'The law itself has a couple of problems with it,' Mukasey said. Ex-AG pushes to alter bribery law

If you represent U.S. businesses and want to scale back an anti-corruption law, what do you do?

Hire the nation’s former top law enforcement official.


The U.S. Chamber of Commerce has recruited former Attorney General Michael Mukasey to press its case for reining in an American law that bans bribery overseas — and for softening the Obama administration’s aggressive enforcement of it. The Foreign Corrupt Practices Act makes it a crime for U.S. companies to pay bribes or offer any “thing of value” to a foreign official to advance the corporation’s interest.

Many advocates for business say enforcement of that law has been too strict, injuring America’s ability to win in a global economy. They also cite lengthy investigations and hefty legal fees over transactions that wouldn’t qualify as traditional bribes, such as giving money to non-government officials, buying dinner for business contacts or even paying for their taxi rides.

Enter Mukasey, a former federal judge whom President George W. Bush brought in to clean up a scandal-tarnished Justice Department in 2007. After leaving the Justice Department, Mukasey returned to New York, joined the firm of Debevoise & Plimpton and began taking on corporate clients, including the Chamber and News Corp.

“The law itself has a couple of problems with it,” Mukasey told POLITICO. He said the business community mainly wants the wording clarified. “In some countries, enterprises are state-owned, so everybody’s a foreign official. You take somebody out to dinner that’s intended to get you a competitive benefit and, boom: You get an investigation.”

“That said, nobody is looking to slacken in cases involving real bribery of public officials,” Mukasey added.

The current leaders of the Justice Department defend the law.

Lanny Breuer, chief of the department’s criminal division, said he’s troubled by suggestions that payments to individuals to win business are above board if they work for private companies and not government-owned ones.

“Corporate bribery, whether of government officials or commercial bribery, is bad for business in general and just plain wrong,” Breuer said in an interview with POLITICO.

“I don’t really accept the fact that the FCPA is truly a burden on American business,” he added. “Our companies should compete based on the quality of their products and the quality of their services and not based on corruption. [And] it’s not as if we’re only prosecuting American companies. Half our [cases involve] foreign companies or foreign subsidiaries” that do business in the U.S. or are traded on a U.S. stock exchange.

The number of prosecutions under the anti-corruption statute roughly doubled to 74 in the first two years of the Obama administration, compared with 38 during the last two years under Bush and near-dormancy in the years before that. The Justice Department boasted in January that the $1 billion in penalties it recovered for violations in fiscal 2010 was “the largest in the history of FCPA enforcement” and accounted for roughly half of all financial penalties and restitution obtained that year by DOJ’s criminal division.

“Over the last two-and-a-half years, we’ve tried to be appropriately aggressive and vigilant with white-collar crime in general and FCPA specifically,” Breuer said.

Gibson Dunn & Crutcher, a major U.S. law firm that advises corporations on compliance, has described the trend as an “enduring explosion” of prosecutions under the law.

Business advocates and some lawmakers also say the vigor and unpredictability with which DOJ is enforcing the law threatens to undermine a priority for President Barack Obama: encouraging U.S. businesses to sell more overseas. Last January, Obama formally adopted a national goal of doubling U.S. exports by 2015.

“I really have no dispute with the cases you’ve brought,” Sen. Amy Klobuchar (D-Minn.) told Breuer at a Senate hearing earlier this year. “It’s just that the investigations that are taking place, oftentimes, I’m sure, find nothing wrong [and] are wreaking havoc in terms of companies trying to do business consistent with the president’s focus on doubling exports.”

The drive to overhaul the anti-bribery law has gained traction on Capitol Hill in recent months. A bipartisan group of lawmakers — including Klobuchar, Sen. Chris Coons (D-Del.) and Rep. James Sensenbrenner (R-Wis.) — are trying to overhaul the 1977 statute. Even some liberal Democratic stalwarts like Rep. John Conyers (D-Mich.) have agreed that some changes may be necessary.

In a survey of corporate executives, investment bankers, private equity executives and hedge fund managers conducted last year for consulting firm Deloitte, 63 percent of respondents said that FCPA issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the past three years.

“In these smaller projects, you look at it and you know it just may not be worth the cost of getting lawyers involved and trying to unpack whether you can hire the brother of the vice minister for economic affairs as a consultant,” said George Terwilliger, a Washington lawyer who advises companies on issues related to the law and a former deputy attorney general under President George H.W. Bush. “That kind of risk avoidance creeps into businesses’ decisionmaking in such a way that it does harm to U.S. business interests abroad.”

Harold Kim, senior vice president of the Chamber’s Institute for Legal Reform, added that the current law and its enforcement “have negatively affected export opportunities for U.S. companies.”

Defenders of the current law say the Chamber wants to dilute an important anti-corruption tool.

“They say, ‘Nobody’s in favor of corruption,’ but when you add it up … they want a strong law, but they don’t want it enforced,” said Stephen Clayton, a California lawyer who formerly headed up FCPA compliance for Sun Microsystems. “You’re taking something that’s just starting to work and because it’s starting to work, cutting it off.”

Nancy Boswell of Transparency International said the existing law has been a model worldwide. “Over time, the American business community, while it has had issues, has always at least in our experience sought to level up the playing field rather than leveling down,” she said.

The rigorous enforcement of the law from the Justice Department and the Securities and Exchange Commission has not always prevailed in the courts.

Last year, the Justice Department indicted 22 businessmen after a unusual sting operation in which FBI agents posed as representatives of Gabon seeking to purchase guns, body armor and other equipment while allegedly seeking bribes on the side. Four defendants pleaded guilty. After a six-week trial in Washington for four of the other men charged, the jury deadlocked. A mistrial was declared earlier this month. The Justice Department says it plans to retry the case.

“They find out a nurse comes to a seminar on how to use some health care techniques. The Metro’s closed down. They give her money to take the cab back, and then they get a major investigation,” Klobuchar said. Her office says the anecdote came from a business in her home state, but they don’t have further specifics on the episode.

Breuer said Justice doesn’t prosecute trivial cases. “We’re not prosecuting the taxi voucher. We’re not prosecuting the lunch,” he said.

But Sensenbrenner charged that the administration’s prosecutions lack consistency: “The way it stands now it depends on the mood of which Justice Department officials has got the file. … We need to have the consistency in order to encourage the exports.”

The Chamber of Commerce paid Mukasey’s firm, Debevoise & Plimpton, about $120,000 in the first half of the year to lobby on FCPA “and issues related to criminal law and policies affecting U.S. corporations,” according to lobbying disclosures filed with Congress. His hiring was first reported in March by Just Anti-Corruption, part of the Justice Department-focused news site MainJustice.com.

Mukasey told POLITICO his effort for the Chamber has gotten a “good reception” on Capitol Hill, including at a House Judiciary subcommittee hearing in June.

He is also involved in an emerging wrinkle to reform: the role of media magnate Rupert Murdoch and his News Corporation conglomerate, currently embroiled in a phone-hacking scandal.

Due to the long-reach of the anti-bribery law, News Corp. could face criminal and civil liability in the U.S. over payments the paper allegedly made for information from police officers guarding the British royal family. Mukasey was retained last month by independent directors on News Corp.’s board to advise them on potential legal fallout from the high-profile scandal.

Despite a reported $1 million donation from News Corp. to the Chamber last year, the business group said its lobbying on FCPA has nothing to do with Murdoch’s potential involvement.

“The two are totally unrelated,” Kim said. “Our efforts to modernize an outdated act have been ongoing for nearly a year and any cynical attempts by those opposed to FCPA reforms to link our efforts to the investigations in the UK are preposterous and, frankly, disingenuous.”