In the wake of the Watergate Scandal, which exposed a variety of corporate as well as political abuses, the Securities and Exchange Commission (SEC) discovered that a staggering number of large corporations had made questionable or illegal payments exceeding $300 million to foreign government officials, politicians, and political parties. In 1977, Congress passed the Foreign Corrupt Practices Act (FCPA) to curb the negative impact of these corrupt payments on United States foreign policy objectives regarding the promotion of democracy and the free market system.
In the decades since the passage of the FCPA, the government has expanded the use of the statute beyond its original target (large corporations) to small- and medium-sized enterprises (SMEs), which often lack the resources and international business sophistication to guard against bribery and extortion in all its forms and thus avoid liability. Additionally, the government’s enforcement regime exists largely outside the courts. As a result, the investigative tactics and settlement agreements are overly harsh on SMEs, exceed statutorily proscribed penalties, and discourage utilization and litigation of a variety of statutory provisions designed to protect businesses from liability.
This Comment argues that the FCPA should be amended to provide SMEs proper defenses against liability through the mental state provisions for domestic concerns and require more judicial oversight of the Department of Justice (DOJ) and the SEC enforcement policies. These changes will encourage SMEs to enter the international marketplace and protect SMEs from investigative costs and settlement penalties that do serious harm to their financial situation and are often disproportionate to the alleged wrongdoing.
Stephen S. Laudone,
The Foreign Corrupt Practices Act: Unbridled Enforcement and Flawed Culpability Standards Deter SMEs from Entering the Global Marketplace,
J. Crim. L. & Criminology