As much as I realize that blawg readers much prefer posts about salacious crimes, violent cops and twitter, sometimes you just have to suck it up and read a post about law.  So suck it up and read Nathan Burney’s review of the Foreign Corrupt Practices Act.  To corporations attempting to do business in a flat world, it’s one of the most poorly conceived and arbitrarily enforced laws around.  No matter how much you may hate corporations, it’s good to keep them financially viable so they can manufacture and sell the shiny stuff you like and hire and pay people so we aren’t reduced to a nation on welfare.

The putative idea behind FCPA is that it’s wrong for American corporations to go around bribing petty officials elsewhere to get or keep business.  Since bribe-givers have no interest group, there are few willing to stand up and disagree.  But as Nathan notes, it’s not quite that simple.

The Foreign Corrupt Practices Act, among other things, says it’s against the law for any U.S. citizen or business to pay a bribe to a foreign official.  The penalties can be staggering, with fines calculated as the amount of income the briber hoped to receive down the road as a result of paying the bribe.  “Any” U.S. citizen means just that: anybody, not just a corporate executive.  A “foreign official” means anyone with a government job — including people working in industries that are government-owned or government-controlled.

“Bribery” includes giving anything of value in the hopes of getting something in return.  It’s really a broad standard.  A bribe doesn’t have to be an explicit tit-for-tat, and it doesn’t have to be just for the purpose of landing a choice contract.  A bribe can be just a nice dinner at a fancy restaurant that might make get you looked on with more favor next time contracts are being awarded.  A bribe can be a “facilitation payment” to a petty bureaucrat, some grease to ensure that you are allowed to do what you are already entitled to do.

In other words, it covers pretty much anything and everything that goes on in the ordinary course of business, from buying dinner when  meeting with the local petty bureaucrat who was given a small Ferrari by your Chinese competition the week before, to sending flowers to paying the vig demanded by the regional Feudal Lord of telephones, with whom you already have a contract but who desires a new Ferrari to keep up with the petty bureaucrat.  Keeping up appearances costs money, you know.

The issue doesn’t only arise from the various disincentives created by the law and its arbitrary dynamics, but by at the hand of a coterie of former justice department lawyers who left the office, went legit, and are now making small fortunes advising and representing corporations in FCPA actions.

Nice work if you can get it–and to the tune of billions of dollars, lawyers, accountants and consultants, many with past ties to the Justice Department, are getting it. In the last few years, as the feds cranked up enforcement of the 33-year-old Foreign Corrupt Practices Act, a thriving and lucrative anti-bribery complex has emerged. Whether it’s having any impact on reducing bribery is another matter. Instead, companies can find themselves getting extorted in foreign lands, only to get extorted again by Washington. It works generally like this: A company that suspects bribery overseas hires a battery of lawyers, accountants and investigators who may then report any findings to Justice in hopes of some undefined leniency. More likely, the company pays out huge fines and then hires more lawyers as government-mandated compliance monitors, a job that can stretch into years of legal billing.

Notice that nothing in there suggests any attempt, even consideration, of defending against allegations?   The reaction of these DOJ-cum-defense lawyers is a simple formula:  Investigate (pay), Report (pay), Concede (pay), Negotiate (pay), Comply (pay), Monitor (Pay).  Notice any theme in there?

It’s not really as Machiavellian as it seems (Bruce Carton doesn’t think so), as not every lawyer schemes to suck up millions upon millions of dollars to no end other than confess to wrongoing, flop on your belly and beg for forgiveness and then pay it all over again (once, if not twice if one includes the fines to be levied) to make sure it never happened again.  Some fight.  Some mean well.  Some have passing thoughts of defending rather than laying spread eagle on the ground.  Some.  But not too many.

This has the effect of empowering the government to engage in baseless rectal exams by young turks of righteousness whose business experience and acumen is, at best, limited to a lemonade stand.  Had these big, wealthy, macho corporations put on their man pants and, if they were not engaged in bribery, duked it out, perhaps they wouldn’t be viewed as ATMs for the government.  But that would have required them to act against advice of counsel.  Very expensive counsel, I might add.

And if you don’t think the FCPA matters to you, who do you think it paying the many millions of dollars forked over to lawyers and government, not to mention the opportunity costs of doing business overseas where only American corporations are subject to a constraint that flies against local culture and custom. 

Nobody is suggesting that actual bribery is a good thing and should be tolerated.  It would be nice if this was pervasive attitude, but regardless, we can hold our corporations to a higher standard.  However, the FCPA has put everyday business practices, with no quid pro quo to even the most fertile of young government lawyer minds, at risk.  It’s going to be awfully hard for the United States to regain its position as an economic engine in the world with two hands and a foot tied behind its back.

But if you’re okay with taking an economic backseat to India, well, then there’s no reason to be concerned and certainly no point in your reading such a boring, law-related post.