By Tom Hamburger , Brady Dennis and Jia Lynn Yang
Published by the Washington Post, April 24, 2012
Wal-Mart, the giant retailer now under fire over allegations of foreign bribery in Mexico, has participated in an aggressive and high-priced lobbying campaign to amend the long-standing U.S. anti-bribery law that the company might have violated.
The push to revisit how federal authorities enforce the statute has been centered at a little-known but well-funded arm of the U.S. Chamber of Commerce where a top executive of Wal-Mart has sat on the board of directors for nearly a decade.
The effort has intensified in the past two years, drawing on the backing of several large companies and trade groups such as the Retail Industry Leaders Association, where one of Wal-Mart’s top executives serves as a director. It also has involved high-powered lobbyists, including former attorney general Michael B. Mukasey.
The 1977 law, known as the Foreign Corrupt Practices Act, prohibits U.S. companies from offering fees or gifts to foreign officials to advance corporate interests.
There is no evidence that suggests Wal-Mart participated in the Chamber’s efforts because of its problems in Mexico. But even as the company has pledged zero tolerance for corruption around the globe, it has been a party to an effort that, some advocacy groups argue, would eviscerate the Watergate-era anti-corruption statute.
The Justice Department launched an investigation into Wal-Mart’s Mexican subsidiary in December over payments of more than $24 million in bribes to win construction permits there .
A company whistleblower told top corporate officials about the alleged bribes in 2005, The New York Times reported recently . The company launched but then shut down an internal inquiry and then failed to notify the Justice Department or the Securities and Exchange Commission of the allegations as required by law.
Wal-Mart’s corporate secretary and top ethics officer, Thomas D. Hyde, who stepped down from his job at Wal-Mart in 2010, was among the company executives who received initial reports of the bribes in 2005, the Times reported.
Between 2003 and 2010, public records show, Hyde sat on the 40-member board of the Institute of Legal Reform, a division of the U.S. Chamber that has led the way in criticizing parts of the law and talking about the need to change it.
Wal-Mart is one of more than 20 companies represented on the ILR’s board, according to the most recent tax filings from the Chamber group. Other companies include General Electric, ExxonMobil and Dow Chemical.
The retailer did not respond to questions about its participation in the Chamber’s campaign. But a person familiar with the effort, who spoke on the condition of anonymity because the board’s deliberations are private, said Wal-Mart was “not particularly active” on the board or in the FCPA lobbying effort.
Wal-Mart issued a statement on Tuesday, saying that it had instituted new protocols to make sure that FCPA investigations are “managed consistently and independently” and that it had created a new role for a global FCPA compliance officer. “We are taking a deep look at our policies and procedures in every country in which we operate,” said company spokesman David Tovar.
Mukasey was at the Justice Department during the latter years of the George W. Bush administration, when enforcement of the anti-bribery law escalated after the Sept. 11, 2001, terrorist attacks.
Over the past two years, the former attorney general’s law firm has received more than $200,000 in fees from the Chamber to work on clarifying the way in which the law is enforced. Although the lobbying campaign has remained largely out of the public spotlight, it has triggered a vigorous debate in the Justice Department and on Capitol Hill, where a handful of lawmakers have considered introducing legislation to amend parts of the law.
“I am bothered by the Chamber’s effort to gut this law,” said Stanley Sporkin, former enforcement director of the SEC who helped write several parts of the statute. “This law has made an important contribution in the world. The Justice Department has been aggressive in enforcing [it], and it has produced good results.”
The debate over the FCPA has intensified in recent years, in part because of the increase in federal enforcement.
In 2004, Justice pursued two cases under the FCPA. By 2008, there were 20 actions. The tough enforcement has continued under President Obama. In 2010, Justice worked on a record 48 cases, including one that resulted in an $800 million fine against German conglomerate Siemens.
Paul Pelletier, a former supervisor for the unit at Justice charged with enforcing the FCPA, said two prosecutors were dedicated to the issue when he began in 2002. By the time he left in 2011, there were 15, as well as additional units at the FBI and the SEC.
“The more we lifted up rocks, the more we saw of it,” said Pelletier of the bribery, adding that cases turned up as companies aggressively globalized their operations.
Last fall, assistant U.S. attorney general Lanny A. Breuer said officials were planning during 2012 to release “detailed new guidance” about how the FCPA should be enforced. Still, he made clear that he had little intention of scaling back the decades-old anti-corruption law.
“This is precisely the wrong moment in history to weaken the FCPA,” Breuer said then. “There is no argument for becoming more permissive when it comes to corruption.”
Breuer’s comments came as several business groups boosted efforts to rework parts of the law. The Chamber’s Institute for Legal Reform released a 28-page policy paper detailing a wish list of FCPA reforms. Among them: Measures limiting a company’s liability for the actions of its subsidiaries and a clearer definition of who qualifies as a “foreign official.”
That push has continued this year, as Justice and SEC officials have met with a wide range of industry and advocacy groups regarding the guidance the agencies plan to issue in coming months.
In February, the Chamber enlisted a disparate collection of other groups, including the American Gaming Association, the Faulkner County Farm Bureau in Arkansas and the Retail Industry Leaders Association, to sign onto an 11-page letter publicly advocating tjat federal officials clarify the statute. The letter argues that vague language in the law and the way in which investigators have enforced it have resulted in “a chilling effect on legitimate business activity.”
Those groups and others have said that they are merely looking for a measure of certainty and clear-cut guidelines from federal authorities.
Mukasey also rejected any suggestion that the Chamber effort is undermining the bribery statute, saying the proposals could ultimately strengthen the effort to fight corruption. “The clarity we are seeking will strengthen incentives for compliance,” he said, adding that the criticism of the Chamber campaign is off base. “I understand why people use that rhetoric. But I don’t see it as accurate.”
The requests by Chamber and its allies for adjustments and clarifications to the law have provoked strong criticisms from some government officials and a coalition of human rights and corporate governance groups.
In a speech last month, Secretary of State Hillary Rodham Clinton reiterated that the Obama administration has no intention of allowing a scaled-down FCPA.
“We are unequivocally opposed to weakening the Foreign Corrupt Practices Act,” Clinton said. “We don’t need to lower our standards. We need to work with other countries to raise theirs. I actually think a race to the bottom would probably disadvantage us.”
Harvard law professor David Kennedy co-wrote a report last year on the FCPA called “Busting Bribery,” which was published by the Open Society Foundation, backed in part by liberal philanthropist George Soros. The paper denounced proposed amendments to the law.
“In the guise of clarifying,” Kennedy said, “they are gutting the law.”
© 2012 Washington Post
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