[Senate Executive Report 105-19]
[From the U.S. Government Publishing Office]



105th Congress                                               Exec. Rpt.
                                 SENATE

 2d Session                                                      105-19
_______________________________________________________________________


 
     CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN 
                  INTERNATIONAL BUSINESS TRANSACTIONS

                                _______
                                

                 July 16, 1998.--Ordered to be printed

_______________________________________________________________________


   Mr. Helms, from the Committee on Foreign Relations, submitted the 
                               following

                              R E P O R T

                   [To accompany Treaty Doc. 105-43]

    The Committee on Foreign Relations, to which was referred 
the Convention on Combating Bribery of Foreign Public Officials 
in International Business Transactions, adopted at Paris on 
November 21, 1997, by a conference held under the auspices of 
the Organization for Economic Cooperation and Development 
(OECD), signed in Paris on December 17, 1997, by the United 
States and 32 other nations, having considered the same, 
reports favorably thereon with one understanding, one 
declaration and three provisos, and recommends that the Senate 
give its advice and consent to the ratification thereof as set 
forth in this report and the accompanying resolution of 
ratification.


                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Background.......................................................2
III. Summary..........................................................2
 IV. Entry Into Force and Termination.................................7
  V. Committee Action.................................................7
 VI. Committee Comments...............................................8
VII. Explanation of Proposed Convention..............................14
VIII.Text of the Resolution of Ratification..........................14

 IX. Appendix........................................................19

                               I. Purpose

    The primary purpose of the Convention on Combating Bribery 
of Foreign Public Officials in International Business 
Transactions (``Convention'') is to require Parties to the 
Convention to criminalize bribery of foreign public officials 
in order to obtain or retain business or other improper 
advantage in the conduct of international business.

                             II. Background

    On November 21, 1997, negotiators from thirty-three 
countries (the twenty-eight Organization for Economic 
Cooperation and Development (``OECD'') member states plus 
Argentina, Brazil, Bulgaria, Chile and Slovakia) signed the 
Convention at the OECD in Paris.
    At the urging of the United States, the OECD adopted in 
1994 a Recommendation on Combating Bribery in International 
Business Transactions, and in 1996 adopted a Recommendation on 
the Tax Deductibility of Bribes of Foreign Public Officials. A 
Revised Recommendation on Combating Bribery in International 
Business Transactions was approved at a May 1997 meeting of 
OECD Ministers. Included was an annex of agreed common 
elements, which was the basis for convention negotiations. 
Three rounds of negotiations were held in July, October, and 
November. The Convention was signed in Paris on December 17th, 
1997, and was submitted to the Senate on May 4, 1998.

                              III. Summary

                               a. general

    The Convention obligates the Parties to criminalize bribery 
of foreign public officials. This is defined to include 
officials in all branches of government, whether appointed or 
elected; any person exercising a public function, including for 
a public agency or public enterprise; and any official or agent 
of a public international organization. A public function 
includes any activity in the public interest delegated by a 
foreign country. A public enterprise is any enterprise over 
which the government or governments may, directly or 
indirectly, exercise a dominant influence. An official of a 
public enterprise shall be deemed to perform a public function 
unless the enterprise operates on a normal commercial basis in 
the relevant market, i.e., on a basis which is substantially 
equivalent to that of a private enterprise, without 
preferential subsidies or other privileges.
    The Convention does not specifically cover political 
parties. Some persons who are not formally designated as public 
officials but who may in fact perform a public function (e.g., 
political party officials in single party states) may, under 
the legal principles of some countries, be considered as 
foreign public officials. In addition, under the legal systems 
of some countries, an advantage promised or given to a person 
in anticipation of that person becoming a foreign public 
official may fall within the Convention's scope.
    The negotiators agreed to apply ``effective, proportionate 
and dissuasive criminal penalties'' to those who bribe foreign 
public officials. Countries whose legal systems lack the 
concept of criminal corporate liability must provide for 
equivalent non-criminal sanctions, including monetary 
penalties. The Convention requires that countries be able to 
seize or confiscate the bribe and bribe proceeds (e.g., net 
profit), or property of similar value, or apply monetary 
sanctions of comparable effect.
    The Convention requires Parties to take necessary measures, 
within the framework of their relevant laws and regulations, 
that prohibit the establishment of off-the-books accounts and 
similar practices used to bribe foreign public officials or to 
hide such bribery. Parties shall make bribery of foreign public 
officials a predicate offense for purposes of money laundering 
legislation on the same terms as bribery of domestic public 
officials.
    Parties are to establish jurisdiction over offenses that 
are committed in whole or in part in their territories. Parties 
may rely on the general jurisdictional principles--nationality 
or territoriality--recognized by their legal systems. The 
territorial basis for jurisdiction is to be interpreted broadly 
so that an extensive physical connection to the act of bribery 
is not required. The Convention provides that Parties will 
review their current bases for jurisdiction and take remedial 
steps if they are not effective in the fight against the 
bribery of foreign public officials. Parties shall consult when 
more than one party asserts jurisdiction. Participating 
governments pledged to work together to provide legal 
assistance relating to investigations and proceedings within 
the scope of the Convention and to make bribery of foreign 
public officials an extraditable offense.
    At the May 1997 OECD Council meeting, Ministers recommended 
that member states submit to national legislatures by April 1, 
1998, legislation to criminalize bribery of foreign public 
officials and seek the enactment of such laws by the end of 
1998. The Convention requires the Parties cooperate in a 
follow-up program, within the framework of the OECD, to monitor 
and promote full implementation.
    The Convention will enter into force when five of the ten 
largest OECD exporting counties, which by themselves represent 
60 percent of the combined total exports of those ten 
countries, deposit their instruments of ratification. If this 
has not occurred by the end of 1998, the Convention will enter 
into force when at least two signatories have deposited their 
instruments of ratification and declare their willingness to be 
bound.

                           b. key provisions

    The Offense. Article 1 of the Convention requires each 
Party to take measures to establish that it is a criminal 
offense under its law for any person intentionally to offer, 
promise, or give any undue pecuniary or other advantage to a 
foreign public official, for that public official, or for a 
third party, in order that the official act or refrain from 
acting in the performance of official duties so that an 
international business will obtain or retain business or any 
other improper advantage. Each Party to the Convention is also 
required to criminalize complicity in an act of bribery of a 
foreign public official.
    ``Foreign public official'' is defined to include persons 
holding legislative, administrative, or judicial office of a 
foreign country, whether appointed or elected; any person 
exercising a public function for a foreign country, including 
for a public agency or public enterprise, regardless of form, 
over which a government, or governments, may, directly or 
indirectly, exercise a dominant influence. This definition does 
not include foreign political parties, officials, or 
candidates. According to a summary prepared by the Departments 
of Commerce, State, and Justice, although political parties are 
not specifically covered, negotiators agreed that the 
Convention will cover business-related bribes to foreign public 
officials made through political parties and party officials.
    Legal Persons. Article 2 of the Convention requires each 
Party, in accordance with its legal principles, to establish 
the liability of persons for the bribery of a foreign public 
official. The commentaries on the Convention state that if, 
under the legal system of a Party, criminal responsibility is 
not applicable to legal persons, the Party is not required to 
establish the criminal responsibility.
    Criminal/Civil Penalties. Article 3 requires parties to 
sanction bribery of a foreign public official with ``effective, 
proportionate and dissuasive criminal penalties.'' If, under a 
Party's legal system, criminal responsibility is not applicable 
to legal persons, the Party shall make certain that legal 
persons are subject to dissuasive and effective non-criminal 
sanctions, including monetary sanctions. Effective measures 
shall be taken to provide that the proceeds of bribery of a 
foreign official or property corresponding to the value of the 
proceeds may be subject to seizure.
    Paragraph 4 of Article 3 states that each Party may 
consider imposing additional civil or administrative sanctions 
upon a person for bribing a foreign public official. The 
commentaries on this paragraph provide that among the civil or 
administrative sanctions which might be imposed are exclusion 
from entitlement to public benefits or aid, disqualification 
from participation in public procurement, placing under 
judicial supervision, and a judicial winding-up order.
    Jurisdiction. Article 4 requires each Party to establish 
its jurisdiction over the bribery of a foreign public official 
when the offense is committed in its territory. In addition, 
each Party is required to establish jurisdiction to prosecute 
its nationals for offenses committed abroad with respect to the 
bribing of a foreign public official.
    Enforcement. Article 5 requires Parties to enforce its 
commitments under the Convention without regard to political or 
economic interests. Specifically, the investigation and 
prosecution of the bribery of a foreign public official shall 
not be influenced by considerations of national economic 
interest, the potential effect upon relations with another 
country, or the identity of the natural or legal persons 
involved.
    Statute of Limitations. Article 6 requires Parties to apply 
a statute of limitations to the offense of bribery of a foreign 
public official that permits for an adequate amount of time to 
investigate and prosecute. The Commentaries are silent on this 
article, so it is not clear what such a time frame would be.
    Money Laundering. Article 7 requires each Party, which has 
made bribery of its own public officials an offense for 
purposes of application of its own money laundering 
legislation, to do the same for the bribery of a foreign public 
official.
    Accounting. Article 8 is an essential provision for 
carrying out the requirements of the Convention. It requires 
measures by each Party to prohibit off-the-books accounts, 
inadequately identified transactions, the recording of non-
existent expenditures, the entry of liabilities with incorrect 
identification of their object, and the use of false documents 
for the purpose of bribing foreign public officials or of 
hiding the bribery. Penalties for the violation of such 
accounting laws must be ``effective, proportionate and 
dissuasive.''
    Mutual Legal Assistance. Article 9 requires each Party to 
provide prompt and effective legal assistance to another Party 
for the purpose of criminal and non-criminal investigations and 
proceedings. The provision assumes dual criminality for 
violations of the Convention, and prohibits any Party from 
asserting bank secrecy as a reason to deny legal assistance.
    Extradition. Article 10 requires bribery of a foreign 
public official to be included as an extraditable offense under 
the Parties' laws and extradition treaties. The Convention 
permits, but does not require, each Party to use the Convention 
as a legal basis for extradition. The Convention requires a 
Party that denies extradition on the basis that the individual 
is a national, to submit the case for prosecution in its own 
jurisdiction. The provision assumes dual criminality for 
purposes of extradition.
    Responsible Authorities. Article 11 requires that each 
Party establish a ``responsible authority'' for purposes of 
mutual legal assistance and extradition. Parties must inform 
the Secretary General of the OECD who the responsible authority 
will be.
    Monitoring and Follow-up. Article 12 requires the Parties 
to follow-up on their commitments through a program that 
monitors enforcement and promotes full implementation. Unless 
otherwise agreed, the program will be carried out in the 
framework of the OECD Working Group on Bribery in International 
Business Transactions.
    Final Clauses. Article 13, concerning signature and 
accession, opens the Convention to signature by non-members of 
the OECD which have become full participants in the OECD 
Working Group on Bribery in International Business 
Transactions. The Convention will enter into force on the 
sixtieth day following the date of deposit of instruments for 
such non-members. Article 14, concerning ratification and 
depositary of the Convention, requires ratification under each 
country's laws, and designates the OECD Secretary General as 
the depositary for instruments of ratification.
    Article 15, regarding entry into force, requires that the 
Convention enter into force on the sixtieth day following the 
date on which five of the ten largest exporting countries have 
deposited their instruments of ratification. In the event that 
this has not occurred by the end of 1998, the Convention will 
enter into force when at least two signatories have deposited 
their instruments of ratification, and declared its readiness 
to be bound by the Convention.
    Article 16, regarding amendments to the Convention, 
requires that amendments be submitted to the OECD Secretary 
General at least 60 days before he convenes a meeting of the 
Parties to consider the amendment. Amendments must be adopted 
by consensus, or by other means that the Parties determine by 
consensus. Amendments will enter into force 60 days after 
instruments of ratification are deposited with the OECD 
Secretary General, or as specified by the Parties when the 
amendment is adopted.
    Article 17, regarding withdrawal, permits a Party to 
withdraw from the Convention upon written notification to the 
OECD Secretary General. The withdrawal will take place one year 
after submission of the written notification. Parties must 
cooperate even after withdrawal on requests for information or 
extradition made prior to withdrawal.

               c. the u.s. foreign corrupt practices act

    During the mid-1970's investigations and legal actions 
against numerous domestic corporations revealed the practice by 
some U.S. corporations of making questionable or illegal 
payments to foreign government officials. The legal and 
regulatory mechanisms for dealing with these payments had 
involved actions by the Securities and Exchange Commission 
(SEC) against public corporations for concealing from required 
public disclosure substantial payments made by the firm and the 
potential for an antitrust action for restraint of trade or 
fraud prosecutions by the Justice Department.
    Government officials and administrators contended that more 
direct prohibitions on foreign bribery and more detailed 
requirements concerning corporate record-keeping and 
accountability were needed to deal effectively with the 
problem. The revelations of slush funds and secret payments by 
American corporations were stated to have affected adversely 
American foreign policy, damaged the image of American 
democracy, and impaired public confidence in the financial 
integrity of American corporations. Congress responded with the 
passage of the Foreign Corrupt Practices Act of 1977.
    After passage, Congress for a number of years considered 
amending the 1977 Foreign Corrupt Practices Act. After a great 
deal of debate through at least three Congresses, the Foreign 
Corrupt Practices Act Amendments were signed into law as Title 
V of the Omnibus Trade and Competitiveness Act of 1988 on 
August 23, 1988. One provision of the 1988 Amendments 
encouraged the Administration to negotiate a treaty at the OECD 
that would require other countries to enact similar laws 
prohibiting bribery of foreign government officials.
    In many ways the OECD Convention on Bribery is very similar 
to the Foreign Corrupt Practices Act (FCPA). However, there are 
several differences which, if the OECD Convention is approved, 
will necessitate changes in the FCPA in order for U.S. law to 
conform with the OECD Agreement.
    First, the FCPA currently criminalizes payments made to 
influence any decision of a foreign official or to induce that 
official to do or omit to do any act, in order to obtain or 
retain business. An amendment will expand the scope to include 
payments made to secure ``any improper advantage,'' the 
language used in the OECD Convention.
    Second, the OECD Convention requires Parties to cover 
prohibited acts by ``any person.'' The current FCPA covers only 
the issuers as defined in the 1934 Securities Exchange Act and 
``domestic concerns.'' An amendment will expand the scope of 
the FCPA to cover acts prohibited by the Convention of persons 
other than the issuers or domestic concerns (i.e., foreign 
natural and legal persons), committed while in the territory of 
the United States, regardless of whether the mails or a means 
or instrumentality of interstate commerce are used in 
furtherance of the prohibited acts.
    Third, the OECD Convention includes officials of 
international agencies within the definition of foreign public 
official. Accordingly, an amendment will expand the FCPA 
definition of foreign public official to include officials of 
public international organizations.
    Fourth, the OECD Convention calls on Parties with 
jurisdiction to prosecute their nationals for offenses 
committed abroad to assert nationality jurisdiction over the 
bribery of foreign public officials, consistent with national 
legal and constitutional principles. Accordingly, an amendment 
will provide for jurisdiction over the acts of U.S. businesses 
and nationals, in furtherance of unlawful payments, that take 
place wholly outside the United States.
    Finally, an amendment to the penalty sections relating to 
issuers and domestic concerns will ensure that penalties for 
non-U.S. citizen employees and agents of issuers and domestic 
concerns accord with those of U.S. citizen employees and 
agents. (Under the current FCPA, non-U.S. citizen and agents of 
issuers and domestic concerns are subject only to civil, rather 
than criminal, penalties.)

                  IV. Entry into Force and Termination

                          a. entry into force

    The Convention enters into force on the sixtieth day after 
five of the ten largest exporting countries, as set out in the 
Convention annex, have deposited instruments of ratification. 
These countries must also represent 60 percent of exports of 
those ten countries. For Parties that deposit instruments of 
ratification after that date, the Convention shall enter into 
force 60 days after deposit of instruments.
    In the event that the Convention has not entered into force 
by December 31, 1998, Parties may declare their willingness to 
accept entry into force notwithstanding the failure to meet the 
requirements set forth above. If two Parties make such 
declarations, the Convention shall enter into force on the 
sixtieth day following deposit of such declarations. For 
Parties that deposit instruments of ratification after that 
date, the Convention shall enter into force 60 days after 
deposit of instruments.

                             b. termination

    Parties may withdraw from the Convention by submitting 
written notification to the Depositary. Withdrawal shall be 
effective one year after the date of such notification. The 
Convention requires that Parties continue to cooperate on 
requests for assistance and extradition made before the date of 
withdrawal.

                          V. Committee Action

    The Committee on Foreign Relations held a public hearing on 
the proposed Convention on June 9, 1998 (a transcript of the 
hearing and questions for the record can be found in the annex 
to this report). The Committee considered the proposed 
Convention on June 23, 1998, and ordered it favorably reported 
by voice vote, with the recommendation that the Senate give its 
advice and consent to the ratification of the proposed 
Convention subject to one understanding, one declaration, and 
three provisos.

                         VI. Committee Comments

    The Committee on Foreign Relations recommends favorably the 
proposed Convention. On balance, the Committee believes that 
the proposed Convention is in the interest of the United States 
and urges the Senate to act promptly to give its advice and 
consent to ratification. Several issues did arise in the course 
of the Committee's consideration of the treaties, and the 
Committee believes that the following comments may be useful to 
the Senate in its consideration of the proposed Convention and 
to the State Department.

                   a. implementation and enforcement

    According to Under Secretary of State Stuart Eizenstat, 
during his testimony before the Committee in support of this 
Convention, the U.S. Government is aware of allegations of 
bribery by foreign firms in the last year affecting 
international contracts worth almost $30 billion. Such bribes 
are not currently prohibited by criminal laws in their home 
jurisdictions.
    The Committee believes that simply ratifying this 
Convention will not reverse this trend. Of primary import in 
curbing bribery of foreign officials under the Convention will 
be the commitment of Parties to implement and enforce fully 
their obligations under the Convention. This will not be an 
easy task, and in some cases may be politically difficult--
particularly in instances where corporations are owned by or 
associated with the government of a Party. The Committee 
therefore supports ratification of the Convention, but cautions 
that it will be a hollow exercise if Parties to the Convention 
view ratification simply as a political exercise to inoculate 
them from criticism related to corrupt practices by their 
companies. The Convention requires not only a political 
commitment to oppose bribery of foreign public officials, but 
requires that Parties take the next step to enact and enforce 
tough laws prohibiting such activities.
    Article 3(1) of the Convention requires each Party to the 
Convention to provide for ``effective, proportionate and 
dissuasive'' criminal penalties. In response to a question for 
the record, the State Department defined such penalties as 
those that:

        ``clearly apply to the offense of bribery of a foreign 
        public official; are proportionate (in the amount of 
        fine and/or length of imprisonment) to the seriousness 
        of the offense; are comparable to the penalties that 
        apply to bribery of a party's own public officials; and 
        provide a deterrent to such conduct.''

The Committee believes that a failure to fully apply such 
penalties would in fact erode the deterrent quality of these 
penalties. As such, the Committee has included in the 
recommended resolution of ratification a requirement that the 
Executive submit a detailed report to the Congress annually 
regarding each Party's enforcement of its domestic laws 
implementing the obligations of the Convention. Included in the 
report will be a detailed account of each Party's efforts to 
investigate and prosecute cases of bribery of foreign public 
officials, including cases involving its own citizens. In 
addition, the Executive must assess whether sufficient 
resources have been provided to enforce a Party's obligations 
under the Convention and whether each Party has shared 
information relating to natural and legal persons prosecuted or 
subjected to civil or administrative proceedings.
    In the annual report's assessment of compliance with the 
obligations of the Convention, the Committee anticipates that 
the President will place an emphasis on the accounting of 
business transactions, as required by Article 8 of the 
Convention. Specifically, the Committee expects the President 
to assess whether Parties are prohibiting off-the-book 
accounts, inadequately identified transactions, the recording 
of non-existent expenditures, the entry of liabilities with 
incorrect identification of their object, and the use of false 
documents for the purpose of bribing foreign officials or 
hiding bribery of foreign or domestic officials.
    The need for full and detailed reporting cannot be 
overstated. In order to ensure this Convention has an impact in 
reducing bribery in international business, increased 
transparency will be required. The Committee was accommodating 
in requiring the Executive to prepare a report on an annual 
basis, rather than biannually, so as to ensure thorough and 
detailed reporting. The Committee expects that the 
Administration will take this reporting requirement seriously 
and respond to each provision of the reporting requirement 
directly.
    Finally, the Convention places the obligation of 
implementation and enforcement of the Convention's requirements 
on each Party. The Committee supports this construct, and would 
be concerned should there be an effort in the future to 
transfer these responsibilities to the OECD or any other 
international body. This should not, however, leave Parties 
under the assumption that they may interpret provisions broadly 
so as to undermine the intent of the Convention: to 
criminalize, and thereby deter, the bribery of foreign public 
officials in order to obtain or retain business or other 
improper advantage in the conduct of international business.

                b. defining ``foreign public official''

    The legal definition given to the term ``foreign public 
official'' by each Party will be pivotal in ensuring that the 
obligations of the Convention have an impact on current 
practices. According to the State Department, in response to a 
question for the record:

        The term ``foreign public official'' is meant to apply 
        to all persons in the legislative, administrative, or 
        judicial branch of government. ``Administrative'' as 
        used in this context is synonymous with our Executive 
        Branch. The term ``foreign public official'' also 
        includes any person exercising a public function for a 
        foreign country, including for a public agency or 
        public enterprise, and any official or agent of a 
        public international organization.

The Committee expects that the Executive will ensure this broad 
understanding is shared by other Parties to the Convention. The 
annual report required of the Executive in the resolution of 
ratification requires a description of the domestic laws 
enacted by each Party to the Convention, and an assessment of 
the compatibility of the laws with the obligations of the 
Convention. The Committee anticipates that the Executive will 
assess each country's laws in relation its assertions to the 
Committee regarding the broad definition of ``foreign public 
official.''
    One shortcoming of the proposed Convention is the failure 
to include in the definition of ``foreign public official'' 
foreign political parties or party officials, and candidates 
for foreign political office. The Administration has assured 
the Committee, in response to a question for the record, that 
it will work to include these officials in the definition:

        U.S. negotiators made a concerted effort to have 
        political parties and party officials covered under the 
        Convention. Other delegations, however, were not 
        prepared to accept this, arguing that political parties 
        and party officials could not be considered ``public 
        officials'' as the term is generally understood.

        At the Conclusion of the negotiations on the text of 
        the Convention in November 1997, United States 
        representatives insisted upon formal agreement on a 
        program of accelerated work on a number of issues not 
        adequately addressed in the Convention text. These 
        issues included bribery of political parties and 
        political party officials in international business 
        transactions, bribery of candidates for political 
        office, and aspects of the use of money laundering 
        legislation in the fight against illicit payments. 
        Accordingly, the OECD Council on December 11, 1997, in 
        approving the Convention text and recommending its 
        adoption by Ministers representing participating 
        countries, adopted a Decision committing member 
        countries to examining these issues and reporting 
        results to Ministers by the Spring 1999 annual OECD 
        Ministerial meeting. At the suggestion of France, two 
        additional issues were added to this accelerated work 
        plan on issues related to bribery of foreign public 
        officials: (a) the role of foreign subsidiaries and (b) 
        the role of offshore money centers.

        Work on these issues will begin with the June 29-July 1 
        meeting of the OECD Working Group on Bribery. It is 
        expected that an experts group of representatives of 
        participating governments will be formed to outline 
        possible recommendations over the late summer and early 
        autumn, with formal Working Group discussions to begin 
        in earnest in November 1998. On political parties, 
        party officials, and candidates for political office, 
        the U.S. objective will be to secure member country 
        agreement to amend the Convention to include such 
        entities/individuals among those to whom payment of 
        bribes to obtain or retain business will be prohibited, 
        as is the case under the U.S. Foreign Corrupt Practices 
        Act. As in the negotiation of the Convention itself, 
        multilateral, bilateral and public diplomacy will be 
        required to achieve these objectives.

The Committee supports the Executive's efforts to include 
political party officials and candidates in the definition. The 
annual report required of the Executive emphasizes the 
importance of U.S. leadership in negotiating an amendment to 
the Convention by requiring the President to describe efforts 
by the United States to amend the Convention to require 
countries to expand the definition of ``foreign public 
official,'' so as to make illegal the bribery of foreign 
political parties or party officials, and candidates for 
foreign political office.
    Finally, the Committee is concerned by a potential loophole 
in the definition of foreign public officials that would allow 
individuals or corporations to bribe family members of foreign 
public officials without penalty. In a response to a question 
for the record, the State Department described the reach of the 
Convention to family members:

        The Convention, like the U.S. Foreign Corrupt Practices 
        Act, covers bribes offered or paid to a foreign public 
        official so that the official will take certain action, 
        or refrain from acting, in the performance of official 
        duties. Bribes to a family member of a foreign public 
        official are covered in circumstances where (1) a bribe 
        is paid to a family member as a conduit or 
        intermediary, who in turn passes it to the foreign 
        public official, the intended recipient; or (2) a 
        foreign public official directs that a bribe, intended 
        to induce that official to take certain action or 
        refrain from acting, be paid to a family member.

The Committee is concerned that in many instances the 
connection between the payment to immediate family members and 
the influence on a foreign public official will not be evident. 
Payments to a family member who does not pass it on to a family 
member who is a public official, yet enriches the family, would 
not be covered under the proposed Convention. The Committee 
directs the President to describe efforts by the United States 
to amend the Convention to expand the definition of ``foreign 
public official,'' so as to make illegal the bribery of 
immediate family members of foreign public officials.

               c. extradition and mutual legal assistance

    Ratification of a bilateral extradition treaty granting the 
authority to extradite individuals in the United States to 
other nations generally reflects an endorsement of the judicial 
system, and the level of respect for human rights in the nation 
with which the United States enters into an extradition 
relationship. Although the proposed Convention provides the 
authority for extradition and legal assistance (should Parties 
choose to use the Convention for such authority), the Committee 
is concerned that nations may seek extradition of individuals 
in the United States under the Convention even in situations 
where there is no bilateral extradition treaty with the United 
States authorizing extradition.
    In order to ensure that this possibility does not arise, 
the Committee's recommended resolution of ratification includes 
an understanding that the United States will not use the 
proposed Convention as the legal basis for extradition to any 
country with which the United States has no bilateral 
extradition treaty in force. In addition, the understanding 
makes clear that even when the United States has a bilateral 
extradition treaty in force, that bilateral extradition treaty, 
not the Convention, will serve as the legal basis for 
extradition of individuals for offenses covered under the 
Convention.
    This understanding thereby ensures that the crime of 
bribery of foreign public officials will be a basis for 
extradition--even in the case of ``list treaties'' that 
enumerate the kinds of crimes upon which the United States may 
extradite. At the same time, all of the provisions of the 
relevant bilateral extradition treaty, including any Senate 
conditions to ratification, will also apply so that it can be 
assured that the normal extradition processes can be followed. 
No legal basis for extradition of individuals in the United 
States will exist when a Party to the Convention requesting 
extradition is not also a Party to a bilateral extradition 
treaty with the United States.
    In the case of mutual legal assistance, the Committee's 
recommended resolution of ratification includes a proviso that 
ensures that any information shared under the proposed 
Convention will be subject to the same Senate proviso that 
typically is included in bilateral mutual legal assistance 
treaties. Specifically, this proviso requires the United States 
to deny assistance when essential public policy interests would 
be violated. Essential public policy interests include when the 
United States has specific information that a senior government 
official who would have access to the information is engaged in 
a felony. The proviso also makes clear that in cases where the 
United States has a bilateral mutual legal assistance treaty in 
force, that treaty will serve as the basis for sharing 
information.

         d. tax deduction of bribes to foreign public officials

    Certain countries permit corporations and individuals to 
deduct bribes paid to foreign officials as a legitimate 
business expense. According to the State Department's response 
to questions for the record, the following countries continue 
to allow such deductions: Australia, Austria, Belgium, France, 
Germany, Luxembourg, New Zealand, Sweden, and Switzerland.
    In 1996, OECD Council members agreed to a Recommendation of 
the Council on the Tax Deductibility of Bribes to Foreign 
Public Officials. The Recommendation requires nations to ``re-
examine [tax measures which may indirectly favor bribery] with 
the intention of denying this deductibility.'' Despite this 
recommendation, the aforementioned countries continue to permit 
tax deduction for bribes. Many countries are quick to talk 
about the need to end corruption and to apply the rule of law 
in developing countries. Yet, these efforts are undermined when 
tax laws in developed countries encourage the very behavior 
they criticize.
    The Committee is concerned that the slow pace in which OECD 
members have implemented this Recommendation may be an 
indication of the lack of commitment to make real changes in 
law and practice with regard to bribes paid by their 
businessmen and women to foreign public officials. Ending the 
tax deduction of bribes seems to be a clear first step, and the 
Committee is somewhat astounded that this change in law has 
been so difficult to attain. The Committee anticipates that the 
Department of Treasury will continue to make this issue a 
priority in its discussions in the OECD, particularly in the 
OECD Working Group on Bribery in International Business 
Transactions.

                 e. expanded efforts to combat bribery

    The Convention was adopted and signed by 28 OECD Member 
States and five non-OECD Members who are participants in the 
OECD's Working Group on Bribery in International Business 
Transactions. Australia, an OECD Member State, has initialed 
the Convention, but has not yet signed it. The non-OECD Member 
signatories include Argentina, Brazil, Bulgaria, Chile and 
Slovakia.
    The Committee recognizes that the OECD, a forum for the 
highly industrialized nations, represents the ideal forum for 
negotiating a Convention of this nature in part because most 
major international companies are based in OECD Member States. 
That said, the Committee commends the OECD's Working Group on 
Bribery in International Business Transactions for involving 
the five non-OECD Members, and encouraging their full 
participation in the Convention. Such participation underscores 
the potential for full globalization of the provisions of the 
Convention.
    As Secretary of State Madeleine Albright stated at the 
December 17, 1997, signing ceremony for the Convention:

        We recognize that supplier nations have a special 
        responsibility to stop this destructive practice. * * * 
        Indifference in the developed world legitimized 
        corruption in the developing world. It encouraged the 
        patronizing belief that the problem was cultural and 
        that we couldn't do anything about it. * * * At the 
        same time, as supplier nations in the OECD take these 
        steps, it is vital that nations in the developing world 
        meet their responsibility to act.

    The Committee agrees with this assessment and notes that 
becoming a Party to the Convention and fully implementing its 
provisions would expand the Convention's goal of reducing 
bribery in international business transactions worldwide. The 
Committee therefore expects the Executive to work through 
bilateral and multilateral fora to encourage other non-OECD 
Members not only to become signatories to the Convention but to 
fully implement and enforce the provisions of the Convention. 
The annual report required of the Executive in the Committee's 
recommended resolution of ratification requires a description 
of U.S. efforts in this regard.
    In addition, the Committee notes the importance of 
combating bribery through multilateral fora outside the OECD, 
and in the activities of these institutions. The Preamble of 
the Convention welcomes actions taken by international 
organizations such as the United Nations, the World Bank, the 
International Monetary Fund, the World Trade Organization, the 
Organization of American States, the Council of Europe and the 
European Union. These organizations have begun to institute, 
often at U.S. urging, policies to strengthen their anti-bribery 
disciplines, such as: taking corruption into account in lending 
practices; undertaking measures to ensure the rule of law and 
promote good governance; establishing uniform procurement 
rules; and enacting practices that promote transparency and 
openness. The Committee recognizes that there is further work 
to be done in these areas and expects that the Administration 
will continue to make such efforts a priority.
    Under Secretary of State Stuart Eizenstat, during his 
testimony before the Committee in support of this Convention, 
noted that the Administration is working in the World Trade 
Organization and in regional fora in Asia and Latin America 
``to encourage increased transparency in government 
procurement.'' The Committee believes that efforts to adopt 
aggressive anti-corruption strategies under the auspices of 
such institutions represent important and complementary efforts 
to the Convention, and should be continued. The Committee also 
recommends that the Administration make a concerted effort to 
pursue such goals through regional fora in Africa, where 
corruption has represented a significant deterrent to U.S. 
companies and to the development of the rule of law.

                VII. Explanation of Proposed Convention

    For a detailed article-by-article analysis of the proposed 
Convention, see the letter of submittal from the Secretary of 
State, which is set forth at pages V-X of Treaty Doc. 105-43.

              VIII. Text of the Resolution of Ratification

    Resolved, (two-thirds of the Senators present concurring 
therein), That the Senate advise and consent to the 
ratification of the Convention on Combating Bribery of Foreign 
Public Officials in International Business Transactions, 
adopted at Paris on November 21, 1997, by a conference held 
under the auspices of the Organization for Economic Cooperation 
and Development (OECD), signed in Paris on December 17, 1997, 
by the United States and 32 other nations (Treaty Doc. 105-43), 
subject to the understanding of subsection (a), the declaration 
of subsection (b), and the provisos of subsection (c).

    (a) UNDERSTANDING.--The advice and consent of the Senate is 
subject to the following understanding, which shall be included 
in the instrument of ratification and shall be binding on the 
President:

          EXTRADITION.--The United States shall not consider 
        this Convention as the legal basis for extradition to 
        any country with which the United States has no 
        bilateral extradition treaty in force. In such cases 
        where the United States does have a bilateral 
        extradition treaty in force, that treaty shall serve as 
        the legal basis for extradition for offenses covered 
        under this Convention.

    (b) DECLARATION.--The advice and consent of the Senate is 
subject to the following declaration:

          TREATY INTERPRETATION.--The Senate affirms the 
        applicability to all treaties of the constitutionally 
        based principles of treaty interpretation set forth in 
        Condition (1) of the resolution of ratification of the 
        INF Treaty, approved by the Senate on May 27, 1988, and 
        Condition (8) of the resolution of ratification of the 
        Document Agreed Among the States Parties to the Treaty 
        on Conventional Armed Forces in Europe, approved by the 
        Senate on May 14, 1997.

    (c) PROVISOS.--The advice and consent of the Senate is 
subject to the following provisos:

                  (1) ENFORCEMENT AND MONITORING.--On July 1, 
                1999, and annually thereafter for five years, 
                unless extended by an Act of Congress, the 
                President shall submit to the Committee on 
                Foreign Relations of the Senate, and the 
                Speaker of the House of Representatives, a 
                report that sets out:

                          (A) RATIFICATION.--a list of the 
                        countries that have ratified the 
                        Convention, the dates of ratification 
                        and entry into force for each country, 
                        and a detailed account of U.S. efforts 
                        to encourage other nations that are 
                        signatories to the Convention to ratify 
                        and implement it.
                          (B) DOMESTIC LEGISLATION IMPLEMENTING 
                        THE CONVENTION.--a description of the 
                        domestic laws enacted by each Party to 
                        the Convention that implement 
                        commitments under the Convention, and 
                        an assessment of the compatibility of 
                        the laws of each country with the 
                        requirements of the Convention.

                          (C) ENFORCEMENT.--an assessment of 
                        the measures taken by each Party to 
                        fulfill its obligations under this 
                        Convention, and to advance its object 
                        and purpose, during the previous year. 
                        This shall include:

                                  (1) an assessment of the 
                                enforcement by each Party of 
                                its domestic laws implementing 
                                the obligations of the 
                                Convention, including its 
                                efforts to:

                                          (i) investigate and 
                                        prosecute cases of 
                                        bribery of foreign 
                                        public officials, 
                                        including cases 
                                        involving its own 
                                        citizens;
                                          (ii) provide 
                                        sufficient resources to 
                                        enforce its obligations 
                                        under the Convention;
                                          (iii) share 
                                        information among the 
                                        Parties to the 
                                        Convention relating to 
                                        natural and legal 
                                        persons prosecuted or 
                                        subjected to civil or 
                                        administrative 
                                        proceedings pursuant to 
                                        enforcement of the 
                                        Convention; and
                                          (iv) respond to 
                                        requests for mutual 
                                        legal assistance or 
                                        extradition relating to 
                                        bribery of foreign 
                                        public officials.

                                  (2) an assessment of the 
                                efforts of each Party to:

                                          (i) extradite its own 
                                        nationals for bribery 
                                        of foreign public 
                                        officials;
                                          (ii) make public the 
                                        names of natural and 
                                        legal persons that have 
                                        been found to violate 
                                        its domestic laws 
                                        implementing this 
                                        Convention; and
                                          (iii) make public 
                                        pronouncements, 
                                        particularly to 
                                        affected businesses, in 
                                        support of obligations 
                                        under this Convention.

                                  (3) an assessment of the 
                                effectiveness, transparency, 
                                and viability of the OECD 
                                monitoring process, including 
                                its inclusion of input from the 
                                private sector and non-
                                governmental organizations.

                          (D) LAWS PROHIBITING TAX DEDUCTION OF 
                        BRIBES.--an explanation of the domestic 
                        laws enacted by each signatory to the 
                        Convention that would prohibit the 
                        deduction of bribes in the computation 
                        of domestic taxes. This shall include:

                                          (i) the 
                                        jurisdictional reach of 
                                        the country's judicial 
                                        system;
                                          (ii) the definition 
                                        of ``bribery'' in the 
                                        tax code;
                                          (iii) the definition 
                                        of ``foreign public 
                                        official'' in the tax 
                                        code; and
                                          (iv) the legal 
                                        standard used to 
                                        disallow such a 
                                        deduction.

                          (E) FUTURE NEGOTIATIONS.--a 
                        description of the future work of the 
                        Parties to the Convention to expand the 
                        definition of ``foreign public 
                        official'' and to assess other areas 
                        where the Convention could be amended 
                        to decrease bribery and other corrupt 
                        activities. This shall include:

                                  (1) a description of efforts 
                                by the United States to amend 
                                the Convention to require 
                                countries to expand the 
                                definition of ``foreign public 
                                official,'' so as to make 
                                illegal the bribery of:

                                          (i) foreign political 
                                        parties or party 
                                        officials,
                                          (ii) candidates for 
                                        foreign political 
                                        office, and
                                          (iii) immediate 
                                        family members of 
                                        foreign public 
                                        officials.

                                  (2) an assessment of the 
                                likelihood of successfully 
                                negotiating the amendments set 
                                out in paragraph (1), including 
                                progress made by the Parties 
                                during the most recent annual 
                                meeting of the OECD Ministers; 
                                and
                                  (3) an assessment of the 
                                potential for expanding the 
                                Convention in the following 
                                areas:
                                          (i) bribery of 
                                        foreign public 
                                        officials as a 
                                        predicate offense for 
                                        money laundering 
                                        legislation;
                                          (ii) the role of 
                                        foreign subsidiaries 
                                        and offshore centers in 
                                        bribery transactions; 
                                        and
                                          (iii) private sector 
                                        corruption and 
                                        corruption of officials 
                                        for purposes other than 
                                        to obtain or retain 
                                        business.

                          (F) EXPANDED MEMBERSHIP.--a 
                        description of U.S. efforts to 
                        encourage other non-OECD member to 
                        sign, ratify, implement, and enforce 
                        the Convention.
                          (G) CLASSIFIED ANNEX.--a classified 
                        annex to the report, listing those 
                        foreign corporations or entities the 
                        President has credible national 
                        security information indicating they 
                        are engaging in activities prohibited 
                        by the Convention.

                  (2) MUTUAL LEGAL ASSISTANCE.--When the United 
                States receives a request for assistance under 
                Article 9 from a country with which it has in 
                force a bilateral treaty for mutual legal 
                assistance in criminal matters, the bilateral 
                treaty will provide the legal basis for 
                responding to that request. In any case of 
                assistance sought from the United States under 
                Article 9, the United States shall, consistent 
                with U.S. laws, relevant treaties and 
                arrangements, deny assistance where granting 
                the assistance sought would prejudice its 
                essential public policy interests, including 
                cases where the Responsible Authority, after 
                consultation with all appropriate intelligence, 
                anti-narcotic, and foreign policy agencies, has 
                specific information that a senior government 
                official who will have access to information to 
                be provided under this Convention is engaged in 
                a felony, including the facilitation of the 
                production or distribution of illegal drugs.
                  (3) SUPREMACY OF THE CONSTITUTION.--Nothing 
                in the Convention requires or authorizes 
                legislation or other action by the United 
                States of America that is prohibited by the 
                Constitution of the United States as 
                interpreted by the United States.


                            A P P E N D I X




               CONVENTION ON COMBATING BRIBERY OF FOREIGN

                   PUBLIC OFFICIALS IN INTERNATIONAL

                         BUSINESS TRANSACTIONS





                            C O N T E N T S

                              ----------                              
                                                                   Page

Eizenstat, Hon. Stuart E., Under Secretary of State for Economic, 
  Business and Agricultural Affairs..............................    23
Heimann, Fritz F., Chairman, Transparency International USA, 
  Washington, DC.................................................    50

                                Appendix

Responses to Additional Questions Submitted for the Record by the 
  Committee......................................................    61
Letter to Chairman Helms, signed by Robert E. Rubin, Secretary of 
  the Treasury, Janet Reno, Attorney General, Charlene 
  Barshefsky, U.S. Trade Representative, Madeleine K. Albright, 
  Secretary of State, William M. Daley, Secretary of Commerce, 
  and Arthur Levitt, Chairman, Securities and Exchange 
  Commission.....................................................    83
Letter to Chairman Helms from William J. Hudson, Chief Executive 
  Officer and President, AMP Incorporated........................    83
Letter to Chairman Helms from Stanley J. Marcuss, Partner, Bryan 
  Cave, LLP, Washington, DC......................................    84


    CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN 
        INTERNATIONAL BUSINESS TRANSACTIONS (TREATY DOC 105-43)

                              ----------                              


                         TUESDAY, JUNE 9, 1998

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met at 10:43 a.m., in room SD-419, Dirksen 
Senate Office Building, Hon. Jesse Helms (chairman of the 
committee), presiding.
    Present: Senators Helms, Hagel, Sarbanes, Robb, and 
Feingold.
    Senator Hagel. Good morning. One point of clarification. I 
am not Chairman Helms. I am Senator Hagel and because I ran 
into my friend Senator Sarbanes who suggested maybe I could 
handle the gavel for 5 or 10 minutes as we are getting Senator 
Helms here--there was, I understand some miscommunication 
between Senator Helms and the keys to his car.
    But nonetheless, he is on his way and I have been asked to 
see if we can kick this off and get right to business. With 
that, I welcome the Under Secretary of State, Mr. Eizenstat. 
Secretary Eizenstat, nice to see you again.
    I would now ask our friend and colleague, Senator Sarbanes, 
for his statement.
    Senator Sarbanes. Well, thank you very much, Mr. Chairman.
    I am very pleased to welcome Stu Eizenstat back before the 
committee. It is always a pleasure to see him. I have to say I 
think he is one of the most effective people in our Government, 
and anytime he is given an assignment, I always sort of breathe 
a sigh of relief because I figure it is going to get worked 
through to a successful conclusion.
    I just might make reference to the incredible work he has 
been doing with respect to Nazi gold, which is a very difficult 
and sensitive issue. I would just note for the record there was 
a very strong editorial in this morning's Washington Post with 
respect to his efforts in that regard.
    On the subject for today, this Convention on Combating 
Bribery of Foreign Public Officials in International Business 
Transactions, I think this is an extremely important measure 
and one that we ought to welcome with open arms and try to move 
through the Congress as quickly as we can.
    Most governments consider bribery of their own public 
officials a serious offense for both the payor and the 
recipient. Except for the United States, however, bribery of 
foreign officials has generally been treated in a more 
ambiguous manner.
    Now, the United States more than 2 decades ago passed the 
Foreign Corrupt Practices Act. We in effect said to our 
business people, well, you cannot go overseas and bribe people. 
We had some instances of that occurring, and then we had very 
serious political ramifications and consequences. So, we 
enacted that legislation.
    But other governments have refrained from imposing legal 
sanctions on such activity which occurs outside of their own 
country. They impose sanctions if people try to bribe their own 
officials, but then they go abroad and bribe other officials, 
and they just kind of shrug their shoulders about it. In fact, 
some of those governments have even allowed tax deductions for 
their corporations who bribe foreign officials.
    Now, I am very much heartened by the fact that we have been 
able to secure a treaty among OECD members that helps combat 
the unacceptable practice of corporate bribery of foreign 
public officials.
    The impetus to move on this issue came from the Congress 
which called on the executive branch in the Omnibus Trade bill 
of 1988 to work through the OECD to arrive at a common anti-
bribery position. Now, some have asserted that the treaty does 
not go as far as it was hoped, but nevertheless it sets us on a 
course to pursue similar actions and efforts and other 
international arena and to broaden anti-corruption efforts in 
cooperation with our competitors.
    Implementation will also help U.S. corporations enjoy a 
more level playing field in their international business 
transactions, something that is very important in increasing 
globalization of the world's economy. Apparently what moved 
some other countries was their businesses finally came to them 
and said, well, we are getting shaken down everywhere we go and 
we need this kind of protection. The American companies say, 
well, we cannot do that because we have a law against it. So, 
that was an impetus. Out of that very negative situation has 
come a positive, so to speak.
    I am sure that we all on this committee share a deep 
interest in these international efforts to combat corruption. 
In addition to dealing with this convention, we will have to 
amend, in some small respects, the Foreign Corrupt Practices 
Act that we enacted in order to conform it with the treaty's 
provisions. That will be handled in the Banking Committee which 
has jurisdiction over that legislation. I serve on that 
committee. I think there is strong bipartisan support in that 
committee for making the changes. I think the orderly way to 
proceed is to move this convention and then move the 
legislation either parallel or right behind it. So, I am very 
hopeful that this committee and the Banking Committee can move 
forward expeditiously to approve this treaty and then to enact 
the legislation that is required to implement it.
    I know Secretary Daley was very much involved in those 
negotiations, some very tough negotiations. I think he did a 
very good job, and I know Secretary Eizenstat has been very 
intimately involved with this issue as well.
    So, Mr. Chairman, this is a very important hearing. I would 
hope from the perspective of all the members of the committee, 
this is a very positive development, and I hope we can move it 
through promptly, as we stand only to benefit from it.
    Senator Hagel. Senator Sarbanes, thank you. Senator Robb?
    Senator Robb. Thank you, Mr. Chairman.
    I have no formal opening statement. I would just like to 
associate myself with the remarks made by the Senator from 
Maryland. I share both the frustrations that he articulated and 
the goals that he has laid out, and I think that this is an 
important hearing and I appreciate your holding it. I thank 
you.
    Senator Hagel. Senator Feingold?
    Senator Feingold. Mr. Chairman, I do have a few remarks 
about this very important subject. Mr. Eizenstat.
    I appreciate the opportunity to be here today to consider 
the Convention on Combating Bribery of Foreign Public Officials 
in International Business Transactions. The convention seeks to 
establish worldwide standards beginning with most of the major 
industrialized countries for the criminalization of the bribery 
of foreign officials to influence or retain business.
    Mr. Chairman, the fact that the committee is poised to 
provide its advice and consent to this convention I think is an 
exceptional event.
    It was just 20 years ago that Congress passed the Foreign 
Corrupt Practices Act, the FCPA. This landmark legislation, 
which I am proud to say was sponsored by one of Wisconsin's 
most respected public officials, Senator William Proxmire, was 
enacted after it was discovered that some American companies 
were actually keeping slush funds for making questionable and/
or illegal payments to foreign officials to help land certain 
business deals.
    For these 20 years, the FCPA has succeeded at curbing U.S. 
corporate bribery of foreign officials by establishing 
extensive bookkeeping requirements to ensure transparency and 
by criminalizing the bribery of foreign officials.
    Now, these very important principles do not simply define 
an American sense of morality in business. I think they 
actually strengthen America's trade policy, foster a faith in 
American democracy, and protect our interests in requiring an 
open environment for U.S. investment.
    Certainly these are principles and guidelines that will 
serve everyone's best interest, and as such are well worth 
promoting worldwide.
    But there has been, as I have been told by a number of 
business people, a price for taking such a high ethical road. 
U.S. companies that are trying to pursue opportunities in the 
global marketplace are forced to compete with firms from 
countries whose national laws take a more essentially laissez-
faire approach to this issue, and they turn a blind eye to 
corruption and graft evident in many business transactions. 
Even in some countries--and this is an example that I cite all 
the time. In Germany, they even allow companies to take a tax 
deduction for bribes paid to foreign officials as a business 
expense. My business people in Wisconsin are always a little 
horrified when they hear that.
    Mr. Chairman, I would call such practices a corporate 
welfare of the worst kind. These laws and practices by our 
closest trading partners clearly put our businesses at a 
disadvantage. I have heard from more than one Wisconsin company 
about international contracts lost as a result of some non-
American company paying a bribe to a foreign official. These 
lost contracts represent lost employment and revenue 
opportunities for my State, as I am sure they do in other 
States. A 1997 report by the Trade Promotion Coordinating 
Committee estimates that U.S. firms lost at least 50 
international commercial contracts valued at more than $15 
billion in a single year.
    But fortunately, with the signing of the OECD convention 
last December, the rest of the industrialized world, along with 
several key lesser developed countries, is finally beginning to 
follow America's lead. What this convention does is initiate 
several significant steps to raise the standards of our major 
trading partners to the level established by the FCPA.
    Mr. Chairman, I have longer remarks that I do not want to 
trouble you with except to say that this is a subject that I 
have been greatly interested in and have introduced legislation 
on for years. So, I am just delighted that not only that the 
administration is working hard on this, but I also want to 
thank the chairman of the full committee and the chairman today 
for giving this quick consideration. I think it is a very 
important treaty for the business people in our country.
    Thank you, Mr. Chairman.
    Senator Hagel. Senator Sarbanes?
    Senator Sarbanes. Mr. Chairman, could I just have a 
unanimous consent to insert a Washington Post editorial, a 
Treaty Against Bribes, discussing this convention, and also an 
article in the Wall Street Journal by Secretary Daley, the 
Battle Against Bribery, in the record?
    Senator Hagel. Without objection, so ordered.
    [The Washington Post and Wall Street Journal articles 
follow:]
                        A TREATY AGAINST BRIBES

               [Printed in the Washington Post, 5/10/98]

    How's this for a level playing field? U.S. law bans the bribery of 
foreign officials to win business contracts; French law makes such 
bribes tax-deductible. For years, the United States has been urging 
other industrialized countries to erase this discrepancy--to outlaw 
foreign bribery, as has U.S. law for more than two decades. Now 
Congress has a chance to help make that happen.
    The instrument at hand is the Organization for Economic Cooperation 
and Development's Convention on Combating Bribery of Foreign Public 
Officials, which 33 leading developed nations signed last December. 
Once the treaty goes into effect, every participating country will 
criminalize bribery of foreign officials. in some ways, the treaty 
doesn't go as far as the U.S. negotiators would have liked. It doesn't 
ban payments to political parties or candidates, for example. But it's 
a huge first step, and other nations have agreed to discuss extending 
its reach once this treaty goes into effect.
    The United Sates has nothing to lose by ratifying the covenant; it 
essentially confirms U.S. law. Exactly 10 years ago Congress instructed 
the executive branch to seek just such a treaty. The only question is 
whether the Senate will find time to vote on it, and whether both 
houses of Congress will find time to pass the necessary implementing 
legislation before everyone goes home to campaign. But timing is 
urgent. The signatories promised maximum effort to ratify by the end of 
this year. Any delay here would only give other countries an excuse to 
deviate from that schedule.
    Corruption exists in all countries, and no doubt always will. But 
in developing nations, and those making a transition from communism to 
free market, corruption can have an especially debilitating effect. 
Such countries often lack established courts and law enforcement 
institutions to keep bribery in check. When ruling elites skim huge 
portions of incoming investment, they impoverish everyone else while 
fostering cynicism and a sense that anyone who is honest is also a sap. 
It's important that all developed countries recognize, as the United 
States has since 1997, that they have a responsibility to help fight 
such destructive dishonesty. And once the treaty comes into force, 
European bribes will not only no longer be legal--they won't be tax-
deductibe, either. That's one more reason for Congress to act fast.

                                 ______
                                 

                       The Battle Against Bribery
                          By William M. Daley
             [Printed in the Wall Street Journal, 12/17/97]
    Today, representatives of 34 countries will meet in Paris at the 
Organization for Economic Cooperation and Development to sign a binding 
agreement outlawing bribery of foreign public officials. This is a 
watershed accord, designed to ensure that price and quality--not 
greased palms--will determine who gains and who loses in markets 
abroad.
    The antibribery convention calls for strict penalties for bribery 
and tight accounting procedures to make it harder to hide illegal 
payments. Bribe givers will also face charges for money laundering. The 
bottom line will be fines, loss of business and even imprisonment. We 
will need to submit the convention to Congress by April with a goal of 
ratification by the end of the year.
    To enforce this agreement governments will offer mutual legal 
assistance; and there will be rigorous monitoring in the OECD. Based on 
this agreement, France has already announced the end of tax 
deductibility for bribes. But we must make sure that our trading 
partners uphold their commitments.
    U.S. firms and workers will clearly benefit from this new accord. 
Since mid-1994 foreign firms have used bribery to win approximately 180 
commercial contracts valued at nearly $80 billion. We estimate that 
over the past year American companies lost at least 50 of these 
contracts, valued at more than $15 billion. And since many of these 
contracts were for groundbreaking projects--the kind that produce 
exports for years to come--the ultimate cost could be much higher.
    As important as this agreement is, we must recognize that it only 
places severe penalties on those companies and individuals who offer 
bribes. It does not address the government officials who seek and 
accept bribes. We must now aggressively urge countries to reform their 
government procurement practices.
    Greater openness and fairness in government procurement will 
significantly increase opportunities for U.S. business in the global 
procurement market, which has been estimated to be worth more than $3 
trillion. We must begin by encouraging nondiscriminatory, timely and 
transparent procedures in government procurement. There is a World 
Trade Organization agreement covering government procurement, but only 
25 countries have signed it. Our goal is for all countries to do so.
    We must recognize the challenges that still lie ahead. We have a 
new WTO working group that will push countries to adopt more open and 
transparent rules. Work is also progressing in the Asia Pacific 
Economic Cooperation forum and the Free Trade in the Americas Agreement 
process. The U.S., like-minded countries, and the business community 
must press for world-wide adoption of these procurement reforms as we 
build a sound global trading system.

    Senator Hagel. Thank you, Senator.
    Now, Mr. Secretary, welcome again and glad you are here. We 
have two panels this morning. Under Secretary of State 
Eizenstat will be first to present testimony, and the second 
panel is Mr. Fritz F. Heimann, Chairman, United States 
Transparency International. So, if you would proceed, Mr. 
Secretary.

STATEMENT OF HON. STUART E. EIZENSTAT, UNDER SECRETARY OF STATE 
        FOR ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS

    Mr. Eizenstat. Thank you very much, Mr. Chairman, Senators. 
I would like to express particular appreciation to Chairman 
Helms for scheduling this hearing so promptly after we have 
sent the convention and the implementing legislation to the 
Senate. It is important the United States lead in the 
ratification and implementation of this convention, just as we 
did in the negotiation.
    Ten years ago the U.S. Congress amended our Foreign Corrupt 
Practices Act and, in so doing, called upon the executive 
branch to negotiate with our major trading partners in the OECD 
an international agreement prohibiting bribery of foreign 
public officials in international business transactions. This, 
by the way, had been a goal of successive U.S. administrations 
since the passage of the 1977 Foreign Corrupt Practices Act, in 
which I am pleased to say I played a personal role when I was 
serving in the White House during that period in helping to 
draft and conceptualize.
    The goal has been to internationalize the principles of the 
Foreign Corrupt Practices Act so that other countries would 
rise to our high standard and so that U.S. businesses would not 
be put at a competitive disadvantage in doing business abroad, 
as we were criminalizing activity by our business people but 
other countries were not.
    The U.S. Government, with the support of the business 
community and Members of Congress, both Republican and 
Democrat, had been working steadily for years to convince our 
trading partners to criminalize the bribery of foreign public 
officials, and I am very pleased that today I can say we have 
met this goal. We are strengthening the rule of law in 
international business and will be providing for a more level 
playing field for our businesses operating abroad and trying to 
export.
    We were right to enact the Foreign Corrupt Practices Act 20 
years ago, and we have been right and Congress was right to ask 
us 10 years ago to press harder for our trade competitors to 
enact similar prohibitions. We have succeeded with the OECD 
convention and there has been really a sea change in attitude. 
I think Senator Sarbanes indicated this. Thirty-three nations 
have agreed to enact criminal laws which will closely follow 
the prohibitions found in our statute. This is a major 
achievement for the rule of law.
    Bribery damages economic development and it hinders the 
growth of democracy in developing countries. It hurts U.S. 
exporters and suppliers in every State and in every district in 
the United States, and it impedes U.S. international trade. The 
U.S. Government is aware of allegations of bribery by foreign 
firms in the last year alone affecting international contracts 
worth almost $30 billion, all of which would not be prohibited 
by criminal laws in the home jurisdictions.
    Governments that signed the convention have now pledged to 
seek its approval and enactment of implementing legislation by 
the end of this year. It is the product of strong American 
leadership and bipartisan effort by the Congress as well, and 
therefore early U.S. action is essential to spurring our major 
competitors. That is again why I am particularly appreciative 
that Chairman Helms would have scheduled this hearing so 
promptly.
    Permit me to briefly highlight what this convention does.
    It obligates the parties to criminalize bribery of foreign 
public officials, including officials in all branches of a 
foreign government, whether appointed or elected. It includes 
payments to officials of public agencies, of public 
enterprises, and of public international organizations as well. 
It would cover government controlled parastatals so that 
publicly owned, foreign owned airlines and utilities and state 
telecommunications companies, which are increasingly important 
in public procurement, would be covered as well and only those 
operating on a purely commercial basis would be exempt.
    The parties must also apply effective, proportionate, and 
dissuasive criminal penalties to those who bribe foreign public 
officials. If a country's legal system lacks the concept of 
criminal corporate liability, it must then provide for 
equivalent non-criminal sanctions, including monetary 
penalties.
    The convention also requires that parties be able to seize 
or confiscate both the bribe and the proceeds of the bribe, the 
net profits resulting from the illegal transaction, or to 
impose equivalent fines.
    The convention has strong provisions to prohibit accounting 
omissions and falsification, and importantly to provide mutual 
legal assistance and even extradition to enforce each other's 
laws. These mutual assistance provisions are particularly 
important because they will enhance foreign governments in 
their efforts to enforce alleged bribery, but they will also 
improve our own enforcement of our Foreign Corrupt Practices 
Act because we will be getting more cooperation from foreign 
governments in both extradition and providing evidence that we 
can use in our own prosecutions.
    While the convention does not directly cover bribery of 
foreign political parties, party officials and candidates for 
public office, OECD members have agreed to discuss these issues 
on a priority basis in the anti-bribery working group of the 
OECD, which negotiated this convention, and to consider 
proposals to cover such political officials by the May 1999 
OECD annual ministerial. However, the convention will cover 
business related bribes to foreign public officials made 
through political parties, made through party officials, made 
through candidates, as well as those bribes that corrupt 
foreign public officials directed to them.
    The greatest impact of our Foreign Corrupt Practices Act 
over the years has been achieved through the business 
community's own response to the law, their institution of 
meaningful internal corporate controls, effective internal and 
external auditing, and the adoption of codes of conduct. We 
would expect to see a similar dynamic if this convention is 
ratified in other OECD countries.
    The convention also provides us for the first time with a 
mechanism to monitor through regular peer review both the 
quality of the legislation enacted by other nations and the 
effectiveness of their enforcement of their legislation. 
Regular comprehensive monitoring will provide us with the 
ability to determine whether other nations actually do what 
they have agreed to do.
    I expect that soon after the convention enters into force, 
we will begin to see a sharp curtailment in the practice of 
bribery of foreign public officials in major international 
business transactions. For the first time, our competitors will 
have to weigh the risks of bribery against the supposed 
benefits.
    This convention does not stand in isolation. It is the 
centerpiece of a comprehensive U.S. Government strategy to 
combat bribery and corruption abroad. In our own hemisphere, we 
successfully concluded the Inter-American Convention Against 
Corruption, which has recently been submitted to the Senate for 
its advice and consent. It is my hope that an early hearing can 
be held at the convenience of this committee on this convention 
as well. Three countries in Latin America were among the five 
non-OECD members that signed the OECD Anti-Bribery Convention.
    We are also working with the International Monetary Fund 
and multilateral development banks to encourage those 
institutions to help countries promote good governments and the 
rule of law.
    In the OECD as well, we are pressing our partners that 
allow tax deductibility, as Senator Feingold mentioned, an 
outrageous situation, to deal with this situation and eliminate 
this preferential treatment. Progress is already being made in 
countries like Denmark, Norway, and Portugal, and in others. 
This process on tax deductibility will be accelerated with the 
conclusion of the OECD convention and we hope that this will be 
the next step taken.
    Since the convention follows our own Foreign Corrupt 
Practices Act very closely, we will need, Mr. Chairman, to make 
far fewer changes to our domestic law than will other countries 
who have no domestic criminal laws in this area themselves.
    We have tailored for our few proposed amendments our 
provisions so that our law will have a scope similar to what we 
expect our major trading partners to achieve as they enact 
their laws. We have been careful not to put U.S. firms at a 
competitive disadvantage. My written statement outlines the 
changes in more detail that we have proposed to the Foreign 
Corrupt Practices Act as implementing legislation.
    We and all signatories to the convention agreed to seek 
approval and enactment of implementing legislation by the end 
of 1998. We believe that it is essential that the U.S. meet 
this schedule. If we do not, other countries will use our delay 
as an excuse to avoid or delay their own implementation. The 
sooner we act in ratifying the convention and enacting our 
implementing legislation, the sooner others will act. That 
will, therefore, level the playing field on which our companies 
must compete to obtain business overseas.
    The business community in the United States strongly 
supports our efforts to ratify the convention as soon as 
possible.
    In conclusion, the successful culmination and conclusion of 
this OECD Anti-Bribery Convention has been a genuine bipartisan 
effort spurred by Congress over the past 10 years, and one that 
several administrations have given priority to.
    I welcome the committee's interest in this important issue 
and I urge you to take action to approve the OECD convention 
and to ensure that the benefits of the convention are realized 
rapidly so that our own companies can at last play on a more 
level playing field.
    Thank you again and I am pleased to answer any and all 
questions.
    [The prepared statement of Mr. Eizenstat follows:]
               Prepared Statement of Stuart E. Eizenstat
    Mr. Chairman and Members of the Committee:
    Ten years ago this summer, the United States Congress passed the 
Omnibus Trade Act which, in part, amended our Foreign Corrupt Practices 
Act. The amendments were a reaffirmation of the strong support of the 
Congress for effective anti-bribery legislation.
    As part of this action, the Congress called on the executive branch 
to negotiate--with our major trading partners in the Organization for 
Economic Cooperation and Development--an international agreement 
prohibiting bribery of foreign public officials in international 
business transactions.
    Such action has been a goal of successive U.S. administrations 
since passage of the 1977 U.S. Foreign Corrupt Practices Act. As then-
President Carter's chief domestic advisor, I was involved in 
development and passage of the FCPA, and can attest to the high 
priority attached to getting a commitment from the world's largest 
industrial countries that they adopt strict anti-bribery laws of their 
own. The goal was to internationalize the principles in the FCPA so 
that other countries would rise to our high standards and so that U.S. 
businesses would not be at a competitive disadvantage doing business 
abroad.
    The U.S. Government, with the support of the business community and 
members of Congress, both Republicans and Democrats, has been working 
steadily for years to convince our trading partners to criminalize the 
bribery of foreign public officials. I am very pleased to inform you 
today that we have met this goal. And we have done so in a manner which 
will provide for freer and fairer international competition, will 
strengthen the rule of law in international business and will provide 
for a more level playing field for U.S. businesses overseas.
    On December 17 of last year, on behalf of the United States, 
Secretary of State Madeleine Albright signed the OECD Convention on 
Combating Bribery of Foreign Public Officials in International Business 
Transactions.
    We were right to enact the Foreign Corrupt Practices Act over 20 
years ago. And we have been right to press hard for our trade 
competitors to enact similar prohibitions. We have succeeded with the 
OECD Convention. Thirty-three nations have agreed to enact criminal 
laws which will closely follow the prohibitions found in our statute. 
This is a major achievement for the rule of law.
    This Convention obligates the world's largest economies to outlaw 
the bribery of officials of other countries in international business 
transactions. This is an important issue for the United States, U.S. 
businesses and workers.
    Let me say, Mr. Chairman, this Convention is very much in our 
national interest. Bribery damages economic development and hinders the 
growth of democracy. It hurts U.S. exporters and suppliers--in every 
state and district in the U.S.--and impedes international trade. The 
U.S. government is aware of allegations of bribery by foreign firms in 
the last year affecting international contracts worth almost $30 
billion, which is not currently prohibited by criminal laws in their 
home jurisdictions.
    Governments that signed the Convention have pledged to seek its 
approval, and enactment of implementing legislation, by the end of this 
year. The Convention is the product of strong American leadership, and 
early U.S. action is essential to spurring on our major competitors, 
whose implementation efforts will directly benefit our international 
interests and U.S. firms and their employees. I am confident that the 
OECD Convention will enter into force promptly and that the Parties 
will enact strong laws and enforce them effectively.
    I would to like to express my thanks, Mr. Chairman, for scheduling 
this hearing so promptly. It is important that we lead in the 
ratification and implementation of this Convention, just as we did in 
its negotiation.
                          THE OECD CONVENTION
    Let me briefly highlight for you what this Convention does:
   The Convention obligates the Parties to criminalize bribery 
        of foreign public officials, including officials in all 
        branches of government, whether appointed or elected. This 
        prohibition includes payments to officials of public agencies, 
        public enterprises, and public international organizations. 
        This, therefore, would cover government-controlled parastatals, 
        such as airlines, utilities, state telecommunications 
        companies, which are increasing important in public 
        procurement. Only those operating on a purely commercial basis 
        would be exempt.
   The Parties must apply ``effective, proportionate and 
        dissuasive criminal penalties'' to those who bribe foreign 
        public officials. If a country's legal system lacks the concept 
        of criminal corporate liability, it must provide for equivalent 
        non-criminal sanctions, including monetary penalties.
   The Convention requires that parties be able to seize or 
        confiscate both the bribe and the bribe proceeds--the net 
        profits that result from the illegal transaction--or to impose 
        equivalent fines so as to provide a powerful disincentive to 
        bribery. Under our law, substantial fines have had significant 
        impact on corporate compliance.
   The Convention has strong provisions to prohibit accounting 
        omissions and falsification, and to provide for mutual legal 
        assistance and extradition. These mutual legal assistance 
        provisions, in particular, will greatly enhance cooperation 
        with foreign governments in cases of alleged bribery, improving 
        both our own enforcement of the FCPA and foreign governments' 
        enforcement of anti-bribery laws.
    The Convention will cover business-related bribes to foreign public 
officials made through political parties, party officials, and 
candidates, as well as those bribes that corrupt foreign public 
officials direct to them.
    While the Convention does not cover directly bribery of foreign 
polticial parties, party officials, and candidates for political 
office, OECD members have agreed to discuss these issues on a priority 
basis in the OECD's anti-bribery working group, which negotiated the 
Convention, and to consider proposals to address these issues by the 
May 1999 OECD annual Ministerial meeting.
                    WHAT TO EXPECT FROM OUR PARTNERS
    The greatest impact of the FCPA has been achieved through 
enforcement measures and through the business community's response to 
the law: the institution of meaningful internal corporate controls, 
effective internal and external auditing, and codes of conduct 
requiring compliance not only with the FCPA, but also with other 
federal criminal laws.
    We would expect to see a similar dynamic in other OECD countries. 
The OECD Convention requirements, which closely follow the FCPA, 
represent a very high standard. As our OECD partners enact effective 
criminal and civil laws to fully implement those requirements, their 
business communities will need to take appropriate steps to comply.
    The Convention also provides us with a mechanism to monitor, 
through regular peer review, both the quality of the legislation 
enacted by the other nations and the effectiveness of their enforcement 
of their legislation. We expect this review mechanism to be modeled 
after a highly successful one developed by the Financial Action Task 
Force on Money Laundering. Regular, comprehensive monitoring will 
provide us with the ability to determine whether other nations actually 
do what they have agreed to do to prohibit their nationals and their 
corporations from bribing to obtain business from foreign governments.
                          SEVERAL YEARS HENCE:
    To be specific, what should we expect to see over the next several 
years?
    I expect that within the next year we will see ratification of the 
OECD Convention by a majority of the OECD nations. Approval by the 
U.S., Germany, France and Japan, by the target date of December 31, 
1998, is key to early and effective implementation. Most ratifying 
nations are expected to enact their implementing criminal and civil 
legislation along with or immediately following ratification.
    Over the next two years we will see the institution of regular, 
comprehensive reviews of the adequacy of both implementing legislation 
and enforcement efforts. We also should begin to see cases prosecuted 
by Signatories to the Convention.
    But of much greater significance, I expect that soon after the 
Convention enters into force--and effective criminal prohibitions are 
enacted into law in the ratifying nations--we will begin to see a sharp 
curtailment in the practice of bribery of foreign public officials in 
major international business transactions.
    The demand for such bribery in some cases will still exist, but the 
risks for OECD companies that are tempted to acquiesce in the payment 
of bribes will be very substantial. For the first time our competitors 
in the OECD countries will have to weigh those risks against the 
supposed benefits of bribery. When this occurs, I am confident that our 
companies will face a more level playing field as they compete for 
international business on a fair basis.
                  RELATED ANTI-CORRUPTION INITIATIVES
    The successful conclusion of the OECD Anti-Bribery Convention has 
not occurred in a vacuum. It is indicative of a changing international 
environment, where there is much more willingness than in the past to 
address directly the problem of international corruption.
    The Convention is the centerpiece of a comprehensive U.S. 
government strategy to combat bribery and corruption. We are, for 
example, working with the International Monetary Fund and the 
multilateral development banks to focus on the debilitating effects of 
corruption on economic stability and development, and to encourage 
those institutions to help countries promote good governance.
    In this Hemisphere, we successfully concluded the Inter-American 
Convention Against Corruption, which has recently been submitted to the 
U.S. Senate for its advice and consent to ratification. It is my hope 
that at an early time convenient for the Committee that a hearing on 
this Convention will be scheduled--and to which we would be invited to 
testify. Three countries in Latin America--Argentina, Brazil and 
Chile--were among the five non-OECD members that signed the OECD Anti-
Bribery Convention. The other two countries are Bulgaria and the Slovak 
Republic.
    We also are working in the World Trade Organization and in regional 
fora in Asia and Latin America to encourage increased transparency in 
government procurement, the major arena for this type of foreign 
commercial bribery.
    In the OECD as well, we are pressing our partners that allow the 
tax deductibility of bribes as business expenses to eliminate this 
preferential treatment. Since a 1996 Recommendation which called for 
such action, Denmark, Norway and Portugal have completed the necessary 
legislative action, and nine of ten remaining countries have begun the 
process of changing their laws so as to deny the tax deductibility of 
bribes. This process has accelerated with the conclusion of the OECD 
Convention.
                        IMPLEMENTING LEGISLATION
    Since the Convention follows our FCPA closely, we have submitted to 
Congress only those amendments designed to bring our law into full 
compliance with its obligations and to implement the Convention.
    We have tailored our proposed amendments so that our law will have 
a scope similar to that we expect our major trading partners to achieve 
as they enact their own laws. We have been careful not to put U.S. 
firms at a disadvantage.
    First, the FCPA currently criminalizes payments made to influence 
any decision of a foreign official or to induce that official to do or 
omit to do any act, in order to obtain or retain business. An amendment 
will clarify that the scope of the FCPA includes payments made to 
secure ``any improper advantage'', the language used in the OECD 
Convention, in order to obtain or retain business.
    Second, the OECD Convention requires parties to cover prohibited 
acts by ``any person''. The current FCPA covers only issuers with 
securities registered with the Securities and Exchange Commission and 
``domestic concerns''. An amendment will expand the scope of the FPCA 
to cover acts prohibited by the Convention of persons other than 
issuers or domestic concerns (i.e., all foreign natural and legal 
persons), committed while in the territory of the United States, 
regardless of whether the mails or a means or instrumentality of 
interstate commerce are used, in furtherance of the prohibited acts.
    Third, the OECD Convention calls on parties with jurisdiction to 
prosecute their nationals for offenses committed abroad to assert 
nationality jurisdiction over the bribery of foreign public officials, 
consistent with national legal and constitutional principles. 
Accordingly, an amendment will provide for jurisdiction over the acts 
of U.S. businesses and nationals, in furtherance of unlawful payments, 
that take place wholly outside the United States.
    Fourth, the OECD Convention includes officials of international 
agencies within the definition of foreign public official. Accordingly, 
an amendment will expand the FCPA definition of foreign official to 
include officials of public international organizations.
    Finally, under the current FCPA, non-U.S. citizen employees and 
agents of issuers and domestic concerns are subject only to civil, 
rather than criminal, penalties. A proposed amendment to the penalty 
sections relating to issuers and domestic concerns will ensure that 
penalties for non-U.S. citizen employees and agents of issuers and 
domestic concerns accord with those of U.S. citizen employees and 
agents.
                                 TIMING
    We and all Signatories to the Convention agreed to seek approval of 
the Convention and the enactment of implementing legislation by the end 
of 1998.
    We believe that it is essential that the United States meet this 
schedule. If we do not, other countries will use our delay as an excuse 
to avoid or delay their own implementation.
    Certainly, we all want U.S. firms and their employees to realize 
the benefits of this Convention as soon as possible. The sooner we act 
in ratifying the Convention and enacting out implementing legislation, 
the sooner others will act, thereby leveling the playing field on which 
our companies must compete to obtain business overseas.
    The business community strongly supports our efforts to ratify the 
Convention as soon as possible. The U.S. Council for International 
Business, the National Association of Manufacturers, the National 
Foreign Trade Council and other business groups have publicly endorsed 
the Convention. We have consulted closely with interested non-
governmental groups, such as Transparency International/USA, whose 
Chairman, Fritz Heimann, is also scheduled to testify here today.
                               CONCLUSION
    Mr. Chairman, and members of the Committee,
    The successful conclusion of the OECD Anti-Bribery Convention has 
been a bipartisan effort, with substantial actions in pursuit of a 
common goal having been taken by the Congress and Administrations over 
the past 10 years. Those of us here today, as well as our predecessors, 
share in the credit for this accomplishment.
    I welcome the Committee's interest in this important issue and I 
urge you to take action--to approve the OECD Convention and to ensure 
that the benefits of the Convention are realized rapidly.

    Senator Hagel. Mr. Secretary, thank you.
    Why do we not start with a 5-minute round of questions and 
see where we go.
    Mr. Secretary, reading from a recent Wall Street Journal 
article which documents in some detail the corruption and 
bribery, the article talks about corruption and bribes have 
been getting worse in recent years, especially given recession, 
high unemployment, and other economic problems in Europe. 
European competitors look to overseas work to make up the 
shortfall of business at home, according to the story, and much 
of that work is in the form of huge infrastructure projects in 
the developing world where poorly paid officials decide who 
gets the business.
    The story goes on to say in some cases bribes are used to 
pay off local officials who control how foreign aid money is 
spent on major projects. According to the Wall Street Journal--
same story--in the 1990's bribery generally ranges from 10 to 
15 percent of the contract--you know that--up from, according 
to this story, 5 percent previously.
    Now, a couple of questions. Which European countries' 
corporations spend the most annually on bribes?
    Mr. Eizenstat. Well, we did a study when I was Under 
Secretary of Commerce, to which actually Senator Feingold 
referred, when we tried to quantify the amount of bribery which 
occurred. It is quite widespread. I think it is best not in 
public session to try to finger particular companies, but it is 
a very widespread practice throughout Europe and one for which 
there are very few countries that have any effective 
enforcement.
    Because it is so pervasive, it is not something that could 
be dealt with other than through a multilateral agreement and 
that is why this is so important.
    Senator Hagel. Mr. Secretary, would you provide for the 
record some more elaboration on that in written form?
    Mr. Eizenstat. We will attempt to give you as many details 
as we can, and if you wish to have a briefing in closed 
session, we can go into more detail.
    Senator Hagel. Thank you.
    Following along this line of general questions regarding 
European companies, how serious do you think the Europeans are, 
Mr. Secretary, about having to forego this business practice 
and changing their ways?
    Mr. Eizenstat. Mr. Chairman, I frankly would say that 5 
years ago no one would have believed that this convention would 
have been possible because of the prevalence of the activities 
by so many European firms.
    Senator Sarbanes alluded to this and I think that there has 
indeed been a sea change, and the sea change has occurred 
because many of the corporations in Europe themselves 
complained about the huge costs of trying to acquire these 
contracts, the shakedowns that occur, the unsavory activities 
through which they are required to go, and the fact that the 
United States had a very positive model.
    So, I think they are very serious. This is not being done 
purely out of a non-pecuniary motive. They I think increasingly 
feel that it is important to live up to high moral standards, 
but their corporations are also telling them this has become a 
very high cost of doing business to get major contracts and one 
they want to avoid.
    Senator Hagel. Mr. Secretary, like the U.S. Foreign Corrupt 
Practices Act, I understand this treaty permits facilitation 
payments. Would a 5 percent commission to a local government 
official constitute a facilitation payment?
    Mr. Eizenstat. Well, it would depend on the particular 
factual situation. Even under our Foreign Corrupt Practices 
Act, commissions obviously can be paid in appropriate 
circumstances to people who facilitate the acquisition of 
contracts. One has to look on a case-by-case basis to determine 
that.
    Senator Hagel. I understand a German official stated 
recently that German companies spend an estimated $5.63 billion 
a year on bribes to foreign officials, most of it added on top 
of the contract price and then written off on their taxes. If 
this treaty is implemented, do you believe these kinds of 
bribes will be, can be eliminated?
    Mr. Eizenstat. Absolutely. They will be and they can be and 
I think that there will be very effective enforcement. I 
believe that almost all of the major European countries will 
enact penalties of a criminal nature and that there will be 
effective enforcement, again not because of altruism alone, but 
because I think increasingly their corporations see it in their 
business interest to do so. So, we have every confidence that 
there will be effective enforcement.
    Senator Hagel. What about, for example, skirting around the 
edges on this with political parties, bosses of political 
parties? My understanding is the treaty does not prohibit 
bribes to political parties?
    Mr. Eizenstat. We tried very hard to have political parties 
covered, and in fact when I was Ambassador to the European 
Union, we had a situation involving an alleged bribe to the 
Socialist Party of Belgium that typified the problem. While we 
did not succeed in fully covering political parties, we made a 
real start.
    First, as I mentioned, we have a commitment that this issue 
will be taken up in the spring 1999 session, and we hope that 
this will be addressed in a serious way.
    Second, the convention does make a real start in covering 
political party officials in the following ways. It would 
prohibit bribes involving political parties and party officials 
in the following circumstances: When the party or official is 
used as an intermediary for a bribe to a foreign public 
official; when corrupt foreign public officials direct business 
related bribes to political parties, which is often the case--
they will say, do not pay me, pay my party--and in one-party 
systems where political parties are, in effect, the government 
and party officials in effect carry out public functions. In 
all these situations, the political parties would be covered. 
So, we made a real down payment, but we do believe that this 
ought to be the next effort to go even a step further.
    Senator Hagel. Mr. Secretary, thank you. Senator Sarbanes.
    Senator Sarbanes. Thank you, Mr. Chairman. Mr. Chairman, I 
have a letter that was sent to me by the Business Roundtable, 
signed by 35 of our leading and major corporations, which I 
would like to include in the record as well.
    Senator Hagel. It will be.
    [The letter of the Business Roundtable follows:]
                                                       May 28, 1998
The Hon. Paul S. Sarbanes
United States Senate
309 Hart Senate Office Building
Washington, DC 20510

Dear Senator Sarbanes:

    We are writing to express our support for the speedy ratification 
and implementation of the Organization for Economic Cooperation and 
Development (OECD) Convention on Combating Bribery of Foreign Public 
Officials in International Business Transactions that the 
Administration has just submitted to the Congress.
    The OECD Convention is a major victory for the United States in its 
battle against international corruption and bribery. It creates an 
international antibribery system that obligates signatory countries to 
adopt domestic laws to combat foreign bribery. Since the Foreign 
Corrupt Practices Act (FCPA) was adopted in 1977, the United States has 
tried to persuade our major trading partners to enact comparable laws. 
In the 1988 Omnibus Trade Act, the Congress directed the President to 
negotiate an international agreement in the OECD on the prohibition of 
overseas bribes. After years of negotiation, the United States has 
succeeded in getting thirty-three other countries (all the OBCD members 
and five non-members) to join the United States in the Convention.
    The Congress, current and past Administrations, and the private 
sector have made their fight against international bribery and 
corruption a priority because international corruption undermines 
important U.S. goals of (1) achieving a level playing field for those 
U.S. companies and their workers that compete overseas, (2) fostering 
economic development and trade liberalization, and (3) promoting 
democracy and democratic institutions. The Department of Commerce has 
estimated that between 1994 and 1996, there were at least 100 cases of 
foreign firms using bribery to undercut U.S. firms' efforts to win 
international contracts, costing our companies over $45 billion. The 
OECD Convention is designed to eliminate these trade distorting 
activities and make foreign bribery a crime in major trading countries.
    Speedy ratification and implementation of the OECD Convention by 
the Untied States is, however, an absolute imperative in order for the 
Convention to succeed. Some of the other parties are not as committed 
to the Convention as the United States and are likely to use a delay in 
U.S. ratification to undermine it. Speedy implementation of the OECD 
Convention is also necessary to show the other parties that the United 
States takes its obligations under the Convention seriously and expects 
other parties to do the same. Since the Convention's effectiveness 
depends on the adoption of international anti bribery laws by the other 
parties, implementation by the United States is necessary to lead the 
way, substantively and politically, for implementation of the 
Convention by other parties.
    Enclosed, for your information, is background material on the OECD 
Convention and a summary of the amendments necessary to bring the FCPA 
into compliance with the OECD Convention.
    We are committed to working with you to help protect U.S. 
businesses and workers from unfair and corrupt foreign 
competitionthrough the ratification and implementation of the OECD Anti 
Bribery Convention by the Congress this year.
    Sincerely
Peter S. Janson
President & CEO
ABB Inc.

Lawrence A. Bossidy
Chairman & CEO
AlliedSignal, Inc.

William J. Hudson Jr.
President & CEO
AMP Incorporated

Curtis H. Barnette
Chairman & CEO
Bethlehem Steel Corporation

Donald V. Fites
Chariman & CEO
Caterpillar Inc.

Robert J. Eaton
Chairman, President & CEO
Chrysler Corporation

Robert B. Palmer
Chairman, President & CEO
Digital Equipment Corporation

Charles O. Holliday
President & CEO
DuPont Company

Richard J. Swift
Chairman, President & CEO
Foster Wheeler Corporation

Michael R. Bonsignore
Chairman & CEO
Honeywell, Inc

D.T. Engen
Chairman, President & CEO
ITT Industries, Inc.

Larry D. Yost
Chairman & CEO
Mentor Automotive, Inc.

Dennis J. Picard
Chairman & CEO
Raytheon Company

Dana G. Mead
Chairman & CEO
Tenneco

James F. Hardymon
Chairman & CEO
Textron Incorporated

Tony L. White
Chairman & CEO
The Perkin-Elmer Corporation

James P. Kelly
Chairman & CEO
United Parcel Service of America

John A. Luke Jr.
Chairman & CEO
Westvaco

Harold A. Wagner
Chairman, President & CEO
Air Products and Chemicals, Inc.

Maurice R. Greenberg
Chairman & CEO
American International Group, Inc.

C. Michael Armstrong
Chairman & CEO
AT&T

Ernest S. Micek
Chairman, President & CEO
Cargill, Inc.

Michael H. Jordan
Chairman & CEO
CBS Corporation

John W. Snow
Chairman, President & CEO
CSX Corporation

William E. Bradford
Chairman & CEO
Dresser Industries, Inc.

George M. C. Fisher
Chairman & CEO
Eastman Kodak Company

John F. Welch Jr.
Chairman & CEO
General Electric Company

James E. Perrella
Chairman, President & CEO
Ingersoll-Rand Company

Raymond V. Gilmartin
Chairman, President & CEO
Merck & Company, Inc.

W. Wayne Allen
Chairman & CEO
Phillips Petroleum Company

D. H. Davis Jr.
Chairman & CEO
Rockwell International Corporation

Thomas J. Engibous
President & CEO
Texas Instruments Incorporated

Philip M. Condit
Chairman, President & CEO
The Boeing Company

Joseph T. Gorman
Chairman & CEO
TRW Inc.

George David
Chairman, President & CEO
United Technologies Corporation

Enclosures

                                 ______
                                 

                WHAT IS THE OECD ANTIBRIBERY CONVENTION?
    The OECD Convention on Combating Bribery of Foreign Public 
Officials in International Business Transactions creates an 
international anti bribery system that obligates signatory countries to 
enact domestic laws to combat foreign bribery.
   The United States, which has had such a law since 1977, will 
        no longer be alone once the Convention is ratified and 
        implemented by the parties.
   Thirty-three countries have joined this historic Convention. 
        Those countries included the 29 OECD members (United States, 
        U.K., Japan, Canada, France, Germany, Italy, Korea, Mexico, 
        Switzerland, Australia, Austria, Belgium, Czech Republic, 
        Denmark, Finland, Greece, Hungary, Iceland, Ireland, 
        Luxembourg, The Netherlands, New Zealand, Norway, Poland, 
        Portugal, Spain, Sweden, Turkey) and five other nations 
        (Argentina, Brazil, Bulgaria, Chile and the Slovak Republic).
   The OECD Convention will level the international trade 
        playing field since our major trading partners are now 
        obligated to enact foreign anti bribery laws.
    Similarly to the Foreign Corrupt Practices Act (``FCPA''), the OECD 
Convention-
   provides that parties shall make it a crime ``for any person 
        intentionally to offer, promise or give any undue pecuniary or 
        other advantage ... to a foreign public official ... in order 
        to obtain or retain business or other improper advantage in the 
        conduct of international business;''
   applies to corrupt payments to office-holders, legislators, 
        and personnel of government controlled companies (so-called 
        ``parastatals'');
   recognizes an exemption for small ``facilitating payments;'' 
        and
   requires parties to enact accounting requirements for the 
        purpose of preventing false or misleading accounting practices 
        that can be used to bribe or to hide such bribery.
    In order to ensure full and effective implementation, the OECD 
Convention also requires that the parties to the OECD Convention-
   review their current basis for jurisdiction and take 
        remedial steps if they are not effective in the fight against 
        bribery;
   consult when more than one party asserts jurisdiction;
   provide legal assistance to each other relating to 
        investigations and proceedings and make bribery of foreign 
        officials an extraditable offense; and
   cooperate in a follow-up program in the OECD to monitor 
        compliance with the Convention
    The parties to the OECD Convention have already agreed to an 
accelerated work plan to address several outstanding issues related to 
the Convention, including acts of bribery relating to foreign political 
parties, and coverage of foreign subsidiaries.

                                 ______
                                 

                    THE OECD ANTIBRIBERY CONVENTION
                SUMMARY OF PROPOSED LEGISLATIVE CHANGES
                  TO THE FOREIGN CORRUPT PRACTICES ACT

    The following five amendments to the Foreign Corrupt Practice Act 
(``FCPA'') are needed to implement the recently-signed OECD Convention 
on Combating Bribery of Foreign Public Officials it International 
Business Transactions:
    First an amendment to expand the scope of the FCPA to include 
payments made to secure ``an improper advantage.''
    (The OECD Convention requires parties to cover payments made to 
``obtain or retain business or other improper advantage in the conduct 
of international business.'' While the FCPA has been interpreted 
broadly to include this, the amendment is necessary to ensure that the 
other parties do not doubt U.S. implementation of the Convention.)
    Second, an amendment to expand the scope of the FCPA to cover 
foreign persons for acts committed while in the United States.
    (The OECD convention requires parties to cover prohibited acts by 
``any person.'' The FCPA currently covers only issuers, as defined in 
the 1934 Securities Exchange Act, and domestic concerns.
    Third, an amendment to expand the FCPA definition of foreign 
official to include officials of public international organizations.
    (The OECD Convention, unlike the current FCPA, includes officials 
of international agencies within the definition of foreign public 
official.)
    Fourth, an amendment to provide for jurisdiction over the acts of 
U.S. persons that take place wholly outside the United States.
    (The OECD Convention calls on parties to prosecute their nationals 
for offenses committed abroad. The FCPA currently covers only issuers 
as defined in the 1934 Securities Exchange Act, and domestic concerns 
who use the mails or other means of interstate commerce.)
    Fifth, an amendment to the FCPA's penalty sections relating to 
issuers and domestic concerns to ensure that penalties for non-U.S. 
citizen employees and agents of issuers and domestic concern accord 
with those of U.S. citizen employees and agents.
    Under the current FCPA, non-U.S. citizen employees and agents of 
issuers and domestic concerns are subject only to civil, rather than 
criminal, penalties.)
    This package of amendments will bring the FCPA into conformity with 
the OECD Convention and lead the way for implementation of the OECD 
Convention by the other parties.

                                 ______
                                 

   THE OECD ANTIBRIBERY CONVENTION A U.S. VICTORY OVER INTERNATIONAL 
                               CORRUPTION
    The OECD Convention on Combating Bribery of Foreign Public 
Officials in International Business Transactions is a major victory for 
the United States in its battle against international bribery and 
corruption.
   Since the Foreign Corrupt Practices Act (``FCPA'') was 
        adopted in 1977, the United States alone has prohibited foreign 
        bribery.
   Without U.S. leadership and perseverance, 33 other countries 
        would not have joined the OECD Convention on December 17, 1997.
    The OECD Convention is the result of bipartisan cooperation and the 
collaborative efforts of the Congress, the Executive Branch and the 
private sector.
   In the 1988 Omnibus Trade Act, the Congress directed the 
        President to negotiate an international agreement in the OECD 
        on the prohibition of overseas bribes.
    The OECD Convention will level the international trade playing 
field.
   The U.S. Department of Commerce estimates that between 1994 
        and 1996 there have been almost 100 cases of foreign firms 
        using bribery to undercut U.S. firms' efforts to win 
        international contracts worth over 45 billion.
    Speedy ratification of the OECD Convention is needed to persuade 
other parties to ratify the Convention quickly.
   Some of the other parties are not as committed to the 
        Convention as the United States and are likely to use a delay 
        in U.S. ratification to undermine the Convention.
    Speedy implementation of the OECD Convention is also necessary to 
show the other parties that the United States takes its obligations 
under the Convention seriously and expects other parties to do the 
same.
   Since the Convention's effectiveness depends on the adoption 
        of international antibribery laws by the other parties, 
        implementation by the United States is necessary to lead the 
        way, substantively and politically, for implementation of the 
        Convention by the other parties.
    Because the FCPA is already in force in the United States, only 
minor amendments are necessary to bring it into line with the OECD 
Convention.
   A summary of proposed legislative changes to the FCPA is 
        attached.

    Senator Sarbanes. I just want to quote briefly one 
paragraph of it which says: ``Speedy ratification and 
implementation of the OECD Convention by the United States is 
an absolute imperative in order for the Convention to succeed. 
Some of the other parties are not as committed to the 
Convention as the United States and are likely to use a delay 
in U.S. ratification to undermine it. Speedy implementation of 
the OECD Convention is also necessary to show the other parties 
that the United States takes its obligations under the 
Convention seriously and expects other parties to do the same. 
Since the Convention's effectiveness depends on the adoption of 
international anti-bribery laws by the other parties, 
implementation by the United States is necessary to lead the 
way, substantively and politically, for implementation of the 
Convention by other parties.''
    Mr. Secretary, you touched on that, but I want to develop 
that a little bit because I think we need to sort of do what we 
can to sort of break the Congress out of the mode of saying, 
well, we will get to it. It is not controversial. It obviously 
serves our interests, and at some point we will go ahead and 
approve this thing.
    I think it is important--well, how important is it--let me 
put it to you this way--that we act quickly and promptly and at 
the head of the line as an impetus or as a motivation for 
others to follow through so we really can get this thing into 
place by the end of this year?
    Mr. Eizenstat. It is really critically important. Every day 
that we delay is another contract lost, another bribe being 
paid by a foreign company to get a contract.
    The way the entry into force operates is that if we are to 
meet this end of 1998 target date, then 5 of the 10 largest 
OECD trading partners, which themselves represent 60 percent of 
the combined total exports of those 10 countries, have to 
deposit their instruments of ratification. If we are to meet 
this by the end of 1998 and encourage Japan, France, Germany, 
Korea, and others, we have to act and we have to show 
leadership. This has, after all, been our baby in a sense. We 
have been pushing this for a decade so that we need to show 
leadership here.
    If we cannot get it done, then the entry into force would 
occur in 1999 if any two countries ratify, but that would mean 
the delay of a full year. Again, we would have another $15 
billion to $30 billion in bribes paid, more contracts lost, and 
more jobs at risk in the United States.
    Senator Sarbanes. Well, I guess the point I am trying to 
get at, it is not only important that we do it by the end of 
1998, but we need to do it now, so to speak, so it serves as a 
prompting----
    Mr. Eizenstat. Exactly. If we do not do it now, then the 
other countries will not even come close to meeting the end of 
1998. Everyone is looking to us.
    Senator Sarbanes. Right.
    Mr. Eizenstat. If we do not act, they will delay.
    Senator Sarbanes. Now, let me ask this question about the 
plans for future expansion. We have got these OECD countries, 
which are leading developed economies, but I notice there are a 
fair number of fairly large economies around the world that are 
not participating in it. Now, they may be somewhat less 
developed, but they still are developed countries and 
significant players in the international economic scheme.
    Will they kind of move into what they perceive a vacuum and 
start engaging in these practices in order to gain an 
advantage? Or is there a possibility of expanding this to bring 
in other such countries?
    Mr. Eizenstat. We are going to make a major effort to 
expand it, and I believe that the momentum, Senator, which is 
being created, this sea change to which I alluded, is occurring 
worldwide. If I may just give you some examples. There are 
already five non-OECD countries who have agreed to ratify this, 
three in Latin American, Brazil, Chile, and Argentina. Bulgaria 
and Slovakia have also agreed to do so. We are going to put a 
major multilateral effort on to get other major economies, but 
the fact that we already have so early on five non-OECD 
countries to go with the 29 that we have means that we will be 
covering with the 34 countries about 75 percent of all the 
trade in the world.
    Senator Sarbanes. Well, Mr. Chairman, I see my time is 
about to expire. I may not be able to stay for the second panel 
to hear Mr. Heimann from U.S. Transparency International. I do 
just want to say a word about the work they are doing.
    This whole transparency movement worldwide is extremely 
important in my judgment. What is happening is we see that this 
issue of corruption I think is a looming problem on the 
international scene and it undermines governments. It obviously 
affects the legitimacy of political actions, and the 
Transparency people, not only in this arena but in other arenas 
as well, have been doing very good work in trying to develop 
ways to attack this. It is really a cancer in the international 
body politic, this growing corruption problem and the lack of 
legitimate standards.
    I will not be here for that panel but I wanted to make that 
observation about the work of U.S. Transparency International.
    Mr. Eizenstat. Senator, may I just say that we have worked 
very closely with Transparency International for years now not 
only in this area of anti-bribery, but in general, the whole 
issue of rule of law and transparency, they have been really 
critical in, and they deserve a major pat on the back, as you 
have given them.
    Senator Hagel. Senator Sarbanes, thank you.
    Senator Robb?
    Senator Robb. Thank you, Mr. Chairman. Again, I have the 
same scheduling difficulty that Senator Sarbanes has, and I 
would like to once again join him in his commendation for the 
Transparency efforts because I will not be able to remain for 
that.
    Very briefly, Secretary Eizenstat, let me ask you a general 
question first.
    The difficulty, it seems to me, that we have--and we allude 
to it, but I am not sure that we have discussed it 
sufficiently--is the culture of bribery which we clearly see as 
bribery and has frustrated U.S. companies and officials and 
others who view the transparency and the rule of law that we 
do, and yet there are a number of countries that, from the very 
beginning of their business practices, have simply viewed it 
differently. We do not agree with it all but we do not 
understand it. But some view what we see clearly as bribery as 
a cost of doing business, a middleman, blackmail, hush money. 
There are a lot of different ways to characterize it, but it 
has been so fully ingrained in the culture that it is very 
difficult not to contend with that practice no matter how many 
laws, treaties, or whatever we come up with.
    Is it your belief that this particular treaty will make 
major inroads into changing the culture so that the 
international community does not have to continue to deal with 
something that is culturally ingrained and viewed differently 
than we see in very black and white terms here but is seen 
differently in some other nations?
    Mr. Eizenstat. Your question is an important one. I think 
that there has been a culture which has accepted and even 
encouraged this as long as the bottom line was getting a 
contract.
    I think one of the prime reasons we have seen the Europeans 
come around on this is not only the bipartisan urging that we 
have had for a decade, but it is the fact that their own 
corporations realize that this is self-defeating. So, I think 
that there is a change in culture and that there will be, as a 
result, effective enforcement because the major corporations 
there recognize that they need an external constraint so they 
can say to the corrupt foreign official, look, our laws now 
prevent this, do not ask us. It allows them to put a shield up. 
So, I think that in many ways we are going to see a change in 
culture. We are already beginning to see it and this will give 
them an excuse in effect to avoid doing what they would prefer 
not to do now.
    Senator Robb. It seems to me that that in many ways is the 
ultimate challenge that we face, and I share your hope that we 
can change that culture.
    One specific question has to do with foreign subsidiaries 
of U.S. companies and whether or not U.S. citizens who work for 
foreign subsidiaries and are in fact bound in most cases 
legally by the laws of the foreign government in which their 
subsidiary resides would be covered and whether or not we 
should include this in the Foreign Corrupt Practices Act.
    Mr. Eizenstat. The answer is yes. First of all, we are 
toughening up the treatment of foreign nationals in the United 
States under the Foreign Corrupt Practices Act. Now our 
citizens are subject to criminal penalties if they engage in a 
bribe, but a foreign national residing in the United States is 
only subject to civil penalties. That would change under the 
convention and under the changes we are suggesting for the 
Foreign Corrupt Practices Act.
    In addition, the foreign subsidiaries of U.S. firms would 
be liable under the Foreign Corrupt Practices Act for acts they 
committed in the United States, and U.S. nationals employed by 
foreign subsidiaries could also be held liable for acts of 
foreign bribery committed anywhere. So, it is quite extensive.
    In that sense, if I may, Senator Hagel, you asked about the 
facilitation payments. No payment to obtain or retain benefits, 
regardless of what it is called, whether it is an agency, a 
commission, a consulting fee, would be exempt from prosecution 
either under our Foreign Corrupt Practices Act or under this 
new convention.
    Senator Robb. Thank you, Mr. Secretary. I see my time has 
expired.
    This is not a particularly hostile committee into which to 
bring this, and I join others in thanking the chairman of the 
full committee for his prompt effort to bring this before the 
bribery and I hope before the full Senate so that we can take 
appropriate action as quickly as possible.
    Thank you, Mr. Chairman.
    The Chairman [presiding]. Senator Feingold?
    Senator Feingold. Mr. Chairman, let me begin by thanking 
you for bringing this treaty so quickly before the committee. 
We all agree it is very important and I am very grateful for 
that.
    Mr. Secretary, my thanks to you for your presentation, your 
expertise, and your leadership on this issue.
    I am interested in this issue of the tax deductions for 
corporate bribery. You mentioned that there was every intention 
to move forward to make sure the countries that we are working 
with here actually eliminate the tax deductibility of these 
bribes. But as I understand it, it is not actually part of this 
convention.
    Can you tell me what specific steps you expect to occur and 
over what time frame so that this could actually be 
accomplished, the elimination of the deductibility?
    Mr. Eizenstat. Yes. As you pointed out, one of the grossest 
and most pernicious practices is actually permitting bribes to 
be deducted in some countries as a business expense. One of the 
first formal actions under our anti-bribery agenda in the OECD 
was the approval in 1996, Senator, of a recommendation that 
OECD member countries reexamine their tax laws with a view to 
denying tax deductibility of bribes.
    At that time, 15 of the 29 countries indicated that bribe 
payments were not tax deductible, but of those which claimed 
the need for legislation to end the practice, Denmark, Norway, 
and Portugal have moved quickly to end tax deductibility. 
France has now passed the necessary legislation contingent on 
the entry into force of this convention to do so. Nine others, 
including Germany, Belgium, Luxembourg, the Netherlands, and 
several others have begun the process of changing their 
legislation, and several have been spurred on by the conclusion 
of this convention. Now, only Iceland among OECD member 
countries has yet to indicate the course it will take.
    So, we think that the passage of this convention will act 
as a further spur to get countries to do what they committed to 
do in 1996 which is to pass legislation disallowing deductions 
for bribes.
    Senator Feingold. Thank you.
    With regard to another point you made and that still arises 
outside of the four corners of the agreement is the question of 
foreign public official not including the definition of some 
political party officials. Can you just say a little bit about 
why the parties were unable to agree on the extent to which 
political party officials would be covered and how can we make 
further progress in this regard?
    Mr. Eizenstat. One of the last issues as we were 
negotiating this was to try to include political officials and 
political parties. We pressed very hard for this, and as I 
indicated, we did make a down payment. In effect, if they act 
as a conduit to the public official or if they are directed by 
the public official to take a bribe in lieu of the public 
official getting it, they would be covered.
    But quite frankly, a number of the European countries were 
not willing to make the necessary change to fully cover 
political parties. They did agree, again, on the down payment 
that I have indicated, and they also agreed to take it up in 
1999. But it was their objections that prevented this being 
more fully covered and I think it is the next challenge that we 
face.
    Senator Feingold. Very good. I, as you know, serve on the 
subcommittee having to do with African issues on this 
committee, and I understand that the Organization of African 
Unity is holding its annual summit this week. Have we made any 
progress with respect to encouraging that organization to 
establish the kind of anti-bribery standards that we are 
talking about here?
    Mr. Eizenstat. Not as much certainly as we have done in the 
OECD or as we have done in the OAS where all the countries of 
this hemisphere that are in the OAS Convention, which is also 
before Chairman Helms and the Senate, have agreed not only on 
anti-bribery action but much broader action in terms of the way 
public officials could amass wealth through undercover methods 
by money laundering and the like. I have to say with respect to 
the Organization of African Unity we have not made that kind of 
progress, but we are determined to do it.
    Also, by working with international financial institutions, 
including the African Development Bank, to make sure that their 
own lending practices are such that they are not part of a 
corrupt practice, this will help all countries in Africa as 
well.
    Indeed, one of the amendments that we will be seeking as a 
result of the convention to our own Foreign Corrupt Practices 
Act would for the first time cover officials of international 
organizations who have heretofore not been subject. So, they 
could have accepted a bribe and not been penalized. For the 
first time, we will be penalizing any official from any 
international organization that is party to a bribe as well, 
and this will help I think set a tone in Africa.
    But we need a lot more work there. There is a great deal of 
corruption in many African countries, and we know that this is 
something we need to work on.
    Senator Feingold. I assume that I and other members of the 
committee could help by raising this issue with African heads 
of state when they come visit with us.
    Mr. Eizenstat. Absolutely, because I think they realize 
that this is a detriment to their own economic development.
    Senator Feingold. Thank you, Mr. Secretary and Mr. 
Chairman, very much.
    The Chairman. Mr. Secretary, I think this is the first time 
I have been tardy in arriving at a committee meeting, and I 
will explain by expressing the opinion that perhaps the Lord 
wanted to infuse me with a bit of humility this morning.
    This was a day for us to have the yardman, who is a very 
fine, old, retired gentleman who just does it for his friends 
for a little bit of money. It was hot, and on days like this, I 
carry him some ice water. I was going out with the big glass of 
ice water and I heard the front door shut behind me.
    Mrs. Helms is at the beach. Everybody on my street is at 
the beach except for the two or three who are working. I roamed 
up and down that street trying to find a telephone. Finally, 
the yardman took me down to a shopping center and I called the 
office and they brought me a key.
    I apologize for being late, but I do thank you, Senator 
Hagel for filling in for me.
    Mr. Eizenstat. Mr. Chairman, if I may say, the only thing 
important that you missed by being late is my profuse 
compliments to you for holding this hearing so promptly.
    The Chairman. Well, I will get them in print and I will 
frame them.
    I might say about the Secretary, he has one of the greatest 
academic records at the University of North Carolina, of which 
Mrs. Helms is also an alumnus. She was there a few years before 
him, but she refuses to let me say what year.
    But in any case, thank you for coming and I thank you 
Senator Hagel for helping me in my great hour of need.
    I am going to summarize a statement that I was going to 
make at the start of the hearing because I want it to be a part 
of the record. Obviously, this committee meeting was scheduled 
to consider the Convention on Combating Bribery of Foreign 
Public Officials in International Business Transactions, signed 
by the United States and 33 other nations in December and sent 
to the Senate on May the 4th of this year.
    Now, this being just June the 9th, I hope it is a 
measurement of this committee's efforts to expedite 
consideration of treaties when the administration shows a 
degree of cooperation in the process. Of course, you are 
responsible for that, Secretary Eizenstat, and I appreciate it. 
We are having some difficulty with some other treaties that 
have been hanging fire, and I am happy to use a little bait and 
switch with the administration, hoping that they will send 
those treaties to the Senate too. But that is neither here nor 
there.
    The committee's attention to this treaty reflects the 
somewhat urgent need to push--and I use that word advisedly--to 
push our European allies and other countries to enact laws that 
criminalize bribery of foreign officials by their citizens 
overseas. Now, this treaty, of course, demands enactment of 
such laws by every country ratifying the treaty. We may not 
have a whole lot of influence with some of those countries, but 
those receiving foreign aid will certainly have an 
encouragement I will say to them here--and I hope they will 
notice.
    For more than two decades--20 years or more--the United 
States has unilaterally imposed such restrictions on its 
businesses through the Foreign Corrupt Practices Act. That 
legislation came into being largely because of growing 
incidents of U.S. companies engaging in bribery overseas during 
the 1970's that brought shame and embarrassment to the United 
States. It certainly did to me.
    When the Foreign Corrupt Practices Act became law, many 
critics claimed it to be ``Pollyanna-ish,'' an example of the 
United States enforcing its values on the rest of the world. We 
always hear that when we stand up for what is right. Some 
sources will say, well, ``you cannot control them, you cannot 
control various things,'' but we can try and we can at least 
take a position ourselves as to what is right and what is 
wrong.
    U.S. businesses are recognized worldwide today as among the 
cleanest, and I hope that point has been made this morning. In 
many cases, it also makes the United States businessmen and 
women more innovative and safer because criminals around the 
world now know that U.S. businesses must comply with anti-
bribery laws.
    At the same time, U.S. companies have lost business to 
European and other OECD member companies who continue to bribe 
foreign officials to win contracts. Some estimate this amount 
to be at least $100 billion. Is that correct?
    Mr. Eizenstat. Well, even on an annual basis, Senator, it 
is about $30 billion. So, if you multiply that by a few years, 
you get up to that level.
    The Chairman. So that is what U.S. businesses have lost in 
sales over a period of time.
    Even more objectionable than the bribery itself is the fact 
that European governments, such as the French, actually 
subsidize such activities by making these bribes tax 
deductible.
    Now, this was described in a January 8, 1998 article in the 
New York Times, which said that the family of Prime Minister 
Bhutto of Pakistan enriched itself through foreign payoffs by 
European companies while Mrs. Bhutto was serving as Prime 
Minister of Pakistan.
    I was a little bit surprised and dismayed about that, I 
might say parenthetically, because we had Mrs. Bhutto for a 
coffee before the committee and extended hospitality to her. 
She is a delicate, charming little lady, who, at the time, had 
just given birth to I think her second child. Maybe it was the 
first.
    At that time I got a lecture every second she was sitting 
next to me about you know who, India. She talked about India, 
India, India so much that when I took her up to the Senate 
chamber to present her to the Senate, I hate to confess this, 
but I slipped in introducing her to the Senate as the Prime 
Minister of India.
    I corrected that quickly, but the deed was done and of 
course all of the news media noticed that--and they should 
have.
    Well, I am going to ask that the rest of my statement be 
included in the record and say that there is a problem--and 
this hearing and the testimony by the Honorable Secretary 
indicates that there is a problem--that we have got to face one 
way or another. We can ignore it at our own peril. Bribery 
affects countries that are least able to resist the appeal of 
bribes, as they do not pay their workers livable wages. It is 
also clear that this treaty will be scarcely more than a band-
aid on the problem of corruption if all countries ratifying the 
treaty do not put in place tough laws that deter their 
companies from engaging in bribery overseas.
    So, as a condition to Senate advice and consent to 
ratification, I am going to urge, and even demand, stringent 
reporting requirements in the treaty's resolution of 
ratification because I want the Senate to be constantly and 
fully informed of the actions of all treaty ratifiers to both 
pass and enforce tough domestic laws that criminalize bribery 
overseas.
    The United States has spent hundreds of billions of 
dollars--when you count the fact that it has borrowed money on 
which we paid interest--on foreign aid over the past half 
century. Often aid is given to countries that are all the way 
at the top of the list in terms of corruption and graft. Yet, 
no amount of assistance can help a country whose officials 
steal from their own people. As long as this corruption exists, 
that we know is wrong, and we do nothing about it and even make 
excuses, saying, well, we cannot do anything about it, then we 
are part of the problem; we are not a part of the solution.
    [The prepared statement of Senator Helms follows:]
                      Statement of Chairman Helms
    This Committee meeting has been schedule to consider the Convention 
on Combating Bribery of Foreign Public Officials in International 
Business Transactions, signed by the United States and 33 other nations 
in December, and sent to the Senate on May 4, 1998.
     This being June 9, this is a measurement of the Committee's 
efforts to expedite consideration of treaties When the Administration 
shows a degree of cooperation in the process. The Committee's attention 
to this particular treaty reflects a somewhat urgent need to push our 
European allies, and other countries, to enact laws that criminalize 
bribery of foreign officials by their citizens overseas. (This treaty 
demands enactment of such laws by every country ratifying the treaty.)
    For more than two decades the United States has unilaterally 
imposed such restrictions on its businesses through the Foreign Corrupt 
Practices Act--legislation that came into being largely because of 
growing incidents of U.S. companies engaging in bribery overseas during 
the 1970s that brought shame and embarrassment to the United States.
    When the Foreign Corrupt Practices Act became law, many critics 
claimed it to be ``Polly Anna-ish'' legislation, and an example of the 
United States enforcing its values on the rest of the world. Today, 20 
years later, those critics have been silenced. U.S. businesses are 
recognized worldwide as among the cleanest. In many cases, it also 
makes U.S. business men and women more innovative, and safer because 
criminals around the world now know that U.S. businesses must comply 
with anti-bribery laws.
    At the same time, U.S. companies have lost business to European and 
other OECD member state companies who continue to bribe foreign 
officials to win contracts. Some estimate this amount to be as high as 
$100 billion in lost sales. Even more objectionable than the bribery 
itself is the fact that European governments, such as the French, 
actually make such bribes tax deductible.
    Consider the case described in a January 8, 1998, article in the 
New York Times. According to this account the family of Prime Minister 
Bhutto of Pakistan enriched itself through foreign payoffs by European 
companies, while Mrs. Bhutto was serving as Prime Minister of Pakistan.
    Specifically, the article detailed how a French military contractor 
agreed to pay Mrs. Bhutto's husband $200 million in order to get a $4 
billion jet fighter deal. The article also pointed to a leading Swiss 
company that paid millions of dollars between 1994 and 1996 to offshore 
companies controlled by Bhutto family members in order to gain business 
advantages.
    One need only look at recent events in Indonesia and the Suharto 
family's corruption to see how such bribery and graft can ravage a 
society and undermine political and economic stability. China too is 
grappling with increased corruption as the old communist party regime 
comes to grips with a more market-oriented economy. One recent article 
in a Chinese paper cites a poll of Asian businessmen that ranked China 
as first in Asia for rampant corruption. The largest growth area for 
their corruption, interestingly, is in the political field, which is 
not covered by the treaty pending before us today, but which is covered 
by the U.S. Foreign Corrupt Practices Act. It seems that the Chinese 
have taken to using the same techniques in the U.S. that foreign 
businessmen use in China.
    So, it's clear there is a problem. Bribery affects countries that 
are least able to resist the appeal of bribes, as they do not pay their 
workers livable wages. And it's also clear this treaty will be scarcely 
more than a band-aid on the problem if all countries ratifying the 
treaty do not put in place tough laws that deter their companies from 
engaging in bribery overseas.
    I must admit to some degree of skepticism as to the will of all of 
the treaty's 34 signatories to implement and fully enforce commitments 
made under the treaty. One need only look to the domestic laws of 
countries like Germany and France that still permit their companies to 
deduct bribes as a legitimate business expense. Despite the fanfare of 
signing an OECD resolution last year promising to prohibit such 
deductions, there's been little progress in those countries to rewrite 
their laws to prohibit such deductions.
    So, as a condition to Senate advise and consent to ratification, I 
shall demand stringent reporting requirements in the treaty's 
resolution of ratification that will fully inform the Senate of the 
actions of the treaty ratifiers to both pass and enforce tough domestic 
laws that criminalize bribery overseas.
    Let me conclude with this observation: The United States has spent 
hundreds of billion in foreign aid over the last 50 years often to 
countries that rank at the top of the list in terms of corruption and 
graft. No amount of assistance can aid a country whose officials steal 
from their own people. If OECD nations continue to turn a blind eye to 
bribery by their own companies, they not only condone such corruption, 
they are party to it.
    We will now hear from the Honorable Under Secretary of State, Stu 
Eizenstat, who will be followed by Mr. Fritz Heimann, Chairman of the 
U.S. branch of Transparency International, and counselor to the general 
counsel of General Electric.

    The Chairman. Let me ask a question, since I brought up 
Madam Bhutto.
    When the United States suspended the delivery of the F-16 
fighter aircraft to Pakistan some years back, that was in 
response to Pakistan's pursuit of nuclear weapons, was it not?
    Mr. Eizenstat. Yes, sir.
    The Chairman. Now, that of course culminated in you know 
what last month, Pakistan succeeded in its nuclear test.
    Now, this past January, the New York Times reported that 
the Government of France not only failed to support U.S. 
antiproliferation efforts toward Pakistan, France tried to win 
the contract to deliver French-made fighter aircraft by giving 
a $200 million bribe to the husband of Madam Bhutto. Have you 
discussed that this morning?
    Mr. Eizenstat. No, sir.
    The Chairman. Well, I want us to ventilate that just a 
little bit so it would be made a matter of unmistakable record 
because we will always have Senators who are so busy with their 
own committee work they do not have time to look at others, and 
we are all guilty of that to some extent.
    Now, because the French bribe went to the Prime Minister's 
husband and not to the Prime Minister herself would that be 
prohibited by this treaty?
    Mr. Eizenstat. It is an important question, Mr. Chairman. 
We are aware of the allegations that have been reported on 
this. One of the interesting points is that in the story it 
notes the apparent care taken to avoid violation of existing 
French domestic corruption laws in the sense that, according to 
the story, no French nationals were permitted to participate in 
the bribe because that would have involved domestic French law.
    When France ratifies this convention and enacts a criminal 
law against the bribery of foreign officials, such a 
transaction could be illegal then under French law, and that is 
the value of the convention.
    Now, with respect to the payment of an official spouse, 
although this would not be a per se violation either of our own 
Foreign Corrupt Practices Act, as it now exists, or of the 
convention, it would be covered under two circumstances.
    One, again if the allegations are correct--and these are 
only allegations--if the official was aware of the bribe and 
directed the payment to his or her spouse to try to avoid it, 
that would be covered.
    Second, it would also be covered if the official had 
indirectly benefited, even if she or he did not directly 
benefit.
    So, in those two ways a spouse could be covered, and 
therefore this, if it were true, might have been covered by the 
convention and, if we amend our Foreign Corrupt Practices Act 
accordingly, by our own act as well.
    The Chairman. Do you think we ought to think about a 
modification to make it unmistakable that it would be unlawful?
    Mr. Eizenstat. Well, it would be I think useful in terms of 
legislative record perhaps under our own law, but because the 
convention did not quite go that far--it only covered spouses 
in the two situations--I think rather than reopening the whole 
convention, this ought to be one of the followup issues. We do 
have some followup in terms of political parties which were not 
fully covered, and this I think would be a good point to do as 
a followup in 1999 to see if we could cover this more clearly. 
I think your point is well taken.
    The Chairman. I tell you what, let us both think about 
that, about how we can make it applicable one way or another--
either by a sidebar or some other mechanism.
    Do the French continue to allow its companies a tax 
deduction for such bribes?
    Mr. Eizenstat. Well, you are quite right in pointing this 
out because France and Germany both do permit tax 
deductibility. France has now passed the necessary legislation 
to end that, and one of the values of, Mr. Chairman, your 
leadership in calling such an early hearing is that that new 
legislation will go into effect barring tax deductibility for 
the first time as soon as this convention enters into force. 
So, that pernicious practice in France would be ended.
    The Chairman. Good.
    Well, let us see. How many of our major trading partners 
allow their companies to deduct bribes from their taxes?
    Mr. Eizenstat. Well, in 1996, Mr. Chairman, when we first 
began working on the tax deductibility item, there were then I 
think 26 members of the OECD. It was before its expansion to 
29. Fifteen indicated that bribe payments were not tax 
deductible. That would have meant that around a dozen did 
permit in some form or another tax deductibility.
    I might also mention, in addition to France, that Norway, 
Denmark, and Portugal, which evidently permitted tax 
deductibility, have now ended this practice by moving quickly 
to pass legislation, and nine other countries, Australia, 
Austria, Belgium, Germany, Luxembourg, the Netherlands, New 
Zealand, Sweden, and Switzerland, have begun the process of 
ending tax deductibility. Clearly this convention, which you 
have championed for so long and again which you have moved us 
to negotiate so quickly, once this goes into force, it will be 
a further spur to these nine countries as well.
    The Chairman. I do not tell the media how to do their 
business, but did you guys get all of those?
    Because I want to give wide circulation to the list he just 
read.
    I am going to wind up and I have a few questions in writing 
that I will offer because you have been here for a long time.
    More than a year ago, the OECD countries signed on to a 
nonbinding resolution to eliminate tax deductions for bribes. 
Do you expect that these deductions will finally be eliminated 
now as a result of treaty?
    Mr. Eizenstat. We hope that this will be one of the things 
that will be taken up in the next spring meeting in 1999. I do 
believe, Senator, that we will see these nine countries and 
several others in tax deductibility and that this convention 
will be a true spur to it. So, I really hope that by the end of 
next year, virtually all of our major trading partners and 
competitors will have ended tax deductibility and will have 
ratified this convention and for the first time criminalized in 
their own laws the kind of bribery we have for 20 years 
criminalized in ours and put our own companies at a competitive 
disadvantage in doing so.
    The Chairman. Well, let us make a little pact here, that 
your side and our side work together in every way possible to 
make it happen.
    I must ask you about the State Department. Are you prepared 
to monitor this situation?
    Mr. Eizenstat. Yes, sir, we are. This is really one of our 
highest priorities, and we have set up an anti-bribery working 
group in the OECD, in which we will be very active players, to 
monitor this and make sure that the necessary legislation is 
passed by our European friends.
    The Chairman. Good.
    Now, maybe one of the other Senators did ask this. The top 
five exporting countries, after the United States, are Germany, 
Japan, France, United Kingdom, and Italy. Do you think they 
will have fully ratified and fully implemented this treaty by 
December 1998, as they pledge to do?
    Mr. Eizenstat. I believe that they will if we do so. 
Frankly, everybody is sitting back and waiting for us to act. 
If we show the kind of leadership that you clearly want us to 
show, and you are showing, I believe that they will.
    The Chairman. Well, I am going to encourage the majority 
leader to put this on the Senate calendar as soon as the 
committee acts on the treaty.
    Mr. Secretary, I often say that the best speeches I make 
are made by me when I am driving home. I say, gee, why did I 
not say so and so and so and so. Let me give you a chance to 
close the record. Do you have anything that you would like to 
add that has not been addressed?
    Mr. Eizenstat. I will probably think of it when I am 
driving home too. But right now none occurs to me.
    The Chairman. Thank you so much for being here, and I 
apologize for my tardiness.
    Mr. Eizenstat. Thank you very much, Mr. Chairman.
    The Chairman. I also apologize to Mr. Heimann who is the 
Chairman of U.S. Transparency International. He sat patiently 
and if he had a baseball bat, I suspect he would work on me.
    But we will go as rapidly as you would like, and if you 
will step forward, sir.
    Mr. Eizenstat. Thank you, Mr. Chairman.
    The Chairman. Mr. Heimann, if you will have a seat. Thank 
you very much for coming this morning. I hope you will not have 
a bad opinion of us because I was so tardy, but good Senators 
were here.
    If you have a prepared statement, I guarantee you that will 
be included in the printed record and whatever you want to do 
about it.

     STATEMENT OF FRITZ F. HEIMANN, CHAIRMAN, TRANSPARENCY 
               INTERNATIONAL USA, WASHINGTON, DC

    Mr. Heimann. Mr. Chairman, I am very pleased to testify on 
behalf of Transparency International. TI is a coalition of 
business and other groups combating international corruption 
and now has national chapters in over 70 countries. The U.S. 
chapter is supported by more than 30 major U.S. companies.
    I am counselor to the General Counsel of General Electric 
and also serve as Chair of TI-USA and have participated 
actively in the anti-corruption work at the U.S. Council on 
International Business, Business Roundtable, and the 
International Chamber of Commerce. Thus, I have very extensive 
contact not just with American but also with foreign 
businessmen on the subject.
    I am here to urge prompt action by the Senate to ratify the 
convention. The convention would take bribery out of the 
equation in international business. This would level the 
playing field between U.S. companies and foreign competitors, 
resulting in more orders for American companies, more jobs for 
American workers. The convention would also contribute 
significantly to other key U.S. objectives, helping to overcome 
the effect of corruption on international development programs 
and on the stability of struggling democracies in Eastern 
Europe and elsewhere.
    The convention has the overwhelming support of U.S. 
business and of all the major business organizations, including 
the Business Roundtable, the U.S. Council on International 
Business, the National Foreign Trade Council, NAM, and the 
ECAT.
    My testimony will cover three issues: Why corruption has 
finally become an international issue, why the convention 
provides a solid framework for combating corruption, and what 
steps we must take to make sure that the objectives of the 
convention are achieved.
    In the last few years, there has been a remarkable 
transformation in the willingness of the international 
community to confront the cancer of corruption. This is a 
development of which the United States can be justly proud.
    Twenty-one years ago, the Foreign Corrupt Practices Act was 
passed unanimously by the Senate and by the House. This was an 
historic first step, the first time any country made it a crime 
to bribe foreign officials. We expected that other countries 
would follow the American example. After all, the same bribery 
scandals which prompted the Congress to act had created major 
reverberations in Japan, Italy, and Indonesia, and other 
countries. This expectation proved wrong. Not a single country 
curbed foreign bribery.
    Since the FCPA went into effect, American companies have 
lost orders amounting to many tens of billions of dollars to 
foreign competitors who remained free to pay bribes. In many 
countries, including Germany and France, bribes continue to be 
tax deductible business expenses. In other words, their 
governments not merely condone but effectively subsidize 
bribery. Notwithstanding the failure of other countries to act, 
the Congress refused to repeal or water down the FCPA.
    In the past 5 years, the tide has finally begun to turn. 
There is now widespread recognition that international bribery 
should no longer be tolerated. The changes reflect the 
following factors.
    First, the end of the cold war has resulted in the spread 
of democratic governments around the world. Political processes 
have become much more open. There is more freedom of the press, 
more independent prosecutors, and judges. As a result, 
corruption is much harder to cover up.
    Failure of international development programs to help the 
world's poorest countries is now largely attributed to 
corruption.
    The Asian crisis has discredited the claim that rapid 
economic growth can continue notwithstanding endemic 
corruption.
    Massive bribery scandals in highly industrial countries, 
such as Italy, Japan, France, Belgium, many others, have 
demolished the argument that corruption is only a problem in 
the developing world.
    International business leaders have increasingly recognized 
that a global economy requires common rules and that these 
rules must be morally defensible.
    Finally, Transparency International has grown with 
extraordinary speed and has helped raise public awareness of 
the costs of corruption.
    These factors have produced a tidal change in public 
perception around the world. There is now widespread 
recognition that action against corruption is required. The 
U.S. is no longer a lone voice in the wilderness.
    There are, of course, entrenched groups who oppose reform. 
Corruption obviously has powerful beneficiaries: Corrupt 
companies, corrupt officials, and a legion of middlemen. 
However, the prospects for reform have never been better.
    The OECD convention is the most important achievement to 
date of the international drive for reform. The OECD provides 
an ideal forum for leveling the international playing field 
because its members include the home bases of practically every 
major international company.
    The convention is the product of 4 years of very hard work. 
The U.S. Government deserves great credit for diplomatic skill, 
for forcefulness, and above all perseverance. In the early 
years, very few of us would have expected to be sitting here 
today advocating prompt action on the convention.
    The convention provides a very solid framework for an 
effective international system. Secretary Eizenstat has already 
described the key provisions, as does my statement. Let me just 
summarize very briefly.
    Bribery is very broadly defined, actually more broadly than 
in the FCPA.
    The term ``foreign public official'' is also broadly 
defined and includes administrative, legislative, and judicial 
officials, whether appointed or elected. It also covers 
officials of government controlled companies.
    I might add that I take a somewhat more optimistic view of 
the question of large gifts to spouses of Prime Ministers than 
the Secretary took earlier. The language of the convention 
clearly talks about direct and indirect gifts, gifts from third 
parties and other intermediaries, and gifts of the magnitude, 
Mr. Chairman, that you referred to I think would very easily be 
covered by the terms of the convention because I do not think 
anybody can reasonably argue that the Prime Minister's husband 
was given very large amounts of money simply because they liked 
the husband.
    The convention also provides for more transparent 
accounting rules, for mutual legal assistance, including 
extradition, and establishes a monitoring and followup process 
to which I want to come back very shortly.
    Like any agreement emerging from multi-party negotiations 
on a tight time schedule, the OECD convention is not perfect. 
However, a followup process has been established to address 
such issues as prohibition of improper payments to foreign 
political parties and treatment of foreign subsidiaries. 
Proposed changes will be taken up at next year's OECD 
ministerial.
    The convention in its present form is a first-rate document 
that closely parallels the requirements of the FCPA. There is 
no reason to delay bringing it into effect promptly. Further 
improvements can obviously be made over time.
    Agreement on the text of the convention by 34 nations 
represents a major breakthrough. However, three additional 
steps must be taken by national governments before the 
convention will have a practical impact on the conduct of 
international business: First, ratification by enough countries 
to meet the entry into force provision; second, passage of 
implementing legislation; and three, enforcement by national 
prosecutors.
    All 34 governments have committed to seek ratification by 
the end of this year, a very challenging target. Prompt action 
by the U.S. Senate would provide an enormously helpful signal. 
Other countries are watching what we do. Any delay here would 
be regarded as a ready excuse for delays elsewhere. Without 
U.S. ratification, it would be practically impossible to meet 
the conditions for entry into force in 1998.
    Passage of implementing legislation is a much bigger step 
in other countries than it is here. We only require small 
changes to conform the FCPA to the requirements of the 
convention. In other counties, making foreign bribery a crime 
requires broad, new legislation.
    After implementing laws are passed, enforcement programs 
must be organized. This too is a major challenge. The history 
of corruption reform is full of anti-bribery laws that are 
never enforced.
    It appears that most OECD members will ratify the 
convention this year. The critical issue for the future will be 
the quality of the implementing laws and the enforcement 
program.
    The OECD monitoring program must make sure that consistent 
and effective results are achieved. This will not be easy 
because there are substantial differences in how the 34 legal 
systems work. It is important to forestall the development of 
major differences in how effectively foreign bribery is 
prohibited. This could lead to a lowest common denominator 
trend because governments would be reluctant to impose stricter 
prohibitions on their own companies than will be imposed on 
their competitors. This risk can be overcome provided that the 
monitoring program holds all parties to high standards.
    We want to stress three issues which we consider essential 
for an effective monitoring program.
    First, the effort to design and organize a strong 
monitoring program should proceed as quickly as possible. A 
clear message that all parties will be held to high standards 
must go out before any tendency to enact minimalist 
implementing legislation gathers force.
    Second, monitoring should begin promptly even if it starts 
on an informal basis. To wait until 1999 after the convention 
enters into force would run the risk that many countries will 
have enacted inconsistent implementing laws, which will be 
difficult to correct.
    Third, we urge that the monitoring process should be open 
to inputs from the business sector and from civil society. It 
should not be limited to governments criticizing other 
governments behind closed doors.
    Because the development of a strong monitoring program is 
so crucial to achieving the objectives of the convention, we 
suggest that this committee ask the State Department to provide 
periodic progress reports, and I am delighted, Mr. Chairman, 
that you are ahead of us with respect to that proposal.
    To conclude, the convention will make foreign bribery a 
crime in the world's major exporting nations. It will 
significantly raise the standards for global competition, 
thereby improving American competitiveness and strengthening 
international development, market reforms, and democratization. 
The convention deserves strong support from your committee on 
both practical and moral grounds, and we thank you particularly 
for giving this subject such quick attention. Thank you very 
much.
    [The prepared statement of Mr. Heimann follows:]
                     Statement of Fritz F. Heimann
    Mr. Chairman, members of the Committee on Foreign Relations, I am 
very pleased to be invited to testify on behalf of Transparency 
International. TI is a non-governmental organization committed to 
combating international corruption. It was launched in 1993 and now has 
national chapters in over 70 countries on every continent. TI-USA, of 
which I am chairman, is supported by a broad coalition, including more 
than thirty major American companies, labor, scholars, development 
experts, and many distinguished individuals. I have been a lawyer for 
General Electric for over four decades and serve as Counselor to the 
General Counsel. I also chair the working group on extortion and 
bribery of the U.S. Council on International Business.
    I am here to urge prompt action by the Senate to ratify the OECD 
Convention to Combat Bribery of Foreign Public Officials. The 
Convention would take bribery out of the equation in international 
business. This would level the playing field between U.S. companies and 
foreign competitors, resulting in more orders for American companies 
and more jobs for American workers. The Convention would also 
contribute to other key U.S. objectives, by helping to overcome the 
effects of corruption on international development programs and on the 
stability of struggling democracies is Central and Eastern Europe and 
elsewhere.
    The Convention has the overwhelming support of a broad coalition of 
major business organizations, including the Business Roundtable, the 
U.S. Council on International Business, the National Foreign Trade 
Council, the National Association of Manufacturers, and the Emergency 
Committee for American Trade.
    My testimony will cover three subjects: (1) Why corruption has 
finally become a high-priority international issue; (2) Why the OECD 
Convention provides a solid framework for combating corruption; and (3) 
What steps must be taken to make sure that the objectives of the 
Convention are achieved.
       I. Why Corruption Has Become Critical International Issue
    During the past five years there has been a remarkable 
transformation in the willingness of the international community to 
confront the cancer of corruption. This is a development of which the 
United States can be justly proud, and for which the U.S. Congress 
deserves particular credit.
    In 1977 the Foreign Corrupt Practices Act passed the Senate 87-0 
and the House 349-0. The FCPA was an historic step, the first time any 
country made it a crime to bribe foreign officials. It was expected 
that other countries would follow the American example. After all, the 
same bribery scandals which prompted Congress to act had created major 
reverberations in Japan, Italy, the Netherlands, Indonesia and 
Honduras. This expectation proved wrong. Not a single country acted to 
curb foreign bribery.
    Since the FCPA went into effect, U.S. companies have lost orders 
amounting to many tens of billions of dollars to foreign competitors 
who remained free to pay bribes. \1\ In many countries, including 
Germany and France, bribes continued to be treated as tax-deductible 
business expenses. Foreign governments not merely condoned, but 
effectively subsidized foreign bribes. Notwithstanding the failure of 
other countries to act, the U.S. Congress refused to repeal or water 
down the FCPA and insisted on retaining the moral high ground. In the 
past five years the tide has finally began to turn. There is now 
widespread recognition that international bribery should no longer be 
tolerated. This changes reflects the following factors:
---------------------------------------------------------------------------
    \1\ The U.S. Department of Commerce estimates that 139 
international commercial contracts valued at $64 billion may have 
involved bribery by foreign firms and that U.S. firms lost 36 of those 
contracts valued at $11 billion. The National Export Strategy, Fourth 
Annual Report to the U.S. Congress, October 1996, at 113.
---------------------------------------------------------------------------
   The end of the Cold War has resulted in the spread of 
        democratic governments around the world. Political processes 
        have become more open and corruption is harder to cover up. 
        There is more freedom of the press, more independent 
        prosecutors and judges.
   Corruption has been identified as a major obstacle to the 
        transition to democracy and market economies in Central and 
        Eastern Europe.
   Much of the failure of international development programs to 
        improve the economies of the world's poorest countries is now 
        widely attributed to corruption. The World Bank, under the 
        leadership of Jim Wolfensohn, has made corruption a high-
        priority issue.
   The Asian crisis has discredited the claim that rapid 
        economic growth can continue notwithstanding endemic 
        corruption. The IMF is making transparency a key element in its 
        assistance programs.
   Massive bribery scandals in highly industrialized countries, 
        including Italy, Japan, Korea, Spain, France and Belgium, have 
        demolished the common excuse for inaction, that corruption is a 
        serious problem only in developing countries. This has clearly 
        created support for the OECD program.
   There is increasing recognition by international business 
        leaders that a global economy requires common rules, and that 
        these rules must be morally defensible. This has resulted in 
        the development by the International Chamber of Commerce of 
        strong Rules of Conduct to Combat Extortion and Bribery.
   Transparency International has grown with extraordinary 
        speed and has helped raise public awareness of the costs of 
        corruption. TI actively promotes the development of systemic 
        reforms such as the OECD Convention.
    These factors have produced a tidal change in public perceptions 
around the world. There now is widespread recognition that action 
against corruption is required. There are still entrenched groups who 
oppose reforms. Corruption obviously has powerful beneficiaries: 
corrupt companies, corrupt officials, and a legion of middlemen. 
However the prospects for reform have never been better.
    II. Why OECD Convention Provides Solid Framework for Combating 
                        International Corruption
    The OECD Convention is the most important achievement to date of 
the international drive for reform. The OECD is the ideal forum for 
tackling the supply side of international corruption because the 
industrialized countries that belong to the OECD are the home bases of 
practically all major international companies.
    The Convention is the product of four years of hard work. The U.S. 
Government deserves great credit for diplomatic skill, forcefulness, 
and above all perseverance. The Convention provides a solid framework 
for an effective international system to prohibit bribery of foreign 
public officials.
   Bribery is broadly defined, more broadly than in the FCPA. 
        The Convention prohibits not only bribes ``to obtain or retain 
        business'' but also to secure ``other improper advantage in the 
        conduct of international business.'' This makes clear that 
        bribery is prohibited not just in procurement of orders, but 
        also in environmental and other regulatory procedures, in tax 
        and customs matters, and in judicial proceedings.
   The term ``foreign public official'' is also broadly defined 
        and includes administrative, legislative and judicial 
        officials, whether appointed or elected. It also covers 
        officials of government-controlled companies. This was a big 
        win for the American negotiating team, over determined 
        opposition, because in many countries procurement in key 
        sectors such as transportation, telecommunications, energy and 
        infra-structure projects is conducted by government 
        corporations.
   Sanctions for foreign bribery must be comparable to those 
        for bribery of domestic officials, and must include effective 
        criminal penalties or equivalent civil sanctions.
   The Convention also calls for establishing accounting and 
        auditing standards, including prohibition of off-the-books 
        accounts.
   Mutual legal assistance, including extradition, is required. 
        This is important because investigations under the FCPA were 
        often stymied by lack of cooperation from foreign governments. 
        The Convention establishes a monitoring and follow-up process. 
        This is of critical importance to assure effective and 
        consistent implementation by 34 countries with major 
        differences in their legal systems. The monitoring program will 
        be conducted by the OECD's Anti-Bribery Working Group, and is 
        expected to be modeled on the monitoring program of the 
        Financial Action Task Force on money laundering. The FATF 
        process is widely respected.
    Like any agreement emerging from multi-party negotiations conducted 
on a tight time schedule, the OECD Convention has some shortcomings. A 
follow-up process has been established by which the OECD Anti-Bribery 
Working Group, the same body that drafted the Convention, will address 
such issues as prohibition of improper payments to officials of foreign 
political parties, and treatment of foreign subsidiaries. Proposed 
changes will be taken up at the May 1999 OECD Ministerial.
    The Convention in its present form is a first-rate document that 
closely parallels the requirements of the FCPA. There is no reason to 
delay bringing it into effect. Further improvements can be made over 
time.
    As noted before, the Convention tackles the supply side of 
corruption. The demand side--corruption by public officials--must also 
be addressed. The World Bank and others are working on procurement 
reforms, increased transparency, and other programs to combat demand-
side abuses. The credibility of efforts from the North to promote 
reforms in the developing world will be greatly strengthened by the 
OECD effort to end foreign bribery by the industrialized countries.
         III. Assuring Effective Implementation and Enforcement
    Agreement on the text of the Convention by 34 nations represents a 
major breakthrough. However, three additional steps must be taken by 
national governments before the Convention will have a practical impact 
on the conduct of international business: (1) ratification by enough 
countries to meet the entry into force provision, (2) passage of 
implementing legislation, and (3) enforcement by national prosecutors.
    All 34 governments have committed to seek ratification by the end 
of this year, a very challenging target. Prompt action by the Senate 
would provide an enormously helpful signal. Other countries are 
watching what we do. Any delay here would be regarded as a ready excuse 
for delays elsewhere. Without U.S. ratification it would be practically 
impossible to meet the conditions for entry into force in 1998.
    Passage of implementing legislation is a bigger step in other 
countries than in the U.S. Here only relatively small changes are 
required to conform the FCPA to the requirements of the Convention. In 
other countries making foreign bribery a crime requires new 
legislation. After implementing laws are passed, enforcement programs 
must be organized. This is key challenge: the history of corruption 
reform is replete with anti-bribery laws that are never enforced. 
Effective enforcement requires political will, plus adequate resources.
    While these three steps require action by national governments, the 
OECD monitoring program must make sure that consistent and effective 
results are achieved. This will not be easy because there are 
substantial differences in how the 34 legal systems work. It is 
important to forestall major differences in how foreign bribery is 
prohibited. Governments will be reluctant to impose stricter 
prohibitions on their own companies than will be imposed on their 
competitors. This could lead to a lowest common denominator trend. This 
risk can be overcome, provided the monitoring program provides clear 
assurance that all parties will be held to high standards.
    The experience with the monitoring program of the Financial Action 
Task Force on money laundering indicates that the challenge of 
achieving effective and consistent enforcement can be met. The effort 
to organize the OECD monitoring is already under way. We want to stress 
three issues which we consider essential for an effective monitoring 
process.
   First, the effort to design and organize a strong monitoring 
        program should proceed as quickly as possible. The message that 
        all parties will be held to high standards must go out before 
        any tendency to enact minimalist implementing legislation 
        gathers force.
   Second, monitoring should begin promptly, even if it starts 
        on an informal basis. To wait until after the Convention enters 
        into effect would run the risk that many countries will have 
        enacted inconsistent implementing laws, which will be difficult 
        to correct.
   Third, the monitoring process should be open to inputs from 
        the private sector and from civil society. It should not be 
        limited to governments criticizing other governments behind 
        closed doors. The monitoring process should be as transparent 
        as possible in order to facilitate non-governmental inputs.
   Because the development of a strong monitoring program is so 
        important to achieving the objectives of the Convention, we 
        suggest that this Committee ask the State Department to provide 
        periodic progress reports
                             IV. Conclusion
    The Convention is part of on ongoing process at the OECD. This 
includes not only the monitoring program and the follow-up program to 
address unresolved issues, but also the implementation of several OECD 
anti-bribery initiatives dealing with issues other than 
criminalization, including the 1996 recommendation to terminate tax 
deductibility of bribes. The success of the OECD to date, coupled with 
the change in public opinion regarding corruption, provides assurance 
that the challenges ahead can be dealt with successfully.
    To conclude, the Convention will make foreign bribery a crime in 
the world's major exporting nations. It will significantly raise the 
standards for global competition, thereby improving American 
competitiveness, and strengthening international development, market 
reforms and democratization programs. The Convention deserves strong 
support from your Committee on both practical and moral grounds. 
Finally, we want to express our appreciation to the Chairman for 
scheduling this hearing so soon after the Convention was transmitted, 
and for placing the Convention on the agenda for action on June 23.

    The Chairman. Sir, this is an excellent statement. I just 
consulted with one of my bosses back here, and I find that 
unless I ask, request, or stipulate that the entire text be 
made available to every Senator, it would not be. But I assure 
you I have just given instructions that it be made available to 
every Senator.
    Mr. Heimann. Thank you very much.
    The Chairman.It is an excellent statement, and I commend 
you on it and I thank you for coming.
    Now, I want to get you on the record for two or three 
things. I posed a question to Stu Eizenstat and I pose it to 
you now. Which European countries' corporations spend the most 
annually on bribes to foreign government officials? Is it 
France or Germany or Denmark?
    Mr. Heimann. TI publishes an annual index rating countries 
based on the level of corruption, and I have been involved in 
lots of arguments with people how accurate is this index. One 
obvious problem you face in this field is that all bribery is 
conducted in secrecy. So, certainly in my experience at GE, 
whenever we lose a business, we run a lost business analysis. 
Very often the salesmen come back with reports saying we lost 
because the other guys paid a bribe. We have learned to apply a 
little bit of skepticism to that. It is just a wonderful excuse 
for losing business. So, my guess is that bribery is extremely 
pervasive in all these countries.
    If you look at the history in the U.S., after the Foreign 
Corrupt Practices Act was passed, the SEC provided a period 
during which companies could report on prior bribes, and 400 
American companies had paid bribes and reported that to the SEC 
in return for indemnity.
    My best guess is the same thing is the case in the rest of 
the world. Bribery, as long as it is not legally prohibited, 
will be practiced very, very broadly, and that is why I think 
this convention is absolutely essential.
    The Chairman. I expect the real answer to it is that it is 
not a question of who is paying bribes, it is a matter of who 
is not paying bribes because so many people are doing it.
    Do you have evidence that the European companies are 
serious about foregoing business--and that their governments 
will not look the other way--should this treaty enter into 
force? Will they be serious about the enforcement of any laws 
they pass?
    Mr. Heimann. My experience through the International 
Chamber of Commerce, which has a committee made up of 
businessmen from many of the major OECD countries, is that the 
important business leaders would be delighted to end 
corruption. They do not like it. They think it has a terrible 
effect within the moral climate within the company. They are 
concerned, however, that they do not want to lose business as 
long as other people continue to pay bribes.
    The Chairman. That is encouraging.
    Mr. Heimann. The beauty of the OECD approach is that it 
ends this dilemma. Once all the major competitors criminalize 
bribery, I think the companies are going to comply.
    I think the same thing is going to happen that happened in 
the U.S. GE traditionally had a policy on antitrust compliance. 
After the FCPA was passed, we amended that policy to include 
compliance with the Foreign Corrupt Practices Act. I was 
involved in counseling our business people, and when you tell 
them, look, if you pay a bribe, not merely are you not doing 
the company a favor by winning an order that way, you are 
likely to wind up in jail and the company is subject to a huge 
fine. That made a big, big difference in how they responded, 
and I am sure German Companies, French companies, Italian 
companies will react exactly the same way. They will put in 
compliance programs once they are legally at risk.
    The Chairman. Well, I thank you, sir.
    This is a step that has got to be taken, and I hope the 
critics of it will let me know precisely, specifically what 
they would do to improve the legislation. We are going to have 
a business session this week--in 2 weeks, and this will be 
prominent on the agenda for that. We will report it out and I 
am going to encourage the Majority Leader to bring this before 
the Senate as promptly as possible.
    I will ask you, as I ask Stu Eizenstat, do you have any 
further comments that you might think, gee, I wished I had 
thought of that?
    Mr. Heimann. I think I would like to answer exactly the way 
Stu Eizenstat answered. Thank you very much.
    The Chairman. Well, your statement is excellent and you are 
certainly kind to come and be with us. If you have further 
thoughts on the legislation or the treaty, please let me know 
either by telephone or by letter because if I am sincere about 
anything--and I think I am--I want to work to make everything 
that comes out of this committee effective and not find out a 
year later that it has this defect or the other.
    But thank you again.
    If there be no further business to come before the 
committee, we stand in recess.
    [Whereupon, at 12:08 p.m., the committee adjourned, subject 
to the call of the Chair.]


                            A P P E N D I X

                              ----------                              


   Responses to Additional Questions for the Record Submitted by the 
                               Committee

                 United States Department of State,
                                          Washington, D.C.,
                                                     June 22, 1998.
The Honorable  Jesse Helms,
Chairman, Committee on Foreign Relations,
United States Senate.
    Dear Mr. Chairman: Following the June 9, 1998 hearing on OECD 
Bribery Convention (Treaty Doc. 105-43), additional questions were 
submitted or the record. Please find enclosed the responses to those 
questions.
    If we can be of further assistance to you, please do not hesitate 
to contact us.

            Sincerely,

                                    Barbara Larkin,
                                       Assistant Secretary,
                                               Legislative Affairs.

    Enclosure: As stated
                                 ______
                                 

                  Questions Submitted by Senator Helms

    Question 1. In his testimony, Under Secretary Eizenstat noted that 
$30 billion was lost in contracts last year as a result of bribes by 
competitors. If this treaty were fully enforced, would all of the 
bribes associated with these contracts be covered by the treaty? If 
not, indicate the amount associated with bribes not covered by the 
treaty.
    Answer. The United States government is aware of allegations of 
bribes in the past year for 61 international contracts worth almost $30 
billion dollars. United States firms competed for some of these 
contracts. If implemented and enforced by signatories, the anti-bribery 
convention would have covered approximately 70% of these incidents of 
alleged bribery.
    The above suspected cases of bribery which would likely not be 
covered by the Convention fall into two categories: (a) those cases of 
bribery where the individual or firm undertaking the bribe was a 
national of a signatory to the Convention or (b) those cases of bribery 
where the intended bribe was a political party or a party official. It 
is intended that OECD outreach efforts to countries not presently 
signatories to the Convention will reduce over time cases falling under 
category (a), while the OBCD's future workplan to address bribes to 
political parties, party officials and candidates for political office 
is intended to reduce significantly cases falling under category (b).
    Question 2. Please provide a list of all cases brought under the 
Foreign Corrupt Practices Act.
    Question 3. Please provide a list of all penalties imposed, and 
amounts paid, under the Foreign Corrupt Practices Act.
    Question 4. Please provide a list of all settlements made, prior to 
final decision, under the Foreign Corrupt Practices Act.
    Answer. Responses to Questions 2, 3, and 4 follow:
Department of Justice
            I. Pre-Act Criminal Prosecutions:
    1. U.S. v. J. Ray McDermott & Co. Inc., E.D. Louisiana, 1978.

    2. U.S. v. Bethlehem Steel Corporation, (80 Cr. No. 0431), 
S.D.N.Y., 1980.

    3. U.S. v. The Williams Companies, (Cr. No.78-00144), D.D.C., 1978 
[Currency and Foreign Transactions Reporting Act].

          The company paid a fine and civil penalty of $187,000.

    4. U.S. v. Control Data Corporation, (Cr. No.78-00210), D.D.C., 
1978 [Mail Fraud and Currency and Foreign Transactions Reporting Act].

          The corporation paid a fine and civil penalty of $1,381,000.

    5. U.S. v. Westinghouse Electric Company, (Cr. No.78-00566), 
D.D.C., 1978 [False statements to Export-Import Bank and Agency for 
International Development]

          The company paid a fine of $300,000.

    6. U.S. v. United Brands Company, (Cr. No.78-538), S.D.N.Y., 1978 
[Mail Fraud]

          The company paid a fine of$15,000.

    7. U.S. v. United States Lines, Inc., (Cr. No. ), D.D.C., 
[Conspiracy to defraud the Federal Maritime Administration].

          The company paid a fine of $5,000.

    8. U.S. v. Sea-Land Services, Inc., (Cr. No.78-103), D.D.C. 1978 
[Conspiracy to defraud the Federal Maritime Administration].

          The company paid a fine of $5,000.

    9. U.S. v. Seatrain Lines, Inc., (Cr. No.78-49) [Conspiracy to 
defraud the Federal Maritime Administration and Currency Transactions 
Reporting Act].

          The company and a subsidiary each paid fines of $260,000.

    10. U.S. v. Lockheed Corporation, (Cr. No.79-00270), D.D.C., 1979 
[Currency and Foreign Transactions Reporting Act, Wire Fraud, false 
statements to Export-Import Bank].

          The company paid a fine and civil penalties of $647,000.

    11. U.S. v. Gulfstream American Corporation, (Cr. No.79-00007), 
D.D.C., 1979 [False Statements to Export-Import Bank and Commerce 
Department]

          The company paid a fine of$120,000.

    12. U.S. v. Page Airways; Inc., (Cr. No.7900273), D.D.C., 1978 
[Currency and Foreign Transactions Report Act].

          The company paid a fine and civil penalty of $52,647.

    13. U.S. v. Textron, Inc., (Cr. No.79-00330), D.D.C, 1979 [Currency 
and Foreign Transactions Report Act].

          The company paid a fine and civil penalty of$131,670.

    14. U.S. v. McDonnell Douglas Corporation., et al., (Cr. No.79-
516), D.D.C., [Mail Fraud, Wire Fraud, conspiracy, false statements to 
Export-Import Bank].
            II. FCPA Criminal Prosecutions:
    1. U.S. v. Kenny International Corp., (Cr. No.79-372), D.D.C., 
1979.

          The company pled to one count of violating the FCPA and 
        consented to a civil injunction against further FCPA 
        violations. The corporation was fined $50,000 and required to 
        pay restitution to the Cook Islands government in the amount of 
        NZ $337,000.

          The chairman of Kenny International consented to the entry of 
        a civil injunction and agreed to enter a plea of guilty to 
        criminal charges in the Cook Islands.

    2. U.S. v. Crawford Enterprises, Inc., Donald G. Crawford, William 
E. Hall, Mario S. Gonzalez, Ricardo G. Beltran, Andres I. Garcia, 
George S. McLean, Luis A. Uriarte, Al L. Eyster and James R. Smith, 
(Cr. No. H-82-224), S.D.Tx, Houston Division, 1982.

          Crawford Ent. Pled no contest--Fined $3,450,000

          D. Crawford Pled no contest--Fined $309,000

          W. Hall Pled no contest--Fined $150,000

          A. Garcia Pled no contest--Fined $75,000

          A. Eyster Pled no contest--Fined $5,000

          J. Smith Pled no contest--Fined $5,000

          G. McLean Acquitted

    3. U.S. v. C.E. Miller Corporation and Charles E. Miller, (Cr. 
No.82-788), C.D. Cal., 1982.

          The corporation pled guilty and was fined $20,000. The 
        individual defendant pled guilty and was sentenced to three 
        years probation and 500 hours community service.

    4. U.S. v. Marquis King, (Cr. No.83-00020), D.D.C., 1983.

          The defendant pled guilty to violations of Currency and 
        Foreign Transactions Reporting Act and was sentenced to 14 
        months incarceration and required to pay prosecution costs.

    5. U.S. v. Ruston Gas Turbines, Inc., (Cr. No. H-82-207), S.D. 
Tex., 1982.

          The corporation pled guilty to a FCPA violation and was fined 
        $750,000.

    6. U.S. v. International Harvester Company, et al, (Cr. No.82-244), 
S.D. Tex., 1982.

          The corporation pled guilty to one count of conspiracy to 
        violate the FCPA and was fined $10,000 plus costs of $40,000.

          An individual defendant also pled guilty to one count and was 
        sentenced to one year of incarceration (suspended)

    7. U.S. v. Applied Process Products Overseas, Inc., (Cr. No. 83-
00004), D.D.C., 1983.

          The company pled guilty to a FCPA violation and was fined 
        $5,000. In addition it consented to a permanent civil 
        injunction.

    8. U.S. v. Gary Bateman, (Cr. No.83-00005), D.D.C., 1983.

          The defendant pled guilty to 5 CFTR misdemeanors and was 
        sentenced to three years probation. In addition, he agreed to 
        pay a civil penalty of $229,512, a civil tax payment of 
        $300,000, and costs of prosecution of $5,000.

    9. U.S. v. Sam P. Wallace Company, Inc., (Cr. No.83-0034) (PG), 
D.P.R., 1983.

          The corporation pled guilty to three counts of FCPA 
        accounting violations and was fined $30,000. In addition, it 
        also pled guilty to a CFTR violation and was fined $500,000.

    10. U.S. v. Alfonso A. Rodriguez, (Cr. No.83-0044 (JI))), D.P.R., 
1983.

          The defendant pled guilty to one count of FCPA bribery and 
        was sentenced to three years probation and fined $10,000.

    11. U.S. v. Harry G. Carpenter and W.S. Kirkpatrick, Inc., (Cr. 
No.85-353), D.N.J., 1985.

          The corporation pled guilty to a FCPA violation and was fined 
        $75,000.

          The individual defendant pled guilty to one count FCPA 
        bribery and was sentenced to three years probation, community 
        service, and a fine of $10,000.

    12. U.S. v. Silicon Contractors, Inc., Diversified Group, Inc., 
Herbert D. Hughes, Ronald R. Richardson, Richard L. Noble and John 
Sherman, (Cr. No.85-251), E.D. La., 1985.

          The corporation pled guilty to a FCPA violation, agreed to a 
        permanent civil injunction, and was fined $150,000.

          Hughes, Richardson, Noble and Sherman agreed to the entry of 
        civil injunctions.

    13. U.S. v. NAPCO International, Inc. and Venturian Corporation, 
(Cr. No.4-89-65), D. Minn., 1989.

          The defendants pled guilty to three counts of FCPA bribery 
        and were fined $785,000. In addition, they paid $140,000 in 
        civil settlement and $75,000 to settle tax charges.

    14. U.S. v. Richard H. Liebo, (Cr. No. 4-89-76) D. Minn., 1989.

          The defendant was convicted of FCPA bribery and false 
        statements and was sentenced to 18 months incarceration 
        (suspended) with three years probation.

    15. U.S. v. Goodyear International Corp., (Cr. No.89-0156), D.D.C, 
1989.

          The corporation pled guilty to one count of FCPA bribery and 
        was fined $250,000.

    16. U.S. v. Young Rubicam Inc., Arthur R. Klein, Thomas 
Spangenberg, Arnold Foote Jr., Eric Anthony Abrahams, and Steven M. 
McKenna, (Cr. No. N-89-68 (PCD)), D. Conn., 1990.

          The company pled guilty to one count of conspiracy to violate 
        FCPA and was fined $500,000.

    17. U.S. v. George V. Morton, (Cr. No. 3-90-061-H), N.D. Tex. 
(Dallas Div.), 1990.

          The defendant pled guilty to one count of conspiracy to 
        violate FCPA and was sentenced to three years probation.

    18. U.S. v. John Blondek, Vernon R. Tull, Donald Castle and Darrell 
W.T. Lowry, (Cr. 741), N.D. Tex. 1990.

          Two of the defendants were acquitted at trial. The charges 
        were dismissed against the two remaining defendants.

    19. U.S. v. F.G. Mason Engineering and Francis G. Mason, (Case No. 
B-90-29), JAC, D. Conn. 1990.

          The corporation pled guilty to one count of conspiracy to 
        violate the FCPA, was fined $75,000, and was required to pay 
        restitution of $160,000.

          The individual defendant also pled guilty to one count of 
        conspiracy to violate the FCPA, was sentenced to 5 years 
        probation, and was fined $75,000 (joint with Company).

    20. U.S. v. Harris Corporation, John D. Iacobucci and Ronald L. 
Schultz, (Cr. No.90-0456), N.D. Cal., 1990.

          The court granted a motion for judgment of acquittal at the 
        close of the government's case.

    21. U.S. v. Herbert Steindler, Rami Dotan, and Harold Katz, (Cr. 
No.194-29), S.D. Ohio 1994.

          One defendant pled guilty to three counts of conspiracy, wire 
        fraud and money laundering and was sentenced to 84 months 
        incarceration and required to forfeit $1,741,453. The remaining 
        defendants are fugitives.

    22. U.S. v. Vitusa Corporation, (Cr. No. 94-253)(MTB), D.N.J., 
1994.

          The corporation pled guilty to a FCPA violation and was fined 
        $20,000.

    23. U.S. v. Denny Herzberg, (Cr. No. 94-254)(MTB), D.N.J., 1994.

          The defendant pled guilty to a FCPA violation and was 
        sentenced to two years probation and fined $5,000.

    24. U.S. v. Lockheed Corporation, Suleiman A. Nassar and Allen R. 
Love, (Cr. No.1:94-Cr-22-016), N.D., Ga. Atlanta Div. 1994.

          The corporation pled guilty to conspiracy to violate the FCPA 
        and was fined $21.8 million. In addition, it paid a $3 million 
        civil settlement. Defendant Nassar pled guilty to two counts 
        and was sentenced to 18 months imprisonment. Defendant Love 
        pled guilty to one count in a related case and was fined 
        $20,000.

    25. U.S. v. David H. Mead and Frerik Pluimers, D.N.J 1998 
[Pending].
    26. U.S. v. Herbert K. Tannenbaum, S.D.N.Y. 1998 [Pending].
            III. FCPA Civil Injunctive Actions:
    1. U.S. v. Roy J. Carver and E. Eugene Holley, (Civ. No.79-1768), 
S.D. Fl., 1979.

          Carver and Holley consented to permanent injunctions from 
        future violations of FCPA.

    2. U.S. v. Finbar B. Kenny, et al., (Civ. 79-2038), 1979.
    3. U.S. v. Dornier GmbH.
    4. U.S. v. Eagle Manufacturing, Inc., (Civil Action No. B-91-171), 
S.D. Tex., 1991.
    5. U.S. v. American Totalisator Company Inc., 1993.

          The corporation consented to permanent injunction from future 
        violations of FCPA.
            IV. Other Cases:
    1. U.S. v. General Electric Company, (Cr. No.1-92-87), S.D. Ohio 
1992.
    2. U.S. v. Benjamin Sonnenschein, (Cr. No.92-680) E.D.N.Y. 1992.
     3. U.S. v. Gary S. Klein, (Cr. No.1-93-52) S.D. Ohio 1993.
     4. U.S. v. National Airmotive Corporation, (DKT. No. CD93-377-CAL) 
N.D. Cal. 1993.
    Question 5a. Please provide a detailed account of the laws enacted 
in each of the countries that are signatory to the treaty of the 
following:
   laws enacted that would prohibit bribery of public officials 
        in international business transactions (details should include 
        the jurisdictional reach of the country's judicial system, the 
        definition of ``bribery'', and the definition of ``public 
        official'')
   laws proposed that would prohibit bribery of public 
        officials in international business transactions (details 
        should include the jurisdictional reach of the country's 
        judicial system, the definition of ``bribery'', the definition 
        of ``public official'', and where such proposals are in the 
        law-making process.)
   laws enacted that would prohibit the maintenance of off-the-
        book accounts, or inadequately identified transactions, the 
        recording of non-existent expenditures, the entry of 
        liabilities with incorrect identification of their object, and 
        the use of false documents for the purpose of bribing foreign 
        officials or hiding bribery of foreign or domestic officials.
   laws proposed that would prohibit the maintenance of off-
        the-book accounts, or inadequately identified transactions, the 
        recording of non-existent expenditures, the entry of 
        liabilities with incorrect identification of their object, and 
        the use of false documents for the purpose of bribing foreign 
        officials or hiding bribery of foreign or domestic officials.
    Answer. (Note: In our response, we have separated out the portion 
of the above question which dealt with the tax deductibility of bribes, 
as the OECD Recommendation on tax deductibility of bribes is on a 
separate track from that of the OECD Convention. The tax deductibility 
question is addressed in a new question 5b.)
    Most signatory countries are still in the process of finalizing the 
necessary legislative proposals to ratify and implement the OECD 
Convention. Most countries will need to do considerably more than amend 
an existing criminal statute, as is the case for the United States. We 
expect the June 29-July 1 meeting of the OECD Working Group on Bribery 
to result in specific initial information on the status of ratification 
and implementation actions in member countries.
    We are not aware of any signatory country which, as of June 19, has 
either ratified the Convention or passed implementing legislation.
    Attached is a table which summarizes the current status of 
ratification and implementation actions in each of the 29 OECD member 
countries and the five nonmember signatories of the Convention.

  OECD Convention on Combating Bribery of Foreign Public Officials in 
      International Business Transactions--Status of Signatories' 
                             Implementation

    Attached is a chart in draft form setting out the title of each 
signatory's implementing legislation and a brief description of the 
status of each signatory's implementation of the convention. The chart 
has been prepared by the Trade Compliance Center of the United States 
Department of Commerce based on information U.S. embassies in the 
signatories' capitals and the U.S. delegation to the Working Group on 
Bribery of the Organization for Economic Cooperation and Development 
(OECD). The chart is current through June 22, 1998, and is periodically 
updated as further information is received.

                           Convention on Combating Bribery of Foreign Public Officials in International Business Transactions                           
                                         [Trade Compliance Center, Department of Commerce, DRAFT--June 22, 1998]                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Country                Relevant Laws                Progress Analysis          Status of Implementation and Ratification of the OECD Convention  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Argentina                                                                          Legal advisers in the Ministry of Justice are divided whether the    
                                                                                    Convention will require amendments to the Argentine criminal code to
                                                                                    redefine bribery. (Buenos Aires 1284, 12 March 1998) Delegate was   
                                                                                    unable to indicate an approximate date upon which legislation would 
                                                                                    be presented to its Parliament. (Paris 7678, 6 April 1998)          
--------------------------------------------------------------------------------------------------------------------------------------------------------
Australia             Criminal Code Amendment                                      Australia participated in the Convention negotiations but did not    
                       (Bribery of Foreign Public                                   sign the Convention (it is expected to do so when domestic          
                       Officials) Bill 1998                                         procedures are completed). The Convention is being considered in    
                       (proposed)                                                   conjunction with changes in the Crimes Act which will be necessary  
                                                                                    to implement the Convention. The Attorney-General has produced an   
                                                                                    ``exposure draft'' of the changes required. This draft, together    
                                                                                    with the Convention is before the Standing Committee on Treaties    
                                                                                    which is conducting hearings. (Canberra 1084, 20 March 1998) The new
                                                                                    criminal legislation is expected to be presented formally to        
                                                                                    Parliament in June. The Australian delegate mentioned informally    
                                                                                    that the Australian business community indicated a very negative    
                                                                                    response to the Convention. She had serious concerns about          
                                                                                    Australia's ability to meet the December 31 deadline. (Paris 7678, 6
                                                                                    April 1998)                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Austria               Criminal Code Amendment                                      Ratification of the Convention is ``nearly'' on track. Meeting the   
                       (Bribery of Foreign Public                                   December 31, 1998 ratification deadline does not seem to be a       
                       Officials) Bill 1998                                         problem. However, the GOA does not yet seem to have solved the      
                       (proposed)                                                   problem of tax deductibility of bribes. (Vienna 2522, 20 March 1998)
                                                                                    A draft bill on criminalization has been completed, and comments by 
                                                                                    the appropriate government agencies are due by May 10. Bribery of a 
                                                                                    foreign public official will be criminalized, existing criminal law 
                                                                                    provisions will be amended to prohibit ``any advantage'' and the new
                                                                                    offense will be made a predicate offense for money laundering       
                                                                                    offenses. (Paris 7678, 6 April 1998)                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
Belgium               Anti-Corruption Bill (Doc.                                   The Belgian Minister of Justice has submitted tough new anti-        
                       Parl., Sera:, 1-107/1,21                                     corruption legislation aimed at meeting Belgium's OECD and EU       
                       September 1995)                                              commitments to the Belgian Parliament. Debate began in the Senate on
                                                                                    March 24. (Brussels 1913, 26 March 1998) The OECD Convention was to 
                                                                                    be sent to the State Council ``in the weeks to come.'' Belgium's    
                                                                                    criminal law amendments may be in effect before the Convention is   
                                                                                    ratified, as the two procedures are not being linked. (Paris 7678, 6
                                                                                    April 1998) The Belgian representative to the OECD has indicated    
                                                                                    that Belgium will meet the end of 1998 deadline for ratification    
                                                                                    (Letter of 2 June 1998, from OECD Rep. Pierre-Dominique Schmidt).   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Brazil                                                                             The Office of International Acts is currently preparing a transmittal
                                                                                    statement for transmission to the Brazilian Congress. There is      
                                                                                    confidence that the Brazilian Congress will ultimately ratify the   
                                                                                    Convention--hopefully this year. (Brasilia 1094, 19 March 1998)     
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bulgaria                                                                           The GOB is now in the process of drafting implementing legislation   
                                                                                    and expects to meet the deadline for bringing the implementing      
                                                                                    legislation into effect. The GOB will submit its request for        
                                                                                    ratification to Parliament once it has made more progress on        
                                                                                    drafting the implementing legislation. (Sofia 1950, 20 March 1998) A
                                                                                    final text of implementing legislation is expected to be approved   
                                                                                    and published in the official Journal in late June or September.    
                                                                                    (Paris 7678, 6 April 1998)                                          
--------------------------------------------------------------------------------------------------------------------------------------------------------
Canada                                                                             Prime Minister Chretien made assurances that the Canadians would     
                                                                                    ratify the Convention by the end of 1998. The package will be       
                                                                                    submitted by the summer recess. (Ottawa 933, 16 March 1998) Draft   
                                                                                    legislation will be table in Commons by the end of April or May.    
                                                                                    While Canadian law generally does not allow tax deductions for      
                                                                                    bribes, there will be some changes to ``tighten up'' the provisions.
                                                                                    (Paris 7678, 6 April 1998)                                          
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chile                                                                              Consultations with the legal departments of the relevant Ministries  
                                                                                    are almost completed. A bill should be presented to the Parliament  
                                                                                    by the end of May or beginning of June. Chile has Parliamentary     
                                                                                    elections at the end of the year, but it was not indicated whether  
                                                                                    this would present a problem in meeting the December 31 deadline.   
                                                                                    (Paris 7678, 6 April 1998)                                          
--------------------------------------------------------------------------------------------------------------------------------------------------------
Czech Republic                                                                     The Czech Republic is in the process of proposing implementing       
                                                                                    legislation. A legislative draft, prepared by the MOJ, is being     
                                                                                    discussed and when approved will be sent to Parliament. This was    
                                                                                    expected to occur on April 1. (Paris 7678, 6 April 1998)            
--------------------------------------------------------------------------------------------------------------------------------------------------------
Denmark                                                                            The Danish general elections have delayed action on implementation of
                                                                                    the Convention. The Convention may not be submitted to Parliament   
                                                                                    prior to the summer recess, but instead in the fall 1998 session.   
                                                                                    (Copenhagen 1536, 16 March 1998) The Danish delegate indicated her  
                                                                                    government expects the process of ratification and implementation   
                                                                                    may take a year, which means they would not meet the December 31    
                                                                                    1998. (Paris 7678, 6 April 1998)                                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Finland                                                                            A bill has been drafted, but for technical reasons has not yet been  
                                                                                    submitted to the legislature. this should happen before the summer  
                                                                                    and the process may be completed by October. (Paris 7678, 6 April   
                                                                                    1998)                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------
France                                                                             France has prepared 2 bills to ratify the Convention and amend its   
                                                                                    criminal code. The respective texts have been submitted to the      
                                                                                    relevant Ministries for approval and to the State Council for its   
                                                                                    formal opinion before being presented to the legislature. The       
                                                                                    expectation is that the process will be completed by the end of     
                                                                                    1998. (Paris 7678, 6 April 1998) France is unwilling to make its    
                                                                                    draft texts public until it has completed its interministerial      
                                                                                    process.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------
Germany               Draft of an Act to the         U.S. DOJ discussed draft      The German MOJ approved draft implementing legislation on March 27   
                       Agreement of 17 December       legislation with German       and submitted it to its legislature on March 30. (Paris 7678, 6     
                       1997 Concerning the            counterpart and is            April 1998) Sources at the Bundestat indicated that the Bundestat   
                       Suppression of Bribery of      satisfied that the            issued its formal review of the OECD Antibribery Convention on May 8
                       Foreign Officials in           legislation meets the         and raised non-substantive procedural issues. Progress towards      
                       International Commercial       Convention's requirements.    ratification of the OECD Antibribery Law is still on schedule. (Bonn
                       Intercourse (proposed)                                       4531, 8 May 1998)                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Greece                Draft Bill Implementing the                                  Greece has prepared draft criminal and administrative legislation    
                       OECD Convention of Combating                                 which was to be sent by April 1 to the competent Ministries. (Paris 
                       Bribery of Foreign Public                                    7678, 6 April 1998) GOG intends to submit a draft bill ratifying the
                       Officials in International                                   Convention and containing implementing legislation to Parliament as 
                       Business Transactions                                        soon as its interministerial procedure are finished, e.g. probably  
                                                                                    in July. Enactment of the new bill is expected before the end of the
                                                                                    year. (Letter of 5 June 1998, from OECD Rep. Spiros Lioukas)        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hungary               Amendment of the Act IV of                                   Under Hungary's current legal regime, only natural persons (and not  
                       1978 on the Criminal Code                                    companies) are subject to the criminal code; changing the code would
                       (drafted)                                                    mean applying the Convention's disciplines domestically as well as  
                                                                                    abroad. The GOH is confident it will meet the 31 December 1998      
                                                                                    deadline to pass implementing legislation. (Budapest 2496, 18 March 
                                                                                    1998) Two draft texts have been prepared to ratify the Convention   
                                                                                    and amend the criminal code. The texts will be sent to the          
                                                                                    Ministries by the end of April and May respectively. (Paris 7678, 6 
                                                                                    April 1998)                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Iceland                                                                            The Icelandic Parliament has already adopted a resolution on the     
                                                                                    fulfillment of the Convention. the Drafting of implementing         
                                                                                    legislation has already begun and all necessary action should be    
                                                                                    done by the end of the year. (Paris 7678, 6 April 1998)             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ireland                                                                            The Irish Government is confident that it will meet the deadline of  
                                                                                    December 31, 1998, for implementing the Convention and is treating  
                                                                                    the December deadline as a firm obligation. (Dublin 1637, 26 March  
                                                                                    1998) The delegate was absent from the March 30-April 1 Working     
                                                                                    Group meetings.                                                     
--------------------------------------------------------------------------------------------------------------------------------------------------------
Italy                                                                              The Government is submitting all proposed modifications to Italian   
                                                                                    laws resulting from recent agreements on bribery to Parliament at   
                                                                                    the same time. Likely time frame is speculated at 5-6 months,       
                                                                                    meaning Italy would meet its January 1, 1999 target for             
                                                                                    Parliamentary approval. (Rome 2345, 26 March 1998)                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Japan                 Amendment to the Unfair        USG has voiced its serious                                                                         
                       Competition Prevention Law     reservations about the                                                                            
                       (proposed)                     adequacy of proposed                                                                              
                                                      legislation. DThe GOJ                                                                             
                                                      submitted the Convention                                                                          
                                                      and its draft implementing                                                                        
                                                      legislation to the Diet on                                                                        
                                                      April 10. Parliamentary                                                                           
                                                      deliberations have begun.                                                                         
                                                      MITI Industrial                                                                                   
                                                      Organizations Division                                                                            
                                                      Director relatively                                                                               
                                                      confident that the                                                                                
                                                      legislation will be passed                                                                        
                                                      this year, probably during                                                                        
                                                      the extraordinary Diet                                                                            
                                                      session which is expected                                                                         
                                                      to be convened in Autumn.                                                                         
                                                      (Tokyo 3114, 22 April 1998)                                                                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
Korea                 Act on Anti-Bribery in            .                          The GOK expects no problems in meeting the OECD's agreed upon        
                       Transactions Overseas 1998                                   deadline of December 31, 1998 for legislative approval. (Seoul 1703,
                       (proposed)                                                   25 March 1998) The delegate indicated every effort will be made to  
                                                                                    submit legislation by July 1. (Paris 7678, 6 April 1998)            
--------------------------------------------------------------------------------------------------------------------------------------------------------
Luxembourg                                                                         Luxembourg noted that work was being carried out in their MOJ and    
                                                                                    that action would be taken on ratification and implementing         
                                                                                    legislation package by the beginning of next year. (Paris 7678, 6   
                                                                                    April 1998)                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mexico                                                                             The Government expects to submit the needed legislation shortly after
                                                                                    Congress begins its next session in September. (Mexico 3004, 25     
                                                                                    March 1998)                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Netherlands                                                                    Dutch implementation of the Convention is moving more slowly than    
                                                                                    officials had hoped due to technical drafting problems and the      
                                                                                    labyrinth process for approval of legislation (Hague 939, 16 March  
                                                                                    1998) Delays in preparing draft legislation and interference by a   
                                                                                    member of Parliament are anticipated. The Netherlands delegate noted
                                                                                    that they would be accommodating six Conventions and protocols in   
                                                                                    its new criminal legislation. (Paris 7678, 6 April 1998)            
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Zealand                                                                        The GNZ expects to bring the Convention into force by December 31,   
                                                                                    1998. Implementing legislation and the Convention itself will be    
                                                                                    presented to Parliament. Parliament is expected to easily pass the  
                                                                                    legislation and to pose no objection to the Convention itself. Both 
                                                                                    are expected to be approved before the end of the year. (Wellington 
                                                                                    280, 10 March 1998)                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Norway                                                                             Implementation of the Convention is on track. The MOJ has drafted an 
                                                                                    amendment to the criminal code expanding the existing ban on bribing
                                                                                    Norwegian public officials to include a ban on bribing all public   
                                                                                    officials. The proposed legislation will be passed to the Norwegian 
                                                                                    Parliament in April or May. (Oslo 1407, 12 March 1998) The          
                                                                                    Convention is expected to be sent to Parliament by the end of June  
                                                                                    and ratification is expected to completed by fall. (Paris 7678, 6   
                                                                                    April 1998)                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
Poland                                                                             The Polish Government is conducting its interministerial review of   
                                                                                    the Convention. Subsequently, it plans to submit the Conventions to 
                                                                                    the Parliament for ratification. Bribes are not deductible. Existing
                                                                                    legislation already criminalizes bribery, but the Supreme Court last
                                                                                    year narrowly constructed the Polish criminal code on bribery,      
                                                                                    limiting its applicability to bribes made to Polish public          
                                                                                    functionaries, but not to foreign ones. If the Government cannot get
                                                                                    the Supreme Court to revise its position, then it will have to seek 
                                                                                    and amendment to the criminal code to reverse the court's position. 
                                                                                    (Warsaw 2984, 18 March 1998)                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Portugal                                                                           The Convention and draft implementation decree are on track for      
                                                                                    Parliamentary approval by the end of July. The GOP expects the      
                                                                                    Parliament to ``take special action, swiftly, without trouble,'' to 
                                                                                    ratify the Convention and decree law before the end of the current  
                                                                                    session (by end-July). (Lisbon 1318, 17 March 1998) Draft           
                                                                                    implementing legislation will be ready for submission to Parliament 
                                                                                    in two to three months. (Paris 7678, 6 April 1998)                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Slovak Republic                                                                    The GOS expects to transmit the Convention text and ratify it by the 
                                                                                    December 31 deadline. (Bratislava 878, 13 March 1998) An advisory   
                                                                                    body has recommended that the Convention not enter into force for   
                                                                                    the Slovak Republic until 2000. (Working Group, 30 March 1998)      
--------------------------------------------------------------------------------------------------------------------------------------------------------
Spain                                                                              Modification of its penal code was to be cleared through the State   
                                                                                    Council the week of April 1 and thereafter presented to the Council 
                                                                                    of Ministers and Parliament. Ratification and implementing          
                                                                                    legislation will be linked. Spain expects to complete its action by 
                                                                                    the end of this year. (Paris 7678, 6 April 1998)                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sweden                                                                             The timetable for bringing the implementing legislation into force by
                                                                                    December 31, 1998, is still firm. (Stockholm 1399, 10 March 1998)   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Switzerland                                                                        Draft legislation is currently being circulated for comment. This    
                                                                                    consultative process will not be completed until May or June. If all
                                                                                    goes well, the Federal Council could submit the legislation to      
                                                                                    Parliament during the final session of 1998 in December. It is      
                                                                                    unlikely there will be any vote until the spring session of 1999.   
                                                                                    (Bern 1107, 12 March 1998)                                          
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turkey                                                                             The Government has prepared the instrument necessary for ratification
                                                                                    and the implementing legislation is ``underway.'' (Paris 7678, 6    
                                                                                    April 1998)                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
United Kingdom        Primarily the Prevention of                                  The UK Home Office believes that existing UK corruption legislation  
                       Corruption Act 1889-1916                                     will meet the Convention guidelines without further revision.       
                                                                                    However, independent of the Convention's mandate, they are currently
                                                                                    reviewing existing corruption and anti-bribery legislation to       
                                                                                    ``update and modernize its contents,'' specifically including its   
                                                                                    application to public and private sector corruption. Subsequently,  
                                                                                    the Home Office will draft and propose a new statue joining related 
                                                                                    domestic and international corruption issues into one legislative   
                                                                                    program for debate and possible implementation by Parliament this   
                                                                                    summer. (London 2766, 13 March 1988) The delegate stated that       
                                                                                    implementing legislation is not necessary in order to ratify the    
                                                                                    Convention. (Paris 7678, 6 April 1998)                              
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Question 5b. Please provide a detailed account of the laws enacted 
in each of the countries that are signatory to the treaty of the 
following:
   laws enacted that would prohibit tax deductibility of bribes 
        to public officials in international business transactions 
        (details should include the jurisdictional reach of the 
        country's judicial system, the definition of ``bribery'', the 
        definition of ``public official'', the standard used to 
        disallow such a deduction, and the ability of taxpayers to 
        deduct inadequately identified expenditures.)
    Answer. We can provide the following general information on OECD 
member country laws denying the tax deductibility of bribes. This 
information is from sources deemed reliable but is not verified.

          Canada: Canadian law does not allow deductions for bribes 
        paid to foreign government officials when the bribe is illegal 
        in a foreign country.

          Czech Republic: Czech law does not allow tax deductions for 
        bribes paid to foreign public officials.

          Denmark: As of January 1, 1998, Denmark has in force a law 
        denying tax deductions for bribes paid to foreign public 
        officials.

          Finland: Finnish case law and administrative practice do not 
        allow tax deductions for bribes paid to foreign public 
        officials. No statutory rule.

          Greece: Greek law does not allow tax deductions for bribes 
        paid to foreign public officials.

          Hungary: Hungary's law allows the deduction of expenses only 
        as specified by law, and tax laws to not specifically refer to 
        bribes. Therefore, Hungary's law does not allow tax deductions 
        for bribes paid to foreign public officials.

          Ireland: No specific legislation and no litigation. However, 
        the tax administration view is that bribes paid to foreign 
        public officials are not deductible.

          Italy: Italian law does not allow tax deductions for bribes 
        paid to foreign public officials.

          Japan: Bribes are not deductible under Japanese law because 
        they are treated as entertainment expenses, which are not 
        deductible.

          Korea: Korea does not allow tax deductions for bribes paid to 
        foreign government officials since bribes are not considered to 
        be business-related expenses.

          Mexico: Mexico does not allow tax deductions for bribes 
        because they do not meet the general requirements to qualify as 
        deductible expenses and because, as related to illicit 
        activities, such payments cannot meet the requirements under 
        the Commerce Code of Mexico.

          Netherlands: As of January 1, 1997, Dutch tax laws deny tax 
        deductions for expenses in connection with illicit activities 
        if a criminal court has ruled that a criminal offense has been 
        committed. (We understand that Dutch criminal law will be 
        amended to criminalize the bribery of a foreign public 
        official.)

          Norway: Under tax law enacted on December 10, 1996, Norway 
        does not allow tax deductions for bribes paid to foreign 
        private persons or public officials.

          Poland: Poland does not allow tax deductions for bribes paid 
        to foreign public officials. Bribery is illegal and an offense 
        for both the briber and the recipient of the bribe. Gains and 
        expenses connected with the offense of bribery cannot be taken 
        into account.

          Portugal: Under a law adopted on December 20, 1997, and 
        effective on January 1, 1998, Portugal does not allow tax 
        deductions for bribes paid to foreign public officials.

          Spain: Spain does not allow tax deductions for bribes paid to 
        foreign public officials.

          Turkey: Turkey does not allow tax deductions for bribes paid 
        to foreign officials because there is no explicit rule allowing 
        deductions for bribes.

          United Kingdom: U.K. law does not allow deductions for bribes 
        paid to foreign officials if the bribe is a criminal offense, 
        contrary to the Prevention of Corruption Acts. If any part of 
        the offense is committed in the United Kingdom, e.g., the 
        offer, agreement to pay, the soliciting, the acceptance, or the 
        payment itself, the payment would be subject to corruption laws 
        and a tax deduction would be denied. The U.K. Finance Act of 
        1993 disallows tax deductions for all payments the making of 
        which constitutes a criminal offense. Further, U.K. tax laws 
        deny deductions for all gift and entertainment expenses.

    We are not able to provide information on the ability of taxpayers 
to deduct inadequately identified expenditures. However, we recognize 
the importance of transparency in income tax Systems. We consider that 
there is no assurance that the deduction of inadequately identified 
expenditures is precluded under OECD member country tax systems.

   laws proposed that would prohibit tax deductibility of 
        bribes to public officials in international business 
        transactions (details should include the jurisdictional reach 
        of the country's judicial system, the definition of 
        ``bribery'', the definition of ``public official'', the 
        standard used to disallow such a deduction, the ability of 
        taxpayers to deduct inadequately identified expenditures, and 
        where such proposals are in the law-making process.)
    Answer. We are able to provide the following information on OECD 
member country proposals to prohibit the tax deductibility of bribes to 
foreign public officials. This information is from sources deemed 
reliable but is not verified.

          Australia: The Australian Government has announced that it 
        will implement appropriate measures to combat bribery of 
        foreign public officials. The Commissioner of Taxation is 
        drafting legislation on the issue of tax deductibility.

          Austria: The Austrian Government is waiting for the 
        criminalization of bribes to foreign public officials before 
        proposing an amendment to the tax law in order to deny tax 
        deductions for such bribes.

          Belgium: At the end of March 1998, a bill limiting the 
        deductibility of so-called ``secret commissions was presented 
        to Parliament along with a bill criminalizing bribes paid to 
        foreign public officials.

          France: On December 30, 1997, France enacted a change to 
        their tax code denying a tax deduction for payments made to 
        ``foreign public officials'' within the meaning of article 1 
        section 4 (footnote 4) of the OECD Convention or to a third 
        party in order that this official act or refrain from acting in 
        the performance of his official duties, in order to obtain or 
        retain a contract or other improper advantage in international 
        business transactions. This tax provision is effective for 
        contracts concluded during tax years beginning as of the entry 
        into force of the Convention.

          Germany: At the end of March 1998, the federal government 
        introduced legislation amending the provisions of national 
        criminal law in order to criminalize the bribery of foreign 
        officials. German income tax law will automatically exclude the 
        deductibility of such amounts as business expenses if either 
        the briber or the recipient has been subject to criminal 
        penalties or to criminal proceedings that were subsequently 
        discontinued on the basis of a discretionary decision by the 
        prosecutor.

          Luxembourg: The Luxembourg government has prepared draft 
        legislation that would criminalize bribes to foreign public 
        officials and deny tax deductions for such bribes.

          New Zealand: Officials are working on a proposal to amend 
        legislation for enactment in 1998 to disallow deductions for 
        bribery.

          Sweden: A bill explicitly denying the tax deductibility of 
        bribes and other illicit payments is likely to be presented to 
        the Swedish parliament this fall, with the intention of having 
        the law in force as of January 1, 1999.

          Switzerland: A proposal to deny a tax deduction for a bribe 
        paid to a foreign official has been presented to Parliament. In 
        October 1997, the Federal Council approved this proposal. A 
        change to Swiss tax legislation is expected in the near future.

    Question 6. Please provide a list of each signatory's efforts to 
date to ratify this treaty, and enact implementing legislation.
    Answer. Available information is contained in the response to 
question 5a.
    Question 7. Please define ``undue pecuniary or other advantage'' as 
used in Article 1(1).
    Answer. A pecuniary advantage is a payment of money. It could 
include outright cash payments, as well as interest-free loans, 
favorable currency exchange rates, and other monetary benefits.
    An ``other'' advantage is any other benefit conferred on the 
foreign public official. The purpose of including ``other'' advantages 
is specifically to include non-monetary gifts. Cf. 18 U.S.C. 201 
(prohibiting improper offer of ``anything of value'' to a federal 
public official). ``Other'' advantages could include shares or 
interests in business enterprises; offers of future employment; 
scholarships for the official's children; expense-paid vacations; 
construction of improvements to the official's residence; etc.
    The operative qualifier in this clause is ``undue.'' It would not, 
for instance, be an ``undue advantage'' if the company paid the 
expenses for the official to travel to the United States to visit its 
manufacturing facility and, as part of its marketing activities during 
that trip, paid reasonable food and lodging expenses for that official. 
Similarly, it would not be an ``undue advantage'' if the official's 
child earned the scholarship on his or her own merits, regardless of 
whether the scholarship was funded by a company seeking to do business 
with the official. It would be ``undue'' if the scholarship was created 
solely to be awarded to the official's child and it was not made 
available to others on a competitive basis.
    Question 8. Please clarify whether bribes to a family member of a 
foreign official would be considered a criminal offense under the 
definition of Article 1.
    Answer. The Convention, like the U.S. Foreign Corrupt Practices 
Act, covers bribes offered or paid to a foreign public official so that 
the official will take certain action, or refrain from acting, in the 
performance of official duties. Bribes to a family member of a foreign 
public official are covered in circumstances where (1) a bribe is paid 
to a family member as a conduit or intermediary, who in turn passes it 
to the foreign public official, the intended recipient; or (2) a 
foreign public official directs that a bribe, intended to induce that 
official to take certain action or refrain from acting, be paid to a 
family member.
    Question 9. Please define ``legal persons'' for purposes of Article 
2, and list the signatories to the proposed treaty that recognize 
corporations as legal persons.
    Answer. ``Legal person'' is meant to cover corporations, 
partnerships, associations, joint-stock companies, business trusts, 
unincorporated organizations, sole proprietorships, or other juridical 
entities other than natural persons.
    Our understanding is that all of the signatories to the Convention 
recognize corporations as legal persons.
    Question 10. Please define ``effective, proportionate and 
dissuasive'' as used in Article 3(1).
    Answer. ``Effective, proportionate and dissuasive'' criminal 
penalties are those that:
   Clearly apply to the offense of bribery of a foreign public 
        official;
   Are proportionate (in the amount of fine and/or length of 
        imprisonment) to the seriousness of the offense;
   Are comparable to the penalties that apply to bribery of a 
        party's own public officials; and
   Provide a deterrent to such conduct.
    Question 11. Please explain what is contemplated by ``deprivation 
of liberty sufficient to enable effective mutual legal assistance and 
extradition'' as used in Article 3(1).
    Answer. Bilateral extradition treaties generally provide that, in 
order to be an extraditable offense, an offense must be punishable by 
deprivation of liberty for a certain minimum period, often more than 
one year. Some bilateral mutual legal assistance treaties have similar 
requirements regarding the furnishing of assistance. Article 3(1) 
requires that natural persons who commit bribery of a foreign public 
official be subject to penalties that exceed such thresholds, so that 
such persons would be subject to extradition and so that mutual legal 
assistance would be available in those cases.
    Question 12. Please provide an example of the situation 
contemplated in Article 3(2).
    Answer. Under German law, for example, corporations are not subject 
to criminal liability. Therefore, under Article 3(2) Germany would be 
obligated to ensure that corporations that engage in bribery of a 
foreign public official are subject to effective, proportionate and 
dissuasive non-criminal sanctions such as civil fines or other 
administrative measures.
    In addition, under Article 3(3) Germany would be obligated to 
provide for the seizure and confiscation of the bribe and the proceeds 
of the bribery, or to impose monetary sanctions of comparable effect.
    Question 13. For purposes of Article 4(1), what action must occur 
for an offense to be ``committed in whole or in part'' in a party's 
territory?
    Answer. The Commentaries to Article 4(1) provide that ``[t]he 
territorial basis for jurisdiction should be interpreted broadly so 
that an extensive physical connection to the bribery act is not 
required.'' The level of activity in one's territory that is required 
to trigger the exercise of territorial jurisdiction may vary from 
country to country. Most signatories to the Convention would require 
more than incidental contacts.
    Question 14. What is an ``adequate time period'' as required in 
Article 6, regarding the statute of limitations?
    Answer. Under U.S. law, no special statute of limitations applies 
to FCPA violations. Accordingly, the applicable statute of limitations 
is five years. See 18 U.S.C. 3282. However, as many FCPA cases require 
the Department to obtain evidence from foreign countries, this period 
may be tolled for up to three additional years once an official request 
to a foreign country is made and filed with the court. See 18 U.S.C. 
3292.
    The Commentaries to the OECD Convention do not provide any guidance 
on this point. At a minimum, the United States would expect other 
signatories to provide for a limitations period at least as long as 
provided in their existing law for investigations of domestic 
corruption offenses. With implementation of the OBCD Convention, it 
will become easier and faster to obtain foreign evidence relating to 
FCPA cases.
    Question 15. To which signatory countries will Article 7, regarding 
money laundering, apply?
    Answer. Article 7 requires that each Party that has made bribery of 
its own public official a predicate offense for the purposes of money 
laundering legislation must do so on the same terms for bribery of a 
foreign public officials. The requirement applies to all signatory 
countries, although its practical effect depends on whether a Party has 
made either the offer or receipt of a bribe (``active or passive 
bribery'') a predicate offense. Concerted international action to 
address money laundering issues in recent years, especially through the 
Financial Action Task Force on Money Laundering, has spurred additional 
countries to take such action. At present, the following countries make 
either active or passive bribery of public officials a predicate 
offense for the purposes of application of money laundering 
legislation:
    The list below outlines those offenses which constitute predicate 
offenses for purposes of money laundering legislation in countries for 
which we have specific information:

          Argentina--offenses with at least three years imprisonment
          Australia--all indictable offenses with more than one year 
        imprisonment
          Austria--offenses with more than three years imprisonment
          Belgium--all offenses
          Brazil--certain offenses, including crimes against the public 
        administration
          Bulgaria--all offenses
          Canada--enterprise crimes (covers bribery)
          Chile--drug trafficking only
          Czech Republic--all serious offenses
          Denmark--certain offenses (not bribery)
          Finland--all offenses
          France--all offenses
          Germany--all serious and some less serious offenses
          Greece--certain offenses (covers bribery)
          Iceland--all offenses
          Ireland--all offenses
          Italy--all intentional offenses
          Japan--drug trafficking; receipt of bribes
          Luxembourg--drug trafficking only
          Mexico--all offenses
          Netherlands--all offenses
          New Zealand--serious offenses with more than 5 years 
        imprisonment
          Norway--all offenses
          Portugal--range of offenses (covers corruption)
          Slovakia--drug trafficking only
          Spain--all serious offenses
          Sweden--all serious offenses
          Switzerland--all serious offenses
          Turkey--most serious offenses
          United Kingdom--all indictable offenses
          United States--130 predicate offenses (covers bribery)

    In certain of the above countries, the applicability of money 
laundering legislation will depend on whether bribery of a foreign 
public official will constitute a ``serious'' offense, thereby making 
it a predicate offense for money laundering legislation.
    We do not at the present time have information regarding Hungary, 
Korea, and Poland.
    Question 16. What is the effect of Article 9 on U.S. law in cases 
where the United States does not have a mutual legal assistance treaty 
with the other Party to the treaty. Is this provision self-executing?
    Answer. This provision has the effect of requiring the United 
States to provide mutual legal assistance to other Parties to the 
convention in matters falling within the convention, consistent with 
applicable United States law. See 28 U.S.C. 1782. The provision is 
selfexecuting.
    Question 17. What is the effect of Article 9 in cases in which the 
United States already has a mutual legal assistance treaty with the 
other party to the treaty?
    Answer. Where the United States already has a mutual legal 
assistance treaty (MLAT) in force, this article presumes that mutual 
assistance will be provided in accordance with that MLAT.
    Question 18. Article 10(2) says that a Party may consider this 
treaty to be a legal basis for extradition in the absence of an 
existing extradition treaty. Is Article 10(2) self executing for 
purposes of bribery of a foreign public official with countries that do 
not have an extradition treaty with the United States? If so, would 
this include cases brought under the Foreign Corrupt Practices Act, or 
only those that are also covered by the treaty? If so, would this apply 
to countries that accede to the treaty in the future?
    Answer. Article 10(2) is self-executing with respect to countries 
that do not have an extradition treaty with the United States and 
choose to consider this convention as a basis for surrender; therefore 
the United States could rely on this convention in a request to such a 
country to extradite a person to the United States. However, long-
standing United States practice and policy has been not to consider a 
multilateral treaty like this convention to be a basis in itself for 
extradition from the United States in the absence of a bilateral 
extradition treaty. This policy would apply to any offenses covered by 
the treaty, and would apply both to nations that already have signed 
the convention and those that accede in the future.
    Question 19. Which signatories to the treaty refuse to extradite 
their own nationals?
    Answer. An authoritative answer to this question is difficult since 
(1) many countries decide whether to extradite nationals on a case by 
case basis, or (2) do so only if certain conditions are present (e.g., 
exceptionally serious charges, or assurances that the extradited person 
can serve his sentence in his home state). The United States strongly 
believes that extradition should be granted without regard to the 
nationality of the offender, and we are aggressively (and rather 
successfully) urging other states to adopt this view; several nations 
that have not extradited their citizens in the past are in the process 
of changing their views, and more may well do so in future.
    Our information suggests that the following states usually do not 
extradite their nationals due to statutory or constitutional 
prohibitions: Austria, Belgium, Brazil, Bulgaria, Denmark, Finland, 
France, Germany, Greece, Hungary, Iceland, Luxembourg, Mexico, Norway, 
Switzerland, and Turkey. Our information suggests that the following 
states usually do extradite their nationals, but their laws either make 
the extradition of nationals discretionary or contain other 
restrictions on such extradition that must be met in individual cases: 
Australia, Chile, South Korea, Ireland, Japan, and the Netherlands. The 
United States, Canada, and the United Kingdom have no restrictions on 
extradition of nationals.
    Question 20. Please detail the role of the OECD authority cited in 
Article 11. Would this override in any way the bilateral agreements on 
extradition and mutual legal assistance?
    Answer. For the United States, the authority for making and 
receiving extradition requests would be the Secretary of State, and 
such requests would continue to be transmitted via diplomatic channels, 
as is the current practice. The authority for the United States for 
making and receiving mutual legal assistance requests under Article 11 
would be the Attorney General, who also serves as Central Authority for 
all of our mutual legal assistance treaties. See 28 C.F.R. 0.64-1. 
Thus, this provision would not override or alter the procedure utilized 
under extradition or mutual legal assistance treaties.
    Question 21. What are the expected costs of the implementation and 
monitoring program described in Article 12?
    Answer. The implementation and monitoring program planned in the 
OECD Working Group on Bribery to evaluate progress under the OECD Anti-
Bribery Convention and other OECD bribery-related commitments will rely 
almost exclusively on existing OECD Secretariat resources and on the 
participation of experts from OECD member countries.
    The OECD, anticipating the upcoming work, has already planned to 
move an OECD Secretariat staff person - from within existing personnel 
resources - to provide additional support to the Working Group. This 
will occur without an increase in overall OECD budget. Some additional 
expense will be incurred by the Secretariat to provide a staff person 
from the Secretariat to participate in anticipated on-site inspections 
in Phase II of the monitoring effort. With 6-8 trips per year 
envisioned, estimated transportation and per diem expenses of $2000 per 
trip would result in travel costs to the Secretariat of $12-16,000 per 
year. These costs will be programmed from within the annual OECD travel 
budget.
    Phase II on-site visits also will likely involve participation by 
experts from OECD member countries. Expenses related to the 
participation of these experts will be borne directly by the 
contributing country and will not affect the OECD budget. We can expect 
1-3 trips per year for U.S. Government experts to participate in these 
visits. These expenses would be borne by the relevant U.S. Government 
agency from within existing travel budget resources.
    Question 22. Please describe the OECD's plan of action for 
monitoring and implementation as required by Article 12.
    Answer. Article 12 of the Convention requires that signatories will 
cooperate in a program of ``systematic'' follow-up to monitor and 
promote the full implementation of the Convention. (An analogous 
commitment to follow-up is contained in the OECD's May 1997 Revised 
Recommendation on Combating Bribery of Foreign Public Officials in 
International Business Transactions, which, in addition to 
criminalization, addresses recommendations on bribery-related issues in 
the areas of accounting/auditing, government procurement and tax 
policy.)
    The OECD Working Group on Bribery is in the final stages of 
determining the precise process to be followed in carrying out the 
monitoring and follow-up functions. A final decision is expected by 
Autumn 1998, at least on the monitoring process through early 2000. In 
fact, monitoring is already starting, and involves periodic reports 
(beginning in late June 1998) from countries on the status of 
ratification and implementation of the Convention. This current 1998 
phase will include informal evaluation of draft laws as well as formal 
evaluation of any enacted laws. Although a number of important details 
remain to be decided, the formal post-1998 process will likely entail 
two phases:
    --Phase I (1999-April 2000) will entail formal legal evaluation of 
the consistency of ratification and implementation actions with the 
requirements of the Convention. Most likely, a detailed questionnaire 
will be completed by each country, examining convention issues as well 
as the areas covered by the 1997 Revised Recommendation. A report will 
be prepared by the OECD Secretariat and two third-country examiners for 
discussion by the Working Group in a special session with the examined 
country, after which a final country assessment will be prepared for 
the Spring 2000 Ministerial meeting of the OECD. There will be 
opportunity for input by interested private sector and nongovernmental 
organization representatives.
    --Phase II (2000 on) will examine the structures put into place to 
enforce the laws, the application of the laws and regulations in 
practice, and the consequences in the business sector. Phase II will 
likely involve 6-8 country evaluations per year, implying a cycle of 4-
5 years to complete evaluation of all participating countries. 
Countries may be examined in order of their relative involvement in 
international trade. The examination will likely involve 
questionnaires, on-site visits to capitals by experts from 
participating third countries and draft reports to guide in-depth 
country examination sessions by the Working Group on Bribery. As in 
Phase I, there will be opportunity for input by interested private 
sector and non-governmental organization representatives.
    Question 23. Please describe the Administration's plan of action 
for amending the proposed treaty to include bribery of political 
parties.
    Answer. U.S. negotiators made a concerted effort to have political 
parties and party officials covered under the Convention. Other 
delegations, however, were not prepared to accept this, arguing that 
political parties and party officials could not be considered ``public 
officials'' as the term is generally understood.
    At the conclusion of the negotiations on the text of the Convention 
in November 1997, United States representatives insisted upon formal 
agreement on a program of accelerated work on a number of issues not 
adequately addressed in the Convention text. These issues included 
bribery of political parties and political party officials in 
international business transactions, bribery of candidates for 
political office, and aspects of the use of money laundering 
legislation in the fight against illicit payments. Accordingly, the 
OECD Council on December 11, 1997, in approving the Convention text and 
recommending its adoption by Ministers representing participating 
countries, adopted a Decision committing member countries to examining 
these issues and reporting results to Ministers by the Spring 1999 
annual OECD Ministerial meeting. At the suggestion of France, two 
additional issues were added to this accelerated workplan on issues 
related to bribery of foreign public officials: (a) the role of foreign 
subsidiaries and (b) the role of offshore money centers.
    Work on these issues will begin with the June 29-July 1 meeting of 
the OECD Working Group on Bribery. It is expected that an experts group 
of representatives of participating governments will be formed to 
outline possible recommendations over the late summer and early autumn, 
with formal Working Group discussions to begin in earnest in November 
1998. On political parties, party officials, and candidates for 
political office, the U.S. objective will be to secure member country 
agreement to amend the Convention to include such entities/individuals 
among those to whom payment of bribes to obtain or retain business will 
be prohibited, as is the case under the U.S. Foreign Corrupt Practices 
Act. As in the negotiation of the Convention itself, multilateral, 
bilateral and public diplomacy will be required to achieve these 
objectives.
    Question 24. Article 16 provides that an amendment may be adopted 
by consensus or ``by such other means as the Parties may determine by 
consensus''. Please elaborate on the kinds of scenarios that you 
contemplate for adoption of amendments in addition to consensus.
    Answer. A consensus decision to adopt an amendment by a means other 
than by consensus may be necessary or desirable when a Party (Country 
``A'') to the Convention, by virtue of a core element of its legal 
system or of its Constitution, is unable to join a consensus on an 
amendment which the vast majority of Parties are prepared to adopt. If 
the Parties are prepared to proceed with the amendment, without the 
participation of Country ``A'', and if Country ``A'' has no objection 
to such action, an amendment to strengthen the Convention could go 
forward, although without committing Country ``A'' to such action.
    One possible scenario, purely for illustrative purposes, might 
involve a significant strengthening of the accounting provisions of the 
Convention, for example. If 32 or 33 signatories were prepared to 
proceed with such action, but one Party was legally barred from 
tightening accounting requirements, for example, it is not 
inconceivable that all Parties might agree that the 32 proceed in 
taking on the commitment, while permitting the lone Party to maintain a 
less stringent commitment.
    Clearly, such an imbalance of commitments would not be acceptable 
in cases where it would result in meaningful competitive differences 
among Parties.
    Question 25. What is the legal status of the commentary 
accompanying the Convention? Can the commentary be amended? If so, how?
    Answer. The Commentaries were adopted by OECD members in November 
1997 in conjunction with adoption of the Convention text. Although the 
Commentaries are not part of the Convention, they reflect the consensus 
interpretation of the negotiators of various provisions in the 
Convention. As such, the Commentaries should be accorded significant 
weight in any subsequent interpretation of the Convention.
    --As the Commentaries reflect contemporaneous negotiating history, 
we are unaware of any process for their amendment.
                                 ______
                                 

                  Questions Submitted by Senator Biden

    Question 1. Please elaborate on the meaning of the term ``foreign 
public official'' set forth in Article 1(4)(a).
   Does the term apply to all employees in the legislative, 
        administrative, or judicial branch of a foreign country? Or is 
        the expression ``holding a legislative, administrative, or 
        judicial office'' meant to limit the reach of the Convention to 
        certain officials?
   Does the term ``administrative'' include all executive 
        branch officials?
    Answer. The term ``foreign public official'' is meant to apply to 
all persons in the legislative, administrative, or judicial branch of 
government. ``Administrative'' as used in this context is synonymous 
with our Executive Branch.
    The term ``foreign public official'' also includes any person 
exercising a public function for a foreign country, including for a 
public agency or public enterprise, and any official or agent of a 
public international organization.
    Question 2. Which of the nations that are signatories of the 
Convention do not provide for criminal corporate liability?
    Answer. The issue is somewhat complex, and we do not have complete 
information on all countries.
    Australia, Canada, Denmark, France, the Netherlands, Norway, 
Sweden, the United States, and the United Kingdom have the concept of 
corporate criminal liability throughout--or in a large part of--their 
criminal law. Belgium and Finland are working to institute such 
liability.
    Some countries have the concept of corporate criminal liability in 
special statutes. Japan uses the concept in environmental, anti-trust 
and securities legislation. Korea uses the concept in environmental and 
anti-trust legislation.
    Many countries, such as Austria, Germany, Italy, Spain and 
Switzerland, have administrative sanctions (e.g., fines) for 
corporations, which may have effects comparable to our corporate 
criminal penalties. The member countries of the European Union will 
adopt such sanctions, when the recently-concluded Protocol II to the 
Convention on the Protection of the Financial Interests of the European 
Union is implemented.
    During the course of the OECD Convention negotiations, Korea 
indicated that it would propose institution of corporate criminal 
liability for the offense of bribery of foreign public officials in 
international business transactions.
    There is a clear trend internationally toward institution of 
corporate legal liability and a number of countries are expected to 
take such action over the next 5-10 years. This appears to be the case 
for many of the European Union member countries, for example.
    In any event, the Convention requires that those countries which do 
not provide for corporate criminal liability in their legal systems 
must provide for effective, proportionate and dissuasive non-criminal 
sanctions for legal persons, including monetary sanctions, for bribery 
of foreign public officials in international business transactions.
    Question 3. Is there a negotiating history regarding Commentary 9?
   Is there a common understanding among the signatories as to 
        the meaning of the terms ``small'' and ``facilitation 
        payment''?
    Answer. Commentary 9, regarding small or ``facilitating payments'', 
reflects the desire of the United States during the negotiation to 
retain our ability to continue to exempt facilitating payments from the 
FCPA. Under the FCPA, we exempt payments from the statute which are 
made to obtain ``routine governmental action(s)'', that is, payments 
which are to facilitate, expedite or secure the performance of a 
routine governmental action. These actions are described in detail in 
the FCPA. While the FCPA does not exempt such payments as ``small'', or 
place any dollar threshold on the size of such payments, it is common 
for persons to interpret this provision of the FCPA as limited to 
payments of very small value. The Commentary further reflects the 
FCPA's provision that a ``routine governmental action'' does not 
include any decision by a foreign official to award new business or 
continue existing business, i.e., quid pro quo bribery.
    Question 4. What is the meaning of the term ``undue'' in Article 
1(1)?
    Answer. It would not, for instance, be an ``undue'' advantage if 
the company paid the expenses for the official to travel to the United 
States to visit its manufacturing facility and, as part of its 
marketing activities during that trip, paid reasonable food and lodging 
expenses for that official. Similarly, it would not be an ``undue 
advantage'' if the official's child earned the scholarship on his or 
her own merits, regardless of whether the scholarship was funded by a 
company seeking to do business with the official. It would be ``undue'' 
if the scholarship was created solely to be awarded to the official's 
child and it was not made available to others on a competitive basis.
    Question 5. What is the legal status of the annex? Is it an 
integral part of the Convention?
    Answer. Yes, the annex is an integral part of the Convention. The 
statistics in the annex are essential in determining whether the entry 
into force requirements of Article 15(1) have been satisfied.
    Question 6. The Foreign Corrupt Practices Act criminalizes bribes 
in order to assist an issuer or domestic concern in ``obtaining or 
retaining business for or with, or directing business to, any person.'' 
E.g., 15 U.S.C. 78dd-1(a)(1).
   Is it intended by the signatories that Article 1(1) requires 
        parties to criminalize ``directing business'' to a person?
    Answer. Neither the Convention nor the Commentaries contain any 
explicit reference to ``directing business''. Our expectation is that 
the implementing criminal, civil and administrative laws to be enacted 
by the Parties to the Convention will include the direction of 
business. For all practical purposes, the ``direction'' of business is 
included in obtaining or retaining business.
    Question 7. Please provide a copy of the OECD's 1996 recommendation 
that countries review the tax deductibility regarding bribery.
    Answer. The 1996 recommendation is attached (follows).

      Organization for Economic Cooperation and Development
                                                     April 17, 1996

  Recommendation of the Council on the Tax Deductibility of Bribes to 
                        Foreign Public Officials

   (adopted by the Council on 11 April 1996 at its 873rd session [C/
                             M(96)8/PROV])

    The Council.
    Having regard to Article 5 (b) of the Convention on the 
Organisation for Economic Cooperation and Development of 14th December 
1960;
    Having regard to the OECD Council Recommendation on Bribery in 
International Business Transactions [C(94)75/FINAL];
    Considering that bribery is a widespread phenomenon in 
international business transactions, including trade and investment, 
raising serious moral and political concerns and distorting 
international competitive conditions;
    Considering that the Council Recommendation on Bribery called on 
Member countries to take concrete and meaningful steps to combat 
bribery in international business transactions, including examining tax 
measures which may indirectly favour bribery;
    On the proposal of the Committee on Fiscal Affairs and the 
Committee on International Investment and Multinational Enterprises:
        I. RECOMMENDS that those Member countries which do not disallow 
        the deductibility of bribes to foreign public officials re-
        examine such treatment with the intention of denying this 
        deductibility. Such action may be facilitated by the trend to 
        treat bribes to foreign public officials as illegal.
        II. INSTRUCTS the Committee on Fiscal Affairs, in cooperation 
        with the Committee on International Investment and 
        Multinational Enterprises, to monitor the implementation of 
        this Recommendation, to promote the Recommendation in the 
        context of contacts with non-Member countries and to report to 
        the Council as appropriate.
    Question 8. Does the Working Group on Bribery in International 
Business Transactions have a plan for how it will carry out the 
function of monitoring and promoting full implementation of the 
Convention under Article 12? If so, please discuss it.
    Answer. Article 12 of the Convention requires that signatories will 
cooperate in a program of ``systematic'' follow-up to monitor and 
promote the full implementation of the Convention. (An analogous 
commitment to follow-up is contained in the OECD's May 1997 Revised 
Recommendation on Combating Bribery of Foreign Public Officials in 
International Business Transactions, which, in addition to 
criminalization, addresses recommendations on bribery-related issues in 
the areas of accounting/auditing, government procurement and tax 
policy.)
    The OECD Working Group on Bribery is in the final stages of 
determining the precise process to be followed in carrying out the 
monitoring and follow-up functions. A final decision is expected by 
Autumn 1998, at least on the monitoring process through early 2000. In 
fact, monitoring is already starting, and involves periodic reports 
(beginning in late June 1998) from countries on the status of 
ratification and implementation of the Convention. This current 1998 
phase will include informal evaluation of draft laws as well as formal 
evaluation of any enacted laws. Although a number of important details 
remain to be decided, the formal post-1998 process will likely entail 
two phases:
   Phase I (1999-April 2000) will entail formal legal 
        evaluation of the consistency of ratification and 
        implementation actions with the requirements of the Convention. 
        Most likely, a detailed questionnaire will be completed by each 
        country, examining convention issues as well as the areas 
        covered by the 1997 Revised Recommendation. A report will be 
        prepared by the OECD Secretariat and two third-country 
        examiners for discussion by the Working Group in a special 
        session with the examined country, after which a final country 
        assessment will be prepared for the Spring 2000 Ministerial 
        meeting of the OECD. There will be opportunity for input by 
        interested private sector and nongovernmental organization 
        representatives.
   Phase II (2000 on) will examine the structures put into 
        place to enforce the laws, the application of the laws and 
        regulations in practice, and the consequences in the business 
        sector. Phase II will likely involve 6-8 country evaluations 
        per year, implying a cycle of 4-5 years to complete evaluation 
        of all participating countries. Countries may be examined in 
        order of their relative involvement in international trade. The 
        examination will likely involve questionnaires, on-site visits 
        to capitals by experts from participating third countries and 
        draft reports to guide in-depth country examination sessions by 
        the Working Group on Bribery. As in Phase I, there will be 
        opportunity for input by interested private sector and non-
        governmental organization representatives.

                               __________
                                                       June 9, 1998
The Hon. Jesse Helms,
Chairman,
Committee on Foreign Relations,
United States Senate.

    Dear Mr. Chairman:

    We would like to voice our shared support for swift Congressional 
approval of the recently-submitted Convention on Combating Bribery of 
Foreign Public Officials in International Business Transactions and its 
related implementing legislation. This Convention, which was signed in 
December of last year at the Organization for Economic Cooperation and 
Development (OECD), is extremely important for the United States. It 
fulfills a desire expressed by the Congress in the Omnibus Trade and 
Competitiveness Act of 1988 that the United States Government seek from 
our OECD partners enactment of criminal prohibitions on foreign corrupt 
practices. The Convention is the culmination of efforts by this and 
previous Administrations.
    Since 1977, when Congress enacted the Foreign Corrupt Practices Act 
(FCPA), the United States has been the only country to criminalize 
effectively the bribery of foreign public officials. Now, for the first 
time, the United States and its major trading partners have agreed upon 
an international Convention which obligates the world's largest 
economies to make it a crime to bribe the officials of other countries 
in international business transactions. This is a major contribution to 
the international rule of law and the promotion of democratic values of 
which we should all be proud. It will combat the damage which bribery 
causes to economic development efforts and to U.S. exporters.
    We and the other 32 signatory countries have agreed to the 
ambitious goal of seeking adoption of necessary legislation to 
implement the Convention by the end of this year. It is essential that 
the United States meet this schedule, in order to continue U.S. 
leadership on this important issue and to encourage other countries to 
implement fully the agreement.
    While the Convention tracks the FCPA closely, we have proposed 
certain amendments to bring our law into fill compliance with the 
obligations of and to implement the Convention. We have been working 
with the business community and with interested nongovernmental 
organizations in this effort, and have sought in the implementing 
legislation to ensure that U.S. firms will face disciplines comparable 
to those of foreign firms as a result of this agreement. When 
implemented and enforced by parties, the Convention will go a long way 
towards reducing incidents of bribery in international business 
transactions.
    We urge the Congress to act quickly to ensure that U.S. firms and 
their employees can realize the benefits of this Convention as soon as 
possible.
    Sincerely,

        Robert E. Rubin
        Secretary of the Treasury

        Janet Reno
        Attorney General

        Charlene Barshefsky          Madeleine K. Albright
        United States                Secretary of State
        Trade Representative

                                     William M. Daley
                                     Secretary of Commerce

                                     Arthur Levitt
                                     Chairman
                                     Securities and Exchange Commission
               AMP Incorporated, Executive Offices,
                                 Harrisburg, PA 17105-3608,
                                                      June 3, 1998.
The Honorable Jesse Helms,
United States Senate,
Washington, DC 20510.

    Dear Senator Helms:
    I am writing to express my support for the speedy ratification and 
implementation of the Organization for Economic Cooperation and 
Development (OECD) Convention on Combating Bribery of Foreign Public 
Officials in International Business Transactions that the 
Administration has just submitted to the Congress.
    The OECD Convention is a major victory for the United States in its 
battle against international corruption and bribery. It creates an 
international antibribery system that obligates signatory countries to 
adopt domestic laws to combat foreign bribery. Since the Foreign 
Corrupt Practices Act (FCPA) was adopted in 1977, the United States has 
tried to persuade our major trading partners to enact comparable laws. 
In the 1988 Omnibus Trade Act, the Congress directed the President to 
negotiate an international agreement in the OECD on the prohibition of 
overseas bribes. After years of negotiation, the United States has 
succeeded in getting thirty-three other countries (all the OECD members 
and five non-members) to join the United States in the Convention.
    The Congress, current and past Administrations, and the private 
sector have made their fight against international bribery and 
corruption a priority because international corruption undermines 
important U.S. goals of (1) achieving a level playing field for those 
U.S. companies and their workers that compete overseas, (2) fostering 
economic development and trade liberalization, and (3) promoting 
democracy and democratic institutions. The Department of Commerce has 
estimated that between 1994 and 1996, there were at least 100 cases of 
foreign firms using bribery to undercut U.S. firms' efforts to win 
international contracts, costing our companies over $45 billion. The 
OECD Convention is designed to eliminate these trade distorting 
activities and make foreign bribery a crime in major trading countries.
    Speedy ratification and implementation of the OECD Convention by 
the United States is, however, an absolute imperative in order for the 
Convention to succeed. Some of the other parties are not as committed 
to the Convention as the United States and are likely to use a delay in 
U.S. ratification to undermine it. Speedy implementation of the OECD 
Convention is also necessary to show the other parties that the United 
States takes its obligations under the Convention seriously and expects 
other parties to do the same. Since the Convention's effectiveness 
depends on the adoption of international antibribery laws by the other 
parties, implementation by the United States is necessary to lead the 
way, substantively and politically, for implementation of the 
Convention by other parties.
    Enclosed, for your information, is background material on the OECD 
Convention and a summary of the amendments necessary to bring the FCPA 
into compliance with the OECD Convention.
    I am committed to working with you to help protect U.S. businesses 
and workers from unfair and corrupt foreign competition through the 
ratification and implementation of the OECD Antibribery Convention by 
the Congress this year.

            Sincerely,
                                 William J. Hudson,
                     Chief Executive Officer and President,
                                                  AMP Incorporated.

                                 ______
                                 

                            Stanley J. Marcuss,    
                          Partner, Bryan Cave, LLP,
                               700 Thirteenth Street, N.W.,
                                       Washington, D.C. 20005-3960.
The Honorable Jesse Helms,
Chairman, Senate Committee on Foreign Relations,
Washington, D.C. 20510.

Re: Ratification of the OECD Anti-Bribery Convention and Adoption of 
Implementing Legislation

    Dear Senator Helms:
    The Senate is currently being asked to ratify the recently 
negotiated Convention on Combating Bribery of Foreign Government 
Officials. Congress as a whole is also currently being asked to amend 
the Foreign Corrupt Practices Act in light of the new Convention. Both 
the Convention and the proposed legislation are significant 
developments: the Convention, because it provides an opportunity to 
enlist other countries in the effort to prevent bribery in the 
international marketplace; the legislation, because it would 
significantly expand the reach of the FCPA as the analysis in 
Attachment A to this letter points out.
    An important issue for Congress to consider during its 
deliberations, however, is whether the other signatories to the 
Convention will enact and enforce laws that are substantially similar 
to the FCPA. If they do not, the uneven playing field that currently 
confronts U.S. business will not only remain in place but will be made 
even worse if Congress should toughen the FCPA by enacting the 
amendments currently being proposed.
    As you may know, the, Convention is not self-executing. It requires 
signatory countries to enact conforming domestic legislation. If they 
do not act at all or if they enact legislation that does not meet the 
Convention's requirements or fail adequately to enforce the laws they 
do enact, U.S. business will continue to be disadvantaged in the 
international marketplace. I should add that, even if other countries 
fulfill their Convention obligations, differences between their laws 
and U.S. law are inevitable because, as the analysis in Attachment B 
points out, there are significant differences between the FCPA and the 
laws that the Convention requires other countries to enact.
    Many, nonetheless, agree that the Convention should be ratified, 
implemented and enforced expeditiously and in earnest by each and every 
signatory now that it has been agreed upon. To minimize the risk that 
other countries will fail to fulfill their Convention obligations and 
that the United States will continue to be the only country that has 
taken effective measures against foreign bribery, I believe Congress 
should adopt measures that require the Executive Branch to press for 
full and effective implementation of the Convention by each of its 
signatories.
    Among the measures Congress might consider are the following:

          A. Delaying the effective date of the FCPA amendments until a 
        majority or some other proportion of the signatories have 
        enacted legislation that meets the requirements of the 
        Convention;
          B. Making effectiveness of the FCPA amendments conditional on 
        a Presidential certification that a majority or some other 
        proportion of the signatories have enacted legislation that 
        meets the requirements of the Convention.
          C. Requiring the President to provide Congress with a 
        periodic analysis of precisely what other signatory countries 
        have done by way of implementing legislation and enforcement. 
        The analysis should include detailed scrutiny of the precise 
        terms of the implementing legislation, an assessment of whether 
        such legislation meets the requirements of the Convention and a 
        description of the ways in which such legislation differs from 
        the FCPA.
          D. Requiring creation of a private sector review board with 
        which the Executive Branch must consult on progress toward 
        implementation of the Convention by each of its signatories.

    I would be happy to amplify these suggestions if you would find it 
useful and hope they are of interest. I would also be grateful if you 
would have this letter and its attachments inserted in the hearing 
record, because they may be of interest to others who are involved in 
the ratification and implementation process.
    I would like to mention in closing that, while I am the Director of 
the Coalition for Fair International Business Practices, a group of 
U.S.-based multinationals interested in the pursuit of effective 
measures to eliminate foreign bribery worldwide, this letter is written 
in my personal capacity and does not reflect the views of every member 
of the Coalition.

            Sincerely yours,
                                        Stanley J. Marcuss.

                                
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