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UNCLAS STATE 037071 
 
SENSITIVE 
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DOC FOR OGC/KNICKERSON 
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DOJ FOR CRIMINAL DIVISION/FRAUD SECTION/MMENDELSOHN 
PASS TO US SECURITIES AND EXCHANGE COMMISSION/INTL. AFFAIRS/TBEATTY 
 
E.O. 12958: N/A 
TAGS: CH CI ECON EG EINV EN ETRD EZ FR ID IN IS PGOV
PREL, RS, SI, TH, UK, KCOR, OECD 
SUBJECT: MARCH 2009 OECD WORKING GROUP ON BRIBERY MEETING 
 
¶1. (SBU) U.S. delegation (USDEL) members from the Commerce, 
Justice, and State Departments and the Securities and 
Exchange Commission (SEC) participated in the OECD Working 
Group on Bribery (WGB) meeting in Paris March 16-20, 2009. 
The WGB made significant progress on its Review of 
Instruments, with the USDEL successfully conveying its view 
that amendments to the existing instruments, as well as new 
binding instruments, were unnecessary and that new issues and 
clarifications would be best advanced through a new 
recommendation.  The WGB also began discussions on a proposal 
to review the WGB Management Group,s role and procedures. 
In addition, the WGB negotiated a rough draft for inclusion 
in the OECD Ministers' June 2009 statement on the importance 
of fighting bribery, respecting Article 5, and rigorous 
monitoring of the OECD Anti-Bribery Convention 
(&Convention8) during the global economic crisis.  Members 
of the delegation also participated in a WGB public 
consultation with the private sector on internal controls and 
external auditors. 
 
¶2.    (SBU) The WGB examined new signatory Israel,s 
Convention implementing legislation and overall legal 
framework for addressing bribery of foreign public officials, 
giving it a fairly positive review.  The U.K. delivered a 
status report on its anti-bribery legislation, which it said 
is on track for public release and &pre-legislative 
scrutiny8 by Easter (April 12).  The Czech Republic provided 
an update on its progress in finally adopting corporate 
liability, estimated for 2010, which the WGB found 
unacceptable.  During the Tour de Table information exchange 
on Parties, current investigation and cases, delegates 
discussed pending French legislation that would make 
investigations of defense companies more difficult and that 
may be in response to the UK,s termination of its BAE 
investigation; at the Chair,s request, France pledged to 
provide a written report within a month and to follow up at 
the June WGB meeting.  USDEL and Switzerland also proposed 
modifying the Tour de Table exercise to focus on specific 
companies/industry sectors and a subset of parties at each 
WGB meeting, which the WGB will consider.  USDEL met with 
several countries on the margins of the meeting, including 
China, currently a WGB observer, on its views of the 
Convention and next steps, and like-minded Parties Canada and 
New Zealand on the issue of facilitating payments.  Although 
a Russian delegation briefly appeared as an observer at the 
beginning of the meeting, it left before USDEL could meet 
with them and made no presentation or remarks.  On the 
margins of the meeting, USDEL also participated in 
discussions concerning a new WGB Chair. 
 
¶3.    (U) USDEL members were Kathryn Nickerson (DOC), Mark 
Mendelsohn and Charles Duross (DOJ), Troy Beatty (SEC) and 
Greg Wierzynski (DOS).  End Summary. 
 
OECD WGB BACKGROUND 
 
¶4.    (SBU) Since the adoption of the Foreign Corrupt 
Practices Act (FCPA) in 1977, the U.S. has vigorously 
enforced criminal and civil penalties against U.S. 
individuals and companies involved in the bribery of foreign 
public officials.  In response to concerns that American 
companies were operating at a disadvantage compared to 
foreign companies that routinely paid bribes, the U.S. led 
negotiations that, in 1997, resulted in the signing of the 
OECD Anti-Bribery Convention.  The Convention is intended to 
level the playing field for U.S. exporters by committing our 
main trading partners to adopt laws criminalizing the bribery 
of foreign public officials.  Now including all thirty OECD 
members plus Argentina, Brazil, Bulgaria, Chile, Estonia, 
Slovenia, South Africa, and Israel, the Convention is 
potentially a powerful tool against corruption.  The OECD WGB 
conducts regular peer review of countries, legal frameworks 
and enforcement.  Although U.S. enforcement is stronger than 
ever, our trading partners, enforcement record has been 
mixed, with most countries having few investigations and 
prosecutions, if any.  The WGB is currently developing a 
permanent peer monitoring mechanism for the Convention. 
 
REVIEW OF INSTRUMENTS 
 
¶5.     (SBU) The WGB continued and made significant progress 
on its Review of Instruments exercise, begun in 2007 (ten 
years after Convention adoption).  The purpose of the review 
is to determine whether the WGB needs to amend, clarify or 
issue guidance on its instruments, i.e., the OECD 
Anti-Bribery Convention, its Commentaries and the 1997 
Revised Recommendation of the Council on Combating Bribery in 
International Business Transactions.  USDEL sought to ensure 
that the WGB did not pursue amending the existing instruments 
or issuing binding obligations (including &authoritative 
interpretations8), which USDEL deems unnecessary and would 
likely require Senate consultations.  Instead, the U.S. 
supported a new non-binding recommendation, which would have 
to be approved by the OECD Council but would not require U.S. 
Senate approval.  The broader WGB, which did not advance 
proposals for new instruments or amendments, appeared to 
support this view. 
 
¶6.    (U) The WGB (with some USDEL support) continued to 
consider language on reporting bribery by public officials, 
effective whistleblower protections, internal company 
controls, UN Convention Against Corruption (UNCAC) 
ratification, mutual legal assistance, and corporate 
liability.  The WGB threw out several issues that did not 
merit revision or clarification, including the treatment of 
bribes from the private sector to the private sector (which 
is beyond the scope of the Convention) and bribes paid to 
third parties on behalf of foreign public officials or paid 
through intermediaries (as such bribes are already explicitly 
covered by the Convention).  Four specific issues related to 
the Review of Instruments (tax deductibility of bribes to 
foreign public officials, Article 5, facilitation payments 
and corporate liability) are discussed in more detail in 
paragraphs below. 
 
¶7.    (SBU) Review of the 1996 joint Recommendation on Tax 
Deductibility of Bribes of Foreign Public Officials (which is 
incorporated into the 1997 Revised Recommendation on 
Combating Bribery in International Business Transactions): A 
representative from the WGB,s sister Committee on Fiscal 
Affairs (CFA) presented a new draft Recommendation on Tax 
Measures for Further Combating Bribery of Foreign Public 
Officials in International Business Transactions that was 
approved by the CFA on January 27, 2009.  The new draft 
recommends in Part I that Member countries and other Parties 
to the OECD Anti-Bribery Convention explicitly disallow tax 
deductions for bribes to foreign public officials, that they 
review their frameworks for disallowing such payments, and 
that they consider including in their bilateral tax treaties 
language to allow tax authorities to share tax information 
with other law enforcement agencies and judicial authorities 
on high priority matters (e.g. to combat money laundering, 
corruption, and terrorism financing).  The WGB was satisfied 
with the bribery text relating to tax deductions in Part I of 
the draft Recommendation.  However, several countries, i.e. 
 
Canada, New Zealand, and Switzerland, took issue with Part II 
of the new Recommendation.  Part II recommends establishing 
an effective legal and administrative framework and providing 
guidance to facilitate tax authorities, reporting on 
suspicions of serious crimes (foreign bribery, money 
laundering, and terrorism financing) to the appropriate 
domestic law enforcement authorities.  As a result, the Chair 
suggested that the CFA either limit Part II,s scope to 
bribery or change the title of the new draft.  USDEL had no 
comments, as it has been coordinating with the Treasury 
Department on the new Recommendation (Treasury has the lead 
on this issue and represents the USG in the CFA).  (Note: 
earlier versions of the new draft Recommendation had included 
provisions on disallowing tax deductions for facilitating 
payments, e.g. generally small payments to public officials 
that are not considered bribes under the FCPA.  In earlier 
meetings, USDEL and several other delegations (in both 
committees) objected to the language, as such payments were 
legal under their systems, so the language on facilitating 
payments was omitted in the final draft.  However, the new 
Recommendation will likely be re-reviewed in three years from 
its adoption, so the issue of facilitating payments 
deductions will likely reappear. End note.) 
 
¶8.    (SBU) Article 5: Of particular concern to the U.S. was 
an overly prescriptive Secretariat proposal on Article 5 of 
the Convention (which prohibits parties from considering 
issues of national economic interest, effects on relations 
with other States or the identity of the legal or natural 
persons involved when exercising discretion to investigate or 
prosecute).  The Secretariat,s proposal set forth a new set 
of required procedural &safeguards8 to ensure that 
decisions not to investigate or prosecute are consistent with 
Article 5.  Many delegates objected to language stating that 
such decisions would be &fully reviewable8 by the WGB. 
USDEL strongly opposed the Secretariat proposal, as it 
exceeded the scope of both the Convention and Commentaries, 
including Article 12.  USDEL suggested instead that OECD make 
a political statement in support of Article 5 in a Council 
recommendation.  With the support of several other 
delegations, the legal advisor to the OECD took on the USDEL 
political statement suggestion and prepared a Ministerial 
declaration discussion draft expressing renewed support for 
the Convention in the context of the global economic crisis 
and calling for diligence in monitoring and enforcement 
without regard for the prohibited considerations in Article 
¶5.  The draft also contains a paragraph calling for accession 
by remaining large exporters outside of the group (China and 
Russia). 
 
¶9.    (SBU) Article 5 continued: USDEL believes such a 
Declaration would serve to (1) reinforce the Convention,s 
importance during the economic crisis; (2) support the WGB 
and continued systematic monitoring, including the WGB,s 
determination, as part of monitoring, to address on a 
case-by-case basis situations like the UK,s decision to 
discontinue its BAE Al Yamamah investigation (without any 
express reference to the UK or that case); (3) address civil 
society,s concerns regarding Article 5 enforcement; and (4) 
send a strong signal to China and Russia to join the 
Convention.  The WGB will continue to work on the draft to 
ready it for consideration at the June OECD Ministerial. The 
United States should strongly support a OECD Ministerial 
declaration that emphasizes rigorous monitoring, Article 5 
obligations, and the accession of new Parties (i.e. China and 
Russia).  Linking the objectives of the OECD Anti-Bribery 
Convention to multilateral cooperation on the global economic 
crisis could send a powerful message about the need for 
anti-bribery enforcement. 
 
¶10. (SBU) Facilitation Payments: Despite the Chair's proposal 
to remove the Commentary to the Convention that allowed for a 
facilitation payment exception, USDEL convinced the WGB that 
it needed to study the issue more closely to provide the 
clarity the business community is seeking.  At USDEL's 
request, the Secretariat will circulate proposed U.S. 
questions on how the issue of facilitation payments is 
handled by countries without the exception, for example 
through the use of prosecutorial discretion.  The WGB agreed 
to separate this issue from the Review of Instruments to 
allow more time, perhaps until October, to develop guidance 
or recommendations.  The WGB will hold an internal meeting 
June 15 to further review the matter; the Swedish delegation 
will head the ad hoc group drafting the agenda, and private 
sector consultation remains a possibility.  In the meantime, 
countries that provide for the exception will discreetly 
reach out to their private sectors to determine best 
practices.  Possible outcomes include WGB guidance to 
prosecutors, investigators, and the private sector, and 
forward-looking language in a new recommendation.  USDEL met 
with allies (Canada and New Zealand) over a working lunch on 
the issue to solidify support (other allies, such as, 
Australia did not attend WGB meeting, while Korea sent its 
OECD mission representative). 
 
¶11. (U) Phase 3: The WGB continued to refine a document 
setting forth procedures for its next, permanent phase of 
monitoring.  The WGB agreed to decouple the issue from the 
Review of Instruments, another USDEL goal, as we have sought 
to begin the new stage of monitoring as soon as possible. 
Delegations will provide comments to the Secretariat,s 
proposed Phase 3 questionnaire to be completed by June. 
 
MANAGEMENT GROUP (MG) REVIEW 
 
¶12. (SBU) The MG was created in 2004 to improve WGB 
efficiency and to engage the Secretariat; the U.S. has been a 
member of the MG since its inception.  At its December 
meeting, the WGB decided to review the MG,s role and 
procedures.  USDEL,s overall goal is to maintain a small 
bureau-like MG that will assist in steering the WGB agenda 
and provide guidance to the WGB and Chair.  USDEL is working 
to ensure that MG,s role remains procedural and does not 
replace the substantive role of the WGB, even if a 
substantive role would sometimes be more convenient for the 
Secretariat.  Currently the MG has eight elected members: an 
independent Chair, a Vice-Chair (Greece) and 
heads-of-delegation from France, Sweden, Italy, Germany, 
Japan and the United States.  In detailed comments to the 
Secretariat,s draft proposals, USDEL advocated for better 
future regional balance and allowing for MG representation by 
delegation alternates when necessary, in light of State,s 
rotation process (State normally represents the USDEL in the 
MG).  The WGB discussion generally echoed these points, and 
the MG said it would discuss the proposals in more detail at 
its next meeting, taking the WGB,s views into account, and 
provide a revised draft for the WGB in June. 
 
INTERNAL CONTROLS AND AUDITING SEMINAR 
 
¶13. (U) Troy Beatty from the SEC served as a facilitator and 
Kathryn Nickerson from DOC represented the USDEL at a public 
consultation with the private sector on internal controls and 
external auditing.  The private sector provided advice on 
these issues and commented on whether revision to the 1997 
Recommendation is warranted.  (Section V of the 1997 
Recommendation requires member countries to consider adopting 
appropriate internal controls and external auditing 
standards.)  The private sector enthusiastically provided 
advice on the elements of an effective compliance and ethics 
program, which participants said must include a strong 
management component, continuous internal training, direct 
reporting channels to management, whistleblower protection, 
and sufficient internal review structures.  Seminar 
participants agreed that while basic requirements of such 
programs should be the same, regardless of the size of the 
company, big corporations should have more elaborate programs 
whereas smaller companies should have programs more 
appropriate to their size.  Furthermore, such programs should 
extend to companies, subcontractors and subsidiaries. 
Participants stressed the importance of government guidance 
and incentives, such as providing information on the amount 
of corruption risk in particular foreign markets.  They also 
suggested that governments ) prosecutors in particular ) 
consider a company,s anti-bribery compliance program and 
whether the program would constitute a mitigating factor in 
prosecution or sentencing.   Concerning external audits, the 
private sector explained that strong internal compliance 
measures would facilitate external auditors, work.  There 
was a long discussion on whether external auditors should 
report all instances of foreign bribery to company 
management, irrespective of materiality (as that term relates 
to financial statement reporting).  There was agreement, if 
such reporting was required or allowed, that some kind of 
safe harbor provisions (protecting auditors from liability, 
i.e., civil lawsuits) would be needed.  The WGB provided 
comments on the private sector,s proposals, and the 
Secretariat was tasked with incorporating them into proposed 
language for a potential new recommendation for discussion at 
the June meeting. 
 
ISRAEL PHASE 1 REVIEW 
 
¶14. (SBU) Israel, the 38th party to the OECD Antibribery 
Convention, underwent its Phase 1 Review in which the WGB 
examined Israel,s law implementing the Convention and 
overall legal framework for addressing bribery of foreign 
public officials.  The WGB found that Israel,s law generally 
met the standards of the Convention, with only a few problems 
that would be addressed during Israel,s Phase 2 review (in 
which examiners and the Secretariat will visit Israel to 
examine its enforcement structure and resources).  For 
example, although the penalties for foreign bribery were more 
or less the same as those for domestic bribery under Israeli 
law, as required by the Convention, the WGB questioned 
whether 3.5 years imprisonment and 38,000 euro fines were 
effective, proportionate and dissuasive, especially for 
corporations, as required by Article 3 (Sanctions) of the 
Convention.  The WGB also expressed concerns about whether 
the requirement under Israeli law that the Attorney General 
approve foreign bribery indictments presented any concerns 
under Article 5 on enforcement, which provides that Parties 
cannot take into account economic considerations, 
relationships with another State, or the identity of the 
specific legal or natural person involved when deciding 
whether to investigate or prosecute.  Both the lead 
examiners, Canada and Switzerland, and Israeli 
representatives were extremely well prepared.  The review was 
an excellent example of Phase 1 monitoring for the observing 
Chinese delegation. 
 
UK DRAFT LEGISLATION 
 
¶15. (SBU)  The U.K. delegate provided a report on the U.K.,s 
progress in fulfilling its Phase 2 bis legislative 
recommendations, as it currently lacks an adequate 
anti-bribery law that meets the Convention,s standards.  The 
U.K. plans to publish a draft bribery bill for 
pre-legislative scrutiny this Parliamentary session before 
April 12 and claims that officials &are firmly on track8 to 
meet this goal.  The U.K. said that it appreciated the OECD 
expert delegation,s visit in January on behalf of the WGB, 
composed of representatives from the Secretariat and the MG 
(Mark Mendelsohn, DOJ,  represented the USG).  The U.K. 
reported that it had taken note of the delegation,s advice, 
particularly concerning the U.K. Law Commission proposal for 
a corporate offense of negligent failure to prevent bribery. 
The U.K. said that &it is mindful of the constraints posed 
by its electoral cycle, requiring a national Parliamentary 
election by May 2010 at the latest,8 and shares the WGB 
concern about the need to make substantial progress in reform 
in 2009.  On the meeting margins, the U.K. delegation 
expressed optimism that the draft bribery bill would progress 
on schedule and that Parliamentary time would be afforded for 
legislation consideration.  The WGB needs to maintain 
pressure on the U.K. to move toward an adequate anti-bribery 
law.  USDEL asks Embassy London to flag appropriate 
opportunities to convey to U.K. officials -- especially those 
at a high level -- the importance of timely reforms. 
 
CZECH IMPLEMENTATION 
 
¶16. (SBU) The Czech delegate reported on Czech efforts to 
establish corporate liability for foreign bribery.  He 
reported that the Czech Government will likely adopt a 
resolution on March 30, 2009 to prepare a draft law on 
criminal corporate liability for discussion by June 2010.  He 
said that the Government may consider an alternative option, 
namely, preparing a policy paper on administrative corporate 
liability by April 30, 2009.  The WGB found this report and 
timetable unacceptable, as it had been recommending that the 
Czech Republic, an original signatory to the Convention, 
adopt corporate liability for years. The WGB agreed that the 
Chair would send two letters, on the WGB,s behalf, to the 
Czech Prime Minister expressing the WGB,s serious concerns 
and asking that the Czech Ambassador to the OECD attend the 
next WGB meeting to report to the group.  The WGB Chair had 
already sent one letter to the Prime Minister in December, 
but had not received a reply at the time of the March 
meeting. 
 
PROBLEMATIC PROPOSED FRENCH LEGISLATION 
 
¶17. (SBU) During the Tour de Table, when the WGB discussed 
press reports of potential cases, the USDEL raised press 
reports that France apparently has a new bill that would 
limit investigating magistrates, power to conduct searches 
of defense contractors, offices or other locations likely to 
have classified or state secret material related to defense 
contracts.  The U.K. joined the USDEL in expressing serious 
concern over this development.  The Chair demanded a report 
from France within a month.  After first denying that the 
bill was public and stressing that the bill was in a 
preliminary state, France said after the lunch break that 
such a bill had in fact been introduced in Parliamentary 
committee in October, that the legislation had been proposed 
by the Defense Ministry, and promised to deliver a written 
report as requested.  This not only raises serious Article 5 
concerns, but may represent France,s response to the UK,s 
discontinuance of its BAE Al Yamamah case and threaten 
chances for the Ministerial Declaration described above (para 
8 and 9).  When confronted, France denied that the draft bill 
was related to the U.K. situation, explaining that the 
legislation had been prepared some time ago.  The USDEL is 
deeply concerned that such legislation could undermine 
bilateral cooperation on anti-bribery and France,s ability 
to fulfill its OECD Anti-Bribery Convention obligations and 
asks Embassy Paris to obtain more information from the French 
about the proposed legislation that would shield the defense 
industry from investigations. 
 
OECD ACCESSION COUNTRIES CHILE, ESTONIA, AND SLOVENIA; 
POTENTIAL CONVENTION OBSERVERS THAILAND, EGYPT, AND INDIA 
 
¶18. (SBU) Chile, Estonia and Slovenia (all parties to the 
Anti-Bribery Convention) are seeking OECD accession, so the 
WGB must provide the OECD with an opinion on whether they are 
fulfilling their anti-corruption obligations.  Chile has made 
significant progress on a bill creating corporate liability, 
which will hopefully pass this year, greatly improving 
Chile,s chances for a favorable opinion from the group.  The 
WGB agreed on draft contents of a letter the Chair will send 
to Chile to encourage it to pass such legislation and note 
other deficiencies it must address.  The Secretariat will 
draft new reports for Estonia and Slovenia, which appear to 
be on track.  The WGB will review the reports in June. 
 
¶19. (SBU) Concerning Thailand's observer request, the Chair 
asked the Secretariat to confirm that the Thai government is 
interested, as the request came from Thailand,s Office of 
the National Anti-Corruption Commission (NACC), which is 
apparently separate from the government.  USDEL said that 
NACC will be meeting with delegation representatives in April 
and will ask about its relationship with the Thai government. 
The Secretariat has sent accession information to Egypt in 
response to initial interest about observing with a view to 
becoming a party to the Convention but has not received any 
further expression of interest.  The Secretariat separately 
told the MG that it is pursuing India, but that India has not 
responded to its inquiries and does not appear interested in 
joining the Convention. 
 
CURRENT CONVENTION OBSERVERS: CHINA AND RUSSIA 
 
¶20. (SBU) USDEL held a brief informal bilateral meeting with 
China, which was attending as an observer for the third time. 
 USDEL stressed the importance of having a foreign 
anti-bribery law and offered continued bilateral assistance 
in this area.  The Chinese did not make a presentation or 
offer any update on the status of their law, saying, when 
asked, that they had nothing to add to the detailed 
presentation they made in December.  The Chinese delegate 
said that China attracts and is making a lot of foreign 
investments and so is concerned about foreign corruption, 
including corruption of its domestic officials by foreign 
companies.  He admitted that Chinese companies risked being 
known as corrupt abroad if China did not enact a foreign 
bribery law soon.  The Chinese delegates stressed their 
continued goal of addressing domestic bribery and 
implementing UNCAC.  USDEL believes continued engagement with 
China on anti-bribery issues is necessary to determine 
Chinese attitudes on domestic legislation against foreign 
bribery and WGB membership, and asks Chinese posts and 
Washington-based China offices to flag opportunities for 
bilateral exchange with the Ministry of Supervision or other 
appropriate Ministries. 
 
¶21. (SBU) Disappointingly, the Russians only made brief 
appearances the first day and a half, and then did not attend 
the rest of the week.  USDEL therefore did not have the 
opportunity to talk to them.  The Secretariat informed USDEL 
during the MG meeting that although interested in accession 
to the OECD, the Russian Ministry of Justice was clearly not 
interested in the Convention and the Ministry of Foreign 
Affairs had to push them to attend at all.  The Secretariat 
warned that assessing Russia will be challenging, given its 
reportedly inadequate new anti-corruption law and lack of 
enforcement.  Nonetheless, the WGB agreed to invite Russia 
for its accession review in December. 
 
NEW CHAIRMANSHIP 
 
¶22. (SBU) Current WGB Chair Mark Pieth invited U.S. delegates 
Kathryn Nickerson and Mark Mendelsohn to lunch to discuss 
whether Pieth should remain as WGB Chair. Delegates from 
France and Holland also participated.  All agreed that it was 
time to start a formal search for the next Chair, as the WGB 
is about to begin its new phase of monitoring and could use 
dynamic new leadership.  Pieth has held the position for 
nineteen years, almost unheard of in the OECD.  All also 
agreed that Pieth would stay for at least another year or so 
(the French delegate suggested until the UK had passed its 
anti-bribery legislation), during which time delegates would 
discreetly start compiling a list of potential successors. 
All agreed that the new chair must speak French and probably 
have a law degree, be capable of managing and inspiring a 
large group, and possess strong public relations skills. 
Although background on anti-corruption issues would be 
desirable, the caliber of a suitable candidate should be such 
that the new chair will be able to learn the substance 
quickly.  Funding the position of the new Chair will be an 
issue, as our understanding is that the current Chair is 
funded by Switzerland.  USDEL will suggest adding discussion 
on a new WGB Chair to the next informal MG agenda (the 
working dinner following the formal MG meeting in June).  In 
the meantime, USDEL members will informally seek advice on 
potential candidates. 
CLINTON