How Multinational Investors Evade Developed Country Laws

How effective are G-8 and OECD efforts to combat bribery and corrupt payments when multinational companies bid on concessions in the developing world? Have the rich countries – and the United States, in particular – done what is necessary to restrain multinational investors from paying off daughters of Presidents and cronies of Ministers to secure favors for their activities? This paper argues that the answer is no. Multinational corporations from the US, Europe, and Japan have devised sophisticated payment mechanisms, as documented and described here, to evade home country anti-corruption laws, including the US Foreign Corrupt Practices Act, with impunity. According to this paper, some US companies have laid these payment arrangements out before the US Department of Justice, the Securities and Exchange Commission, and other US agencies, without arousing any objection whatsoever. Without reforms of the kind spelled out here, the OECD and G-8 campaign to prevent corrupt payments will turn out to be a sham. This working paper provides a preview of research included in a much broader forthcoming CGD monograph entitled Harnessing Foreign Direct Investment for Development: Policies for Developed and Developing Countries.