During the mid-1970s investigations and administrative and legal actions against numerous domestic corporations revealed that the practice of making questionable or illegal payments by United States corporations to foreign government officials existed to some extent within the American business community. The legal and regulatory mechanisms for dealing with these payments had involved actions by the Securities and Exchange Commission (SEC) against public corporations for concealing from required public disclosure substantial payments made by the firm, including to foreign government officials. There was also the potential for an antitrust action for restraints of trade or fraud prosecutions by the Department of Justice (DOJ). Government officials and administrators contended that more direct prohibitions on foreign bribery and more detailed requirements concerning corporate recordkeeping and accountability were needed to deal effectively with the problem. The revelations of slush funds and secret payments by American corporations were stated to have affected adversely American foreign policy, damaged abroad the image of American democracy, and impaired public confidence in the financial integrity of American corporations. Congress responded with the passage of the Foreign Corrupt Practices Act (FCPA) of 1977. The principal purpose of the 1977 Act was to prevent corporate bribery of foreign officials. It had three major provisions to attempt to accomplish this purpose. The first major provision amended Section 13(b) of the Securities Exchange Act of 1934 to require issuers which must register their securities with the SEC to keep detailed books, records, and accounts which accurately record corporate payments and transactions. The second major provision required SEC registered issuers to institute and maintain an internal accounting control system to assure management's control, authority, and responsibility over the firm's assets. The third major provision of the original 1977 Foreign Corrupt Practices Act prohibited domestic corporations, whether or not registered with the SEC, from corruptly bribing a foreign official, a foreign political party, party official, or candidate for the purpose of obtaining or maintaining business. Two provisions of the 1977 Act made it a crime for any American business to use the mails or interstate commerce to offer or pay money or anything of value to a foreign official or to a foreign political party, party official, or candidate for foreign political office in order to influence the person in his decisionmaking or to use his influence to assist the firm in obtaining or retaining business. The 1977 Act also prohibited the payment of money to any person by a business if the business knew or had reason to know that the payment was to be used to bribe a foreign official for his influence in obtaining or retaining business. Congressional intent appeared to place an affirmative responsibility on the corporation to exercise control over its officers, directors, and employees, and to take steps to assure that its foreign agents did not use corporate assets or payments to make other payments to bribe foreign officials. Under the 1977 Act not all payments to employees of foreign governments were intended by Congress to be considered illegal bribes. For example, the definition of "foreign official" excluded employees of a foreign government "whose duties are essentially ministerial or clerical." Also, the legislative history of the act specifically stated that it was not intended to cover "grease payments" to foreign officials, explained as payments for expediting shipments through customs or placing a transatlantic telephone call, securing required permits, or obtaining adequate police protection, transactions which may involve even the proper performance of duties. The legislative history also suggested that extortions of money by foreign officials might be used as a defense against bribery charges by a business if its property or lives of its employees were threatened. An example used to illustrate acceptable payments was the payment to a foreign official to prevent the dynamiting of an oil rig. Almost since passage of the 1977 Act, frequent criticism of the operation of the act occurred. Opponents argued that the act had a chilling effect upon United States export trade and that many companies ceased foreign operations rather than face the uncertainties and the burdens of the act. Critics of the 1977 Act also argued for removal of the "reason to know" standard concerning liability for actions of a firm's agent in a foreign country. This would eliminate the legal responsibility of the management of a domestic firm over the unauthorized and undirected actions of an agent without the necessity of management's also showing that it had no "reason to know" that the agent was using corporate funds, payments, or commissions to bribe foreign officials. These critics argued that American firms should not have to bear the responsibility of playing detective concerning the independent actions of persons that they retained as agents in foreign countries. Critics also contended that the internal accounting controls required by the 1977 Act were too costly and burdensome upon domestic firms, especially when potential criminal penalties within the act for failure to institute adequate controls arguably made officials of firms overly and unnecessarily cautious in implementing costly accounting controls. The public recordkeeping requirements were also criticized as unduly burdensome. Critics of the act argued for a materiality standard for public recordkeeping in which a firm would be required to report only expenditures and outlays deemed material to the profits and revenues of the firm. Another frequent criticism of the 1977 Act was that the United States was more interested in exporting its cultural biases than its products. It was argued that, in nations in which acceptance of a fee or payment by a government official from one doing business with the government is customary and not unlawful under the laws of that nation, no violation of a United States law should occur. Critics also argued that an international agreement among the world's industrialized nations prohibiting businesses of all those countries from bribing foreign officials was necessary to prevent businesses of other countries from gaining an unfair and harmful competitive advantage over American businesses. In response to these criticisms, Congress for a number of years considered amending the 1977 Foreign Corrupt Practices Act. After considerable debate through at least three Congresses, the Foreign Corrupt Practices Act Amendments of 1988 were signed into law as Title V of the Omnibus Trade and Competitiveness Act of 1988 on August 23, 1988. Although the amendments maintained the three major parts of the 1977 Act discussed above—the accounting standards, the requirements of SEC registered issuers, and the anti-bribery provisions—the 1988 amendments made some significant changes to the 1977 Act. Section 5002 of the Trade Act amended Section 13(b) of the Securities Exchange Act to provide that no criminal liability shall be imposed for violation of the accounting standards unless a person knowingly circumvents or knowingly fails to implement a system of accurate and reasonable accounting controls. According to the legislative history, this provision was intended to ensure that criminal penalties would be imposed where acts of commission or omission in keeping books or records or administering accounting controls have the purpose of falsifying books, records, or accounts or of circumventing accounting controls. This was also intended to include the deliberate falsification of books and records and other conduct calculated to evade the internal accounting controls requirement. Section 5002 of the Trade Act also added to Section 13(b) of the Securities Exchange Act a provision that an issuer holding 50% or less of the voting power of a domestic or foreign firm is required to use its influence only in good faith to cause the domestic or foreign firm to devise and maintain a system of acceptable accounting controls. The House report stated that this amendment was intended to recognize that it was unrealistic to expect a minority owner to exert a disproportionate degree of influence over the accounting practices of a subsidiary. For purposes of the accounting standards, "reasonable assurances" and "reasonable detail" mean such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs. Thus, the prudent man qualification was adopted to clarify that the current standard does not require an unrealistic degree of exactitude or precision. Section 5003 of the Trade Act amended the provisions of the Foreign Corrupt Practices Act concerning the anti-bribery prohibitions by issuers and domestic concerns. The Foreign Corrupt Practices Act continued to prohibit any issuer; officer, director, employee, or agent of the issuer; any stockholder acting on behalf of the issuer; or, in fact, any United States concern to offer, pay, promise to give, or authorize the giving of anything of value to a foreign official, a foreign political party, party official, candidate, or to any person for the purpose of obtaining or maintaining business. Section 5003 amended the 1977 Act to prohibit payments to any foreign official for the purpose of "influencing any act or decision of such foreign official in his official capacity, or inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official." This language was inserted so that the foreign bribery standard would conform to the domestic bribery standard found in 18 U.S.C. Section 201. The "knowing" requirement was retained, and the "recklessly disregarding" standard was abandoned in conference. However, the "knowing" requirement was intended to encompass the "conscious disregard" and "willful blindness" standards, including a conscious purpose to avoid learning the truth. [T]he Conferees agreed that "simple negligence" or "mere foolishness" should not be the basis for liability. However, the Conferees also agreed that the so-called "head-in-the-sand" problem—variously described in the pertinent authorities as "conscious disregard," "willful blindness" or "deliberate ignorance"—should be covered so that management officials could not take refuge from the act's prohibitions by their unwarranted obliviousness to any action (or inaction), language or other "signalling device" that should reasonably alert them of the "high probability" of an FCPA violation. The major changes which Section 5003 of the Trade Act made in the 1977 Foreign Corrupt Practices Act had to do with when the bribery provisions apply to an American business or person acting on behalf of an American business. For example, the anti-bribery provisions under the 1988 Amendments did not apply to any facilitating or expediting payment to a foreign official, political party, or party official.