Fertile ground for corruption: implementing the Foreign Corrupt Practices Act in the fragmented state of Afghanistan.

AuthorOsmani, Safa W.

"The American people deserve more, and should expect better, from their public officials, and I am proud of the work that our prosecutors and law enforcement agents did then, and continue to do now, to combat domestic corruption. But corruption is no less harmful when it is perpetrated abroad." (1)

  1. INTRODUCTION

    Foreign corruption has run rampant for a tremendous amount of time. (2) To directly address this problem, Congress enacted the Foreign Corrupt Practices Act (FCPA) in 1977. (3) Corruption has adverse effects on democratic institutions; it deteriorates public accountability and redirects resources away from national priorities, including public "health, education, and infrastructure." (4) The impact of corruption abroad can spread rapidly through the global marketplace and ultimately cause chaos domestically. (5) Due to their substantial international impact, foreign bribery and corruption are deemed a threat to U.S. national security. (6) For these reasons, enforcement of the FCPA is a continuing priority for the United States. (7)

    Despite national efforts, some foreign countries--often both the government and its citizens--still blame the United States for overseas corruption. (8) Among these is Afghanistan, a country consumed with high levels of corruption. (9) Unfortunately, corruption within the Afghan government creates animosity between the Afghan people and their leaders, triggering a lack of confidence and a sense of insecurity among the community. (10) The Afghan people are exposed to war and corruption every day. (11) Bribes structure the way people complete daily tasks, and those on the receiving end are unashamed, despite Islam condemning such bribery. (12) It is difficult to criticize the Afghan people for their apathy, however, because such indifference ultimately stems from a loss of faith in a peaceful future. (13)

    The Afghan people, however, have not lost all hope, as newly elected President Ashraf Ghani said they "demonstrated a remarkable will for wanting transformation" during the elections. (14) President Ghani said he was attracted to the position for its nearly impossible tasks, but confirmed it is not a "mission impossible." (15) Unsurprisingly, the elections spanned many months due to allegations of electoral fraud. (16) During his presidency, Ghani is determined to change Afghanistan's status as the third most corrupt country on Earth. (17) President Ghani stated that he is personally "not corrupt" and refuses to foster the corruption that is stifling the country's ability to progress. (18)

    This Note will first grapple with the definition of corruption. (19) This Note will then explore the background of the FCPA, as well as its purposes, provisions, and enforcement vehicles. (20) Next, it will discuss corruption as a global problem, investigating other global anticorruption initiatives, which have proven effective. (21) Thereafter, it will provide a brief history of Afghanistan as a war-torn, underdeveloped, corruption-driven country. (22) It will also delve into the legal history of Afghanistan. (23) It will discuss corruption's adverse effects on the country. (24) Finally, this Note will analyze the possible effectiveness of the FCPA in Afghanistan and how the United States overcomes cultural barriers, in addition to the lack of security, to do its best for a damaged country. (25)

  2. HISTORY

    1. Defining Corruption

      One must first understand that corruption is a multifaceted occurrence, as well as a complex and real problem. (26) In its simplest form, however, corruption is the misuse or abuse of "public power for private gain." (27) More precisely, it is the act of a usually trusted authority figure who illegally exploits his position to secure an advantage for himself or another. (28) The most evident example of leveraging public power for private advancement is when officials "accept[], solicit[], or extort[] a bribe." (29) Corruption's dangerous nature not only harms the public by transferring the nation's wealth to private bank accounts, but it also taints the government's accountability. (30)

      Those who speak of corruption in a public forum often disapprove of it. (31) The inhabitants of most underdeveloped countries consider corruption an unchangeable fact of life, which they must accept. (32) Some consider corruption an added cost of living, a necessary expense to accomplish anything. (33) Alternatively, others consider corruption an infringement on fundamental human rights. (34) Regardless, all agree that corruption increases the wealth of those involved while simultaneously depleting the nation's capital and general welfare. (35)

      Unfortunately, it is not easy to target specific sources of corruption because its causes are always circumstantial. (36) Corruption grows when institutions are weak and still developing; the transitional nature of this phase makes corruption even harder to regulate. (37) Many factors, such as decreasing salaries for civil service workers and promotions unrelated to performance, weaken the motivation for governmental employees to remain honest and work productively. (38) To fight a system plagued with corruption, one must understand the three elements that comprise the formula of corruption: "monopoly power," "discretion," and "accountability." (39) When government officials have monopolistic power and are not held accountable for their decisions or actions, they are instead incentivized to utilize corrupt practices.40 Furthermore, corruption prevails when the informal rules created, displace the formal rules and laws. (41) Thus, the existence of proper laws is not the only solution to corruption, as the appropriate enforcement of these laws is also essential. (42)

    2. The Foreign Corrupt Practices Act of 1977

      1. Origins and Purposes for Statute's Enactment

        Corruption has always been a global issue, however, the international community has only recently attempted to recognize and implement solutions. (43) In the United States, the FCPA is most commonly portrayed as a byproduct of the Watergate scandal. (44) Congress, however, actively investigated allegations of international corruption before the Watergate scandal. (45) Congressional hearings focused predominantly on the Lockheed Corporation scandal of the early 1970s; these investigations forewarned Congress of the need for legislation barring such overseas payments. (46) Lockheed acknowledged that it paid "several multi-million dollar bribes" to multiple countries, to guarantee its government contracts in those specific countries. (47) After a long haul, President Carter signed the FCPA--then known as the Foreign Corrupt Practices and Investment Disclosure Bill--into law on December 20, 1977. (48)

        The FCPA is largely considered an instrument to fight global corruption. (49) It was the first antibribery statute in the world, even though, initially, it was merely symbolic. (50) Congress intended the passage of the FCPA to discontinue corporate bribery, which had injured the reputation of U.S. companies and decreased the public's trust in their financial incorruptibility. (51) Congress acknowledged that corruption creates enormous costs both domestically and internationally, and therefore, enacted the statute to lessen these detrimental effects, aid companies in battling corrupt demands, and, simultaneously, address the damaging foreign policy consequences of transnational bribery. (52) Through the FCPA, Congress deemed payments to foreign officials unethical and explicitly contrary to American values. (53)

      2. Provisions of the FCPA

        The FCPA is part of the Securities Exchange Act of 1934 (Securities Act) and consists of two main provisions: the antibribery provisions and the accounting provisions. (54) The antibribery provisions forbid individuals and businesses from bribing foreign government officials to acquire or maintain business, while the accounting provisions enforce specific recordkeeping and inner-control requirements on issuers, prohibiting individuals and companies from knowingly fabricating issuer records. (55) The antibribery provisions concern three classes of persons or entities: "issuers, 'domestic concerns,' and 'any person' who violates the Act while in ... the United States." (56) A company is an "issuer" if it owns "a class of securities registered under Section 12 of [the Securities Act] or is required to file periodic and other reports with SEC." (57) "Domestic concern" is a significantly broader term than "issuer." (58) Non-United States nationals and corporations comprise the last category. (59) Provided that some act in furtherance of an FCPA violation occurs within the United States, the individual or entity perpetrating such an act will be subject to the jurisdiction of United States courts. (60) Therefore, given the government's decision to expand the scope of the statute, many companies and individuals who may believe they are outside the scope of jurisdiction become subject to United States scrutiny. (61)

        Along with the antibribery provision, the FCPA includes accounting provisions that not only apply to bribery-related violations but also to all public companies; this ensures these companies accurately account for their assets and liabilities and do so in reasonable detail. (62) The accounting provision's central components include the "books and records" provision and the "internal controls" provision. (63) The "books and records" provision compels issuers to maintain detailed records and accounts that mirror transactions, as well as issuer asset dispositions. (64) The "books and records" provision prohibits any payments of any value made with a corrupt purpose, regardless of materiality. (65) The SEC and DOJ typically enforce this provision when there has been a misrepresentation of large bribe payments or in instances of widespread, inaccurate recording of lesser payments made as part of a pattern of bribery. (66)

        The "internal controls"...

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