Rupert Murdoch and News Corp may end up being prosecuted in the US under a 1977 US law known as the Foreign Corrupt Practices Act (FCPA) for their illegal bribes to officials in Britain. The law prohibits American companies from bribing foreign public officials overseas. I had a hand in both drafting the law and conducting the investigative hearings that led to it, in my prior life as chief investigator for the Senate Banking Committee under the superb Sen. William Proxmire.
At the time, there was an epidemic of bribery by American corporations overseas. What brought the issue to a head were revelations that Lockheed had paid bribes to several foreign governments to buy its military aircraft, including Japan, Italy, the Netherlands, West Germany and Saudi Arabia. To add insult to injury, Lockheed had been bailed out by the US government in 1971 to the tune of $195 million.
Conventional wisdom had it that you could not do business in much of the world without paying bribes. We were warned by business lobbies that if the US passed such a law, American business would lose out to less naively idealistic competitors; and that the law was probably unconstitutional because it was "extra-territorial" - meaning that it tried to apply US law overseas.
But the hearings by both the Banking Committee and by Sen. Frank Church's subcommittee on multinationals sparked outrage. Congress, then safely in the hands of progressives, duly passed the law and President Carter signed it. Over the years, it has been used repeatedly, as the Prospect's former executive editor Michael Tomasky explains in a fine piece for Daily Beast/Newsweek, and foreign bribery by multinational actually diminished.
Fast forward to this decade. Today's conventional wisdom is that multinational corporations and banks are too big and too stateless to be effectively regulated. But as the Foreign Corrupt Practices Act demonstrates, that's self-serving nonsense. A company does not even need to be based in the US, if it does substantial business or banking here. The most notably bribery prosecution under the Foreign Corrupt Practices Act was of Siemens, which had a billion dollar slush fund to pay bribes. Siemens, a German corporation, was prosecuted both in Germany and in the US under the FCPA, and paid an $800 million fine to the US Treasury.
Two candidates for US regulation of global activity are tax evasion and financial fraud. According to Senator Carl Levin, we could easily collect at least $100 billion yearly in taxes owed but illegally evaded via offshore evasion by US-based individuals and corporations. That's a trillion dollars over a decade, and surely a lot less painful than cutting Social Security and Medicare.
We could also put a stop to the kind of financial speculation that is putting the economy on the verge of a second financial collapse. If a corporation does business in the US, or has a bank account here, you can regulate it.
There is a lot of well meaning argument about how "regulatory arbitrage" - the search by companies for more friendly regulatory climates - makes meaningful regulation of corporations impossible in a global economy. The FCPA proves that this is not so. The problem is not that business is too global to regulate. It's that business has too much political influence--and that today's legislators are a lot less public-minded than those whom I served in the 1970s.