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ABANATIONALINSTITUTEONTHEFOREIGNCORRUPTPRACTICESACT
"ORIGINS
OF
THE
FCPA"
OMNISHOREHAMHOTELWASHINGTON,
DC
MONDAV,OCTOBER
16,20069:15
AM
TheFCPAisnowinits29thyearandgoingstrong.WhilethereweresomerockytimeswhenIthoughtitwouldbedismembered,thefactisithasweatheredthroughthoseroughdaysandremainsvibrantasitnowentersitsfourthdecade.WhatIenvisionedwhenthelawwasenactedwasanewcorporateregimewherebriberyofforeignofficialswouldbealmostcompletelyextinguishedatleastasitpertainedtomajorU.S.corporations.Asallofusherehaveobserved,thewild-eyeddo-gooderspredictionsneveroccurred.Insteadstatisticsindicatethatbriberyofforeignofficialshasmaintainedasteadypaceovertheyears.Whathasbeenparticularlydisturbingtomeisthattheprovisionoftheactrequiringpublicissuerstodeviseandmaintainasystemofinternalaccountingcontrolsthatassures:•Executionoftransactionsonlyinaccordancewithmanagement'sauthorizationwhichneedtoberecordedinconformitywithGAAP.;
 
•Accesstoassetsonlyinaccordancewithmanagement'sauthorization;•Themaintenanceoftheaccountabilityforassets;and•Appropriateactionwhenacomparisonbetweenexistingassetsandrecordedassetsdemonstratesdifferences;hasbeenvirtuallyignored.ForhowelsecanoneexplainthecurrentfuroroverSection404ofSarbanes-Oxleythatonceagainmandatedacompanyhaveasystemofeffectiveinternalcontrols.Iaskthequestion:arethemanycompaniesthatarecomplainingaboutsection404totallyignorantoftheFCPAaccountinginternalcontrolrequirements?Ifnothatwouldbeanunfortunatecommentaryandwouldindicateanalmostunparalleleddegreeofhubris.IamsuremanyofyouknowtheSEC'sprogramofself-evaluationwithafollow-upreporttotheSEChasitsoriginsintheFCPAprogram.Backinthemid-1970'sforeignbriberybyU.S.corporationswasrampant.
It
wasquitereminiscentoftheoptionspracticesofthisday,althoughIthinktheincidenceofforeignbriberyexceededthecurrentfloodofoptionscases,Atonetimetherewereapproximately650sensitivepaymentcasesinactivestatus.
2
 
TheCommissionbecameveryconcernedaboutwheretheprogramwasgoingandImustsaywithmeforleadingthemintothismorasswithseeminglynoendinsight.Wehadawonderfulchairmanatthetime,RaeGarrett.Althoughhewasquiteconservative,hedidnotlikedishonesty.Andsohewassupportiveoftheprogram.However,evenwithhissupporthewantedtoseeanexitstrategy.AlanLevenson,mydeardepartedfriend,whowasthenDirectoroftheDivisionofCorporateFinanceandmyselfwereattendingtheAnnualNorthAmericanSecuritiesCommissionersconferenceinthewonderfulcityofSanAntonio.Inattendancewerethevariousstatesecuritiescommissioners.Forthosewhohaveattendedoneofthoseconventions,youknowtheyareablast.Inthemiddleoftheproceedings,AlanLevensonandIweresummarilysummonedbacktoDCbyChairmanGarrett.WhenwearrivedattheCommission,youcouldseetheChairmanwasundersomepressurefromthebusinesscommunityandhisownCommission.Hetoldushewasnotgoingtoexercisehisdraconianpowersanddeclaretheprogramatanend.Instead,hewantedAlanandmetocomeupwithastrategytocaptheprogram.AlanandIverymuchappreciatedthewaytheChairmanhandledit.Hediditinawaythatavoidedapublicspanking.
It
iswiththisbackgroundthat
3
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