regulations in
practice, and the consequences in the business sector. Phase II will
likely involve 6-8 country evaluations per year, implying a cycle of 4-
5 years to complete evaluation of all participating countries.
Countries may be examined in order of their relative involvement in
international trade. The examination will likely involve
questionnaires, on-site visits to capitals by experts from
participating third countries and draft reports to guide in-depth
country examination sessions by the Working Group on Bribery. As in
Phase I, there will be opportunity for input by interested private
sector and non-governmental organization representatives.
Question 23. Please describe the Administration's plan of action
for amending the proposed treaty to include bribery of political
parties.
Answer. U.S. negotiators made a concerted effort to have political
parties and party officials covered under the Convention. Other
delegations, however, were not prepared to accept this, arguing that
political parties and party officials could not be considered ``public
officials'' as the term is generally understood.
At the conclusion of the negotiations on the text of the Convention
in November 1997, United States representatives insisted upon formal
agreement on a program of accelerated work on a number of issues not
adequately addressed in the Convention text. These issues included
bribery of political parties and political party officials in
international business transactions, bribery of candidates for
political office, and aspects of the use of money laundering
legislation in the fight against illicit payments. Accordingly, the
OECD Council on December 11, 1997, in approving the Convention text and
recommending its adoption by Ministers representing participating
countries, adopted a Decision committing member countries to examining
these issues and reporting results to Ministers by the Spring 1999
annual OECD Ministerial meeting. At the suggestion of France, two
additional issues were added to this accelerated workplan on issues
related to bribery of foreign public officials: (a) the role of foreign
subsidiaries and (b) the role of offshore money centers.
Work on these issues will begin with the June 29-July 1 meeting of
the OECD Working Group on Bribery. It is expected that an experts group
of representatives of participating governments will be formed to
outline possible recommendations over the late summer and early autumn,
with formal Working Group discussions to begin in earnest in November
1998. On political parties, party officials, and candidates for
political office, the U.S. objective will be to secure member country
agreement to amend the Convention to include such entities/individuals
among those to whom payment of bribes to obtain or retain business will
be prohibited, as is the case under the U.S. Foreign Corrupt Practices
Act. As in the negotiation of the Convention itself, multilateral,
bilateral and public diplomacy will be required to achieve these
objectives.
Question 24. Article 16 provides that an amendment may be adopted
by consensus or ``by such other means as the Parties may determine by
consensus''. Please elaborate on the kinds of scenarios that you
contemplate for adoption of amendments in addition to consensus.
Answer. A consensus decision to adopt an amendment by a means other
than by consensus may be necessary or desirable when a Party (Country
``A'') to the Convention, by virtue of a core element of its legal
system or of its Constitution, is unable to join a consensus on an
amendment which the vast majority of Parties are prepared to adopt. If
the Parties are prepared to proceed with the amendment, without the
participation of Country ``A'', and if Country ``A'' has no objection
to such action, an amendment to strengthen the Convention could go
forward, although without committing Country ``A'' to such action.
One possible scenario, purely for illustrative purposes, might
involve a significant strengthening of the accounting provisions of the
Convention, for example. If 32 or 33 signatories were prepared to
proceed with such action, but one Party was legally barred from
tightening accounting requirements, for example, it is not
inconceivable that all Parties might agree that the 32 proceed in
taking on the commitment, while permitting the lone Party to maintain a
less stringent commitment.
Clearly, such an imbalance of commitments would not be acceptable
in cases where it would result in meaningful competitive differences
among Parties.
Question 25. What is the legal status of the commentary
accompanying the Convention? Can the commentary be amended? If so, how?
Answer. The Commentaries were adopted by OECD members in November
1997 in conjunction with adoption of the Convention text. Although the
Commentaries are not part of the Convention, they reflect the consensus
interpretation of the negotiators of various provisions in the
Convention. As such, the Commentaries should be accorded significant
weight in any subsequent interpretation of the Convention.
--As the Commentaries reflect contemporaneous negotiating history,
we are unaware of any process for their amendment.
______
Questions Submitted by Senator Biden
Question 1. Please elaborate on the meaning of the term ``foreign
public official'' set forth in Article 1(4)(a).
<bullet> Does the term apply to all employees in the legislative,
administrative, or judicial branch of a foreign country? Or is
the expression ``holding a legislative, administrative, or
judicial office'' meant to limit the reach of the Convention to
certain officials?
<bullet> Does the term ``administrative'' include all executive
branch officials?
Answer. The term ``foreign public official'' is meant to apply to
all persons in the legislative, administrative, or judicial branch of
government. ``Administrative'' as used in this context is synonymous
with our Executive Branch.
The term ``foreign public official'' also includes any person
exercising a public function for a foreign country, including for a
public agency or public enterprise, and any official or agent of a
public international organization.
Question 2. Which of the nations that are signatories of the
Convention do not provide for criminal corporate liability?
Answer. The issue is somewhat complex, and we do not have complete
information on all countries.
Australia, Canada, Denmark, France, the Netherlands, Norway,
Sweden, the United States, and the United Kingdom have the concept of
corporate criminal liability throughout--or in a large part of--their
criminal law. Belgium and Finland are working to institute such
liability.
Some countries have the concept of corporate criminal liability in
special statutes. Japan uses the concept in environmental, anti-trust
and securities legislation. Korea uses the concept in environmental and
anti-trust legislation.
Many countries, such as Austria, Germany, Italy, Spain and
Switzerland, have administrative sanctions (e.g., fines) for
corporations, which may have effects comparable to our corporate
criminal penalties. The member countries of the European Union will
adopt such sanctions, when the recently-concluded Protocol II to the
Convention on the Protection of the Financial Interests of the European
Union is implemented.
During the course of the OECD Convention negotiations, Korea
indicated that it would propose institution of corporate criminal
liability for the offense of bribery of foreign public officials in
international business transactions.
There is a clear trend internationally toward institution of
corporate legal liability and a number of countries are expected to
take such action over the next 5-10 years. This appears to be the case
for many of the European Union member countries, for example.
In any event, the Convention requires that those countries which do
not provide for corporate criminal liability in their legal systems
must provide for effective, proportionate and dissuasive non-criminal
sanctions for legal persons, including monetary sanctions, for bribery
of foreign public officials in international business transactions.
Question 3. Is there a negotiating history regarding Commentary 9?
<bullet> Is there a common understanding among the signatories as to
the meaning of the terms ``small'' and ``facilitation
payment''?
Answer. Commentary 9, regarding small or ``facilitating payments'',
reflects the desire of the United States during the negotiation to
retain our ability to continue to exempt facilitating payments from the
FCPA. Under the FCPA, we exempt payments from the statute which are
made to obtain ``routine governmental action(s)'', that is, payments
which are to facilitate, expedite or secure the performance of a
routine governmental action. These actions are described in detail in
the FCPA. While the FCPA does not exempt such payments as ``small'', or
place any dollar threshold on the size of such payments, it is common
for persons to interpret this provision of the FCPA as limited to
payments of very small value. The Commentary further reflects the
FCPA's provision that a ``routine governmental action'' does not
include any decision by a foreign official to award new business or
continue existing business, i.e., quid pro quo bribery.
Question 4. What is the meaning of the term ``undue'' in Article
1(1)?
Answer. It would not, for instance, be an ``undue'' advantage if
the company paid the expenses for the official to travel to the United
States to visit its manufacturing facility and, as part of its
marketing activities during that trip, paid reasonable food and lodging
expenses for that official. Similarly, it would not be an ``undue
advantage'' if the official's child earned the scholarship on his or
her own merits, regardless of whether the scholarship was funded by a
company seeking to do business with the official. It would be ``undue''
if the scholarship was created solely to be awarded to the official's
child and it was not made available to others on a competitive basis.
Question 5. What is the legal status of the annex? Is it an
integral part of the Convention?
Answer. Yes, the annex is an integral part of the Convention. The
statistics in the annex are essential in determining whether the entry
into force requirements of Article 15(1) have been satisfied.
Question 6. The Foreign Corrupt Practices Act criminalizes bribes
in order to assist an issuer or domestic concern in ``obtaining or
retaining business for or with, or directing business to, any person.''
E.g., 15 U.S.C. 78dd-1(a)(1).
<bullet> Is it intended by the signatories that Article 1(1) requires
parties to criminalize ``directing business'' to a person?
Answer. Neither the Convention nor the Commentaries contain any
explicit reference to ``directing business''. Our expectation is that
the implementing criminal, civil and administrative laws to be enacted
by the Parties to the Convention will include the direction of
business. For all practical purposes, the ``direction'' of business is
included in obtaining or retaining business.
Question 7. Please provide a copy of the OECD's 1996 recommendation
that countries review the tax deductibility regarding bribery.
Answer. The 1996 recommendation is attached (follows).
Organization for Economic Cooperation and Development
April 17, 1996
Recommendation of the Council on the Tax Deductibility of Bribes to
Foreign Public Officials
(adopted by the Council on 11 April 1996 at its 873rd session [C/
M(96)8/PROV])
The Council.
Having regard to Article 5 (b) of the Convention on the
Organisation for Economic Cooperation and Development of 14th December
1960;
Having regard to the OECD Council Recommendation on Bribery in
International Business Transactions [C(94)75/FINAL];
Considering that bribery is a widespread phenomenon in
international business transactions, including trade and investment,
raising serious moral and political concerns and distorting
international competitive conditions;
Considering that the Council Recommendation on Bribery called on
Member countries to take concrete and meaningful steps to combat
bribery in international business transactions, including examining tax
measures which may indirectly favour bribery;
On the proposal of the Committee on Fiscal Affairs and the
Committee on International Investment and Multinational Enterprises:
I. RECOMMENDS that those Member countries which do not disallow
the deductibility of bribes to foreign public officials re-
examine such treatment with the intention of denying this
deductibility. Such action may be facilitated by the trend to
treat bribes to foreign public officials as illegal.
II. INSTRUCTS the Committee on Fiscal Affairs, in cooperation
with the Committee on International Investment and
Multinational Enterprises, to monitor the implementation of
this Recommendation, to promote the Recommendation in the
context of contacts with non-Member countries and to report to
the Council as appropriate.
Question 8. Does the Working Group on Bribery in International
Business Transactions have a plan for how it will carry out the
function of monitoring and promoting full implementation of the
Convention under Article 12? If so, please discuss it.
Answer. Article 12 of the Convention requires that signatories will
cooperate in a program of ``systematic'' follow-up to monitor and
promote the full implementation of the Convention. (An analogous
commitment to follow-up is contained in the OECD's May 1997 Revised
Recommendation on Combating Bribery of Foreign Public Officials in
International Business Transactions, which, in addition to
criminalization, addresses recommendations on bribery-related issues in
the areas of accounting/auditing, government procurement and tax
policy.)
The OECD Working Group on Bribery is in the final stages of
determining the precise process to be followed in carrying out the
monitoring and follow-up functions. A final decision is expected by
Autumn 1998, at least on the monitoring process through early 2000. In
fact, monitoring is already starting, and involves periodic reports
(beginning in late June 1998) from countries on the status of
ratification and implementation of the Convention. This current 1998
phase will include informal evaluation of draft laws as well as formal
evaluation of any enacted laws. Although a number of important details
remain to be decided, the formal post-1998 process will likely entail
two phases:
<bullet> Phase I (1999-April 2000) will entail formal legal
evaluation of the consistency of ratification and
implementation actions with the requirements of the Convention.
Most likely, a detailed questionnaire will be completed by each
country, examining convention issues as well as the areas
covered by the 1997 Revised Recommendation. A report will be
prepared by the OECD Secretariat and two third-country
examiners for discussion by the Working Group in a special
session with the examined country, after which a final country
assessment will be prepared for the Spring 2000 Ministerial
meeting of the OECD. There will be opportunity for input by
interested private sector and nongovernmental organization
representatives.
<bullet> Phase II (2000 on) will examine the structures put into
place to enforce the laws, the application of the laws and
regulations in practice, and the consequences in the business
sector. Phase II will likely involve 6-8 country evaluations
per year, implying a cycle of 4-5 years to complete evaluation
of all participating countries. Countries may be examined in
order of their relative involvement in international trade. The
examination will likely involve questionnaires, on-site visits
to capitals by experts from participating third countries and
draft reports to guide in-depth country examination sessions by
the Working Group on Bribery. As in Phase I, there will be
opportunity for input by interested private sector and non-
governmental organization representatives.
__________
June 9, 1998
The Hon. Jesse Helms,
Chairman,
Committee on Foreign Relations,
United States Senate.
Dear Mr. Chairman:
We would like to voice our shared support for swift Congressional
approval of the recently-submitted Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions and its
related implementing legislation. This Convention, which was signed in
December of last year at the Organization for Economic Cooperation and
Development (OECD), is extremely important for the United States. It
fulfills a desire expressed by the Congress in the Omnibus Trade and
Competitiveness Act of 1988 that the United States Government seek from
our OECD partners enactment of criminal prohibitions on foreign corrupt
practices. The Convention is the culmination of efforts by this and
previous Administrations.
Since 1977, when Congress enacted the Foreign Corrupt Practices Act
(FCPA), the United States has been the only country to criminalize
effectively the bribery of foreign public officials. Now, for the first
time, the United States and its major trading partners have agreed upon
an international Convention which obligates the world's largest
economies to make it a crime to bribe the officials of other countries
in international business transactions. This is a major contribution to
the international rule of law and the promotion of democratic values of
which we should all be proud. It will combat the damage which bribery
causes to economic development efforts and to U.S. exporters.
We and the other 32 signatory countries have agreed to the
ambitious goal of seeking adoption of necessary legislation to
implement the Convention by the end of this year. It is essential that
the United States meet this schedule, in order to continue U.S.
leadership on this important issue and to encourage other countries to
implement fully the agreement.
While the Convention tracks the FCPA closely, we have proposed
certain amendments to bring our law into fill compliance with the
obligations of and to implement the Convention. We have been working
with the business community and with interested nongovernmental
organizations in this effort, and have sought in the implementing
legislation to ensure that U.S. firms will face disciplines comparable
to those of foreign firms as a result of this agreement. When
implemented and enforced by parties, the Convention will go a long way
towards reducing incidents of bribery in international business
transactions.
We urge the Congress to act quickly to ensure that U.S. firms and
their employees can realize the benefits of this Convention as soon as
possible.
Sincerely,
Robert E. Rubin
Secretary of the Treasury
Janet Reno
Attorney General
Charlene Barshefsky Madeleine K. Albright
United States Secretary of State
Trade Representative
William M. Daley
Secretary of Commerce
Arthur Levitt
Chairman
Securities and Exchange Commission
AMP Incorporated, Executive Offices,
Harrisburg, PA 17105-3608,
June 3, 1998.
The Honorable Jesse Helms,
United States Senate,
Washington, DC 20510.
Dear Senator Helms:
I am writing to express my support for the speedy ratification and
implementation of the Organization for Economic Cooperation and
Development (OECD) Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions that the
Administration has just submitted to the Congress.
The OECD Convention is a major victory for the United States in its
battle against international corruption and bribery. It creates an
international antibribery system that obligates signatory countries to
adopt domestic laws to combat foreign bribery. Since the Foreign
Corrupt Practices Act (FCPA) was adopted in 1977, the United States has
tried to persuade our major trading partners to enact comparable laws.
In the 1988 Omnibus Trade Act, the Congress directed the President to
negotiate an international agreement in the OECD on the prohibition of
overseas bribes. After years of negotiation, the United States has
succeeded in getting thirty-three other countries (all the OECD members
and five non-members) to join the United States in the Convention.
The Congress, current and past Administrations, and the private
sector have made their fight against international bribery and
corruption a priority because international corruption undermines
important U.S. goals of (1) achieving a level playing field for those
U.S. companies and their workers that compete overseas, (2) fostering
economic development and trade liberalization, and (3) promoting
democracy and democratic institutions. The Department of Commerce has
estimated that between 1994 and 1996, there were at least 100 cases of
foreign firms using bribery to undercut U.S. firms' efforts to win
international contracts, costing our companies over $45 billion. The
OECD Convention is designed to eliminate these trade distorting
activities and make foreign bribery a crime in major trading countries.
Speedy ratification and implementation of the OECD Convention by
the United States is, however, an absolute imperative in order for the
Convention to succeed. Some of the other parties are not as committed
to the Convention as the United States and are likely to use a delay in
U.S. ratification to undermine it. Speedy implementation of the OECD
Convention is also necessary to show the other parties that the United
States takes its obligations under the Convention seriously and expects
other parties to do the same. Since the Convention's effectiveness
depends on the adoption of international antibribery laws by the other
parties, implementation by the United States is necessary to lead the
way, substantively and politically, for implementation of the
Convention by other parties.
Enclosed, for your information, is background material on the OECD
Convention and a summary of the amendments necessary to bring the FCPA
into compliance with the OECD Convention.
I am committed to working with you to help protect U.S. businesses
and workers from unfair and corrupt foreign competition through the
ratification and implementation of the OECD Antibribery Convention by
the Congress this year.
Sincerely,
William J. Hudson,
Chief Executive Officer and President,
AMP Incorporated.
______
Stanley J. Marcuss,
Partner, Bryan Cave, LLP,
700 Thirteenth Street, N.W.,
Washington, D.C. 20005-3960.
The Honorable Jesse Helms,
Chairman, Senate Committee on Foreign Relations,
Washington, D.C. 20510.
Re: Ratification of the OECD Anti-Bribery Convention and Adoption of
Implementing Legislation
Dear Senator Helms:
The Senate is currently being asked to ratify the recently
negotiated Convention on Combating Bribery of Foreign Government
Officials. Congress as a whole is also currently being asked to amend
the Foreign Corrupt Practices Act in light of the new Convention. Both
the Convention and the proposed legislation are significant
developments: the Convention, because it provides an opportunity to
enlist other countries in the effort to prevent bribery in the
international marketplace; the legislation, because it would
significantly expand the reach of the FCPA as the analysis in
Attachment A to this letter points out.
An important issue for Congress to consider during its
deliberations, however, is whether the other signatories to the
Convention will enact and enforce laws that are substantially similar
to the FCPA. If they do not, the uneven playing field that currently
confronts U.S. business will not only remain in place but will be made
even worse if Congress should toughen the FCPA by enacting the
amendments currently being proposed.
As you may know, the, Convention is not self-executing. It requires
signatory countries to enact conforming domestic legislation. If they
do not act at all or if they enact legislation that does not meet the
Convention's requirements or fail adequately to enforce the laws they
do enact, U.S. business will continue to be disadvantaged in the
international marketplace. I should add that, even if other countries
fulfill their Convention obligations, differences between their laws
and U.S. law are inevitable because, as the analysis in Attachment B
points out, there are significant differences between the FCPA and the
laws that the Convention requires other countries to enact.
Many, nonetheless, agree that the Convention should be ratified,
implemented and enforced expeditiously and in earnest by each and every
signatory now that it has been agreed upon. To minimize the risk that
other countries will fail to fulfill their Convention obligations and
that the United States will continue to be the only country that has
taken effective measures against foreign bribery, I believe Congress
should adopt measures that require the Executive Branch to press for
full and effective implementation of the Convention by each of its
signatories.
Among the measures Congress might consider are the following:
A. Delaying the effective date of the FCPA amendments until a
majority or some other proportion of the signatories have
enacted legislation that meets the requirements of the
Convention;
B. Making effectiveness of the FCPA amendments conditional on
a Presidential certification that a majority or some other
proportion of the signatories have enacted legislation that
meets the requirements of the Convention.
C. Requiring the President to provide Congress with a
periodic analysis of precisely what other signatory countries
have done by way of implementing legislation and enforcement.
The analysis should include detailed scrutiny of the precise
terms of the implementing legislation, an assessment of whether
such legislation meets the requirements of the Convention and a
description of the ways in which such legislation differs from
the FCPA.
D. Requiring creation of a private sector review board with
which the Executive Branch must consult on progress toward
implementation of the Convention by each of its signatories.
I would be happy to amplify these suggestions if you would find it
useful and hope they are of interest. I would also be grateful if you
would have this letter and its attachments inserted in the hearing
record, because they may be of interest to others who are involved in
the ratification and implementation process.
I would like to mention in closing that, while I am the Director of
the Coalition for Fair International Business Practices, a group of
U.S.-based multinationals interested in the pursuit of effective
measures to eliminate foreign bribery worldwide, this letter is written
in my personal capacity and does not reflect the views of every member
of the Coalition.
Sincerely yours,
Stanley J. Marcuss.
<greek-d>

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