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.

As ProPublica’s Jake Bernstein told On the Media last weekend:

If you pay off the policeman and you don’t write it down in your company ledger as ‘bribe to policeman,’ then this can be a problem because you haven’t accurately kept your books and records.

Koehner explains further at his blog:

Thus, if other payments part of News Corp.’s wide-ranging scandal—such as “hush” settlement payments to phone hacking victims are misrecorded on the company’s books and records, such entries would provide the basis for independent FCPA books and records violations—even if such conduct does not directly implicate the FCPA’s anti-bribery provisions.
Koehler explains the Justice Department has a great deal of discretion in FCPA cases, which in all but two cases in the history of the law have been settled through negotiated agreements. The agency determines their enforcement action based on the cooperativeness of the offending company and the degree to which company leadership knew about the corrupt practices. The more cooperative and less knowing company executives are, the better the offending company tends to fare.

The financial consequences for companies charged with violations of the FCPA can be enormous. Siemens paid $800 million in a 2008 settlement. If an FCPA case is raised against News Corp., it will be a lengthy and costly process for the company, but it’s unlikely to bring down the whole enterprise.

For this reason, Richard L. Cassin, a lawyer who specializes in FCPA and started “The FCPA Blog,” wrote last week that it would be a shrewd move for News Corp. to disclose everything up front to the feds. He says these investigations inevitably lead investigators to ask “Where else?”

But Cassin is less convinced than Koehner that News Corp will need to disclose anything, or that the DOJ will press the case against News Corp.

Though he acknowledges the FCPA could be applied here, and that there is mounting political pressure to do so, he says there is no reason for the United States to take on a local case that is already getting legal attention from British authorities.

On this point, he and Koehler disagree. Koehler says the UK lacks the laws to seriously pursue a bribery case against News Corp. Until July 1, 2011, he says the UK’s bribery laws were weak; though the current law is airtight and even stronger than America’s FCPA, it only applies to cases that have taken place after the law’s implementation—meaning not News Corporation. Reuters columnist (and CJR Audit contributor) Felix Salmon has also made this point.

Many commentators—that Washington Post editorial for one—have also argued that using the FCPA to go after News Corp. would be an example of American overreach, butting into matters the United Kingdom is completely capable of adjudicating itself.

Koehler calls this a “valid point,” but not one that is unique to News Corp. The same argument could be made against every case involving the FCPA; to be overreaching and extraterritorial is the very spirit of the law. The FCPA was established to hold US corporations (like News Corp.) accountable for their activities abroad. Koehler says it is common for parent companies to be charged under the FCPA for activities of its subsidiaries.

There is another possible wrinkle to any potential FCPA case against News Corp: it may be that the alleged payments to police—at least the five that Scotland Yard has fessed up to—were reported to have taken place in 2003, before the US incorporation of News Corp.

Amid last week’s speculation about possible FCPA investigations, another story—conspiratorial, but inevitable under the circumstances—emerged in British and America’s left-leaning blogosphere. The stories, with only coincidence to go on, linked a $1 million donation News Corp. made to the US Chamber of Commerce last summer to a campaign to amend the FCPA law the Chamber launched last fall. Just another big bribe—albeit not one to a foreign official—was the implication.

But there’s no proof of this and indeed, and until there is, caution would be warranted. Lots of big businesses give money to the Chamber of Commerce, the business lobby, for lots of things. And at least one of the Chamber’s proposed FCPA amendments, which has the endorsement of lawyers—Koehler and Cassin among them—and some bipartisan support, is widely favored.

It’s also hard to imagine News Corp could have seen this one coming.

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Erika Fry is a former assistant editor at CJR.