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Making Sure Corruption Remains "Made in America"
Making Sure Corruption Remains "Made in America"
February 14, 2012
Originally published in Forbes
In the annals of American legislation, few laws are as futile in their impact, capricious in their enforcement, and hypocritical in their content as the Foreign Corrupt Practices Act of 1977 (FCPA). Designed to put a stop to the bribery of foreign government officials, politicians, and political parties by corporations seeking to do business in corrupt countries around the world, the FCPA hangs as a sword of Damocles over any company that hopes to remain competitive in places that are not as enlightened as the U.S. when it comes to finding acceptable ways to bribe government officials.
Dormant for decades, the Justice Department has ramped up prosecutions, settlements, sting operations, and plea deals; raking in over $2 billion in criminal penalties since President Obama took office. It is Avon’s turn in the barrel, as news of a federal Grand Jury investigation looking into how Avon got a license to conduct door-to-door sales in China was recently leaked to the Wall Street Journal. Apparently surprised by the news, Avon executives can now begin the process of groveling their way to a plea bargain.
If the U.S. government really wants to use its influence to get the world of global business to operate on a level playing field, instead of terrorizing American corporations for doing in Rome as do the Romans, perhaps it should run training sessions for foreign governments on how to construct a legalized system of influence peddling as subtle and backhanded as the one we have here.
I sat in on such a training session in the winter of 2008 run by the venerable K&L Gates LLP, the nation’s ninth largest law firm, which boasts on its website of its ability to “seamlessly integrate lobbying and regulatory implementation.” These were the salad days when the bipartisan earmark express was running at full speed. The purpose of the call was to instruct me, the director of a private company with little experience in the ways of Washington, on exactly how one boards the gravy train.
The folks at K&L Gates are both very good at what they do and very open about how they do it. I’m sure they were operating by the book, which is why foreign governments would be wise to hire K&L to teach them how to collect money from corporations while avoiding the embarrassment of prosecutions under FCPA and other laws like it.
Step one was to retain K&L, a registered lobbying firm, to drive the process. After all, if you are going to play the influence game you’d better make sure you hire only the most upstanding and well connected people to serve as intermediaries. We were quoted a $6,500 per month retainer plus a 7.5% commission paid out of the $1 million dollar earmark we were seeking.
Step two was to hold four fundraisers, making sure we raised $10,000 for Representative Rick Larsen, $20,000 for Senator Chris Dodd, $20,000 for Senator Joe Lieberman, and $10,000 for Appropriations Subcommittee Chairman Peter Visclosky. (I had never heard of Peter Visclosky, but he was apparently central to the whole operation.)
The K&L Gates lobbyist who ran the call stressed that it was very important that when writing checks to the above mentioned politicians—and getting our company’s employees, directors, and their families to do likewise—we should be careful that none of the individual checks exceed the hard dollar limits prescribed in our enlightened campaign finance laws. No corruption here!
He also explained that it was perfectly legal for a company to give bonuses to employees provided these are not directly tied in timing and amount to political donations in such an obvious way that they could be construed as illegal reimbursements. Heaven forbid, we are all law abiding citizens.
Not being accustomed to this way of doing business, I asked how we could be sure that the “donations” would help us get the earmarks we sought. “Let me put it this way,” assured the lobbyist, “they’ve never let us down.”
There was a little more to it than that, but not much. The lobbyist explained that the earmark—or “plus-up” as they call it—has to be routed through a funding agency, and not every federal agency is a willing partner in this process. “But,” he advised, “agencies under budget stress are usually willing to cooperate.” In return for passing along the money, the conduit agency keeps a handling fee of anywhere from 5% to 15%. I didn’t ask what that negotiation involved.
Add it all up and had we accepted the proposal, a million dollar earmark would have cost somewhere north of $200,000 to buy, all financed by the U.S. taxpayer. Do you think Avon paid Chinese officials that high a percentage of their profits for permission to peddle lipstick and skin cream? And, dare I ask, how much did this cost you and me?
How enlightened we are, smug in the knowledge that our method for feeding at the public trough is morally superior to the benighted practices of corrupt foreigners. And more flexible too, since the same legal process of running campaign “fundraisers” can be used if you want to block, say, a politically controversial oil pipeline or dodge a boneheaded regulation. And just think of the possibilities if you are trying to raise money for an unfinanceable solar cell, windmill, electric car, biofuel, or battery company! But please don’t ever allege that campaign donors receive quid-pro-quos. Civilized people know that all they are buying is “access.”