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