The Wall Street Journal reported on Monday that federal prosecutors in the Justice Department’s Enron Task Force are investigating whether Enron bribed foreign government officials to win contracts for its overseas operations, a potential violation of the Foreign Corrupt Practices Act. (1)

Although Justice Department officials will neither confirm nor deny that they are investigating other specific cases, they do confirm that they are aware of reports that some of the same U.S. companies under investigation for accounting fraud and other alleged violations stemming from their domestic operations may have also bribed foreign officials to obtain business.

Xerox, for example, admitted in a July, 2002 filing with the SEC that “[I]n India, we have learned of certain improper payments made over a period of years in connection with sales to government customers by employees of our majority–owned subsidiary in that country. … We estimate the amount of such payments in 2000, the year the activity was stopped, to be approximately $600 to $700 thousand.”(2)

Business Week also reported on July 1 that the SEC is investigating whether Tyco subsidiary Earth Tech Venezuela may have used illegal means to win a $200 million contract to build an industrial water-treatment complex in Venezuela.(3)

The Department of Justice has successfully prosecuted only about 40 cases since the law was passed in 1977. Not only are such cases tough to win, but corporate lobbyists have successfully weakened the law since its passage.

In 1988, corporate lobbyists who were able to get Congress to pass a “grease payment” exception, which says that if you are paying money to get the machinery of government in a foreign country to take “routine government action,” it’s not a violation of the law. (4)

In April, U.S. District Court Judge David Hittner ruled that it is legal for an executive from a U.S. company to make payments to a foreign official to reduce the company’s tax burden or customs duties. The case involved two executives of American Rice, Inc. (5)

“When Congress returns to session in September, members need to take a look at this issue and determine whether there is an enforcement problem or a need to fix the law,” says Citizen Works president Theresa Amato.

1. See John R. Wilke, “Enron Criminal Probe Focuses On Alleged Corruption Abroad,” WSJ August 5, A1.

2. See Xerox 10-=K/A, filed with the Securities and Exchange Commission, July 11, 2002 http://www.sec.gov/Archives/edgar/data/108772/000095013002004956/0000950130-02-004956.txt

3. “The Tax Games Tyco Played,” Business Week, July 1, 2002, pp 40 –41.

4. “Foreign Corrupt Practices Act Takes Major Hit,” Corporate Crime Reporter, April 29, 2002.

5. “Foreign Corrupt Practices Act Takes Major Hit,” Corporate Crime Reporter, April 29, 2002. Also see “No Kidding: Anti-Bribery Law Takes a Hit,” by Russell Mokhiber and Robert Weissman, available at: http://lists.essential.org/pipermail/corp-focus/2002/000114.html

Citizen Works is a nonprofit, nonpartisan organization dedicated to advancing citizen participation in power by giving people the tools and opportunities to build democracy.