Senate Floor Remarks Of Senator Patrick Leahy In Opposition To The Resolution To Kill The SEC Resource Extraction Rule, Which Protects Investors And The Public By Increasing Transparency To Discourage Massive Payments By Oil Companies And Others To Corrupt Foreign Kleptocrats

Mr. President, Republicans in both chambers have introduced a resolution to permit oil, gas, and mining companies to continue making secret payments – involving billions of dollars – to corrupt foreign governments in exchange for access to their countries’ natural resources. 

This resolution would overturn legislation on which I worked closely with former Republican Senator Richard Lugar and Senator Cardin, and was included as Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to provide greater transparency when such payments are made and help better inform investors and combat massive corruption in the process.

One would think that everyone here would support a commonsense rule that will protect investors and make it a lot harder to get away with the theft of billions of dollars in public funds in some of the poorest countries of the world.  But apparently that’s not a concern, at least not to the sponsors of this resolution or those who intend to support its passage.  

Some Republicans and their friends in the oil and gas industry say this rule creates unacceptable burdens. That is utterly without merit, as I will explain in a moment. 

But even assuming there were a grain of truth to that, rather than proposing to amend the underlying legislation, which would require bipartisan support, this resolution is being advanced under the Congressional Review Act, to enable a simple majority vote to completely dismantle the rule with minimum debate. 

Keep in mind that the rule is simply the product of the U.S. Securities and Exchange Commission (SEC) implementing bipartisan congressional intent, and would not take effect until the end of 2018.  Despite what some have claimed, the SEC has not twisted the statute in any way when they developed this rule. But if this rule is overturned, the SEC will be prevented from issuing any substantially similar rule, potentially in our lifetimes. 

In other words, what we are doing here is, for all practical purposes, the death knell for global efforts – involving most of our closest allies – to combat massive corruption resulting from the extraction of natural resources and help investors assess risk in the often murky and unstable oil, gas and mining sectors.  This is an issue on which the United States, until now, has been a global leader.   

I mention this because the sponsors of this resolution have said that they support the goals of this rule and all they want to do after overturning it is make some minor adjustments to it.  That is the epitome of disingenuous.  The rule does not take effect until the end of 2018.  If that was what they really wanted to do, they would propose an amendment and we could discuss it.  Their real purpose, even if they are reluctant to say so, is to prevent disclosure. 

This rule has two primary purposes.  First, to protect investors.  Investors whose combined net worth exceeds $10 trillion, support this rule and its equivalency with the rules adopted by some 30 other governments.  And second, to protect the public.

The practical effect of overturning this rule is that U.S. and foreign companies will be able to continue to make secret payments to corrupt foreign autocrats like Vladimir Putin and kleptocracies in Africa like the governments of Angola and Equatorial Guinea.  By doing so, these companies will be aiding and abetting those kleptocrats when they pocket the proceeds for their personal use.  We have seen this for years.  The people of those countries barely survive on $1 or $2 dollars per day, while their leaders drive Mercedes, fly private jets to vacation homes on the French Riviera or in Santa Monica, and pay off the armed forces to keep themselves in power.

And where does the money come from that pays for that grotesque flaunting of wealth?  From the royalties paid by U.S. and other foreign companies.

Do we really want to be complicit in that kind of thievery and immorality by shielding it from public scrutiny?  Do we really think that the American people want to be tarred with it indirectly through the shady activities of American companies?  Do we really want to hide important information from investors who are trying to assess risk in the companies they invest in? Of course not.

Anyone who reads this rule and pays the slightest attention to the estimated $1 trillion lost to crime, corruption, and tax evasion in these countries, and the millions of deaths attributed to corrupt practices where these extractive companies operate, will recognize the fallacy of the baseless attacks by those who oppose it.

The sponsors of this resolution claim that this rule puts American businesses at a competitive disadvantage.  What are they talking about?  The rule applies to both U.S. and foreign companies and complements existing laws elsewhere in the world. In fact, Chinese state-owned companies, like PetroChina and Sinopect are covered by the US law.  Great Britain, the EU, Canada, and Norway are just four examples of governments that have adopted similar rules, with Russian state-owned companies like Rosneft and Gazprom covered in the UK. 

I challenge the sponsors of this legislation to provide any objective facts to support the argument that U.S. companies are disadvantaged by this rule.  That is a pernicious myth.

The sponsors have also repeated the self-serving claims of the petroleum industry that complying with this rule would unacceptably increase their cost of doing business.  While that has become the predictable complaint of the business community whenever such a rule is promulgated, in this instance they base it on an outdated and discredited analysis.  The irony is that even if one were to agree with their most farfetched, worst case scenario it pales compared to their immense profits.

If we overturn our rule, what prevents others from doing the same?  And then we are right back where we started.  Once again we will have paved the way for secret payments and billions of dollars stolen from the public treasuries and squirreled away in Swiss bank accounts by the Robert Mugabes of the world.

There is another aspect to this that no one has talked about, and that is the connection between corruption and terrorism, particularly in Africa.  Terrorist groups flourish where government corruption contributes to incompetent, corrupt military forces.  Terrorists benefit when revenues from these activities are kept in the dark, enabling them to radicalize and recruit an impoverished and resentful population.  By overturning this rule, Senators should know that violent extremists, terrorists and other criminal enterprises will be among the beneficiaries.

Corruption is among the most corrosive forces that breed instability and violence, and then countries like ours end up trying to feed and shelter the innocent people who bear the brunt of it.

It not only wreaks havoc on the people of those countries, it hurts American companies trying to do business there and it hurts Americans who invest in these risky companies.  If the norm is nondisclosure, then bribery becomes an unavoidable and accepted way of doing business.  

That is what companies from countries like Russia and China that compete with American companies would prefer, because corruption is what they are best at.  But this rule requires those foreign companies and others to similarly disclose their profits.  Are the sponsors of this resolution even aware of this?  This rule will enhance U.S. competitiveness.  This rule protects investors and the public.

When it was first passed, Section 1504 put the United States at the forefront of transparency and government accountability efforts.  And as I have already said, that leadership paid off.  Other countries have followed our example.  This resolution will jettison a decade of work here and abroad.  There is no excuse for it.  There is no need for it.  If there are legitimate concerns about Section 1504 then let’s talk about ways to amend it and improve it. 

But let’s not, by overturning this rule, tell the world that we don’t believe in transparency and good governance. That we will turn our backs on the theft and misuse of payments made by U.S. companies, that we do not care about the people of those countries who suffer the consequences, and that we do not care about American investors who deserve this critical information so they can have confidence in the companies they invest their hard-earned money in.  This resolution is an affront to the values and to the citizens of our great and good nation.

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