[Senate Executive Report 106-15]
[From the U.S. Government Publishing Office]
106th Congress Exec. Rpt.
SENATE
2d Session 106-15
======================================================================
INTER-AMERICAN CONVENTION AGAINST CORRUPTION
_______
June 30, 2000.--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. 105-39]
The Committee on Foreign Relations, to which was referred
the Inter-American Convention Against Corruption (``The
Convention''), adopted and opened for signature at the
Specialized Conference of the Organization of American States
(OAS) at Caracas, Venezuela, on March 29, 1996, signed by the
United States on June 27, 1996, at the Twenty-Seventh Regular
Session of the OAS General Assembly meeting in Panama City,
Panama, having considered the same, reports favorably thereon
with six understandings, one declaration and three provisos,
and recommends that the Senate give its advice and consent to
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 Denunciation................................6
V. Committee Action.................................................7
VI. Committee Recommendation and Comments............................7
VII. Explanation of Proposed Convention...............................8
VIII.Text of the Resolution of Ratification...........................8
IX. Annex...........................................................11
I. Purpose
The purpose of the Inter-American Convention Against
Corruption (``the Convention'') is to require Parties to the
Convention to criminalize solicitation or acceptance of bribes
and other corrupt acts, to criminalize transnational bribery in
commerce, and to eliminate bank secrecy or political grounds as
the bases to refuse
cooperation with other Parties in criminal investigations under
the Convention.
II. Background
On March 29, 1996, a Specialized Inter-American Conference
met in Caracas, Venezuela, and negotiators from twenty-one OAS
member states signed the Convention. The United States signed
the Convention on June 2, 1996, at the twenty-seventh regular
session of the OAS General Assembly in Panama City, Panama. On
March 6, 1997, the Convention entered into force following
deposit of the second instrument of ratification. The President
submitted the Convention to the Senate for advice and consent
on April 1, 1998. As of the date of this report, twenty-six OAS
member states had signed the Convention, and twenty had
deposited their instruments of ratification.
III. Summary
A. GENERAL
The Convention was the first multilateral instrument of its
kind. It is hoped that the Convention will be an effective tool
to assist in the hemispheric effort to combat corruption. It
may also enhance the law enforcement efforts of the Parties in
other areas, given the links that often exist between
corruption and organized criminal activity such as drug
trafficking.
The United States has long been concerned about bribery of
foreign officials. In 1977, the United States enacted the
Foreign Corrupt Practices Act to criminalize the bribery of
foreign officials, and has urged other nations to adopt similar
statutes. The Convention is intended to ensure that Parties
enact statutes to criminalize bribery and other kinds of public
corruption. It establishes a treaty-based regime of obligations
among OAS member states to fight corruption. Within the
Convention are limited requirements similar to the U.S. Foreign
Corrupt Practices Act and other U.S. laws relative to bribery
of public officials.
In 1998 the United States became Party to the Organization
for Economic Cooperation and Development (OECD) Convention on
Bribery in International Business Practices. Like the OAS
Convention, the OECD agreement requires parties to enact
statutes similar to the Foreign Corrupt Practices Act. The OECD
Convention criminalizes payment, or the ``supply side'' of
bribes. While the OAS Convention, too, addresses the supply
side, it also addresses the ``demand side'' by committing its
parties to outlaw solicitation or acceptance of bribes and
other corrupt acts.
In submitting the Convention to the Senate, the Executive
Branch stated that the Convention will not require implementing
legislation for the United States.
B. KEY PROVISIONS
The Convention has a preamble and twenty-eight articles.
Key provisions are summarized below.
Federalism. Article I of the Convention sets forth the
scope of the Convention's operation. The United States
understands the Convention to impose obligations on the Federal
Government. The Convention does not impose obligations on the
conduct of state, local or other non-Federal officials.
Anti-Corruption Measures. In Article III of the Convention,
Parties undertake a broad obligation to consider--with a view
to creating, maintaining and strengthening institutional
capacity--a variety of domestic measures. These measures
include: (1) standards of conduct and implementation of the
standards for the correct, honorable, and proper fulfillment of
public functions; (2) instruction to government personnel to
ensure proper understanding of their responsibilities; (3)
systems for financial disclosure of persons who perform public
functions; (4) open and transparent government procurement
systems; (5) government revenue collection and control systems
that deter corruption; (6) laws that deny favorable tax
treatment for expenditures made in violation of the anti-
corruption laws; (7) systems for protecting individuals who
report acts of corruption; (8) oversight bodies to implement
anti-corruption laws; (9) deterrents to the bribery of
government officials, such as the requirement that businesses
keep accurate books and records; (10) mechanisms to encourage
participation by civil society in anti-corruption activities;
and (11) further study of preventative measures.
Jurisdiction. Article V of the Convention obliges the
Parties to establish jurisdiction over covered offenses.
Parties must establish jurisdiction over acts committed in
their territory, and over the acts of persons present in their
territory whose extradition to a second country they deny on
the basis of nationality.
Covered Offenses. Article VI of the Convention specifies
the acts of corruption to which the Convention applies: (1) the
solicitation or acceptance by a government official or by a
person who performs public functions of any article of monetary
value or other benefit in exchange for any act or omission in
the performance of his public functions; (2) the offering or
granting to a government official or a person who performs
public functions of any article of monetary value or other
benefit in exchange for any act or omission in the performance
of his public functions; (3) any act or omission in the
discharge of his duties by a government official or a person
who performs public functions for the purpose of illicitly
obtaining benefits; (4) the fraudulent use or concealment of
property derived from any acts referred to in this article; and
(5) the participation in any manner in the commission or
attempted commission of any of these acts. In addition, two or
more Parties to the Convention may agree to cover additional
offenses.
Criminalization. Article VII obligates Parties to establish
as criminal offenses the acts of corruption described in
Article VI. Parties must also facilitate cooperation among
themselves pursuant to the Convention. There are statutes
already in effect in the United States that criminalize a wide
range of corrupt acts. Although these statutes may not in all
cases be defined in terms or elements identical to those used
in the Convention, the conduct intended under the Convention to
be criminalized would in fact be criminal conduct under U.S.
law. Although there is no general ``attempt'' statute in U.S.
federal criminal law, federal statutes criminalize ``attempts''
in connection with specific crimes. Moreover, significant acts
of corruption involving ``attempts'' would be generally subject
to prosecution in the context of one or more other crimes.
Accordingly, the United States will enact no new legislation to
implement Article VII.
Transnational Bribery. Pursuant to Article VIII, each
Party, subject to its Constitution and fundamental legal
principles, must prohibit and punish transnational bribery.
This offense is defined as the offering or granting by Party
nationals, persons having habitual residence in a Party, and
Party-domiciled businesses, to a government official of another
state any article of monetary value or any other benefit in
connection with any economic or commercial transaction in
exchange for any act or omission in the performance of that
official's public functions. However, because of the
constitutional proviso mentioned above, the Article does not
assume that every state will criminalize such activity. In the
event a country has not criminalized transnational bribery it
is obligated to provide assistance and cooperation to the
extent possible to other states. Current United States law
provides criminal sanctions for transnational bribery. No
additional legislation is needed for the United States to
comply with the obligation imposed in Article VIII of the
Convention.
Illicit Enrichment. Subject to its Constitution and
fundamental legal principles, each Party is required by Article
IX of the Convention to establish as an offense the significant
increase in the assets of a government official that cannot
reasonably be explained by lawful earnings during the
performance of public functions. If a nation does not establish
such a criminal offense, it is nonetheless obligated to provide
assistance and cooperation to the extent possible. In the
United States such a statute would be unconstitutional because
it would place the burden of proof on the individual, rather
than the government. Consequently, the Executive Branch
proposed an understanding stating that in the United States the
establishment of such an offense would be inconsistent with the
U.S. Constitution and the fundamental principles of the U.S.
legal system, and that the United States is not obligated to
establish a new criminal offense of illicit enrichment under
Article IX of the Convention.
Progressive Development. Article XI sets out a list
describing conduct that is not covered by the Convention, but
which negotiators view as desirable areas for the enactment of
domestic laws in order to criminalize and deter corruption. For
Parties with statutes already in place which criminalize the
conduct described in Article XI, the relevant conduct will be
deemed to fall within the Convention's coverage. Article XI
covers (1) the improper use by a government official or a
person who performs public functions of any kind of classified
information which that person has obtained because of or in the
performance of his functions; (2) the improper use by a
government official or a person who performs public functions
of any kind of property belonging to the state to which that
person has access because of or in the performance of his
functions; (3) any act or omission by any person who seeks to
obtain a decision from a public authority whereby he illicitly
obtains any benefit or gain, whether or not the act or omission
harms state property; and (4) the diversion by a government
official of any movable or immovable property, monies, or
securities belonging to the state, to an independent agency, or
to an individual that the official has obtained because of his
position for purposes of administration, custody, or other
reasons.
Extradition. Article XIII provides that the Convention may
serve as the legal basis for extradition with respect to any
offense to which the Convention applies. However, the United
States shall not consider the Convention to be the legal basis
for extradition to any country with which the United States has
no bilateral extradition treaty in force. Where the United
States does have a bilateral extradition treaty in force, that
bilateral extradition treaty shall serve as the legal basis for
extradition for offenses that are extraditable in accordance
with this Convention.
Mutual Legal Assistance. Article XIV of the Convention
requires broad mutual legal and technical assistance among the
Parties. In no case may United States assistance be provided to
the International Criminal Court, unless the treaty
establishing the Court has entered into force for the United
States by and with the advice and consent of the Senate, as
required by Article II, section 2 of the United States
Constitution.
Property/Proceeds of Offenses. Article XV sets out
assistance requirements regarding proceeds and property.
Parties must provide to each other the broadest possible
measure of assistance, in the identification, tracing,
freezing, seizure, and forfeiture of property or proceeds
obtained, derived from, or used in the commission of corruption
offenses. However, in no case may United States assistance be
provided to the International Criminal Court, unless the treaty
establishing the Court has entered into force for the United
States by and with the advice and consent of the Senate, as
required by Article II, section 2 of the United States
Constitution.
Bank Secrecy. Under Article XVI of the Convention, Parties
may not invoke bank secrecy as a basis to refuse to provide
assistance sought by a requesting state. In applying this
Article, Parties may take into account their domestic law,
procedural provisions, or bilateral or multilateral agreements.
The Article also permits a requested Party to limit use by the
requesting state of information provided under this Article.
Political Exception. Article XVII provides that a political
purpose, in and of itself, may not be a grounds for refusing a
request for assistance from a Party under Articles XIII
(Extradition), XIV (Assistance and Cooperation), XV (Measures
Regarding Property) and/or XVI (Bank Secrecy).
Central Authorities. Under Article XVIII, each Party must
designate a central authority to make and receive requests for
assistance and cooperation.
Final Clauses. Articles XXI (Signature), XXII
(Ratification), XXIII (Accession) and XXIV (Reservations)
provide that the Convention is open for signature by OAS Member
States. The Convention is subject to ratification, and shall
remain open for accession by states which are not OAS members.
Instruments of ratification and accession must be deposited
with the OAS General Secretariat, currently located in
Washington, D.C. Reservations that are not incompatible with
the object and purpose of the Convention are permitted.
C. THE U.S. FOREIGN CORRUPT PRACTICES ACT
During the mid-1970s, 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 enactment, Congress for a number of years considered
amending the 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.
The OAS Convention is another step forward in the effort to
multinationalize the fight against corruption in transnational
business. Although there are differences in detail, the
Committee believes that the OAS Convention's provisions on
transnational bribery (Article VIII) are consistent with the
Foreign Corrupt Practices Act. Both are concerned with payments
made to obtain business, or the giving of something for value
for an official act, omission or exercise of influence.
IV. Entry Into Force and Denunciation
A. ENTRY INTO FORCE
The Convention entered into force on March 6, 1997. For
each State ratifying or acceding to the Convention after its
entry into force, the Convention shall enter into force on the
thirtieth day after deposit by such State of its instrument of
ratification or accession.
B. DENUNCIATION
The Convention shall remain in force indefinitely, but any
of the States Parties may denounce it. A denouncing state
party's instrument of denunciation must be deposited with the
General Secretariat of the Organization of American States. One
year from the date of deposit of the instrument of
denunciation, the Convention shall cease to be in force for the
denouncing State.
V. Committee Action
The Committee on Foreign Relations held a public hearing on
the Convention on May 2, 2000 (a transcript of the hearing and
questions for the record can be found in the annex to this
report). The Committee considered the Convention on June 7,
2000, 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 six
understandings, one declaration and three provisos.
VI. Committee Recommendation and 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.
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 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.
In addition, the Committee's recommended resolution of
ratification includes an understanding that no assistance may
be provided to the International Criminal Court in connection
with United States activities under this Convention unless the
International Criminal Court's organic statute, the Rome
Statute, enters into force for the United States pursuant to
constitutional procedures.
Finally, the Committee understands that lawful intelligence
activities of the United States Government are not covered by
this Convention, and therefore it is unnecessary to provide any
exemptions for such activities.
VII. Explanation of Proposed Convention
For a detailed article-by-article analysis of the proposed
Convention, see the corresponding Letter of Submittal from the
Secretary of State, which is set forth at pages V-XIV of Senate
Treaty Document 105-39.
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 Inter-American Convention Against
Corruption, adopted and opened for signature at the Specialized
Conference of the Organization of American States (OAS) at
Caracas, Venezuela, on March 29, 1996, (Treaty Doc. 105-39);
referred to in this resolution of ratification as ``The
Convention,'' subject to the understandings of subsection (a),
the declaration of subsection (b), and the provisos of
subsection (c).
(a) Understandings.--The advice and consent of the
Senate is subject to the following understandings,
which shall be included in the instrument of
ratification of the Convention and shall be binding on
the President:
(1) Application of article i.--The United
States of America understands that the phrase
``at any level of its hierarchy'' in the first
and second subparagraphs of Article I of the
Convention refers, in the case of the United
States, to all levels of the hierarchy of the
Federal Government of the United States, and
that the Convention does not impose obligations
with respect to the conduct of officials other
than Federal officials.
(2) Article vii (``domestic law'').--
(A) Article VII of the Convention
sets forth an obligation to adopt
legislative measures to establish as
criminal offenses the acts of
corruption described in Article VI(1).
There is an extensive network of laws
already in place in the United States
that criminalize a wide range of
corrupt acts. Although United States
laws may not in all cases be defined in
terms or elements identical to those
used in the Convention, it is the
understanding of the United States,
with the caveat set forth in
subparagraph (B), that the kinds of
official corruption which are intended
under the Convention to be criminalized
would in fact be criminal offenses
under U.S. law. Accordingly, the United
States does not intend to enact new
legislation to implement Article VII of
the Convention.
(B) There is no general ``attempt''
statute in U.S. federal criminal law.
Nevertheless, federal statutes make
``attempts'' criminal in connection
with specific crimes. This is of
particular relevance with respect to
Article VI(1)(c) of the Convention,
which by its literal terms would
embrace a single preparatory act done
with the requisite ``purpose'' of
profiting illicitly at some future
time, even though the course of conduct
is neither pursued, nor in any sense
consummated. The United States will not
criminalize such conduct per se,
although significant acts of corruption
in this regard would be generally
subject to prosecution in the context
of one or more other crimes.
(3) Transnational bribery.--Current United
States law provides criminal sanctions for
transnational bribery. Therefore, it is the
understanding of the United States of America
that no additional legislation is needed for
the United States to comply with the obligation
imposed in Article VIII of the Convention.
(4) Illicit enrichment.--The United States of
America intends to assist and cooperate with
other States Parties pursuant to paragraph 3 of
Article IX of the Convention to the extent
permitted by its domestic law. The United
States recognizes the importance of combating
improper financial gains by public officials,
and has criminal statutes to deter or punish
such conduct. These statutes obligate senior-
level officials in the federal government to
file truthful financial disclosure statements,
subject to criminal penalties. They also permit
prosecution of federal public officials who
evade taxes on wealth that is acquired
illicitly. The offense of illicit enrichment as
set forth in Article IX of the Convention,
however, places the burden of proof on the
defendant, which is inconsistent with the
United States Constitution and fundamental
principles of the United States legal system.
Therefore, the United States understands that
it is not obligated to establish a new criminal
offense of illicit enrichment under Article IX
of the Convention.
(5) Extradition.--The United States of
America 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 bilateral
extradition treaty shall serve as the legal
basis for extradition for offenses that are
extraditable in accordance with this
Convention.
(6) Prohibition on assistance to the
international criminal court.--The United
States of America shall exercise its rights to
limit the use of assistance it provides under
the Convention so that any assistance provided
by the Government of the United States shall
not be transferred to or otherwise used to
assist the International Criminal Court agreed
to in Rome, Italy, on July 17, 1998, unless the
treaty establishing the Court has entered into
force for the United States by and with the
advice and consent of the Senate, as required
by Article II, section 2 of the United States
Constitution.
(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 State 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.--Not later than April
1, 2001, 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 and actions to advance its object
and purpose.-- A description of the domestic
laws enacted by each Party to the Convention
that implement commitments under the Convention
and actions taken by each Party during the
previous year, including domestic law
enforcement measures, to advance the object and
purpose of the Convention.
(C) Progress at the organization of american
states on a monitoring process.--An assessment
of progress in the Organization of American
States (OAS) toward creation of an effective,
transparent, and viable Convention compliance
monitoring process which includes input from
the private sector and non-governmental
organizations.
(D) Future negotiations.-- A description of
the anticipated future work of the Parties to
the Convention to expand its scope and assess
other areas where the Convention could be
amended to decrease corrupt activities.
(2) Mutual legal assistance.--When the United States
receives a request for assistance under Article XIV of
the Convention 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 XIV of the Convention, 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 interest, including cases where the Central
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.
IX. A N N E X
----------
INTER-AMERICAN CONVENTION AGAINST CORRUPTION (Treaty Doc. 105-39)
----------
TUESDAY, MAY 2, 2000
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 2:03 p.m., in
room SD-419, Dirksen Senate Office Building, the Hon. Lincoln
D. Chafee, presiding.
Present: Senator Chafee.
Senator Chafee. This afternoon we are having a hearing to
consider the Inter-American Convention Against Corruption, and
the United States signed the Convention on June 27, 1996. And
it was transmitted to the Senate on April 1, 1998. To date, 18
of the Convention's 26 signatories have ratified.
Today's hearing will give this committee an opportunity to
explore the many facets of the Convention, including how the
United States becoming a party to it will affect U.S.
interests.
As long as history has been recorded, corruption has been
an unfortunate fact of life in the administration of
government. For a variety of reasons, cultural, economic and
moral, public officials have been lured by and often succumb to
the temptation to put the common good aside for personal gain.
Corruption is antithetical to successful democracy, as it
severs the trust that links public servants with the people
they represent.
As the world's leader in the promotion of democratic
values, the United States has a unique obligation to confront
the many challenges to these cherished values. Public
corruption ranks among those challenges.
Corruption not only wastes public resources, but it also
discourages investment from overseas. Indeed when conducting
operations abroad, an international businessperson seeks, among
other things, a sound and honest host government that upholds
the rule of law.
If a government is known or suspected to be corrupt, the
willingness of the business community to invest is diminished.
Corruption thus deters international trade and consequently
hinders economic growth.
The United States has been in the forefront of the fight
against international corruption. In 1977, Congress enacted the
Foreign Corrupt Practices Act which, among other things,
criminalizes the bribing of foreign officials.
More recently, in 1998, the United States became party to
the Organization for Economic Cooperation and Development
Convention on Bribery in International Business Practices, a
treaty aimed at combating corruption in the private sector.
The next major step in fighting international corruption is
the Inter-American Convention Against Corruption. The
Convention commits our trading partners in the Americas to
criminalize a wide range of corrupt acts, increase enforcement,
enhance legal and judicial cooperation and strengthen
preventive measures such as disclosures of assets.
The administration has indicated that no implementing
legislation will be needed for U.S. compliance with the
Convention.
Other nations, however, will have to enact substantial
reform measures. I believe that ratification of this Convention
is very much in our national interest, and hope this hearing
can illuminate its many attributes.
As an elected official, I surely recognize that foreign aid
is one of the least popular expenditures of the Federal
Government. Skeptics often liken providing foreign assistance
to pouring money down the drain of corrupt governments.
Perhaps, this Convention will, among other things, help
begin to erase that perception and enhance the confidence of
American taxpayers in continued U.S. international engagement.
I would like to thank all of today's witnesses for sharing
with the committee their informed views on these important
issues. I look forward to a useful and informative discussion.
I am very honored to have as our first witness, the
Honorable Alan P. Larson, the Under Secretary of State for
Economic, Business and Agricultural Affairs.
And I am very honored that you took your valuable time to
present your views on this important subject. Welcome.
[Prepared statement and news release by Senator Chafee
follow:]
Prepared Statement of Senator Lincoln D. Chafee
This afternoon the Foreign Relations Committee holds a hearing on
an important international agreement, the Inter-American Convention
Against Corruption. The United States signed the Convention on June 27,
1996 and it was transmitted to the Senate on April 1, 1998. To date,
eighteen of the Convention's twenty-six signatories have ratified.
Today's hearing will give this committee an opportunity to explore the
many facets of the Convention, including how the U.S. becoming a party
to it will affect U.S. interests.
As long as history has been recorded, corruption has been an
unfortunate fact of life in the administration of government. For a
variety of reasons--cultural, economic and moral--public officials have
been lured by, and often succumb to, the temptation to put the common
good aside for personal gain. Corruption is antithetical to successful
democracy, as it severs the trust that links public servants with the
people they represent. As the world's leader in the promotion of
democratic values, the United States has a unique obligation to
confront the many challenges to these cherished values. Public
corruption ranks among those challenges.
Corruption not only wastes public resources, but it also
discourages investment from overseas. Indeed, when conducting
operations abroad, an international businessperson seeks, among other
things, a sound and honest host government that upholds the rule of
law. If a government is known or suspected to be corrupt, the
willingness of the business community to invest is diminished.
Corruption thus deters international trade and, consequently, hinders
economic growth.
The United States has been in the forefront of the fight against
international corruption. In 1977, Congress enacted the Foreign Corrupt
Practices Act, which, among other things, criminalizes the bribing of
foreign officials. More recently, in 1998 the United States became
party to the Organization for Economic Cooperation and Development
(OECD) Convention on Bribery in International Business Practices, a
treaty aimed at combating corruption in the private sector.
The next major step in fighting international corruption is the
Inter-American Convention Against Corruption. The Convention commits
our trading partners in the Americas to criminalize a wide range of
corrupt acts, increase enforcement, enhance legal and judicial
cooperation, and strengthen preventive measures such as disclosure of
assets. The Administration has indicated that no implementing
legislation will be needed for U.S. compliance with the Convention.
Other nations, however, will have to enact substantial reform measures.
I believe that ratification of this Convention is very much in our
national interest, and hope this hearing can illuminate its many
attributes.
As an elected official, I surely recognize that foreign aid is one
of the least popular expenditures of the federal government. Skeptics
often liken providing foreign assistance to ``pouring money down the
drain of corrupt governments.'' Perhaps this Convention will, among
other things, help begin to erase that perception and enhance the
confidence of American taxpayers in continued U.S. international
engagement.
I would like to thank all of today's witnesses for sharing with the
committee their informed views on these important issues. I look
forward to a useful and informative discussion.
______
[For Immediate Release--Tuesday, May 2, 2000]
Chafee Signals Approval of Inter-American Convention Against Corruption
Washington, DC.--U.S. Senator Lincoln D. Chafee (R-RI)--Chairman of
the Senate Foreign Relations Subcommittee on the Western Hemisphere,
Peace Corps, Narcotics and Terrorism--today signalled his support for
the Inter-American Convention Against Corruption.
At a Foreign Relations Committee hearing to examine the merits of
the convention, Chafee noted that the treaty would require many of its
signatory nations to take substantial legislative steps to eliminate
public corruption, while the United States is already in full
compliance. He also noted that anti-corruption campaigns were critical
for many developing nations which hope to attract foreign direct
investment.
``As long as history has been recorded, corruption has been an
unfortunate fact of life in the administration of government,'' Chafee
said at the hearing. ``For a variety of reasons--cultural, economic and
moral--public officials have been lured by, and often succumb to, the
temptation to put the common good aside for personal gain.''
Chafee continued. ``Corruption not only wastes public resources,
but it also discourages investment from overseas. Moreover, corruption
is antithetical to successful democracy, as it severs the trust that
links public servants with the people they represent. As the world's
leader in the promotion of democratic values, the United States has a
unique obligation to confront the many challenges to these cherished
values. Public corruption ranks among those challenges.''
In 1996, President Clinton signed the Inter-American Convention
Against Corruption. The terms of the treaty require parties to
criminalize the solicitation or acceptance of bribes; strengthen
cooperation in criminal investigations, and; enact preventative
measures, including asset disclosure and conflict of interest standards
for public officials, as well as strong procurement rules.
Since the Western Hemisphere accounted for 44 percent of U.S.
exports in 1999, the adoption of anti-corruption measures will
significantly aid U.S. businesses with international ties. U.S.
businesses, already bound by the Convention Against Bribery of Foreign
Public Officials to avoid offering bribes to foreign officials, often
find themselves competing on an uneven playing field against foreign
domestic competition. Domestic businesses often feel free--or even
required--to provide bribes and kickbacks to public officials as the
cost of doing business. The Inter-American Convention would require
signatories to outlaw and aggressively prosecute these practices.
STATEMENT OF HON. ALAN P. LARSON, UNDER SECRETARY OF STATE FOR
ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS, DEPARTMENT OF
STATE
Mr. Larson. Mr. Chairman, thank you. And I am very honored
to be here today to testify in support, enthusiastically, of
the Inter-American Convention Against Corruption.
With your permission, Mr. Chairman, I would like to submit
my written statement for the record----
Senator Chafee. Yes.
Mr. Larson [continuing]. And make, very quickly, a few main
points about this Convention.
The first is that it is very strongly in our interest. The
second is that it is part of a global strategy. Third, it
advances our interest in several important discreet ways. It
has significant substantive provisions. And as you indicated,
Mr. Chairman, it requires no change in U.S. law.
Mr. Chairman, in the Americas, corruption is a major
obstacle to development, and it is a threat to democracy.
Corruption also deprives our businesses of the opportunity to
operate in a transparent, honest and predictable environment.
And this Convention is a very important regional instrument to
help us combat these problems.
It is part of a global strategy, and you outlined some of
the most important features of that: Our leadership in passing
the Foreign Corrupt Practices Act in 1977; our leadership in
pushing for the multi-lateralization of many of the key
attributes of the Foreign Corrupt Practices Act in the OECD
Convention Against Bribery.
We are also working in other fora. We have made anti-
corruption efforts a major part of the stability pact for the
countries of Southeast Europe. And we are working very hard
with the international financial institutions, the IMF and the
regional development banks to incorporate anti-corruption
principles in their programs.
Mr. Chairman, I believe that ratification of the Inter-
American Convention would advance four important U.S.
objectives.
First of all, it would strengthen the ability of the United
States to continue to play a leadership role on these issues.
The willingness of the countries in this hemisphere to sign and
ratify this treaty is one indication of their seriousness.
And I have noticed in my travels throughout the region and
in my meetings with senior officials from this part of the
world that they genuinely believe that it is in their interest
to attack this problem.
That said, signing and ratifying a treaty is not enough. As
you indicated, many of them will have to implement new laws,
and they will have to make sure that those laws are adequately
enforced.
And to do that, I think we will need, as the United States,
to play a leadership role in promoting effective
implementation. U.S. businesses will benefit from the legal
regimes that this Convention is designed to promote.
The Convention will also provide and strengthen--it will
strengthen and augment the existing mechanisms that we have for
international cooperation on law enforcement matters.
In addition the ratification of this treaty will bolster
our efforts to support democratic institutions in this
country--in this hemisphere, institutions that really are
debilitated by corruption.
Now, the specific provisions of the Inter-American
Convention are spelled out in more detail in my written
testimony.
I would just like to highlight that the Convention does
require states to take specific steps to combat corruption. It
imposes an obligation on each state to enact legislation that
will criminalize acts of corruption that are specified in the
Convention, and that these include the solicitation or
acceptance of bribes; the offering or granting of bribes; any
act or omission by a government official to obtain illicit
benefits for himself or others; the fraudulent use or
concealment of property derived from the above mentioned acts;
and participation in or association or a conspiracy to commit
such acts.
Second, the Convention also includes provisions on
international cooperation and assistance such as extradition,
mutual legal assistance, asset seizure and forfeiture. This
cooperation will be subject to the limits of applicable
existing treaties including bilateral treaties and the domestic
laws of each country. It also envisions technical cooperation
and exchange of experience, which can help in the
implementation.
Third, subject to each country's constitution and
fundamental legal principles, the Convention establishes an
obligation to criminalize the bribery of foreign government
officials. In this way, it deals with the same type of core
issue that the OECD Convention deals with.
To sum up, Mr. Chairman, I believe it is critical to the
international strategy of the United States in combating
corruption, for the United States to become a party to the
Inter-American Convention Against Corruption. It gives us
credibility in our international efforts. It helps us ensure
that the obligations of the treaty are implemented faithfully.
It responds to the desire of our business community for the
United States to be involved in this first-ever legal framework
for cooperation among the governments of this hemisphere to
address the problem.
We really appreciate the opportunity that this hearing
provides for consideration of the treaty, and I would be
pleased to answer any questions you may have.
I did want to mention that the Deputy Legal Advisor of the
State Department, Jamie Borek, is with me, if there turns out
to be highly technical or highly legal questions that arise.
Thank you.
Senator Chafee. Thank you, Mr. Larson.
[The prepared statement of Mr. Larson follows:]
Prepared Statement of Hon. Alan P. Larson
Mr. Chairman and members of the Committee:
I am pleased to appear before you today to testify in support of
the Inter-American Convention Against Corruption (``the Convention''),
and to address generally the issue of corruption in the Americas.
a political commitment to combat corruption in this hemisphere
The problem of corruption is a major obstacle to development in the
Americas, and we believe every effort must be made to address it.
Corruption slows and impedes the consolidation of democratic
institutions, and weakens the rule of law. It undermines the confidence
of people in their government. It is all too often linked with trans-
border criminal activity, including drug trafficking, organized crime,
and money laundering. In sum, its effects are wide-ranging and
pernicious.
Corruption also undermines the ability of businesses of the United
States and other countries to operate in a transparent, honest and
predictable environment. In 1996, an IMF study found that corruption
lowers investment and economic growth. The reason is simple: investors
are wary of investing in countries where corruption is prevalent, and
low levels of investment lead to low growth. The Finance Ministers of
the Western Hemisphere, at their meeting in Mexico in February 2000,
noted that ``corruption has been recognized as a serious problem that
adversely affects investment, public revenue, growth, and development
in much of the Western Hemisphere'' and that corruption is ``a threat
to investor and taxpayer confidence.''
A shared recognition of the importance of this issue prompted the
nations of the Hemisphere to agree to develop an unprecedented regional
instrument to help combat that scourge of corruption. During the early
1990s, the democratic governments of Latin America became increasingly
aware that corruption threatened political stability and economic
growth in their countries. When the 34 democratically elected heads of
state met in Miami in 1994 for the first Summit of the Americas, there
was widespread support for practical action to combat corruption. The
President of Venezuela specifically recommended negotiation of an
Inter-American Convention Against Corruption.
The willingness of the Hemisphere's countries to take this step,
and to follow it up--as a significant number have--by signing and
ratifying the treaty promptly, reflects a commitment by the governments
of the region to address the problem in a serious fashion. My travels
in the region and contacts with regional leaders convince me that
popular support for anti-corruption initiatives remain strong and that
governments are committed to action. However, it is not enough for
countries to sign and ratify the Convention and pass new criminal laws.
U.S. leadership will be critical to ensuring the implementation of the
obligations of the Convention. We will be working on an effective
strategy to ensure that the countries of the Hemisphere fully implement
this agreement. By becoming a Party to the Convention, the United
States will be better placed to promote its effective implementation.
one element of a global approach
The fight against corruption is a high priority in our foreign
policy, particularly with regard to this Hemisphere. The United States
has taken a leadership position in combating overseas commercial
bribery ever since the enactment in 1977 of the Foreign Corrupt
Practices Act (``FCPA''). Later, we led the effort to negotiate an
international convention that would enshrine the basic provisions of
the FCPA: the Organization for Economic Cooperation and Development
Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions (``the OECD Anti-Bribery
Convention''). The United States Senate voted its advice and consent to
ratification of that Convention in 1998. In the same year, Congress
passed implementing legislation that broadened the FCPA slightly to
conform to our obligations under the Convention. Nineteen other states
have ratified the OECD Convention, which entered into force in February
1999. A vigorous review of implementation is under way; the domestic
implementing laws of 21 countries have been scrutinized by the OECD
Bribery Working Group. The success of the United States on the OECD
Convention is a tribute to the strong bipartisan support from the
members of this Committee, and from others in both the House and
Senate.
The Administration is combating corruption on many other fronts. In
February of last year, Vice President Gore hosted the Global Forum on
Fighting Corruption, which was attended by representatives from over 90
countries. Among the attendees were twenty-one OAS member governments,
five at the level of Vice-President, and one head of a national
parliament; the Attorney General of Mexico; and several representatives
from Latin American non-governmental organizations. At the Forum, the
Vice President and the Secretary of State made clear the importance of
the Inter-American Convention and the commitment of the Administration
to its ratification. We are now making preparations for the Second
Global Forum, which we are cohosting with the government of The
Netherlands, and which will take place in The Hague in May of next
year.
The Administration has encouraged the IMF, the World Bank, and the
Inter-American Development Bank to incorporate anti-corruption
principles in their programs. All three of these major international
financial organizations are involved in supporting and monitoring a
wide variety of anti-corruption programs that include judicial reform,
integrated financial systems, the development of public ethics offices,
and public administration reform. These institutions, along with the
U.S. Government, the United Nations and a number of foundations belong
to an 18 member Donor Consultative Group on Accountability/Anti-
corruption in Latin America and the Caribbean. The Group meets
regularly and shares information about anti-corruption activities in
the hemisphere.
We have also pushed for a strong Anti-Corruption Initiative for the
Stability Pact for Southeast Europe. Countries of the region have made
commitments to take priority measures against corruption, especially
actions to: implement international anti-corruption instruments,
promote good governance, strengthen legislation, promote transparency
and integrity in business, and support public involvement. An anti-
corruption steering group under the Stability Pact will monitor
progress in anti-corruption efforts. The United States, the European
Commission, the OECD, and the Council of Europe, and the World Bank are
working closely in support of this Initiative.
Thus, our anti-corruption effort involves a set of integrated
policies. Regional efforts such as the Inter-American Convention are an
integral part of this framework.
provisions of the inter-american convention
The Inter-American Convention was adopted at the Specialized
Conference on Corruption of the Organization of American States (OAS)
in Caracas, Venezuela, on March 29, 1996. Twenty-one states signed the
treaty on the date of its adoption. The United States participated
actively in the Convention's negotiation, and signed it on June 27,
1996. To date, 26 states have signed, and 18 states have deposited
their instruments of ratification. The Convention entered into force on
March 6, 1997.
The Convention was the first instrument of its kind in the world to
be negotiated, and was adopted and opened for signature on March 29,
1996 at Caracas. In addition to requiring parties to criminalize acts
of corruption, the Inter-American Convention will enhance cooperation
among the nations in the Hemisphere in the battle against both domestic
and transnational acts of corruption. I will describe the principal
provisions of the Convention and then summarize some of the distinct
advantages to the United States of becoming a party.
The Convention requires that the States Party take specific steps
to combat corruption. It imposes an obligation on each State Party to
enact such legislation as is necessary to criminalize the acts of
corruption specified in the Convention. Such acts include, the
solicitation or acceptance of bribes; the offering or granting of
bribes; any act or omission by a government official to obtain illicit
benefits for himself or others; the fraudulent use or concealment of
property derived from the above-mentioned acts; and participation in,
or association or conspiracy to commit, such acts.
Thus, the treaty requires criminalization not only of the ``supply
side'' or ``active'' bribery (i.e., the offering of bribes) but also
the ``demand side'' or ``passive'' bribery (i.e., the solicitation or
acceptance of bribes). Although most nations in the Hemisphere already
to some extent have enacted corruption legislation, such as anti-
bribery laws, the Convention seeks to ensure that such legislation is
broad and comprehensive in key areas.
The United States can become a party to the Convention without any
additional legislation, because existing U.S. law is already sufficient
to satisfy the Convention's provisions regarding requirements for
legislation, and the other provisions in the Convention are self-
executing and will not require implementing legislation. However, to
clarify our interpretation of certain provisions of the Convention, we
recommend the submission with the U.S. instrument of ratification of
certain Understandings, which I will describe further on in this
statement.
The Convention also includes provisions on certain forms of
international cooperation and assistance. These include extradition,
mutual legal assistance, and asset seizure and forfeiture. With respect
to all of these forms of cooperation, the Convention expressly provides
that cooperation will be subject to the limitations of applicable
existing treaties, including bilateral ones, and to the domestic law of
each country. The Convention also contemplates technical cooperation
and exchanges of experiences. All of the foregoing are comparable to
forms of cooperation already envisioned in various law enforcement
treaties to which the United States is a party. Through such
cooperation and assistance, the Convention will facilitate the
prevention, investigation, and prosecution of acts of corruption.
One especially noteworthy feature of the Convention is the
obligation in Article VIII to criminalize the bribery of foreign
officials. In recent years, the United States Government has sought in
a number of multilateral fora to persuade other governments to adopt
legislation akin to the U.S. Foreign Corrupt Practices Act. The
Convention represented a breakthrough on that front, and lent impetus
to similar measures pursued by the United States in other multilateral
fora, such as the OECD, the Council of Europe, and the United Nations.
benefits of u.s. ratification
The United States would benefit from becoming a Party to the Inter-
American Convention in many ways. First, becoming a Party would
strengthen the ability of the United States to continue to assert a
leadership role in this area. Most of the countries in this Hemisphere
are at least signatories to the Convention, and a significant number
either are or may soon become Parties. Given the strong position the
United States has historically taken in opposition to corruption, and
the fact that our laws and policies on this issue are at the forefront
internationally, our absence from this treaty regime would be
conspicuous, and would detract from our ability to exert pressure on
the various states which are party to implement the Convention to the
most vigorous extent possible.
Second, U.S. business will benefit from a legal regime that is
designed to address the problem of corruption in this Hemisphere. The
corruption of governmental officials significantly hinders business
transactions and yields economic inefficiencies. The Convention imposes
requirements on other states to criminalize transnational bribery,
which would help level the playing field for U.S. companies competing
for business in the region. Some countries of the Hemisphere have
significant capital-exporting multinational enterprises, so the further
expansion of prohibitions on transnational bribery in those countries'
legal systems would be a significant complement to the OECD Convention.
Clearly, U.S. businesses see the benefits of this Convention, as
manifested by the letter dated April 7, 2000 sent to Senator Helms by
the leaders of 10 leading business associations to express support for
the ratification this year of the Convention.
A third advantage to the United States is that the Convention
augments existing mechanisms for international cooperation in law
enforcement matters. For example, most of our older extradition
treaties with countries in the region render extraditable only certain
offenses listed in the treaty. The Corruption Convention would
supplement such treaties with the additional offenses contemplated by
the Convention, thereby enabling the United States to more effectively
obtain the extradition of offenders accused of corruption offenses.
Fourth, ratification would further U.S. efforts to support
democratic institutions in the region. Corruption debilitates and
destabilizes government institutions. Democracy has made impressive
strides in the Western Hemisphere; with the exception of Cuba,
democratically elected governments are the norm. However, as recent
events in Ecuador and Paraguay underline, democracies remain vulnerable
and fragile. Public corruption further undermines the legitimacy of
governments and weakens support for the often difficult steps that
responsible governments must take. Corruption has become a rallying cry
for citizens too long denied transparent, accountable government. A
recent survey in the Hemisphere demonstrated that while the majority of
citizens still support democracy as the preferred system of government,
a majority are also deeply dissatisfied with the practice of democracy
in their country. In many countries in the region, corruption by
entrenched political parties and interests has become a major issue in
electoral politics in recent years, bringing the issue front and center
and demonstrating how corruption can bring down even democratically
elected governments if it is not effectively addressed.
four understandings
The Administration recommends that the United States include four
Understandings when it deposits its instrument of ratification for the
Convention. These Understandings, the proposed texts of which were
included in the Administration's transmittal of the Convention to the
Senate, would clarify views of the United States about certain
provisions of the Convention. Our views as set forth in these
Understandings are consistent with the text and history of the
Convention.
First, regarding Article I (on definitions), we recommend an
Understanding that the Treaty imposes obligations only with respect to
the conduct of U.S. federal officials. We believe this needs to be an
Understanding, rather than a Reservation, because it simply reaffirms a
point that was already addressed without dissent during the treaty
negotiations. At the conclusion of the negotiations, the United States
delegate read a statement into the record, asserting that we understood
the Convention would not impose obligations with respect to officials
other than federal officials for countries with a federal system of
government. This statement was seconded by the delegation from Canada
and from other States with federal systems, and was not challenged by
any of the other delegations.
Second, regarding Article VII (on legislation), we recommend an
Understanding to the effect that existing U.S. laws already criminalize
the conduct that the Convention requires be criminalized, even though
such laws may not necessarily be defined in terms or elements identical
to those used in the Convention. This should be an Understanding rather
than a Reservation because the requirement in Article VII refers to
criminalization by the Parties of certain acts of corruption described
in Article VI, but does not call for each State Party to incorporate
into its domestic law each specific element of the acts specified in
Article VI.
Third, concerning Article VIII (on transnational bribery), we
recommend an Understanding to indicate that the Foreign Corrupt
Practices Act (FCPA), a law already in effect for the United States,
satisfies the requirement of this Article. Such an Understanding would
be consistent with the negotiating history, as this Article was
included at the behest of the United States for the very purpose of
requiring other States to enact legislation comparable to the FCPA. We
believe an Understanding of this nature is necessary simply because the
elements of the FCPA are not identical in every minute respect to the
elements of the offense described in Article VIII, and there was no
expectation by any of the negotiating delegations that the United
States would need to modify the FCPA to comply with the Treaty.
Finally, regarding Article IX (on illicit enrichment), we recommend
an Understanding that establishment of such an offense would be
inconsistent with the U.S. Constitution and fundamental principles of
our legal system, and that therefore--in accordance with the terms of
the Article--the U.S. will not establish a new criminal offense of that
nature. By its terms, Article IX renders the obligation to criminalize
illicit enrichment subject to each State Party's ``Constitution and the
fundamental principles of its legal system.'' To the extent that
Article IX contemplates establishment of an offense of ``illicit
enrichment'' which would entail shifting the burden of proof to the
defendant in a criminal prosecution, it would be inconsistent with the
U.S. Constitution and fundamental principles of our legal system. Since
the text of Article IX expressly contemplates opt-out in such
circumstances, there would be no need to style this statement as a
Reservation rather than as an Understanding.
conclusion
In conclusion, Mr. Chairman, we believe that to support democracy
and sound economic development, we need to take strong action against
corruption. This has been a top priority of this Administration, and
with strong bipartisan and private sector support, we have made
significant progress. The Inter-American Convention Against Corruption
will be an important step to advance this cause in our own Hemisphere.
It addresses for the first time certain forms of corruption and
encourages international cooperation and assistance. U.S. ratification
will ensure that we remain a leader in anti-corruption efforts and help
create an environment which will promote long-term growth and
opportunities for U.S. firms. The Convention is very much in the
interest of the United States and our partners in the Hemisphere. The
Administration strongly supports and urges the United States Senate to
give its advise and consent to the Convention.
I will be pleased to answer any questions the Committee may have.
______
Responses of Hon. Alan P. Larson to Additional Questions Submitted for
the Record
Question 1. The letter of submittal to the President by the
Secretary of State recommends an understanding relating to Article VII.
The proposed understanding indicates that there is an ``extensive
network of laws already in place in the United States that criminalize
a wide range of corrupt acts.''
Please elaborate on the network of such laws.
Answer. The following is a summary of the U.S. federal laws in
place that satisfy the requirements of Article VII of the Convention,
which requires the States Parties to criminalize the offenses set forth
in Article VI.
While no single federal statute uses precisely the terms of Article
VI of the Convention, Article VI(1)(a) (solicitation or acceptance of
bribes) and VI(1)(b) (offering or granting bribes) were patterned on
U.S. law (18 U.S.C. Sec. 201 (b) and (c)), and various federal anti-
corruption laws are so comprehensive that no further legislation would
be needed to prosecute the conduct described in Article VI. The
following U.S. statutes cover the conduct described in Article
VI(1)(a), VI(1)(b), and VI(1)(c):
18 U.S.C. Sec. 201(b) (bribery of public officials)
18 U.S.C. Sec. 201(c) (making or receiving illegal gratuities)
18 U.S.C. Sec. 208 (acts affecting a personal financial
interest)
18 U.S.C. Sec. 641 (theft or misuse of Government property)
18 U.S.C. Sec. 666 (theft or bribery involving Federal
programs)
18 U.S.C. Sec. 1951 (bribery or extortion affecting commerce)
18 U.S.C. Sec. 371 (conspiracy to defraud the Government)
18 U.S.C. Sec. 1341 (mail fraud)
18 U.S.C. Sec. 1343 (wire fraud)
18 U.S.C. Sec. 1346 (honest services fraud)
2 U.S.C. Sec. Sec. 437g(d), 441a-441h (Federal campaign
financing)
The offense of fraudulent use of property described in Article
VI(1)(d) (fraudulently using or concealing property derived from
bribery) would be covered under 18 U.S.C. Sec. Sec. 1341, 1343, and
1346, the same Federal fraud statutes that are used to cover
corruption-related acts. The fraudulent concealment of bribe proceeds
could be prosecuted under 18 U.S.C. Sec. Sec. 1956 and 1961(1), as a
specified unlawful act for the purposes of money laundering.
Participation in any of the above acts of corruption, as described
in Article VI(1)(e), is punishable pursuant to 18 U.S.C. Sec. 2 (aiding
and abetting) and 18 U.S.C. Sec. 3 (accessory after the fact).
Conspiracy is punishable under 18 U.S.C. Sec. 371. As noted in the
recommended understanding to Article VII, although there is no general
``attempt'' statute under federal law, the attempt to bribe or engage
in other significant acts of corruption will generally be subject to
prosecution under one of the substantive offenses described above.
Question 2. Article XIII(2) of the treaty provides that ``[e]ach of
the offenses to which this article applies shall be deemed to be
included as an extraditable offense in any extradition treaty in force
between the States Parties.'' Article XIII(3) provides that the
Convention may be used as the ``legal basis for extradition with
respect to any offense to which this article applies.''
--Will the United States require the existence of a bilateral
treaty in order to extradite for offenses under this Convention?
--Given that the United States does not have in effect an offense
of illicit enrichment, and doing so would be inconsistent with the U.S.
Constitution and fundamental principles of the U.S. legal system, will
the United States regard offenses under Article IX as extraditable
offenses under any treaty?
Answer. Consistent with past U.S. practice with respect to
multilateral law enforcement conventions, the United States will not
rely on the Convention alone as the basis for extradition, but rather
will extradite only to countries with which it has a bilateral
extradition treaty in force.
The crime of illicit enrichment, as it is defined in Article IX of
the Convention, would not be an extraditable offense for the United
States. United States extradition law and practice under our
extradition treaties require ``dual criminality,'' i.e., the conduct
for which extradition is sought must be considered criminal in both the
Requesting and Requested State. The offense of ``illicit enrichment''
as it is defined in Article IX is not criminal under current U.S. law
and therefore would not be extraditable under U.S. practice. However,
if the underlying conduct that was the basis for the foreign charges
was criminal under applicable U.S. criminal statutes (e.g., false
statements, fraud, criminal tax violations, embezzlement) extradition
would be possible, assuming all other conditions for extradition under
the relevant bilateral treaty are satisfied. This is consistent with
Article XIII(5) of the Convention, which provides that ``[e]xtradition
shall be subject to the conditions provided for by the law of the
Requested State or by applicable extradition treaties, including the
grounds on which the Requested State may refuse extradition.''
Senator Chafee. I am a big believer in when you have a
hearing, you actually hear, and I welcome you. And I have no
further questions. Thank you for your testimony.
Mr. Larson. OK.
Senator Chafee. And we will convene the next panel.
Mr. Larson. Great. Thank you very much.
Senator Chafee. Welcome.
For the next panel, we have Ms. Nancy Zucker Boswell, the
Honorable William T. Pryce and Ms. Lucinda Low.
And we will start in the middle with the Honorable William
T. Pryce. Welcome.
STATEMENT OF HON. WILLIAM T. PRYCE, VICE PRESIDENT, COUNCIL OF
THE AMERICAS, WASHINGTON, DC
Mr. Pryce. Thank you very much, Mr. Chairman. Good
afternoon and I am Bill Pryce, the vice president of the
Council of the Americas, in charge of our Washington
operations. And I appreciate the opportunity to testify before
you today.
I would like permission to submit my testimony for the
record. And I will try to make it much briefer here.
First of all, I wanted to say that we certainly would
associate ourselves with your very fine statement about the
problems of corruption. And I would also associate our business
organization with the words of Mr. Larson.
I want to applaud your efforts, Mr. Chairman, and those of
Chairman Helms, for scheduling this hearing on the issue of
corruption in the Americas. This once taboo subject can have
such far-reaching negative consequences that addressing it is
critical to continuing economic and political and social
progress in development in Latin America.
Corruption and this Convention, of course, are also of
concern to our member companies who suffer the consequences of
missed opportunities and the uncertainty of investments.
The practice of corruption in the conduct of international
business operations represents an inefficient use of resources
that leads to economic, political and social costs.
Corruption is costly, inefficient; and it results in a poor
quality product or service. It penalizes the best and most
efficient producers and rewards the least efficient. The new
interrelated economy of the 21st century warrants a new way of
doing business.
There are also damaging political costs to corruption.
Corruption is secretive and behind the scenes. Therefore, the
public does not know what is going on and is left out of the
process. The result is a loss of accountability and a weakening
of institutions from the inside.
It is almost like a house that is getting rotted by
termites and you do not see it, but all of sudden it falls
down. The rule of law is weakened and democracy is undermined.
Corruption, since it is hidden, is by its very nature
undemocratic.
Socially, corruption is destructive of morality and public
decency. It undermines and weakens the strong social values
that are necessary for a true and modern democratic system to
function.
It also reduces a sense of crime and guilt, because if
corrupt acts can be done with impunity, then other types of
theft and criminal activity will be more likely to occur.
Mr. Chairman, it was not long ago that businessmen would
brag privately about their illicit business practices.
Corruption was part of the business of doing business. Now,
there are conferences on corruption, and there is a growing
recognition that the topic must be addressed.
Although corrupt practices have certainly not been
eliminated, there is a much greater sense that corruption is
wrong and it needs to be minimized. In fact, although some
industrialized countries continue to offer tax deductions for
bribes, this practice is generally being phased out.
The changing climate of opinion is largely due to U.S.
leadership and to recent multilateral developments.
As we all know, the passage of the Foreign Corrupt
Practices Act in 1977 was a historic first step. And it was a
courageous bold move that made it a crime for U.S. citizens and
companies to bribe U.S. officials.
This initiative in the beginning cost U.S. companies
billions of dollars in lost business. And it was criticized in
some circles. But it was a bold demonstration of leadership,
and now most U.S. businessmen praise the legislation.
And although other countries did not follow suit for many
years, we confronted the fact that over 400 U.S. companies
admitted making questionable illegal payments to foreign
governments and politicians. We took the high road and gained
increased respect for the U.S. throughout the world.
We now have another opportunity following the OECD
Convention, which I will not speak about, because I know it has
already been covered--but we have another opportunity to
continue the U.S. leadership in the fight against corruption.
The Inter-American Convention Against Corruption is the
next logical step in the effort to combat unfair business
practices.
Negotiated under the auspices of the Organization of
American States, the Convention criminalizes the solicitation
and acceptance of bribes, providing a comprehensive legal
framework to combat public corruption in the hemisphere.
It identifies acts of corruption and creates binding
obligations for enforcement of anti-corruption measures.
It is important both because it addresses the solicitation
of bribes and because it broadens the reach of anti-corruption
oversight by covering most of the countries of Latin America.
An important instrument in efforts to combat corruption is
the establishment of transparency measures. The transparency
laws and regulations go hand-in-hand with anti-corruption
efforts and can serve to stop corruption before it happens.
They can shine a bright light into the dark and secret
corners where corruption is practiced and bring it to an end.
That which is not stopped then is attacked by the anti-
corruption laws that have teeth.
The Inter-American Convention Against Corruption provides
transparency measures in its provisions, requiring the
registration of income, and assets and liabilities of persons
who perform public functions in certain posts and making such
registrations public.
The Convention also has a mechanism to ensure that publicly
held companies and other types of associations maintain books
and records which accurately reflect the acquisition and
disposition of assets and have sufficient internal accounting
controls to enable their officers to detect corrupt acts.
Again, these measures can work to preempt corruption and are
part of the Convention.
It is--in a colloquialism, it is a great help in keeping
the honest people honest. It is a great, great help.
Although, it was U.S. leadership that helped bring about
the Inter-American Convention, we are now in a position where
other countries are moving ahead on this agreement, while we
have not yet given our full support.
Mr. Chairman, each year, the Council of the Americas
assists its member companies in addressing disputes over
questionable contracts and business practices with governments
and business leaders throughout the Americas.
Corruption remains one of the most pressing problems for
conducting international business. The costs of corruption for
companies are very difficult to measure. And information on
these missed opportunities is not quantifiable, but there is no
doubt that corruption negatively impacts our companies.
This Convention is not a panacea, but what we are talking
about is adopting an international agreement that promotes
accountability and transparency, and it will lead to more
predictable rules for U.S. companies doing business overseas.
In effect, it will help level the playing field for U.S.
business.
The corrosive influence of corruption hinders the full
development of the countries of the hemisphere and limits
opportunities for U.S. companies.
The U.S. must do all it can to address this critical issue.
The U.S. has been a leader in combating corruption and taking
bold stands and enacting landmark legislation.
And the Inter-American Convention is in U.S. interests,
because it forbids what is already against U.S. law. U.S.
corporations and investors are bound by the FCPA, and
therefore, U.S. industry will lose a unilateral disadvantage
that is otherwise applied to them, if this Convention is
adopted. It will level the playing field, as I said, and remove
our self-imposed unilateral sanction of ethical business
practices.
As of now, the Inter-American Convention has been ratified
by 18 of the 26 countries that have signed the document. The
United States has yet to ratify it.
And to advance that Convention and to maintain our
leadership role in the hemisphere, it is essential that we do
ratify and do so soon.
This Convention will not solve all the problems of
corruption in the hemisphere, but it is an excellent beginning.
And if we do not ratify, we will be sending a message that we
believe the Convention lacks merit.
Mr. Chairman, in conclusion, I would note that this
Convention is a great start and gives the hemisphere a solid
benchmark to work from. However, to fully realize the benefits
of this Convention, we need to focus on implementation and the
establishment of consistent rules.
Multilateral followup is required to ensure that the
damaging effects of corruption of and by public officials are
eliminated. But the U.S. cannot lead in these efforts to
implement the Convention if we ourselves have not ratified it.
On behalf of the Council of the Americas, I strongly urge
the committee to recommend that the Senate ratify this
Convention as soon as possible.
Thank you, sir. And I would be happy to answer any
questions.
Senator Chafee. Well, thank you, Mr. Pryce. It is exciting
our hemisphere is leading the way in this area.
[The prepared statement of Mr. Pryce follows:]
Prepared Statement of Ambassador William T. Pryce
Good afternoon, Mr. Chairman and Members of the Committee. I am
Bill Pryce, Vice President of the Council of the Americas in charge of
our Washington operations, and I appreciate the opportunity to testify
before you today.
The Council is the leading business organization dedicated to
promoting hemispheric economic integration, free trade and investment,
open markets, and the rule of law throughout the Western Hemisphere.
The Council's membership includes major U.S. multinational companies
with interests in Latin America. Members represent a variety of
sectors: manufacturing, energy, transportation, technology,
communications, banking, financial services, and natural resources,
among others.
I want to applaud your efforts Mr. Chairman and those of Chairman
Helms for scheduling this hearing on the issue of corruption in the
Americas. This once taboo subject can have such far-reaching negative
consequences that addressing it is critical to continuing economic and
political progress and development in Latin America. Corruption and
this convention are of course also of concern to our member companies
who suffer the consequences of missed contract opportunities and the
uncertainty of investments.
The practice of corruption in the conduct of international business
operations represents an inefficient use of resources that leads to
economic, political and social costs. From an economic standpoint
corruption is costly, inefficient and results in a poor quality product
or service. It penalizes the best and most efficient producers and
rewards the least efficient. The new interrelated economy of the 21st
century warrants a new way of doing business.
There are also damaging political costs to corruption. Corruption
is secretive and behind the scenes; therefore, the public does not know
what is going on and is left out of the process. The result is a loss
of accountability and a weakening of institutions from the inside. The
rule of law is weakened and democracy is undermined. Corruption, since
it is hidden, is by its very nature undemocratic.
Socially, corruption is destructive of morality and public decency.
It undermines and weakens strong social values that are necessary for a
true modern democratic system to function. It also reduces a sense of
crime and guilt because if corrupt acts can be done with impunity,
other types of theft and criminal activity will be more likely to
occur.
These costs of corruption add up and must be addressed. Old habits
are hard to break but there is a changing environment concerning
corruption. We need to embrace this change in attitude and lead the
effort to reduce corruption and its debilitating costs.
Mr. Chairman, it wasn't long ago that businessmen would brag
privately about their illicit business practices. Corruption was part
of the business of doing business. Now, there are conferences on
corruption and there is a growing recognition that the topic must be
addressed. Although corrupt practices have certainly not been
eliminated, there is a much greater sense that corruption is wrong and
needs to be minimized. In fact, although some industrialized countries
continue to offer tax deductions for bribes, this practice is generally
being phased out.
The changing climate of opinion is largely due to U.S. leadership
and to recent multilateral developments. The passage of the Foreign
Corrupt Practices Act (FCPA) in 1977 was a historic first step, where
our country confronted corruption. This courageous move made it a crime
for U.S. citizens and companies to bribe officials of another country.
This initiative cost U.S. businesses billions in lost business and was
criticized in some circles, but it was a bold demonstration of
leadership and now most U.S. businessmen praise the legislation.
Although other countries did not follow suit for many years, we
confronted the fact that over 400 U.S. companies admitted making
questionable or illegal payments to foreign government officials and
politicians. We took the high road and gained increased respect for the
U.S. throughout the world.
In 1988, the Congress called upon the Executive Branch to negotiate
with our trading partners at the Organization for Economic Cooperation
and Development (OECD) an international agreement that would require
our trading partners to enact laws similar to our FCPA. Due to
committed U.S. leadership and years of hard work, the OECD Convention
to Combat Bribery of Foreign Public Officials was signed and ratified
and came into force on February 15, 1999. This convention works to
eliminate corruption in transactions involving companies and public-
sector bodies. Under the convention it is illegal for any citizen of an
OECD member country to bribe or attempt to bribe a foreign government
official. This Convention would not have been adopted without U.S.
leadership.
We now have another opportunity to continue U.S. leadership in the
fight against corruption. The Inter-American Convention Against
Corruption is the next logical step in the effort to combat unfair
business practices. Negotiated under the auspices of the Organization
of American States, the Convention criminalizes the solicitation and
acceptance of bribes, providing a comprehensive legal framework to
combat public corruption in the hemisphere. The Convention identifies
acts of corruption and creates binding obligations and enforcement of
anti-corruption measures. The Inter-American Convention is important
both because it addresses the solicitation of bribes and because it
broadens the reach of anti-corruption oversight by covering the
countries of Latin America.
An important instrument in efforts to combat corruption is the
establishment of transparency measures. Transparency laws and
regulations go hand in hand with anti-corruption efforts and can serve
to stop corruption before it happens. They can shine a bright light
into the dark and secret corners where the corruption is practiced and
bring it to an end. That which is not stopped is then attacked by the
anti-corruption laws that have teeth. The Inter-American Convention
Against Corruption provides transparency measures in its provisions
requiring the registration of income, assets and liabilities of persons
who perform public functions in certain posts and making such
registrations public. The Convention also has a mechanism to ensure
that publicly held companies and other types of associations maintain
books and records which accurately reflect the acquisition and
disposition of assets, and have sufficient internal accounting controls
to enable their officers to detect corrupt acts. Again, these measures
can work to preempt corruption and are part of the Convention.
Although it was U.S. leadership that helped bring about the Inter-
American Convention, we are now in a position where other countries are
moving ahead on this agreement while we have not yet offered our full
support.
Mr. Chairman, each year, the Council assists its member companies
in addressing disputes over questionable contracts and business
practices with governments and business leaders throughout the
Americas. Corruption remains one of the most pressing problems for
conducting international business. The costs of corruption for
companies are very difficult to measure. Information on missed
opportunities is not quantifiable. But there is no doubt that
corruption negatively impacts companies. This Convention is not a
panacea, but what we are talking about is adopting an international
agreement that promotes accountability and transparency and will lead
to more predictable rules for U.S. companies doing business abroad. It
will help level the playing field for U.S. business.
There is no question that corruption has a harmful effect on
developing countries. Corruption discourages foreign investment and
disrupts normal business practices. It undermines respect for
governmental institutions and fosters organized crime. Examples of the
tremendous costs of corruption on governments and citizens reveal how
expensive this problem is. In a speech last year, Vice President Gore
spoke of the case of Guatemala where third-party procurement monitoring
has helped reduce corruption in the Ministry of Health. This has gained
savings of 43 percent for the Ministry and lowered the price of its
medicine by an average of 20 percent.
The corrosive influence of corruption hinders the full development
of the countries of the hemisphere and limits opportunities for U.S.
companies. The United States must do all it can to address this
critical issue. The U.S. has been a leader in combating corruption,
taking bold stands and enacting landmark legislation. The Inter-
American Convention is in U.S. interests because it forbids what is
already against U.S. law; U.S. corporations and investors are bound by
the FCPA. Therefore, U.S. industry would lose a unilateral disadvantage
that is otherwise applied to them. The Convention would level the
playing field for U.S. business interests and remove our self-imposed,
unilateral sanction of ethical business practices.
As of now, the Inter-American Convention Against Corruption has
been ratified by 18 of the 26 countries that have signed the document.
The United States has yet to ratify it. To advance the convention and
to maintain our leadership role in the hemisphere it is absolutely
essential that we do so and soon. The convention will not solve all the
problems of corruption in the hemisphere but it is an excellent
beginning, If we don't ratify we would be sending a message that we
believe the convention lacks merit.
Mr. Chairman, in conclusion I would note that this convention is a
great start and gives the hemisphere a solid benchmark to work from.
However, to fully realize the benefits of this convention we need to
focus on implementation and the establishment of consistent rules.
Multilateral follow-up is required to ensure that the damaging effects
of corruption of and by public officials are eliminated. But the U.S.
cannot effectively lead in efforts to implement this convention if we
ourselves have not ratified it. On behalf of the Council of the
Americas I strongly urge the committee to recommend that the Senate
ratify the convention as soon as possible.
Senator Chafee. I would now like to hear from Ms. Nancy
Zucker Boswell. Welcome, Nancy.
STATEMENT OF NANCY ZUCKER BOSWELL, MANAGING DIRECTOR,
TRANSPARENCY INTERNATIONAL USA, WASHINGTON, DC
Ms. Boswell. Thank you, Mr. Chairman. I am honored to be
here today to testify on behalf of Transparency International.
We are a non-governmental organization dedicated to
combating international corruption. We have grass roots
national chapters in over 70 countries worldwide; 20 of them
here in the Americas, including in Argentina, Brazil, Canada,
Chile, Colombia, Peru, Mexico, and Venezuela.
The U.S. chapter, of which I am the managing director, is
supported by a broad coalition of more than 30 American multi-
nationals and leading lawyers, accountants, judges, academics
and other distinguished individuals.
Our chapters in Latin America have found that corruption
undermines development, distorts income distribution and
corrodes public trust in democratic institutions. As has been
pointed out, it also adds to the cost of business.
Latin America is a particularly important growth market,
but corruption has undermined its potential for growth. We
believe the Inter-American Convention Against Corruption can
make a major contribution to addressing these problems.
As you noted in your opening remarks, Mr. Chairman, the
Convention will directly benefit U.S. interests. Ratification
is broadly supported by major business organizations. Many of
them have signed a letter of support. We would like to ask, Mr.
Chairman, that this letter be submitted into the record of this
hearing.
[The letter referred to follows Ms. Boswell's prepared
statement.]
Let me suggest three primary reasons for Senate action.
First, there is now a window of opportunity for reform in the
Americas. Second, the Convention can make a major contribution
to the broader anti-corruption efforts in this hemisphere. And
third, U.S. leadership is essential to securing these
objectives.
A window of opportunity for reform finally opened for the
first time since Congress took the historic step to end
widespread bibery in international business.
As my colleague Bill Pryce noted, when Congress enacted the
Foreign Corrupt Practices Act, it expected others to follow.
But for almost two decades, no one did. Recently, however,
there has been a profound change in attitude; and the issue is
now high on the international agenda.
This is in part due to the mounting evidence, both to the
private sector, civil society, the government and development
assistance communities that corruption has severe economic,
social and political costs.
The interests of these various sectors in reducing these
costs has fueled the growth of the anti-corruption movement and
opened an opportunity for reform.
By 1994, massive bribery scandals had led to the removal of
several Latin Presidents from office, and there was a new
willingness to confront the issue. There was also a strong
public demand for change that brought new leadership to the
fore.
They agreed with the U.S. initiative to place the issue on
the 1994 Summit of the Americas. The leaders committed then to
negotiate a hemispheric agreement. And within 15 months, the
Inter-American Convention was concluded. Its rapid conclusion
is striking testimony, both to U.S. leadership and to the
regional consensus, for action.
The Convention is also one part of a broader anti-
corruption reform program. If we are truly to have an impact,
that program must also include economic and legal reforms, such
as deregulation and privatization, creating a more independent
judicial system, private sector action, greater freedom of the
press and more meaningful public participation.
The Convention thus is an important addition to this
broader reform program. Under Secretary Larson has described
some of the provisions, and my colleague from the American Bar
Association will provide greater detail.
I would like to simply underscore that in addition to being
one element of a broad reform program, the Convention makes a
very valuable addition to the start made by the OECD Anti-
Bribery Convention.
That Convention will have a marked impact limiting the
actions of major U.S. competitors, because they are virtually
all based in OECD member countries.
But it addresses only the supply side; in other words, the
companies that pay the bribes. As we indicated when we
testified before this committee in 1998, the demand side also
has to be addressed, and the Inter-American Convention does
that. It focuses primarily on the public officials.
It is far broader in scope than the OECD, reflecting the
complex nature of corruption and the comprehensive approach
that is needed to confront it. Together, these two landmark
Conventions provide a pincer attack on corruption.
This brings me to the third reason for U.S. ratification.
And that is: U.S. leadership is essential to securing the full
potential of these two Conventions. They will only be realized
if there is effective implementation and enforcement.
At this committee's hearings on the OECD Convention,
Chairman Helms expressed his skepticism about the will of the
OECD signatories to fully enforce their commitments. In
ratifying the Convention, the Senate recognized the importance
of a followup process.
Since the OECD Convention entered into force in 1999, a
vigorous process has made encouraging progress moving
signatories to fulfill their commitments. Many countries have
already been found to be in compliance. And those that are not
have been told to address their deficiencies.
Peer pressure is moving them to take the remedial steps
necessary and warning others not to submit inadequate measures.
We believe that a peer review process will be even more
important for the Inter-American Convention because its
implementation will be complex, time-consuming and costly.
Countries will need to enact considerable new legislation and
regulations in order to come into compliance. And experience
demonstrates that peer review will ensure that high standards
are met.
However, the Inter-American Convention does not provide for
such a process, and the current program involves only country
workshops and technical assistance. We have worked to encourage
parties to move forward to create a peer process and are
finding some resistance to creating it.
A key stumbling block is that the U.S. has not yet ratified
the Convention. And it is difficult for us to press for strong
followup until it has.
Senate ratification is clearly a prerequisite not only to
creating the process but to enabling the U.S. to fully
participate in it. We are concerned that unless the U.S.
participates, regional progress may stall, and our ability to
stimulate action in other countries may be handicapped.
On the other hand, ratification will demonstrate the
importance the U.S. places on the Convention as a key element
of its anti-corruption strategy. It will send a strong message
of support to reformers and remove any pretext others might
have for not moving forward.
As others have noted, this is a non-controversial agreement
that embodies U.S. values. It enjoys bipartisan support and
requires no implementing legislation. Therefore, we think the
Convention should be ratified unanimously.
We would respectfully suggest that the committee maintain
its important oversight function by requiring that progress
reports on implementation be provided.
In 1998, Chairman Helms placed such stringent reporting
requirements on the resolution of ratification for the OECD
Convention. That resolution calls for 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. Transparency
International fully supported the chairman's action then and
does so again today.
In conclusion, we believe that this Convention can make a
real difference in reducing corruption and promoting the rule
of law across the hemisphere.
Reform will significantly improve market opportunities,
promote equitable development and make democratic institutions
more effective. For over 20 years, this country has taken the
lead in promoting anti-corruption reform here at home and
around the world.
Ratification of this Convention will send a strong signal
that we continue to place the utmost importance on good
governance and we expect others to do the same.
We appreciate the committee's holding this hearing and your
consideration of this important instrument.
Thank you.
Senator Chafee. Thank you, and also for the good work
Transparency International does on this subject.
Ms. Boswell. Thank you.
[The prepared statement of Ms. Boswell follows:]
Prepared Statement of Nancy Zucker Boswell
Mr. Chairman and members of the committee on Foreign Relations, I
am very pleased to be invited to testify before you today on behalf of
Transparency International. TI is a non-governmental organization that
is dedicated to combating international corruption. Since its founding
in 1993, it has grown rapidly and now has grass roots national chapters
in over 70 countries. Twenty of them are in the Americas, including in
Argentina, Brazil, Canada, Chile, Colombia, Peru, Mexico, Venezuela and
the U.S.
The U.S. chapter, of which I am the Managing Director, is supported
by a broad coalition, including more than thirty major American
companies, lawyers, accountants, scholars, jurists, development
experts, and other distinguished individuals.
In Latin America, as in many other parts of the world where
corruption is systemic and institutions are weak, corruption has
undermined development, distorted income distribution, and corroded
trust in democratic institutions, with profound consequences both
within and beyond national borders. It has also added to the cost of
business. Latin America is an important growth market, but corruption
has undermined the potential for growth.
The Inter-American Convention Against Corruption can make a major
contribution to addressing these problems. It will strengthen the rule
of law and transparency in Latin America. This will create a more
hospitable environment for business, promote development, and build
more accountable and democratic institutions.
The Convention has already been ratified by 18 nations, including
most every major Latin American country. In order to have a practical
impact, the Convention must be implemented and effectively enforced.
U.S. leadership is vital to achieving this objective, and prompt U.S.
ratification is needed or this effort will falter. The Convention
clearly embodies our values and ratification requires no implementing
action on our part. Senate action will directly benefit U.S. interests
and is broadly supported by leading business organizations.\1\ They
have signed a letter in support of Senate ratification of the
Convention, and we would like to ask the Chairman to submit it into the
record of this hearing.
---------------------------------------------------------------------------
\1\ These include the Association of American Chambers of Commerce
of Latin America, the Brazil-U.S. Business Council, the Business
Roundtable, the Council of the Americas, , the Mexico-U.S. Business
Committee, the National Association of Manufacturers, the National
Foreign Trade Council, PhRMA, the U.S. Chamber of Commerce, and the
U.S. Council for International Business.
---------------------------------------------------------------------------
I would like to highlight in my testimony three primary reasons for
prompt Senate action:
first, there is now a window of opportunity for reform in
the Americas;
second, the Convention can make a major contribution to
broader anti-corruption efforts in the hemisphere;
third, U.S. leadership is essential to securing its
objectives.
i. there is now a window of opportunity for reform in the americas
In 1977, when Congress enacted the Foreign Corrupt Practices
Act,\2\ it took the first historic step on the path to end widespread
bribery in international business. It was expected that others would
also criminalize bribery of foreign officials.
---------------------------------------------------------------------------
\2\ Pub. L. No. 95-213, 91 Stat. 1494 (1977).
---------------------------------------------------------------------------
For almost two decades, no one followed. But, in recent years,
there has been a profound change in attitude. Thanks in part to the
work of Transparency International, the issue is now high on the
international agenda. Mounting evidence has demonstrated that
corruption has severe economic, social and political costs with adverse
effects on the private sector, civil society, the government and the
development assistance community. This coincidence of interests has
fueled the growth of the anti-corruption movement and created a window
of opportunity for reform.
By 1994, following massive bribery scandals and the removal of
several Latin presidents from office, there was a new willingness to
confront the issue. There was strong public demand for change and new
leadership elected to take action.
The U.S. found support among the leaders for placing the issue of
corruption on the agenda of the Miami Summit of the Americas. The
Summit Declaration stated that ``effective democracy requires a
comprehensive attack on corruption'' and that ``corruption in both
public and private sectors weakens democracy and undermines the
legitimacy of governments and institutions.'' \3\
---------------------------------------------------------------------------
\3\ Summit of the Americas, Plan of Action, No. 5, Miami, Fla.,
Dec. 11, 1994.
---------------------------------------------------------------------------
The leaders committed to negotiate a hemispheric agreement and to
undertake the many necessary economic, legal and regulatory reforms
that are part of an effective anti-corruption program.
Fifteen months after the Summit, the Inter-American Convention
Against Corruption was concluded and signed by 21 nations.\4\ The
Convention's rapid conclusion is striking testimony both to U.S.
leadership and to the regional consensus for action.
---------------------------------------------------------------------------
\4\ Reprinted at 35 I.L.M. 724 (1996).
---------------------------------------------------------------------------
Since its conclusion, it has been ratified by 18 countries,
including Argentina, Chile, Colombia, Costa Rica, Panama, and
Venezuela. Recent elections in many of these countries have brought to
power a new set of leaders committed to intensify reform efforts.
ii. the convention contributes to broader reform efforts in the
hemisphere
The Convention is an important part of the broader anti-corruption
agenda that is needed to address corruption. That agenda was agreed to
at the 1994 Summit and includes deregulation and privatization,
simplification of administrative procedures and creating more
independent judicial systems. It also includes private sector action;
stricter auditing and accounting standards; and greater freedom of the
press, wider publication of information and more meaningful public
participation.
The criminal and preventive measures of the Convention are
important steps in this broad approach. The principal provisions of the
Convention call on parties to:
Criminalize solicitation or acceptance of bribes and other
corrupt acts by public officials;
Strengthen cooperation in criminal investigations and
preclude the use of bank secrecy laws or political grounds as
the bases for refusing cooperation;
Promote ``preventive'' measures, including disclosure of
assets and conflict of interest standards for public officials,
and strong procurement rules.
The Convention is far broader in scope than the OECD Convention on
Bribery of Foreign Public Officials,\5\ reflecting the complex nature
of corruption and the comprehensive approach that is needed to confront
it. The OECD Convention, which this body ratified unanimously on July
31, 1999, requires the 34 signatory nations to enact legislation
similar to the FCPA, prohibiting companies from bribing foreign public
officials to obtain or retain business or other improper advantage. The
OECD Convention will have a marked impact on the actions of major U.S.
competitors because they are virtually all based in OECD member
countries.
---------------------------------------------------------------------------
\5\ Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, reprinted at 37 I.L.M. (1998).
---------------------------------------------------------------------------
The OECD Convention addresses only the ``supply'' side, e.g., the
companies that pay bribes. As we indicated when TI testified before
this committee on June 9, 1998, the ``demand'' side also has to be
addressed and that is what the Inter-American Convention does. It
focuses primarily on the public officials who demand or take bribes.
Together, these two landmark conventions provide a pincer attack on
corruption.
iii. u.s. leadership is essential to securing its objectives
However, their full potential will only be realized if there is
effective implementation and enforcement. U.S. leadership is critical
to accomplishing this objective.
At this committee's hearings on the OECD Convention, Chairman Helms
expressed his skepticism about the will of the OECD signatories to
implement and fully enforce their commitments. In ratifying that
convention, the Senate recognized the importance of a monitoring
process.
Since the OECD Convention entered into force on February 15, 1999,
a vigorous peer review monitoring process has made encouraging progress
moving signatories to fulfill their commitments. It has reviewed the
implementing legislation of most of the 21 countries that have ratified
to date. TI National Chapters have played an active part in the
monitoring process and have submitted their analysis of implementing
legislation.
Many countries have been found to be in compliance. Those that are
not have been told to address the deficiencies. Peer pressure is moving
them to take remedial steps and warning others not to submit inadequate
measures.
A peer review process will be even more important for the Inter-
American Convention because its implementation will be more complex and
time-consuming. Considerable new legislation and regulations will be
required to bring countries into compliance. Technical expertise and
best practices will be necessary to ensure high standards are met. Many
government agencies will have to participate in the process and there
will be competing demands for resources.
Currently, the Inter-American Convention does not provide for a
peer review monitoring process, and the OAS follow-up program involves
only country workshops and technical assistance.
Transparency International has been encouraging the OAS to
establish such a process, and there has been some good progress in
building consensus over the past six months. Last November, we brought
together experts from across the hemisphere to consider how best to
make progress. The experts concluded that a peer review process will be
essential to secure effective implementation, especially in countries
where laws are on the books but not always effectively enforced.
The OAS is currently working to strengthen the follow-up process.
In February, the Finance Ministers of the Western Hemisphere issued a
statement calling for the establishment of a multilateral mutual review
mechanism. In March, the OAS Secretary General opened a Special Session
on the Convention by noting an emerging consensus for such mechanisms.
Nonetheless, there is still strong resistance to creating such a
mechanism. A key stumbling block is that the U.S. has not yet ratified
the Convention. It will be difficult for the U.S. to press for a strong
follow-up process until it has ratified.
Prompt Senate ratification is clearly a prerequisite step to
creating the process and to enabling the U.S. to fully participate in
it. Unless the U.S. participates, progress may stall. Our ability to
stimulate action in other countries will be handicapped if the U.S. is
not at the table.
Ratification will demonstrate the importance we place on the
Convention as a key element of an effective anti-corruption strategy.
It will send a strong message of support for reformers and remove any
pretext others might use for not moving forward.
This is a non-controversial agreement that embodies U.S. values. It
enjoys the broad support of all sectors, including the leading business
organizations. To our knowledge, no organization opposes it.
The Administration has indicated that no implementing legislation
is needed because existing U.S. laws and practices are already in
compliance with the Convention. As with the OECD Convention, we think
that the Inter-American Convention should be ratified unanimously.
Chairman Helms placed stringent reporting requirements on the
resolution of ratification for the OECD Convention. TI recommended that
this committee ask the State Department to provide periodic progress
reports on the OECD Convention. Today, we respectfully suggest again
that the Committee continue to maintain its important oversight
function by asking, as a condition for ratification, that it call for
progress reports on the Inter-American Convention.
conclusion
In conclusion, the Inter-American Convention can make a real
difference in reducing corruption and promoting the rule of law and
greater accountability across the hemisphere. These reforms will
significantly raise standards, improving market opportunities,
promoting equitable development, and making democratic institutions
more accountable. For over twenty years, the U.S. has taken the lead in
promoting anticorruption reform at home and around the world.
Ratification of this Convention will send a strong signal that the U.S.
continues to places the utmost importance on good governance and
expects others to do the same.
We would like to express our appreciation for the Committees's
scheduling this hearing and for its consideration of this important
instrument.
______
April 7, 2000.
The Honorable Jesse Helms
Chairman,
Senate Committee on Foreign Relations,
450 Dirksen Senate Office Building,
Washington, DC.
Dear Mr. Chairman: We are writing to express our support for
ratification this year of the Inter-American Convention Against
Corruption that was transmitted to the Senate on April 1, 1998.
The Inter-American Convention is the next important step in the
fight against bribery and corruption in this hemisphere. Your prompt
action helped criminalize the ``supply side'' of bribery with the
entry-into-force of the OECD Anti-Bribery Convention on February 15,
1999. Since then, the OECD Working Group has been making good progress
in ensuring that our trading partners enact laws comparable to the
FCPA. But, the OECD Convention only applies to those who pay the bribe.
There is much to do on the ``demand side'' to secure laws and
practices that provide a hospitable environment for U.S. business and
trade, foster economic development, and promote democracy and
accountable institutions. The Inter-American Convention is a strong
beginning, committing our major trading partners in the hemisphere to
criminalize a wide range of corrupt acts, step up enforcement, enhance
legal and judicial cooperation, and strengthen preventive measures,
such as codes of conduct for public officials, disclosure of assets,
and whistle blower protection.
Realizing the Convention's full potential will be a long and
difficult process and will require U.S. political leadership.
Ratification is absolutely imperative to demonstrate that the United
States takes its obligations seriously and expects the same of others.
The Administration has indicated that no implementing legislation
is needed. For other countries, implementation will require substantial
reform. To accelerate this process, the OAS has initiated a follow-up
program, providing technical assistance and model laws, and has
circulated a questionnaire that will reveal the extent of reform
needed.
When the Convention was negotiated, the parties did not consider a
formal monitoring program. However, in light of the positive experience
of the OECD and the Financial Action Task Force, the OAS Working Group
is currently considering creating a peer review monitoring mechanism.
U.S. ratification is essential if we are to promote this outcome and to
participate in the important follow-on process.
We look forward to the opportunity to address any issues of concern
and appreciate your continued support for meaningful anti-corruption
reform across the hemisphere.
Sincerely,
Maston N. Cunningham, President, AACCLA
Robert C. Petterson, Chairman, U.S. Section,
Brazil-U.S. Business Council
Thomas E. McNamara, President, Council of the
Americas
James R. Jones, Chairman, U.S. Council, Mexico-U.S.
Business Committee
Jerry Jasinowski, President, National Association
of Manufacturers
Frank D. Kittredge, President, National Foreign
Trade Council
Alan F. Holmer, President and CEO, Pharmaceutical
Research and Manufacturers of America
Fritz Heimann, Chairman, Transparency
International-USA
L. Craig Johnstone, Senior Vice President,
International, Economic and National
Security Affairs, U.S. Chamber of Commerce
Thomas M.T. Niles, President, U.S. Council for
International Business
Senator Chafee. I would just add that even with the
ratification of the treaty, it is still going to be difficult
back in my home State of Rhode Island. We still struggle with
corruption.
We are not above it. There is scandal going on in our
capital city of Providence, bribery of elected officials and
officials that work for the government.
Ms. Boswell. You make a--that is an excellent point. That
is indeed, I think, all the more reason why our partners down
in the Americas need this Convention, to help them make the
kind of progress we would all like to see them make.
Senator Chafee. Yes, sometimes it is ingrained so deeply in
the culture, it takes awhile, but you have to start somewhere.
And we are doing that here hopefully.
Ms. Boswell. Exactly. Thank you so much.
Senator Chafee. Thank you.
Ms. Lucinda Low, welcome.
STATEMENT OF LUCINDA A. LOW, REPRESENTATIVE TO THE INTER-
AMERICAN BAR ASSOCIATION, AMERICAN BAR ASSOCIATION, WASHINGTON,
DC
Ms. Low. Thank you very much. I would like to thank the
committee first for conducting this hearing and for the
opportunity to testify.
I am testifying today on behalf of the American Bar
Association. I currently serve as the American Bar
Association's representative to the Inter-American Bar
Association.
In 1997, when I had the privilege of chairing the ABA
Section of International Law and Practice, the House of
Delegates of the American Bar Association adopted a policy in
support of ratification by the United States of the Inter-
American Convention Against Corruption with minimal
reservations, understandings, and declarations. The House of
Delegates' policy also called for prompt, full and consistent
implementation of the Convention.
With your permission, Mr. Chairman, I would like to submit
our full statement for the record and summarize only some key
points here today in my oral remarks.
I would like to focus on the Convention, what it is, how it
fits in the context both of U.S. measures to combat corruption,
and the international architecture that is growing up in recent
years around this issue.
I would then like to address several reasons why we think
now is an appropriate time for the United States to ratify the
Convention, and then comment briefly on the issue of
reservations, understandings and declarations.
As you have noted, Mr. Chairman, the Inter-American
Convention was, in fact, the first multilateral instrument to
combat corruption agreed to. It came out of the Summit of the
Americas, and its focus is on the issue of public sector
corruption, and the problems that public sector corruption
creates for economic development, political stability and
hemispheric integration.
The Inter-American Convention takes, what I like to call, a
holistic view of the problem of corruption. It addresses
corruption both from the supply side and from the demand side,
as other speakers have indicated.
It requires criminalization of a number of acts of
corruption, including the crime of trans-national bribery,
which we criminalized in our Foreign Corrupt Practices Act.
It requires countries to consider a series of, what are
called, preventive measures to promote the rule of law and to
reform the states and state processes.
And finally, it contains provisions for international
cooperation in the investigation and enforcement of offenses.
As such, it is a broader instrument than the OECD Anti-
Bribery Convention, which targets specifically the issue of the
transnational bribery of foreign public officials and
international cooperation in the investigation and enforcement
of that specific offense.
In a way, you can see the Inter-American Convention as the
outline or the blueprint for the legal and institutional
infrastructure that countries need to put into place to combat
what Nancy has rightly indicated is the complex problem of
public corruption.
I like to see it as a kind of ``to do'' list for countries,
steps they need to take to deal with this problem of
corruption.
Now, in the case of the United States, we have basically
created this infrastructure over a period of years. We have
enacted all of the elements on the ``to do'' list, not always
precisely in the same form as the Convention calls for. But if
you study this instrument, as I have, you will see that they
are all there.
And that means that the United States does not need to
enact any implementing legislation upon ratification of the
Convention, although there are several understandings that may
be appropriate.
Why then, if the United States has already enacted
everything it needs to enact does the United States need to be
part of this regime?
There are several reasons why U.S. participation is, in our
view, essential; and previous speakers have touched on these.
But let me just highlight three that I think are particularly
salient.
First, it is important and useful for the United States to
be part of the international cooperation provisions of this
Convention, which Under Secretary Larson alluded to. This will
help us enforce our own laws and will support other countries'
efforts to make corruption not a crime of impunity, but a crime
that can be enforced.
And I would note that the Inter-American Convention's
provisions in this regard are very similar to the provisions of
the OECD Antibribery Convention, which the U.S. has supported.
I would also note that if you look at recent enforcement of
the U.S. Foreign Corrupt Practices Act, you will see that a
number of recent cases come out of the Latin American region.
So this is not an academic issue.
The second reason why I think the United States needs to be
part of this regime is to help shape the implementation and
enforcement of the Convention, to help develop implementation
priorities.
For the most part, the Convention is what we would call a
non-self-executing treaty. It requires the enactment of
domestic laws. It requires the enforcement of those laws.
And so the manner in which countries implement this
Convention, the priorities they attach to issues of preventive
measures, what should come first becomes a very, very important
issue. And the United States should be at the table for that
process.
Third, but not least in this list of three of the reasons
for U.S. ratification, is for the United States to show its
long-term commitment to the problem of combating corruption in
the Americas. The Convention, as has already been noted, was
done with significant support from the United States.
Certain provisions of the Convention such as the
transnational bribery provision were done with the direct
encouragement of the United States. And so it is especially
important for the United States to follow through with
ratification of the Convention.
Now is arguably a critical time for the United States to
act. The Convention has now been in force for 3 years. As you,
yourself, noted, Mr. Chairman, it has widespread adherence in
the region. And that is a very encouraging sign. That it could
attract 26 signatories and 18 parties in such a short period of
time is very good progress indeed.
And there are many key countries in the hemisphere list.
But there are still gaps in ratification. And I note that the
momentum may be beginning to slow down. We had eight countries
ratify in 1997; five in 1998; four in 1999; and only one to
date in this year 2000. And when the issue comes to
implementation, the gaps may be even larger.
U.S. ratification, in our view, would help reinvigorate
this process and would allow the United States, as I have
indicated, to push for full implementation, consistent
implementation and active enforcement, as we believe in the
American Bar Association would be appropriate and desirable.
So for these reasons, the American Bar Association supports
ratification of this Convention by the United States this year.
The last issue I would like to comment on is a more
technical issue dealing with reservations, understandings and
declarations. As noted earlier, the ABA believes in general
that the RUD's to this Convention should be kept to a minimum.
Reservations can undercut the effectiveness of a
Convention. And we note that to date among the 18 countries
that have ratified, the number of reservations has been quite
minimal, only one that we are aware of.
For the United States, we believe no reservations to the
Convention are warranted.
There are several understandings that have been proposed by
the administration. These, in general, reflect differences
between the U.S. approach to the problem of criminalization of
acts of corruption and the Latin American approach, or
differences between common law systems and civil law system, as
well as the fact that we have a Federal system of government.
The only real issue in our view with respect to the
proposed understandings is what to do on the subject of illicit
enrichment. Illicit enrichment is one of the Convention's
provisions that calls for a criminalization when a public
official has assets that cannot be explained in relation to the
lawfully earned income of that official during his term in
office.
As this offense is written in the Inter-American
Convention, to implement it by the United States would create a
constitutional conflict, because it would violate the
presumption of innocence set forth in our Constitution.
However, the Inter-American Convention allows for an opt-
out right with respect to this offense of illicit enrichment,
which means that the United States can ratify the Convention if
it wishes without taking a reservation on this point.
If the U.S. does exercise this opt-out right--and we
understand that is what has been proposed by the
administration--there is some risk that this opting out could
encourage other countries to opt out, not so much of the
illicit enrichment provision which is already a feature of the
legal regimes of many Latin America countries, but possibly opt
out of the transnational bribery criminalization obligation,
which is structurally analogous to illicit enrichment.
We would view this as an undesirable result and, therefore,
suggest that the committee may want to consider another
alternative, which would be rather than opting out, to declare
that existing laws in the United States effectively implement
this provision.
And we are speaking here specifically of the combination of
disclosure laws for senior Federal Government officials coupled
with criminal tax enforcement provisions and specifically the
net worth method of proof for criminal tax evasion. If the
United States were to choose this approach, it should do so
with the understanding that it would not be shifting the
constitutional burden of proof.
On that technical note, then, let me close my remarks by
reiterating my thanks to the committee for its leadership in
taking this issue up at this time.
Let me also express the hope that the committee will move
expeditiously to recommend advise and consent to this
Convention so it can go to the floor. This will be an excellent
year for the United States to ratify the Inter-American
Convention and would confirm continued U.S. leadership in this
critical area.
I am available to answer any questions you may have. And
let me also introduce my colleague from the American Bar
Association, Stuart Demming, who heads the ABA's task force on
corrupt practices, who is also available for any questions.
Thank you very much.
Senator Chafee. Thank you.
[The prepared statement of Ms. Low follows:]
Prepared Statement of Lucinda A. Low
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to testify before the Committee
concerning U.S. ratification of the Inter-American Convention Against
Corruption.
My testimony today is submitted on behalf of the American Bar
Association. I am a former chair of the ABA Section of International
Law and Practice, and currently serve on the International Section's
Council and as the ABA's representative to the Inter-American Bar
Association. With me is Stuart Deming, an officer of the Section of
International Law and Practice and current co-Chair of an ABA Task
Force on Standards on Corrupt Practices.
In 1997, during my chairmanship, the International Law Section of
the ABA developed a report and recommendation on the Inter-American
Convention Against Corruption. This report and recommendation, a copy
of which is attached, calls on the United States and other OAS Member
States to ratify the Inter-American Convention Against Corruption
promptly, encourages ratification to be subject to minimal reservations
and understandings, and urges prompt, full and consistent
implementation by States Parties. Our recommendation was approved by
the ABA House of Delegates in 1997 and thus constitutes official ABA
policy. It is complemented by a 1998 ABA policy supporting U.S.
ratification of the OECD Antibribery Convention, and an earlier policy
urging the development of international standards to combat public
corruption in international business transactions.
In my testimony today, I would like to focus principally on how the
Inter-American Convention Against Corruption, as a regional instrument
for the Western Hemisphere, fits into the emerging international
standards against public corruption, and, within that context, why it
is in the U.S. interest to participate in the Convention's regime. I
would also like to address certain technical issues regarding
ratification and implementation, and to answer any questions the
Committee members may have about the Convention, or how it compares to
U.S. law or other international instruments.
At the outset, I would like to commend the Committee for its
support of U.S. ratification of the OECD Antibribery Convention in
1998. The OECD Convention is a highly-targeted instrument that
addresses one principal issue--transnational bribery of foreign public
officials--from the ``supply,'' or bribe payers, side. Its focus is on
disciplining business actors from major capital exporting countries and
on establishing cooperation mechanisms for facilitating investigations
and enforcing its provisions. Prompt U.S. ratification of the OECD
Convention was a crucial step in putting its prohibitions into effect
for a critical mass of countries in a record time frame. The OECD
Convention furthered an important U.S. policy goal of establishing, in
the countries that compete most strongly with the U.S. for major
international projects, standards regarding the bribery of foreign
public officials that parallel U.S. standards, as reflected in our
Foreign Corrupt Practices Act (FCPA). The OECD Convention thus leveled
the playing field for U.S. international business and set an
international standard with which U.S. business could readily comply.
Now that the OECD Convention has entered into force and is being
implemented, it is an appropriate time to turn to ratification of the
Inter-American Convention. For different reasons, U.S. ratification of
this instrument is also strongly in the interests of the United States.
And unlike the OECD Convention, which required amendments to the FCPA,
the Inter-American Convention requires no changes to U.S. law.
Why is it in the U.S. interest to ratify the Inter-American
Convention? To answer this question requires an understanding of how
the Inter-American Convention differs from its OECD counterpart. The
Inter-American Convention was borne of the first Summit of the Americas
in Miami in 1994. It was recognized by the Summit participants that
hemispheric economic integration, made possible by the shift in the
region towards democratic governments and the establishment of free-
market economies, required progress in the rule of law, transparency in
administrative processes, and modernization of the state. Corruption--
especially public corruption--undermines the development of democratic
institutions and effective market mechanisms. It leads to misallocation
of resources, and threatens the rule of law and political stability,
adversely affecting the ability of countries to attract capital and
foster economic development.
In many Latin American countries, public corruption is a ``demand
side'' problem as much as a supply side problem. There is a need to
strengthen civil service and the judiciary, reform laws and
administrative processes (e.g., public procurement) to make them more
modern, transparent and efficient, and to develop new systems of checks
and balances, and watchdog institutions. Although some countries in the
region are capital exporters, most are not. Thus, most of the OAS
countries are not likely in the near to medium term to become parties
to the OECD Antibribery Convention. More importantly, the OECD
Convention approach, which focuses narrowly on the issue of
transnational bribery and closely-related offenses, is not currently an
approach--as the OAS Member States themselves have recognized--that
adequately addresses the needs of the Latin American region. Rather, a
broader-based effort, focusing on both the demand and the supply sides
of public corruption, and on preventive measures as well as
criminalization, is the more appropriate approach for the region as a
whole at this time.
The Inter-American Convention reflects this broader, systemic
approach to the issue of public corruption. In addition to requiring
criminalization of a range of offenses (referred to as ``acts of
corruption'')--domestic bribery, transnational bribery, illicit
enrichment, among others--and providing for cooperation among signatory
countries in investigations and enforcement, it requires countries to
undertake reforms on the ``demand'' (or official government) side, in
tax and customs administration, procurement systems, civil service
reform, and the like--the so-called preventive measures. In addition,
like the OECD Convention, it requires parties to cooperate in the
investigation and prosecution of offenses, including in the areas of
mutual legal assistance, extradition, and asset tracing and seizure.
The Inter-American Convention can thus be seen as representing a kind
of ``to do'' list for countries to combat public corruption as well as
providing tools for effective enforcement of the relevant laws. In our
view, it is precisely this kind of approach that makes sense for the
region at this time.
Unlike some Inter-American treaties, the OAS Anticorruption
Convention has garnered significant support from the countries of the
region in a relatively short time. It has been signed by 26 OAS Member
States, and went into effect in 1997. Currently 18 countries are
parties, including two countries--Argentina and Mexico--that are also
parties to the OECD Convention. Despite this strong start, however,
significant gaps remain in ratification and implementation.
Like the OECD Antibribery Convention, the Inter-American Corruption
Convention's success depends on widespread ratification, implementation
and enforcement by the relevant countries. And because the Inter-
American Convention is significantly broader in scope than the OECD
Convention, implementation and enforcement poses even a greater
challenge for States Parties than they do in the OECD Convention
context. Priorities must be established, especially in the area of
preventive measures, and resources must be allocated. Under the best of
circumstances, full implementation cannot be expected to happen
overnight, but will occur over a period of years. In fact, the history
to date is that although important steps have been taken by a number of
countries, overall implementation has been spotty.
The United States, as the country most responsible for putting the
issue of public corruption onto the hemispheric agenda and, among
capital exporting countries, among the countries with the most at stake
in the region in terms of promoting the rule of law and democratic
institutions and developing market economies, needs to be a full
participant in this implementation process. The United States does not
need any implementing legislation of its own to participate in the
Convention's regime; we have over the years enacted in some form all of
the various items on the Convention's ``to do'' list. The United States
does have an interest, however, in ensuring that the Convention is
fully implemented and enforced by other countries of the region. in
helping countries set priorities among the range of items on the ``to
do'' list, in helping devise the best approach to a particular issue,
and in keeping countries' feet to the fire if implementation and
enforcement lag.
Without having ratified the Convention, however, it is unlikely the
United States will have the ability to influence the implementation and
enforcement process as fully as it would like. For example, the OAS is
exploring the establishment of a monitoring mechanism for the
Convention that will be open only to countries that have ratified the
Convention. Even without such a mechanism, however, the views of non-
ratifying countries on implementation and enforcement issues are
unlikely to be accorded the same deference as ratifying countries.
Moreover, for the United States, as one of the proponents of the
Convention, to refuse to ratify the Inter-American Convention now would
be taken as a sign by the other OAS Member States that the United
States is not seriously committed to reform in this hemisphere.
For these reasons, U.S. ratification of the Convention makes sense.
Ratification sends a strong message to countries of the region of a
sustained commitment of the United States to this issue. It positions
the United States to play a continued leadership role within the
hemisphere on this issue. It supports our national goals of promoting
democratization and economic development, and is an important
complement to hemispheric integration. It also promotes the goal of
universal ratification in the region.
Let me now turn to the questions of reservations, understandings
and declarations (RUDs). As noted at the outset, the ABA's 1997 policy
on the Inter-American Convention recommended that any ratifications be
subject to minimal RUDs. Reservations, if excessive, can undercut the
effectiveness of a treaty. The Inter-American Convention, Article XXIV,
permits reservations to specific articles provided the reservations do
not conflict with the purpose of the treaty. To date, the reservations
taken by ratifying countries have been minimal.
As we understand it, the Administration has proposed no
reservations to the Convention, but has proposed several
understandings, to Articles VII, VIII and IX. The proposed
understanding with respect to Article VII would make clear that the
United States does not intend to enact new laws to implement Article
VII, since existing laws effectively reflect the ``acts of corruption''
required to be criminalized in that Article. The proposed understanding
with respect to Article VIII similarly would clarify that the United
States considers the Foreign Corrupt Practices Act to constitute
adequate implementation of that Article's requirement to criminalize
transnational bribery. We concur with both those understandings. We
also note with respect to Article VIII that the Inter-American
Juridical Committee of the OAS has clarified that facilitating payments
may be excepted from a prohibition on transnational bribery consistent
with the Convention.
The final proposed understanding relates to Article IX, illicit
enrichment. The Convention permits countries to ``opt out'' of the
criminalization obligations of Articles VIII and IX both, without the
need to take a reservation, if criminalization would conflict with
their constitutions or fundamental legal principles. As the State
Department report accompanying the transmittal of the Convention to the
Senate points out, Article IX of the Convention raises such a conflict
in light of the constitutional presumption of innocence in Article IV
of the U.S. Constitution. The Administration therefore recommends that
the United States ``opt out'' of the criminalization obligation under
Article IX, but declare its willingness to provide assistance to other
countries in the investigation and enforcement of illicit enrichment
cases consistent with U.S. domestic law, as required by the Convention.
The ABA policy does not explicitly address how the illicit
enrichment issue should be handled. The accompanying report notes,
however, that although the constitutional concern with our enacting a
penal offense as specified in Article IX would be substantial, U.S. law
currently contains measures that collectively function as the
equivalent of such a provision for senior federal government officials.
Specifically, when the financial disclosure obligations for senior
federal officials under the Ethics in Government Act are coupled with
the so-called ``net worth method of proof'' for criminal tax evasion
under 26 U.S.C. Sec. 7201, the result is the effective criminalization
of illicit enrichment of these officials, enforced through the tax
code. A similar result follows in other contexts when state and local
disclosure regimes are taken into consideration.
Accordingly, one alternative to the U.S. exercising the ``opt out''
right built into the Convention (the exercise of which may prompt other
countries to opt out of Article VIII or IX as well) might be for the
United States to declare that the foregoing measures represent
effective implementation of this obligation and that no further
implementing legislation is contemplated. Were the United States to do
so, care would need to be taken to ensure that such a step is not
construed as shifting the burden of proof. For this reason, if the
United States does not opt out of Article IX, its ratification should
be subject to the understanding that the burden of proof under U.S. law
would remain unchanged.
Again, thank you for the opportunity to testify and for your
consideration of the Convention at this timely juncture. I would be
happy to answer any questions the Committee may have.
______
AMERICAN BAR ASSOCIATION
Policy Adopted at the ABA's 1997 Annual Meeting
Resolved, That the American Bar Association supports the prompt
ratification and implementation of the Inter-American Convention
Against Corruption (Inter-American Convention) by the United States, by
other members of the Organization of American States (OAS), and by
other countries that are eligible to accede to the Inter-American
Convention.
Further Resolved, That the American Bar Association urges:
(1) that such ratification be subject to minimal reservations
and under- standings; and
(2) that such implementation be full, effective and
consistent.
Further Resolved, That, to assure consistency and effectiveness,
the American Bar Association supports the criminalization of the
bribery of foreign officials through the Inter-American Convention and
through other instruments and fora in a manner consistent with the
agreed upon common elements set forth in the Annex to the Organization
for Economic Cooperation and Development's (OECD) Revised
Recommendation of the Council on Combating Bribery in International
Business Transactions and with the basic principles of the Foreign
Corrupt Practices Act of the United States.
Further Resolved, That the American Bar Association supports
efforts by the OECD and its member countries to promptly carry out,
fully implement, and actively enforce the OECD's Revised Recommendation
of the Council on Combating Bribery in International Business
Transactions in a manner that effectively deters foreign corrupt
practices in the conduct of international business.
Senator Chafee. And as Nancy said earlier, this should not
be controversial and hopefully we can move expeditiously
forward. And before we adjourn, I would just like to ask if you
would like to add anything extemporaneous on the subject.
Mr. Pryce.
Mr. Pryce. I would just say that there is real progress,
but that one of the biggest impediments to new investment in
Latin America among our countries is the lack of respect for
the rule of the law, and not combating corruption undermines
that respect. And it is one part of a greater whole that is
very important to have it ratified for that reason also.
Senator Chafee. Yes. We talk about a global economy. Well,
we should start with a hemispheric economy, especially
considering the broad range of first, second, and Third World
economies in this hemisphere. And so this is an exciting move
forward and hopefully we can ratify soon.
Any other comments before we adjourn?
Lucinda.
Ms. Low. Just to endorse the comment about corruption being
the flip side of the rule of law. I think that, in part,
explains why the Bar has been so committed to this issue.
Senator Chafee. Thank you.
And the hearing record will be left open for 3 days to give
members an opportunity, who were not able to be here this
afternoon, to further ask questions for the record.
So thank you once again for taking your valuable time and
sharing your thoughts with us here.
The meeting is adjourned.
[Whereupon, at 2:45 p.m., the hearing was adjourned.]
[The following letter was received subsequent to the
hearing for inclusion in the record.]
The Carter Center,
Latin American and Caribbean Program,
Atlanta, GA, May 4, 2000.
The Honorable Jesse Helms
Chairman,
Senate Committee on Foreign Relations,
450 Dirksen Senate Office Building,
Washington, DC.
To Senator Jesse Helms:
I write to commend you for holding a hearing on the Inter-American
Convention Against Corruption and to urge the Senate to ratify this
convention. Since the Congress approved the Foreign Corrupt Practices
Act during my administration, the U.S. has been a leader in the field
of ending bribery and corruption. It is essential that we continue to
demonstrate our commitment and leadership to encourage others to
confront this vice that harms investment, development, and democracy.
The OECD approval of its Convention Against the Bribery of Foreign
Officials in 1997 and the subsequent Senate ratification of this
convention was a crucial step forward in ending the supply side of
foreign bribery. The OAS Convention provides the other side of the
coin--focusing on the demand side within countries and the necessary
implementation of legal and policy reforms to criminalize and to
prevent corruption, as well as mutual assistance needed to combat
international corruption.
We have been working with governments in this hemisphere and with
Transparency International and national NGOs in Latin America to
encourage ratification and implementation of the OAS Convention. In May
1999, we held a major conference at The Carter Center in Atlanta on
Transparency for Growth, focusing on measures to combat and prevent
corruption in our hemisphere. A number of current and former leaders
signed our final declaration (attached) with recommendations that
included not only the urgency to ratify and implement the OAS
Convention, but also the need to establish a monitoring mechanism to
help ensure that the new rules are actually enforced. I then wrote to
all the leaders of this hemisphere, including President Clinton, to
inform them of our findings and to urge ratification and implementation
of the Convention.
We would be in a much stronger position to work for change among
our Latin American neighbors and to encourage the OAS to adopt
monitoring mechanisms if the U.S. first ratifies the Convention. The
United States would not have to implement any new legislation to come
into compliance with the treaty. Continued United States leadership in
this area is vital, and l hope that you will expedite the Convention's
coming to the Senate floor and give it your full support.
Sincerely,
Jimmy Carter.
[Attachment]
FINAL STATEMENT
``Transparency for Growth'' Conference, Council of Presidents and Prime
Ministers of the Americas, Wednesday, May 5, 1999
Corruption is one of the principal threats to democracy, growth and
equity in the hemisphere. It distorts public services, deters
investment, discriminates against the poor, and destroys public
confidence in democratic governments. This was the starting point of
two days of discussion at The Carter Center by hemispheric leaders,
members of the private sector, journalists, and NGOs. Representing the
Council of Presidents and Prime Ministers, a group of 32 former and
current heads of government from Latin America and the Caribbean, the
leaders in this conference concluded that progress toward transparency
can be achieved where civil society and governments work together to
overcome opposition from vested interests. Indeed, important progress
has been made already.
Participants from two dozen countries discussed strategies,
including implementation of international conventions against
corruption, the role of civil society including media and the private
sector in promoting transparency, and measures to increase
accountability in government-business transactions. The group
encountered a diversity of opinion, driven by the very different social
and economic contexts in the region, and recognized that solutions will
necessarily need to be tailored to each country. Furthermore, some
sources of corruption are international, including multinational
corporations and narco-trafficking, and small countries may be
particularly vulnerable. Solutions must therefore reach across borders.
We are also aware that corruption is systemic, affecting all aspects of
society, and consequently there will be no quick fix. The solutions,
too, will need to be systemic, engaging society broadly and tackling
the problem from several directions at once.
Rich discussions yielded creative ideas about practical first
steps. Here are some of our conclusions:
First, we recognize that although corruption is an ethical issue,
it is also a policy problem, meaning it can be remedied by setting and
enforcing rules that encourage people to do the right thing. It is a
crime of calculation. Where the benefits outweigh the penalties for
illicit behavior, systems can provide incentives for corruption. A
shorthand description is Corruption = Monopoly + Discretion -
Accountability. The task is to remove the opportunities provided by
monopolies and discretionary decision-making power, and increase the
costs of corruption through detection and enforcement of a nation's
laws.
The good news is that there are solutions, and improvements can
begin immediately. But it takes civic courage and commitment from
leaders, international lenders and other organizations, coalitions of
businesses and NGOs in civil society, to illuminate previously dark
corners of government transactions. The antidote to corruption is
information, committed leadership, collective action and clear rules.
Second, it is time to move from denunciations to diagnosis. Hard
data is necessary to combat the problem, and it is now possible to get
it. New diagnostic tools, including analyses and interviews of
businesses, citizens and public officials, are now available from the
World Bank and others to provide a map of the nature and location of
corruption in public and private organizations. This information that
can be used to devise national action plans for every segment of the
society. We encourage governments to carry out these diagnoses and make
them public, and then to challenge every branch of the government and
civil society to create action plans to resolve their specific
problems.
Third, as democracy has begun to consolidate more broadly in the
hemisphere, one dilemma it has introduced is how to finance campaigns
and political parties without leaving elected leaders obligated to
special interest groups, narco-traffickers, or tainted money, or
without spending vast quantities of money that is desperately needed
for development. The interdependence of the public and private sector
is highlighted by businesses dependent on public contracts for their
livelihood, and political parties dependent on private contributions.
Opening up those transactions through specific disclosure mechanisms
will begin to level the playing field. We recommend:
a) Enforcing existing laws and strengthening regulation,
oversight institutions and audit capacity.
b) Regulation and disclosure requirements for income and
expenditures of parties and candidates.
c) Reducing campaign expenses by limiting the campaign
period, and fostering free media time on TV and radio under
equal conditions.
d) Financial disclosure requirements for public officials,
elected or appointed, to avoid conflict of interest and illicit
enrichment, with periodic monitoring by a special office.
e) National laws prohibiting bribery, which might be
developed via a model statute process.
f) Business codes of conducts and compliance programs as a
prerequisite to bid on World Bank and IDB-financed projects, or
to appear on national registers of approved contractors.
g) Streamlining of public procurement laws and broad
deregulation.
Fourth, transparency is the first step in combating corruption, but
it requires a media and civil society capable of accessing information
and then using it to demand accountability from their governments. We
recommend:
a) Laws be enacted that require governments to open up and
provide documentation about their budgeting and spending
procedures so that citizens and journalists can have the
information they need to understand and evaluate what their
governments are doing.
b) Training NGOs to use new technologies, including the
internet, and to monitor privatization and public contracting.
c) Publication of public contract awards, dates of delivery
of goods, schedules of payments, and the bidding process in
privatizations.
d) Quarterly report cards on the service delivery quality in
certain sectors, such as health, as well as on efforts to
reduce corruption via the national action plans.
e) Databases about civil servant credentials in order to
prevent nepotism and patronage.
f) Public hearings to provide opportunities for citizens to
give input on priorities for public works projects and bid
requirements within budgetary limitations.
g) Formation of regional informational networks and databases
so that citizens can learn about access to information and
share successful strategies to combat corruption.
Fifth, we wish to emphasize the importance of a free press in
promoting transparency and democracy. The status of press freedom in
the hemisphere is sometimes discouraging. The Inter-American Press
Association recently found that fourteen countries have press laws that
place regulations on freedom of the press. Seventeen countries have so-
called insult laws that can result in imprisonment for journalists
convicted of criticizing government officials. Eight countries have
laws requiring licensing of journalists or mandatory membership in
associations. In the last decade, 203 journalists have been killed in
the Americas, a human rights situation so deplorable that the region's
presidents and prime ministers asked the OAS last year to establish a
special office for preventing such incidents, which the OAS has done.
Only six countries in the hemisphere have laws dealing with the right
of access to information that are considered effective.
To support professionalism in the media, and avoid unsupported
denunciations that make headlines and sell papers but undercut the
media's credibility, we recommend:
a) Development of laws that will secure access to information
by making official documents open to public inspection without
undue delay or burdensome paperwork.
b) Expansion of programs to train the press to conduct solid
investigations based on evidence.
c) Strengthening of the judicial system's capacity to
investigate and prosecute corruption where the evidence
indicates it is merited, such that no one is tried in the press
and innocent citizens have an oppomtunity to defend their good
names in a just court.
Sixth, we are convinced that recent treaties, including the OECD
Convention Against Bribery and the Inter-American Convention Against
Corruption are important steps in bringing a common approach to solving
both the demand and supply side of bribery. But they will only be
effective when fully implemented by signatory countries. We urge member
states of the OAS at their June 1999 General Assembly to call for:
a) Prompt ratification by all OAS member states as per their
commitments in the Plan of Action of the Santiago Summit of the
Americas;
b) Creation of a peer review mechanism that will promote
consistent and effective implementation of criminal laws and
preventive measures, and which will share best practices and
model laws;
c) Provision by the IDB and World Bank of all necessary
technical assistance for capacity building in order to enable
and support full implementation of the Inter-American
Convention.
The corruption issue is one of concern to all nations, and should
receive attention at the highest levels. Here we want to commend U.S.
Vice President Al Gore for his global forum last February. In closing,
we want to emphasize the need for ethical values not only in government
but in businesses, journalism, banking and indeed every walk of life.
Perhaps most important are the messages we convey to our children
through education in schools and churches, as it is they who will pay
the price if we fail to act now to stem this ill. We are committed to
carrying our transparency work further, and we hope you will join us in
this important endeavor.
Jamil Mahuad Witt, President of Ecuador
Said Musa, Prime Minister of Belize
Arthur Robinson, President of Trinidad and Tobago
Nicolas Ardito-Barletta, former president of Panama
Rodrigo Carazo, former president of Costa Rica
Jimmy Carter, former president of the United States
Osvaldo Hurtado, former president of Ecuador
Alfonso Lopez Michelsen, former president of
Colombia
Gonzalo Sanchez de Lozada, former president of
Bolivia
Juan Carlos Wasmosy, former president of Paraguay
Ambassador Richard Bernal, representative of
Jamaican Prime Minister P.J. Patterson
Daniel Romero, representative of former Venezuelan
president Carlos Andres Perez
Jose Miguel Villalobos, representative of Costa
Rican president Miguel Angel Rodriguez