French Judge Renaud van Ruymbeke recently threatened to subpoena U.S. Vice President Dick Cheney over a massive corruption scandal involving Halliburton's operations in Nigeria in the 1990s. Interpreting the move as another melodramatic twist in the U.S.-France soap opera seems tempting. Yet the implications are serious. A lack of decisive action by U.S. enforcement agencies could damage the reputation of American businesses abroad, especially after Enron's debacle and the other scandals and questions about conflicts of interest related to Iraq reconstruction contracts.

Halliburton told the Securities and Exchange Commission last May that the company employees made $2.4 million in "improper payments" to Nigerian officials "to obtain favorable tax treatment." The payments allegedly violated the Foreign Corrupt Practices Act, passed in 1976 when SEC investigators discovered an epidemic of bribery by American corporations operating overseas.

In a pre-emptive strike against implicating Cheney in the scandal, Halliburton officials told reporters that the "payments were made in 2001 and 2002." That would mean they occurred after Cheney exited the company.

But during an investigation of alleged corruption at French oil companies involved in a natural gas project tin Nigeria, French officials uncovered evidence that seriously conflicts with Halliburton's version of events. According to Le Figaro, a witness told French investigators that the scam was orchestrated by Halliburton and extends back to the mid-1990s. Halliburton's claim that no senior officers were involved also seems unlikely, given the complex use of offshore subsidiaries and bank accounts. Hence the interest in interviewing Cheney, who was CEO at the time.

So far, U.S. officials have given no indication that they are paying close attention to this case. The Justice Department shares enforcement responsibility for Foreign Corrupt Practices Act with the SEC. Although both agencies neither confirm nor deny they are investigating specific cases, their lack of action in similar cases is hardly reassuring. For example, the agencies failed to act after an IRS audit team handed over evidence of bribery associated with an Enron power project in Guatemala, according to the Senate Finance Committee. So much for the Bush administration's pledge to crack down on corporate crime.

This lack of initiative shouldn't be surprising. The Justice Department has successfully prosecuted fewer than 50 cases since the law was passed in 1977. The agencies are rarely encouraged to pursue such cases because the government sees its role as aiding U.S. businesses, not tarnishing their image abroad. An SEC that's notoriously overworked and under-resourced can't prioritize foreign corruption cases, especially when its docket is full of all kinds of accounting fraud.

Halliburton is a case in point. The SEC has yet to settle accounting fraud charges filed against Halliburton nearly two years ago (the fraud also allegedly happened under Cheney's watch as CEO). At the time, an Arthur Andersen commercial resurfaced in which Cheney gloated about getting "over and above" the normal accounting advice from the now-defunct firm. Then, after a punishing month of headlines, Cheney conveniently changed the subject to war against Iraq.

A pattern of overseas bribery cases involving U.S. companies, many of them also involved in accounting fraud, has emerged in recent years. Reported cases of overseas corruption include Xerox (India), Tyco (Venezuela), Accenture (Middle East), IBM (South Korea), and Enron (allegations of wrongdoing span the globe: UK, India, Ghana, Colombia, Bolivia, Panama, Nigeria and the Dominican Republic). The problem isn't only with the Justice Department and SEC's weak enforcement of the law. Corporate lobbyists and key court decisions have also weakened the Foreign Corrupt Practices Act in recent years by opening up loopholes in the law.

These loopholes and the need for stronger enforcement are solvable problems that neither the Democrats nor the Republicans have so far seen fit to address. What began as a ripple could become another serious corporate crime wave and damage the reputation of U.S. businesses, especially if the response isn't swift and serious.

Charlie Cray, a Foreign Policy In Focus analyst, is director of the Center for Corporate Policy in Washington, DC.

Copyright (c) 2004, South Florida Sun-Sentinel

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