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Crackdown on foreign bribery grows in US

September 21, 2005

By Kevin Drawbaugh

WASHINGTON (Reuters) – Foreign bribery cases are gaining
prominence on the U.S. regulatory docket due partly to a surge
in corporate acquisitions and the dirty dealings they expose,
lawyers and officials said on Wednesday.

Amid growing concern with bribery overseas and a U.S.
crackdown, corporate acquirers are voluntarily bringing more
potential violations of America’s Foreign Corrupt Practices
Act, or FCPA, to the notice of authorities.

“We certainly have seen an increase in the number of
companies coming forward to discuss issues with respect to the
FCPA,” said Paul Berger, associate director of the U.S.
Securities and Exchange Commission’s enforcement division.

Berger said at the SEC “there are a fair number of
investigations under way” dealing with FCPA.

Any increase in FCPA cases means progress in a global war
on official corruption. But there is still a long way to go in
leveling the playing field for companies that prohibit using
bribes to gain competitive advantage, lawyers said.

“It’s often said that there are countries where bribery is
a way of life, and that’s still the case,” said Laurence
Urgenson, partner at the law firm of Kirkland & Ellis.

Official corruption is a major problem for reconstruction
efforts in places such as war-torn Iraq and post-tsunami
Indonesia. Money and resources needed to help people in
distressed areas are often wasted on official bribes.

Transparency International, a British anti-bribery group,
recently said corruption was rampant in 60 countries, noting
the worst are often the poorest, such as Bangladesh and Haiti.

The United States adopted the FCPA in 1977 after hundreds
of companies admitted paying bribes in the mid-1970s. The law
bans U.S. citizens from bribing foreign officials for the
purpose of keeping or obtaining business opportunities.

Only about 100 FCPA cases have been brought, but the tally
is rising fast, due partly to recent international agreements
to combat bribery and partly to renewed M&A activity, lawyers
said.

If the current M&A spurt continues, deal volumes in 2005
will come near levels not seen since the 1990s boom years, Wall
Street investment bank J.P. Morgan Chase said last week.

Corporate buyers are increasingly keen to wash acquisitions
clean before closing on deals to avoid future liability,
lawyers said. As a result, some are bringing FCPA problems to
the SEC and the Justice Department. Both have new powers and a
new vigor for tackling white-collar crooks.

One recent high-profile case was Titan Corp., a U.S.
defense communications and intelligence group that pleaded
guilty earlier this year to making illegal payments to
government officials in the West African nation of Benin.

The payments came to light when defense contractor Lockheed
Martin Corp. was reviewing Titan’s books as part of a planned
acquisition of the company. The deal later fell apart.

Titan was acquired this summer by L-3 Communications, but
not before agreeing to a record-setting $28.5 million
settlement with the SEC and Justice Department.

Another recent case arising from an M&A context involved
bomb detection gear maker InVision Technologies Inc.. It agreed
to fines in a case in which the Justice Department decided not
to prosecute under FCPA, clearing the way for General Electric
Co. to acquire InVision.

Automaker DaimlerChrysler AG has said it is being
investigated by the SEC over possible FCPA issues, as have
several energy companies linked to scandals at Riggs Banks and
in the United Nations’ Oil for Food program in Iraq.




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