Bribery is bad

Photo of Jake Parent, coordinator of Public Citizen's U.S. Chamber Watch programBribery is bad.

It hurts our economy by making it hard for legitimate businesses to compete, and it hurts democracy by eroding the trust people have in public institutions.

That’s why we found it a bit shocking that the U.S. Chamber of Commerce – an organization that purports to be on the side of all businesses – has spent so many resources over the past few years trying to weaken laws that keep big corporations from gaining an advantage through bribery.

A new U.S. Chamber Watch paper highlights the U.S. Chamber’s efforts to weaken the Foreign Corrupt Practice Act (FCPA). This important law has been around since the 1970’s and prohibits companies from trading anything of value to public officials in exchange for favorable business treatment.

Seems pretty smart right?

Well, the U.S. Chamber dislikes the FCPA enough to ask for some rather startling changes to weaken its effectiveness.

Among those was a request that parent companies not be held liable for the actions of their subsidiaries.

That means that if Company A establishes Company B for the purpose of doing business in a particular country, Company A would not be responsible if Company B then goes out and bribes officials.

The really scary part?

In writing our report, we found out that a lot of the companies who have, in fact, been prosecuted for FCPA violations used this exact scheme to pull it off. That means that the U.S. Chamber basically wants to give companies immunity for a known pattern of abuse.

Here’s just one example of a company charged for bribery under the FCPA:

In December 2012, Eli Lilly and Company was charged with improper payments made by its subsidiaries to foreign government officials in Russia, Brazil, China and Poland. The company agreed to pay $29.3 million in fines.

These activities were found to be widespread and included the following:

  • In Russia, Eli Lilly’s subsidiary made more than $7 million in payments to government officials (including a person close to members of the Russian parliament) and disguised them as “marketing services.” These payments were made with the intent of securing business and apparently were allowed to go on for years, despite knowledge of the activity by Eli Lilly.
  • Employees at Eli Lilly’s Chinese subsidiary were found to have falsified expense reports in order to hide improper gifts and cash payments to doctors who worked for the government.
  • The Brazilian subsidiary allowed a distributor to pay bribes to government health officials in order to secure $1.2 million in sales to government institutions.
  • In Poland, a subsidiary made improper payments to a charitable foundation that was founded by a high-ranking government health authority. The payments were found to have been made in order to facilitate the official’s support for placing Eli Lilly products on the government reimbursement list.

Other big-name companies like Pfizer and Johnson & Johnson also have used subsidiaries to carry out actions that were found to be in violation of the FCPA.

It’s not a stretch to say that the changes to the FCPA asked for by the U.S. Chamber would create safe-havens for companies by insulating them from the actions of their subsidiaries.

It’s hard to determine exactly why the U.S. Chamber would want to do this, but one thing is clear:

The changes asked for by the U.S. Chamber have been condemned by experts from the worlds of business, academia and law enforcement as unnecessary and as a threat to the world economy.

It’s our hope that those in charge of making sure companies play by the rules keep that in mind the next time the U.S. Chamber comes knocking on the door.

We’ll be watching…

Jake Parent is the coordinator of Public Citizen’s U.S. Chamber Watch. To learn more about Chamber Watch, follow @uschamberwatch on Twitter and sign up for email updates