A Voice From the Past Rings True 35 Years Later: Ted Sorensen on the FCPA

By Juliet S. Sorensen

In July 1976, a New York lawyer named Theodore C. Sorensen wrote an article for Foreign Affairs entitled “Improper Payments Abroad: Perspectives and Proposals.”[i] At the time, Congress was engaged in a lengthy debate about how most effectively to prevent U.S. entities from paying bribes to foreign government officials. That debate lasted until December 1977, when the Foreign Corrupt Practices Act ("“FCPA”) was enacted.

Sorensen was a partner at Paul, Weiss, Rifkind, Wharton and Garrison, where, over the course of more than 40 years, he represented U.S. and multinational corporations in negotiations with governments all over the world. Although Sorensen remains best known for his eleven years of work with John F. Kennedy, first in the Senate and then in the White House as Special Counsel and speechwriter, he noted in his 2008 memoir, Counselor: A Life at the Edge of History, that he applied the lessons he learned in government to the private practice of law:

What I had learned from JFK was invaluable to me as an international lawyer—to listen and learn from leaders of other countries; to be cautious on matters of war and peace until I knew the case for each side and all the facts and alternatives; to recognize that cultural differences can lie at the heart of political, policy, even legal disagreements . . . .

Ted Sorensen died on October 31, 2010. Just as the speeches he crafted with John F. Kennedy continue to resonate, so too do his observations on the nuances of corporate bribery and international business. Real-world pragmatism is one unifying trait. By way of example, in “Improper Payments Abroad” he noted that

Not every payment to a foreign government employee is a bribe. Nor is every corporate political contribution abroad improper. Not every foreign consultant or sales agent is corrupt or retained to perform some improper function. . . . Payments to a foreign consultant, agent, lawyer or marketer, if made in cash or not fully reported or if wholly out of proportion to his services, most likely deserve condemnation. But properly recorded payments, of an amount appropriate under the circumstances, to a qualified and responsible professional for his performance of legitimate and necessary services, may well be perfectly justifiable. To be sure, such individuals may be making the most of their personal, political, business or family ties with key government officials—a phenomenon not unfamiliar in our own country. But they also know the local language, procedures, personnel, regulations, press and sources of supplies and information. They can provide the visiting businessman with a local headquarters, communications, and a means of scheduling and coordinating appointments, as well as valuable advice on strategy and presentation.

Sorensen, moreover, took care to distinguish between bribes and

those payments, usually smaller, made by businessmen in a country where they are not prohibited, to facilitate, expedite or express appreciation for the normal, lawful performance of ministerial or procedural duties by a low-ranking government employee. ‘Grease’ payments which help persuade the bureaucrat or functionary to do his job and continue the lawful flow of paper or goods should not be commended; but neither should they be confused with bribing that individual not to do his job.

This distinction was subsequently codified in the FCPA at 18 U.S.C. § 78dd(b), under the rubric of the “exception for routine government action.”

The nuances of “grease” notwithstanding, Sorensen issued an unambiguous call for the passage of anti-bribery legislation and for corporations to refrain from all bribe payments because they were unethical, if not (at the time) illegal:

It is unethical for a corporation to pay bribes or kickbacks to foreign officials to induce them to violate their duty—a practice subversive of sound government, sound business and sound relations between the two, no matter how deeply entrenched it may have become in the host country; a costly, wasteful interference with the free competitive market system; and a cynical, shabby technique of getting business which usually rewards the richest, most reckless and ruthless while passing on the cost to those who can afford it least.

Sorensen’s advice to Congress on how to draft an international anti-corruption law is particularly relevant in light of last November’s congressional hearings examining the Department of Justice’s enforcement of the FCPA, and the increasingly vocal calls for amending the Act:

Such a law would have to be drawn and enforced with great care and precision, carefully setting forth the distinctions between bribery and the other forms of payments described above, and not undertaking to enforce what it cannot reach without placing numerous police agents in every U.S. embassy. Unenforced and unenforceable laws only engender disrespect.

Sorensen proceeded to reject the concern that a law like the FCPA would result in overseas business going to U.S. competitors, and a decline in U.S. exports:

A large number of U.S. corporations successfully operating overseas have constantly faced and consistently resisted the pressures and temptations to make payments. Those not resisting appear in many cases to have been those too lazy to compete in honest salesmanship or too inefficient to compete on price, quality and service.

In this regard, Sorensen’s view is corroborated by the research of Columbia Business School‘s Professor Shang-Jin Wei, who in 2000 conducted an extensive comparison of U.S. foreign direct investment and foreign direct investment from other countries. Wei found that corruption deters all foreign direct investment, regardless of the source, and that U.S. firms were no less likely to suffer from a lack of business overseas than firms based in countries lacking anti-bribery criminal statutes.

In 1976, Sorensen took the position in “Improper Payments Abroad” that international action against corrupt practices was more likely to take root if the U.S. led the way with the passage of its own anti-bribery legislation:

[A]waiting development of an international code by the OECD, GATT, IMF or the United Nations is largely an excuse for delay and inaction. . . . [T]he United States will be in a stronger position to call for action from other countries, and to embarrass or otherwise pressure any U.S. companies’ competitors who are still paying bribes, after we have taken effective action against our own unethical corporations in this regard.

This “race to the top” thesis was borne out with enactment of the OECD anti-bribery convention in 1997 and the United Nations Convention Against Corruption in 2005, two international treaties in which the United States played a key leadership role in both drafting treaty language and in rallying sufficient international support.

Finally, Sorensen argued that a ban on payments to government officials was good for U.S. national security and stature as a world leader:

U.S. security and stature are not increased when foreign officials are improperly induced to ignore their countries’ internal needs or to distort their defense priorities by spending their limited funds . . . on what are frequently marginal weapons systems or a kind they do not need, cannot afford to maintain or will not be able to operate. . . . In short, it is on balance in the long-run interest of the United States to halt these wasteful, corrosive and indefensible payments to foreign officials by U.S.-based corporations and their subsidiaries. Such action would enable this country once again to offer moral leadership to the world, demonstrating our concern not only for the defense of society but also for the kind of society we are defending, and practicing what we preach about the free market system.

In the arena of international corruption, as in so many others, Ted Sorensen offered insight and moral leadership, written with the incisive clarity that was his hallmark. How I wish he was still with us.

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Juliet S. Sorensen is a Clinical Assistant Professor of Law at Northwestern University, where her teaching and research interests include international criminal law and corruption. She is the daughter of Theodore C. Sorensen.

[i] Theodore C. Sorensen, “Improper Payments Abroad: Perspectives and Proposals,” 54 Foreign Affairs 719 (1976).

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Juliet S. Sorensen

Juliet S. Sorensen