Tuesday, December 7, 2010

Remembering Stephen Solarz

Stephen Solarz, the former Democratic congressman from New York died last week at the age of 70.

His obituary (see here) does not mention the Foreign Corrupt Practices Act. However Solarz, along with Representative Robert Eckhardt and Senators Frank Church and William Proxmire, were leaders in the mid-1970's as Congress investigated various foreign corporate payments - a process that resulted in the FCPA being signed by President Carter in December 1977.

Below are a few of Solarz's FCPA highlights.


On June 3, 1975, Solarz introduced H.R. 7539 - believed to be the first bill (of many that would follow) to address foreign corporate payments. The bill stated: “Any American company or any official or employee of an American company who, with intent to influence any official act affecting such company, gives or attempts, offers, promises, conspires to give any thing of value to any foreign government, any foreign official, or any foreign political organization, shall be fined not more than $10,000 or imprisoned not more than one year, or both."

During a June 1975 hearing before the House Subcommittee on International Economic Policy, Solarz testified as follows. “It is tragic when one hears that a major U.S. concern bribes a foreign official in order to secure special trade concessions or when another leading multinational corporation makes a massive political donation to an incumbent political party in order to maintain business relations.” “[T]o deal with the problem,” Solarz said he introduced H.R. 7539 “to specifically prohibit the bribery of any foreign government, foreign official, or foreign political organization by any American company or official or employee thereof.” Solarz stated that “[t]his legislation would remove any questions which American business persons, foreign governments and their officials, and any others may have about the manner in which a U.S. firm operates overseas.”

On June 11, 1976, Solarz introduced H.R. 14340 - a bill that attempted to deal with the foreign corporate payments issue not by directly prohibiting such payments, but rather by requiring companies to disclose such payments. Titled the “International Contributions, Payments, and Gifts Disclosure Act,” H.R. 14340 provided that issuers shall be required to file a sworn disclosure statement “to provide a complete accounting of any offer or agreement of any agent of employee of a company or its parent, to make any contribution, pay any fee, or give anything of significant value in connection with (A) direct and indirect political contributions to foreign government; (B) direct and indirect payments and gifts to employees of foreign governments which are intended to influence the decisions of such employees and which are made either with or without the consent of their sovereign; and (C) direct and indirect payments and gifts to employees of foreign, nongovernmental purchasers and sellers which are intended to influence normal commercial decisions of their employer and which are made without the employer’s knowledge or consent.”

On July 1, 1976, Solarz introduced H.R. 14681 - a bill that attempted to deal with the foreign corporate payments issue indirectly through the Overseas Private Investment Corporation ("OPIC"). H.R. 14681 provided that the OPIC “shall issue such regulations and take such other steps as are necessary to provide for the termination of any insurance or reinsurance issued […] which is applicable to any investor with respect to a project if [OPIC] determines […] that such investor or any agent of such investor” inter alia “has offered, paid, or agreed to pay any significant amount of money or has offered, given, or promised to give anything of significant value to an individual who is an official of a foreign government or instrumentality thereof for the purpose of inducing that individual to use his influence within such foreign government or instrumentality to affect any decision or other action of such foreign government or instrumentality with respect to such project.”

H.R. 14681 passed the House on August 24, 1976. Solarz remarked on the House floor in urging passage of H.R. 14681 as follows: “This legislation is based on a very fundamental and important assumption which is that agencies of the U.S. Government should not insure corporations which are engaged in paying bribes to foreign officials. It seems to me that we have a moral obligation, as well as a political interest, in prohibiting practices which are both corrupt and counterproductive. Whatever the private advantages of illegal payments to foreign officials may be to the corporations which engage in them, I think they are far outweighed by the public disadvantages to the foreign policy of our own country, if and when they are disclosed. Mr. Speaker, in the last several months a number of agencies of our own Government, including the IRS and the SEC and the other body in this Congress, have attempted to deal with this problem by passing new legislation and promulgating revised regulations. I think we have a responsibility to act as well. This bill is by no means a panacea. Obviously, it will not eliminate the problem of bribery. But it is a significant step forward in the right direction, and it is a new beginning of which I think we can be proud.”

During a September 1976 hearing before the House Subcommittee on Consumer Protection, Solarz's written statement states as follows. “It is clear that American companies have engaged in bribery on a grand and international scale to such an extent that the conduct of American foreign relations has been damaged. Headline after headline has appeared concerning some new American multinational company coming forward with an admission of corporate bribery or other payments to foreign officials. One day it is Lockheed. Another day it is Gulf. A third day it is General Tire. And the list goes on and on to include a roster of some of the United States largest and most distinguished corporations.” Among other things, Solarz stated that the “problem with corporate bribery overseas is that it poses very significant problems for our own foreign policy.” Among other things, Solarz stated that “our relationship with Japan is the foundation of our whole foreign policy in the Far East, and yet we see the government of a valued ally being shaken as a result of the disclosures relating to the Lockheed scandal.” In his written statement, Solarz noted that “the Netherlands have been similarly shaken by the allegations surrounding Prince Bernhard, husband of Queen Juliana and Inspector General of the Armed Forces, suggesting that he received $1.1 million in Lockheed payoffs.” Similarly, Solarz noted that Italy “is essential to the viability of the southern plank of NATO, where a stable government committed to continued participation in NATO is essential to our own security interests and where the Italian Communist Party has made significant gains in the most recent elections, we find that the Government has been at least partially undermined as a result of allegations concerning the possible bribery of some of the highest officials of the Italian Government by American corporations.”

During an April 1977 hearing before the House Subcommittee on Consumer Protection and Finance, Solarz's written statement states as follows. “The time is long overdue … for affirmative and meaningful steps to be taken to cope with this situation. Failure to take prompt and effective action can only encourage the continuation of these practices, and thereby, continue to create serious problems in our international economic and political relations throughout the world. The stability of numerous governments has been threatened and political parties in several countries have been seriously compromised.”

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