Regulators have been intensifying their scrutiny of corporate bribery infractions lately. In the last half of 2004, for example:
- Bristol-Myers Squibb Co. revealed that the Securities and Exchange Commission has launched an investigation into some of the company’s German units for possible violations of the Foreign Corrupt Practices Act (FCPA).
- Three former Lucent Corp. employees, including a former CEO, received SEC Wells notices stemming from the alleged bribing of Saudi Arabia’s former telecommunications minister with cash and gifts worth up to $21 million.
- Halliburton Corp., embroiled in investigations by both the Department of Justice and the SEC, disclosed that it may have bribed Nigerian officials to secure favorable tax treatment for a liquefied-natural-gas facility.
- The SEC hit the U.S. unit of Zurich-based ABB Ltd. with a $16.4 million judgment reflecting information on bribery and related accounting improprieties that were uncovered in due diligence prior to a divestiture.
From the corporate perspective, of course, Sarbanes-Oxley raises the stakes for violating the FCPA. With CEOs and CFOs now personally signing off on company financials, those executives are likely to be warier than ever of letting a bribe slide through, or letting their guard down in matters of compliance or disclosure.
Corporate directors, who are responsible for monitoring internal audits, are also worried. Sarbanes-Oxley “has increased our company’s efforts dramatically to document our processes and internal controls on a companywide basis,” says Warren Malmquist, director of audit services at Coors Brewing Co. in Golden, Colorado. When it is auditing company subsidiaries, his department expends “considerable effort” testing the validity of payments made by foreign subsidiaries, he adds, noting that the brewer has never had an FCPA violation. Meanwhile, the USA Patriot Act, which lists bribery of foreign officials as a possible component in money-laundering cases related to the funding of terrorism, allows separate penalties to be assessed for both the payoffs and the money-laundering schemes.
Avoiding the Shadows
Conducting business globally, of course, exposes U.S. companies to all sorts of payoff minefields that don’t exist at home. The Corruption Perceptions Index, based on bribery data and surveys conducted by Berlin-based Transparency International, a nongovernment organization dedicated to fighting bribery, finds signs of “rampant corruption” in no fewer than 60 countries. (Bangladesh and Haiti are the worst of that group, and Russia and several other former Soviet republics are included.)
Non-U.S. companies face far fewer constraints when dealing in this shadowy business world. While the 35 signatories of the Organization of Economic Cooperation and Development’s 1997 convention made it a crime to bribe foreign officials, “there has been little enforcement of new laws by national governments, other than by the United States,” Fritz Heimann, chairman of the U.S. branch of Transparency International, writes on its Website. “There is insufficient awareness in the business community that foreign bribery has become a crime, and relatively few non-U.S. companies have adopted anti-bribery compliance programs.”