Alcoa Archives - U.S. Chamber Watch

July 25, 2014

Anti-corruption law still doing its job; U.S. Chamber still doesn’t like it

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The need for the Foreign Corrupt Practices Act remains alive and well. Companies and executives are still getting caught red-handed. The U.S. Chamber still wants the highly effective law weakened.

Since the landmark guilty plea and settlement in the Alcoa Worldwide Alumina (Alcoa) case in January, companies have paid another $196 million in penalties for violations of the Foreign Corrupt Practices Act (FCPA). In March, Marubeni Corporation pleaded guilty to bribing an Indonesian member of Parliament, among other foreign officials. In April, Hewlett-Packard subsidiaries in Russia, Poland and Mexico accepted responsibility for bribing former executives of state-owned companies and police department officials and for maintaining a multi-million dollar slush fund for various other corrupt payments in those countries. The Department of Justice (DOJ) has indicted several other individuals since the Alcoa case as well, including Wall Street broker-dealers and a former vice president of Bechtel Corporation.

Despite these recent successes in curbing egregiously corrupt behavior under the FCPA, the U.S. Chamber of Commerce wants to weaken the law. A few days before Halloween 2010, the Chamber released a report that dressed up the FCPA as a boogeyman that scared away business with its “increasingly aggressive” interpretation by enforcement agencies. The Chamber report demanded five amendments to the FCPA — nominally to provide guidance for businesses in complying with the law — that actually were designed to hamstring enforcement. Undeterred by the subsequent release of a 130-page guidance document by DOJ and the Securities and Exchange Commission (SEC) rejecting the Chamber’s demands, the Chamber still ranks FCPA “reform” among their lobbying priorities for 2014.

One of the Chamber’s proposed amendments calls for limited liability for corporations whose subsidiaries violate provisions of the FCPA — in other words, rewarding ignorance (or feigned ignorance) by parent companies. But loosening the rules for parent companies creates an incentive for more of the same corrupt acts described in the Hewlett-Packard subsidiaries’ admissions of misconduct just this April.

Public Citizen’s November 2013 report, “License to Bribe,” details all five amendments sought by the Chamber, and provides common-sense rebuttals to each proposal. The bottom line: corruption is demonstrably harmful to both business and democracy.

The FCPA is America’s most salient global anti-corruption tool. Since it was first enacted in 1977, countries and international organizations around the world have followed America’s lead and enacted similar global anti-corruption rules. Now that business is more global than ever before, it is no time to weaken the FCPA.

Jess Unger is a legal fellow with Public Citizen’s Congress Watch division

January 28, 2014

Alcoa Joins the Gang of U.S. Chamber of Commerce Directors in Trouble over FCPA Violations

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The government has taken action against yet another company, subsidiary or executive represented on the board of directors of the U.S. Chamber of Commerce or its Institute for Legal Reform for violations of the Foreign Corrupt Practices Act (FCPA). On Thursday, Alcoa World Alumina, a company controlled by Alcoa Inc., pleaded guilty in federal court to bribing officials in Bahrain to win a supply deal in violation of the FCPA, which bars U.S. companies from bribing foreign officials to gain a business advantage. Alcoa will pay a $161 million civil penalty, the third largest FCPA-related disgorgement ever.

Public Citizen’s November 2013 report “License to Bribe” documented the efforts made by the U.S. Chamber of Commerce since 2010 to weaken the FCPA. The Chamber has proposed five changes that are wolves in sheep’s clothing and would undermine the law. All of the proposed changes were rebuffed by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), which have joint jurisdiction to enforce the FCPA and released guidelines responsive to the U.S. Chamber’s requests to weaken the law.

One change the Chamber seeks is to limit a company’s liability for the acts of its subsidiaries. The DOJ and the SEC responded in a set of guidelines, saying that such a limitation would give companies an incentive to create subsidiaries for the purpose of engaging in bribery. Indeed, that is the mechanism through which many FCPA violations have taken place – including the Alcoa violations identified by the government.

The U.S. Chamber’s membership is a well-kept secret, but the organization’s efforts to weaken the FCPA seem to coincide with the behavior of a number of the companies represented on its board of directors. How much overseas bribery would the companies funding the U.S. Chamber commit if there were no law against it?

Additionally, why don’t those companies step out of the shadows and lobby openly against the FCPA, rather than hiding behind the U.S. Chamber? Would they still lobby against the FCPA if they didn’t have the cloak of anonymity afforded by the Chamber?

Alcoa’s subsidiary, Alcoa World Alumina, earned $446 million in gross profit on transactions facilitated by bribes between 2005 and 2009, according to the DOJ. The subsidiary will pay $223 million in fines and criminal penalties for violating the FCPA, while the parent company will pay a separate $161 million civil penalty for related SEC violations. According to the SEC, Alcoa’s subsidiary used an intermediary to funnel the illicit payments to Bahraini officials, and “Alcoa lacked sufficient internal controls to prevent and detect the bribes, which were improperly recorded in Alcoa’s books and records as legitimate commissions or sales to a distributor.”

The $384 million total settlement ranks fifth on the top 10 FCPA cases of all time; the civil penalty ranks third on the list of the biggest FCPA-related corporate disgorgements.

No. 1 on the list of top enforcement actions is the $800 million fine levied in 2008 against Siemens Corporation, whose President and CEO is a Chamber director.

The Chamber’s record of trying to weaken the FCPA in ways that would legalize bribery, and its continued allocation of leadership positions to bad corporate actors, should cast a pall of ethical questionability over everything else it does.

Sam Jewler is the press officer at Public Citizen’s U.S. Chamber Watch. To learn more about Chamber Watch, follow @uschamberwatch on Twitter, like us on Facebook and sign up for email updates.