Last week, Attorney General Eric Holder announced a formal investigation into allegations that News Corp. has violated the Foreign Corrupt Practices Act (FCPA).
In the wake of evidence that Rupert Murdoch’s UK papers may have bought information (and perhaps silence) from British police officers, the United States’s little-known anti-bribery law has in its 34 years, never received so much attention as it is now. So it’s worth asking how the law might apply, and would its use be warranted?
Eliot Spitzer, who wrote “Prosecute News Corp.” in a piece for Slate, not only says yes to the latter question—he writes that it’s imperative:
The News Corp. case presents a pretty simple test for Attorney General Eric Holder: If the department fails to open an immediate investigation into News Corp.’s violations of the FCPA, there will have been a major breach of enforcement at Justice.
But the editorial pages of The Washington Post and News Corporation’s own Wall Street Journal over the weekend claimed no, calling on the press to check the festival spirit of News of the World coverage and warning—lest they fall under spells of schadenfreude or long-loathing of Murdoch—against taking the scandal too far.
Both newspapers were particularly critical of the press’ drumbeat for FCPA prosecutions against News Corp., which began with this July 8 story in The Guardian.
The Journal was defensive:
The political mob has been quick to call for a criminal probe into whether News Corp. executives violated the U.S. Foreign Corrupt Practices Act with payments to British security or government officials in return for information used in news stories. Attorney General Eric Holder quickly obliged last week, without so much as a fare-thee-well to the First Amendment.
The Post weighed in:
It would be easy, however, for the reaction to the scandal to go too far, driven by the long-standing antipathy among the media and political left for Mr. Murdoch and his rightward-leaning organs. Calls by some Democrats in Congress for the Justice Department to investigate News Corp. for violations of the Foreign Corrupt Practices Act, for example, are premature at best; Britain has good bribery laws and is perfectly capable of following up allegations of payoffs to its police or others.
Both The New York Times’s Peter J. Henning
and Forbes’s Harvey Silverglate (who was far more fired up that Spitzer never faced federal prosecution for using prostitutes), were skeptical an FCPA case would be mounted against News Corp.
But that’s not the clear verdict among America’s legal community.
Mike Koehler, an assistant professor of business law at Butler University who writes about the law at his “FCPA Professor” blog, explains the law prohibits the payment of money or anything of value to a “foreign official” to “obtain or retain business.”
Even with what few details that are known in the News of the World scandal, Koehler says the case against News Corp., a US-based company (and so subject to the FCPA), is clear.
Scotland Yard has admitted that News of the World reporters paid at least five police officers at least 100,000 pounds in exchange for information used in stories in 2003. British police officers qualify as “foreign officials”; there is precedent from a 2006 FCPA case in which an Iraqi police officer was considered a “foreign official,” says Koehler.
Some commentators like Henning have claimed that the “obtain or retain business” language of the law is too narrow to be applied to News Corporation’s case. But Koehler disagrees. He notes that while the law once targeted companies that directly bribed foreign officials for government contracts, the Department of Justice has ramped up FCPA enforcement in recent years, pursuing cases against companies who have gained—through payment to customs and immigration officials, for instance—any sort of comparative business advantage.
Koehler explains in a blog post:
Thus, payments to London police officers that allowed News of the World to obtain non-public information to write sensational news stories - and thus sell more newspapers - would seem to fit the type of FCPA enforcement. Given that News Corp. is a media company and its product is information, such payments are similar to an oil and gas company making payments to a “foreign official” to obtain non-public information concerning the location of oil and gas deposits.
In addition to criminal bribery allegations, News Corp. should also be concerned with civil charges that could arise as a result of the “books and records” provisions of the FCPA, says Koehner. These provisions fall under the jurisdiction of the SEC and essentially penalize companies for bad bookkeeping.