Practices make perfect

Prosecutors are corrupting effective anti-corruption law. A US judge just adamantly overturned the first court win against a company under the Foreign Corrupt Practices Act, ruling the government fudged evidence. It’s an extreme case, but not the first time prosecutors have stretched to nail firms for bribing overseas officials. It further threatens a useful federal law already under attack.

A criminal conviction under the FCPA could be crippling. It’s why most companies usually cut pricey deals to avoid having to fight bribery accusations in court. In 2008, for example, Siemens settled a case for a record $1.6 billion. US companies have paid a total of about $4 billion to resolve FCPA charges over the last five years.

With so few cases scrutinized in court, prosecutors have been free to test the outer limits of what is an increasingly popular law for them to use. Unproven offenses have become benchmarks for other settlements. Some companies, like Japanese tiremaker Bridgestone this year, have paid fines for practices that may not even be illegal.

That’s why the Lindsey Manufacturing trial was an important test. In May, the electrical-tower maker and its top executives were convicted for bribing officials of Mexico’s state-owned electric utility. But on Thursday, a judge overturned the verdict and dismissed the indictment, finding that government lawyers had hidden grand jury testimony, altered sworn statements and committed other serious misconduct.

The embarrassing reversal may encourage companies to fight rather than settle. It has already emboldened efforts in Congress to weaken the FCPA. Critics, including the US Chamber of Commerce, say the law doesn’t clearly define terms like “foreign official” or give companies enough credit for reporting wrongdoing or adopting programs to prevent bribery. They claim the Lindsey debacle highlights those flaws.

But that sounds like a stretch unto itself. The FCPA has generally been a success. It has forced firms to address corruption and served as a model for similar laws in Britain, Russia and elsewhere. The real problem has been overly aggressive enforcement that oversteps legal and ethical bounds. That’s the lesson of the Lindsey trial. It’s up to prosecutors to rightly uphold the law, not for Congress to blunt it.