This article was reprinted with permission from FCPA Professor
GlaxoSmithKline’s (GSK) scrutiny in China – by the Chinese government – dominated the headlines in July (see here for a prior post).
Shortly thereafter, many began to question the motivations of the Chinese government in investigating GSK and several other multinational pharmaceutical companies operating in China. Did the Chinese government have pure motivations? Or was there something else going on as the scrutiny was occurring at the same general time the Chinese government was seeking price concessions from multinational pharma companies in an effort to make healthcare more affordable for its citizens
See here from Bloomberg, here from Reuters.
The general issue gained plenty of traction in the blogosphere and editorial pages.
See here (“The decision of the Chinese government to act against Glaxo is likely motivated by a desire to make a strategic example of an international pharma company in China”).
See here (“With national healthcare expenses expected to reach $1 trillion annually by the end of the decade, China is looking for ways to reduce costs. The country’s National Development and Reform Commission has targeted the drug pricing policies of GSK, Merck, Novartis, Baxter, Astellas Pharma and almost 60 other international drug manufacturers for investigation. [...] Growing drug costs in China thus appear to have provided the Chinese government with the motivation to institute and “go public” with the GSK investigation, as well widening the probe into other pharmaceutical companies.
See here (“Still to be seen, however, is what’s motivating the crackdown. Drug makers have faced increasing pressure by Beijing to cut prices and share intellectual property, but neither aim should be accomplished through prosecuting bribery.”)
If GSK and other foreign firms operating in China did indeed violate Chinese law, should the real motivations of the Chinese government in investigating GSK and other companies even matter? What if the motivations of the Chinese government are less than pure?
Bringing the question home, if a company subject to the FCPA violates the law, should the real motivations of the U.S. government in bringing an enforcement action even matter? Are the motivations of our government always pure when it comes to FCPA enforcement? After all, the lack of FCPA anti-bribery charges against Siemens and BAE was hardly pure. The DOJ’s sentencing memorandum in those cases make clear that the settlements were structured in such a way as to avoid debarment issues for the company (and for the U.S. government). That is hardly a pure motivation for enforcing a law.
The mysterious end to the James Giffen enforcement action (see here for the prior post) – in which he asserted a public authority defense and that his actions were undertaken with the knowledge and approval of the highest levels of U.S. government – was hardly pure.
Impure motives are improve motives whether the impurity leads to lax enforcement or aggressive enforcement.
And certainly the U.S. is not alone. When the U.K. Serious Fraud Office dropped its investigation of BAE concerning business conduct in Saudi Arabia because the Saudis allegedly threatened to cease cooperation on terrorism issues, that was not a pure motive.
The interesting thing is this. With increased competition among nations in enforcing anti-bribery laws (an issue frequently discussed on these pages – see here instance), we can expect to see more motives being questioned.
This makes it all the more important – as I highlighted several years ago – in “The Facade of FCPA Enforcement” that we get things right here in the U.S. when it comes to FCPA enforcement.
But then again, this is not merely an enforcement issue.
Let’s not forget that the real reason the U.S. ended up with the Foreign Corrupt Practices Act in 1977 was not exactly pure.
Sure, one will find certain statements in the legislative history to support the notion that what motivated Congress to enact the FCPA was so-called post-Watergate morality. However, as detailed in “The Story of the Foreign Corrupt Practices Act,” the main motivation of Congress in enacting the FCPA was clearly foreign policy.
Senator Frank Church, an FCPA leader, was clear in opening initial hearings as to the so-called foreign corporate payments in May 1975. He stated.
“For what we are concerned with is not a question of private or public morality. What concerns us here is a major issue of foreign policy for the United States. [...] It is time to treat the issue for what it is: a serious foreign policy problem.”
In chairing another Congressional hearing in 1975, Senator Church likewise stated: “I have focused on the foreign policy aspects of this issue because that is the chief concern of my subcommittee.”
Representative Solarz, who emerged as an FCPA leader in the House, stated:
“What is in fact at stake is the foreign policy and national interest of the United States. It is clearly in our interest to put a stop to these pernicious practices. [...] We simply cannot permit activity which so damages U.S. foreign policy.”
Representative Moss stated:
“Business practices of these corporations abroad often impact directly on U.S. foreign policy. Disclosures have shown that United Brands dealings with the Honduran Government and Lockheed’s relationship with the Dutch Crown, Italian political parties, and former key leaders of the ruling Japanese party had an impact as great as the Department of State might have had. Surely the public expects more than to have foreign policy made in the board rooms of United Brands or Lockheed. Not only is a publicly owned corporation unaccountable to the public when it uses its assets to bribe foreign governmental officials, but also it is unaccountable to its shareholders, the ones to whom the assets belong.”
In short, Congressional leaders wanted foreign governments and foreign political parties accountable and answerable to the U.S. government itself, not to private enterprise because of the bribe payments. This was not a pure or altruistic reason for enacting the FCPA, it was a power play tied directly to foreign policy.
Should motivations matter?
Read more articles on the FCPA by Mike Koehler at FCPA Professor.
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