Politicians as the guardians of the status quo: a demonstration of rank and privilege without responsibility

Much has been written about corruption and bribery

involving major corporations in the United

States such as Lockheed. However, most of this lite

rature ignores the link between Watergate

and the Foreign Corrupt Practices Act. The role of

accounting and accountants in disguising the

use of corporate funds for illicit purposes has als

o not been addressed even though many of the

enquiries into Watergate and related activities exp

ressed concern that none of the cases of

financial misstatement had been discovered or, at l

east reported, by auditors. In other words, the

accountability system envisaged in the financial re

porting and audit requirements of the

Securities Exchange Act and professional pronouncem

ents had failed. Nonetheless, the

Foreign Corrupt Practices Act has done little to ad

dress the accounting and audit failures that

gave rise to its enactment. The paper uses

post-Watergate investigations and hearings leading

to

the enactment of the United States Foreign Corrupt

Practices Act in 1977 to demonstrate the

power of interested parties to influence for their

own benefit, the outcome of legislation and

other forms of regulation. In general, the findings

support the observation expressed in the

Letter of Transmittal of the Final Report of the Se

nate Select Committee on Presidential

Campaign Activities (1974a, p.1227) that while “ran

k has its privileges because rank has its

responsibilities”, privilege is often used “as a do

dge of responsibility”. The paper draws

largely on historical documents, in particular, rep

orts of the Senate Select Committee on

Presidential Campaign Activities, transcripts of he

aring of various House of Representatives

and Senate Committees and Sub-Committees dealing wi

th issues arising from Watergate and

Watergate-related activities.