Naivete: Foreign Payoffs Law

by Neil Jacoby, Peter Nehemkis, Richard Eells

Fall 1979

Volume 22
Issue 1

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This article describes the enforcement of a new Public Law against foreign payoff by the U.S. government during 1979, imposing a liability upon corporate boards and managements to establish firm accounting controls over foreign operations, and criminalizes the making of foreign political payments. This law is an amendment in to the Securities Exchange Act of 1934 and is supposed to be a simplistic diagnostic tool for a complex sociocultural, economic, and political problems. The new statute makes it a crime for a U.S. company, its directors, officers, and employees to make payments to foreign officials or politicians for the purpose of influencing their decision-making authority in obtaining or retaining business. The law covers an American company's foreign commercial agents who may act as conduits for such payments. The U.S. Securities and Exchange Commission believed that its existing statutory authority was adequate to compel companies to disclose questionable payments and accounting practices.

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