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Repeal Of Anti-Corruption Rule May Hurt National Security, Critics Warn

Feb 27, 2017
Originally published on February 28, 2017 8:02 pm

One of the very first bills President Trump signed into law this month killed a Securities and Exchange Commission rule meant to promote transparency in countries riddled with corruption. Trump said getting rid of the rule, which required oil, gas and mining companies to disclose overseas royalties and other payments, would bring back jobs and save extraction companies many hours of paperwork and, potentially, hundreds of millions of dollars.

But critics of this rollback say it could make the U.S. less safe. The rule was an important national security tool, they argue, since corruption often leads to violence, instability and terrorism.

Former Sen. Richard Lugar, the Indiana Republican who co-authored the original legislation to require the transparency rule, was disappointed to see his fellow Republicans vote overwhelmingly in both houses of Congress to invalidate the SEC rule, which hadn't even gone into effect yet.

"History shows that many resource-rich countries are very poor because the vast mineral resources have bred corruption that has led to poverty, hunger and instability," Lugar told NPR.

He said as he was working on this issue, Rex Tillerson, now secretary of state and then head of Exxon Mobil, came to see him to lobby against the reporting requirements. Tillerson argued that the rule would put American companies at a disadvantage.

But even as energy lobbyists worked to delay the SEC rule, the U.K., Canada, Norway and other countries picked up on Lugar's idea and ran with it.

"So the argument that the U.S. would be competitively at a disadvantage doesn't make sense at all," Lugar said, "because clearly, other countries have understood that corruption must stop."

There is a national security argument for promoting transparency, too, says Kate Bateman, a visiting fellow at the Center for a New American Security. Corruption fuels conflict and terrorism, she says — lessons "learned from our experiences in Iraq and Afghanistan."

Bateman, a former State Department official who worked with the Special Investigator for Afghanistan Reconstruction, says the SEC rule was a "simple transparency measure" that would show citizens of foreign countries — and U.S. bankers and investors — how much money was pouring into countries like Nigeria, where she says corruption has complicated the military's battle against the militant group Boko Haram.

"Resource-rich, underdeveloped countries often have weak institutions and rule of law," Bateman wrote after the rule was repealed. "Payments by foreign companies can easily end up in the overseas bank accounts of a tiny, corrupt elite and do nothing to spur economic growth, provide basic services to deprived populations, or build capable, professional security forces."

The SEC is not the place for a social agenda, argues Rep. Bill Huizenga, a Michigan Republican who wrote the rule-killing legislation signed by Trump. "While this is may be a laudable goal, using federal securities law and the SEC to enforce social issues is inconsistent with the SEC's core mission and completely inappropriate," he said on the House floor in early February.

There is another SEC rule that could be on the chopping block soon. That one requires U.S. tech companies to report if they are getting so-called conflict minerals from Africa.

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When President Trump addresses Congress tomorrow, he's likely to talk about Republican efforts to roll back regulations. In its zeal to deregulate, the new Congress has already gotten rid of a rule that required certain U.S. companies to report overseas payments. As NPR's Michele Kelemen reports, supporters of the stricken measure say it was an important tool in the fight against corruption and the funding of terrorism.

MICHELE KELEMEN, BYLINE: It was one of the first bills President Trump signed. And as he did so, he said he was bringing back jobs and saving oil and mining companies many hours of paperwork.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: This a big signing - very important signing. And this is HJ Resolution 41, disapproving the Securities and Exchange Commission's rule on disclosure of payments by resource extraction issuers. It's a big deal.

KELEMEN: Nearly all the Republicans on Capitol Hill voted to repeal those SEC rules, and that's a big disappointment to former Senator Richard Lugar of Indiana. He's a Republican who was behind the idea that oil, gas and mining companies traded on American stock exchanges should have to report their payments to foreign governments.

RICHARD LUGAR: And I would just say that history shows that many resource-rich countries are actually very poor because the vast mineral resources have bred corruption that has led to poverty, hunger and instability.

KELEMEN: Lugar, who had been the top Republican on the Foreign Relations Committee, says the American oil and gas sector fought him on this from the very beginning.

LUGAR: At the time that we were writing it, Rex Tillerson, who was then head of ExxonMobil, came to see me and indicated and made the argument that's been made again and again that this would be a gesture that would make American companies uncompetitive.

KELEMEN: Tillerson is now secretary of state. And even as energy lobbyist here work to delay the SEC rules, the U.K., Canada, Norway and others picked up on Lugar's idea.

LUGAR: So the argument that the United States would be competitively at a disadvantage doesn't make sense at all because clearly other countries have understood that the corruption must stop if we're going to as a nation or a group of nations attempt to bring about a better standard of living for these countries.

KELEMEN: There is a national security argument for promoting transparency, too, says Kate Bateman of the Center for a New American Security. She says corruption fuels conflict and terrorism.

KATE BATEMAN: And a lot of these lessons we've learned from our experiences in Iraq and Afghanistan.

KELEMEN: Bateman, a former State Department official, says the SEC rule was a, quote, "simple transparency measure" that would show citizens of foreign countries and even U.S. bankers and investors how much money was pouring in.

BATEMAN: We're talking about Nigeria, Angola - talking about countries that have, like - 70 to 80 percent of their GDP may come from these kinds of payments by foreign companies.

KELEMEN: But the SEC isn't the place for a social agenda, says Republican Congressman Bill Huizenga of Michigan who wrote the legislation signed by Trump.

(SOUNDBITE OF ARCHIVED RECORDING)

BILL HUIZENGA: While this may be a laudable goal, using federal securities law and the SEC to enforce social issues is inconsistent with the SEC's core mission and completely inappropriate.

KELEMEN: There is another SEC rule that could be on the chopping block soon for the Trump administration. That one requires U.S. tech companies to report if they're getting so-called conflict minerals from Africa. Michele Kelemen, NPR News, Washington.

(SOUNDBITE OF NATIONAL SYMPHONY ORCHESTRA PERFORMANCE OF TCHAIKOVSKY'S "SLEEPING BEAUTY") Transcript provided by NPR, Copyright NPR.