Imagine if a foreign government defined employees of General Motors and AIG as "foreign officials" of the United States government because the government owns portions of the company, or called Bloomberg Media employees "foreign officials" because 85 percent of the company is owned by a government official, the Mayor of New York City. Take a GM senior manager out to lunch and you may have committed bribery!
You'd laugh at the absurdity of it. Unless you were Keith Lindsey and you were defending yourself in a trial in which how one defines "foreign official" could mean jail and millions of dollars in fines.
Lindsey is the president of a small business, Lindsey Manufacturing, and he and his company face felony charges by U.S. prosecutors for allegedly paying off officials at an electric utility in Mexico. They are fighting the charges, arguing that the government has defined too broadly executives of the utility as "foreign officials" of the Mexican government. That argument got a boost when, after prosecutors alleged in the indictment that the Mexican utility was state-owned, the government recently conceded to the court that the Mexican entity was not. So Lindsey and his company are fighting, even though it threatens to put his company, which employs 110 Americans, out of business. "If this drags on for much longer, there won't be a Lindsey Manufacturing," he has said.
The Lindsey case and others like it have brought attention to the need to reform an outdated law that many believe is hurting American businesses' ability to compete fairly in the global market: the Foreign Corrupt Practices Act (FCPA).
The FCPA was established in 1977 to punish companies that engage in foreign bribery. Though the basic premise of the act - that corrupt business transactions are unethical and undermine public confidence in the free market system - remains as true today as when initially enacted, the recent explosion in its enforcement, coupled with its many ambiguities, is exacting a toll on law-abiding corporations, whose connection to allegedly improper acts is attenuated at best and nonexistent at worst.
At the end of 2009, 120 investigations were pending - a 40-fold increase from 2002, when there were 3 open FCPA investigations. The total number of FCPA enforcement actions nearly doubled from 2009 to 2010 - from 45 to 76.
This increased focus by the Department of Justice and the Securities Exchange Commission has led some companies to curtail or cease certain foreign operations, as well as abandon acquisitions of and joint ventures with foreign companies, rather than face the vagaries of FCPA enforcement.
Lisa A. Rickard serves as president of the U.S. Chamber Institute for Legal Reform (ILR), where she provides strategic leadership to ILR's comprehensive program aimed at changing the legal culture that has resulted in our nation's litigation explosion.