The (Grand)father of the FCPA

Former federal judge Stanley Sporkin is one of my heroes. Yes, I am biased because as an AUSA in Washington, D.C. I tried several cases before him, and in private practice, I have collaborated with him on many projects.

My admiration, however, extends back to events surrounding the enactment of the FCPA. Judge Sporkin has told the story many times but it is a story worth retelling. Of course, he is too modest to remind everyone of his critical role in the creation of the FCPA. His role is not laid out in any legislative history which is all too often inaccurate and omits key behind the scenes conversations and contacts.

In the midst of the Watergate scandal hearings before the Senate Select Committee in the early 1970s, corporate executives testified about slush funds which were being used to fill the coffers of President Nixon’s re-election campaign, which prophetically had the acronym of CREEP (Committee to Re-Elect the President). Judge Sporkin who was then serving as the Director of Enforcement at the SEC wondered how companies were recording these transactions on their books.

He opened investigations of these companies and discovered that the companies were not accurately recording these transactions. He was shocked that public companies were not required to do so by any law or regulation. As his investigations proceeded, Judge Sporkin opened the government’s eyes to a vast network of corporate bribery and unrecorded funds used to pay foreign governments and conduct other improper activities.

In response to these concerns, Judge Spokin came up with the idea that publicly-traded companies should be required to keep accurate books and records. As he testified before Congress,

Most of all, I was amazed that there was no requirement that publicly traded corporations maintain honest books and records. My research of the various laws did reveal that such a “books and records” requirement was included in the laws governing this nation’s financial institutions. It occurred to me that if such a requirement was good enough for this nation’s brokerage and banking institutions, why not for its industrial concerns?

I became convinced that what was necessary was a simple law that would require corporations to keep accurate books and records. In my view, a corporation would think twice before it recorded a bribe for what it was. Since bribery is generally considered a crime, it would be virtually untenable for someone to admit in writing that the corporation is engaging in such activities on an ongoing basis. Bribery needs secrecy in order to flourish. Thus, I theorized that requiring the disclosure of all bribes paid would, in effect, foreclose that activity.

Judge Sporkin worked closely behind the scenes within the SEC and with Senator Proxmire to design the FCPA, which was ultimately enacted in 1977. Interestingly, Judge Sporkin did not advocate for the foreign bribery prohibition because he thought it would be too difficult to detect and prove but he viewed the accurate books and records requirement as an easier tool to deter companies from engaging in such behavior. Senator Proxmire ultimately insisted on putting a foreign bribery prohibition in the law and the rest is history, as the saying goes.

Judge Sporkin continues today to help companies navigate the FCPA to ensure compliance. He stands as one of the great ones and will forever hold a unique place in history.

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