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Rich Nations Zero In On International Graft

French industrialist Serge Dassault may own a lot of airplanes, but for now he's stuck on the ground: He faces an international arrest warrant if he steps outside France.

The chief of the aircraft company Dassault Aviation is a suspect in a corruption scandal involving Belgium's ruling Socialist Party, but has refused to answer questions in a Belgian courtroom on the alleged payment of $2 million in bribes to win a $200 million military contract. Mr. Dassault denies any involvement.

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The case is only the latest signal that bribes are becoming risky business for the world's business leaders. European judges are becoming more aggressive in pursuing corruption cases as well. Most nations outlaw bribery at home, but only the United States and Sweden ban paying bribes abroad to win foreign contracts. In many nations, including France, the practice is still tax deductible.

Today the 27-member club for the world's wealthy nations, the Organization for Economic Cooperation and Development (OECD), is expected to endorse recommendations to strengthen international anticorruption legislation. The proposals would engage members to end tax deductibility for bribes, develop a coordinated strategy to criminalize all bribery, and enforce anticorruption measures in the use of foreign aid.

The proposals are the result of a "full-court press" from American officials, says David Aaron, US ambassador to the OECD. US officials say they want to level the playing field in the competition for international contracts. "There isn't a country that hasn't been marked by this [corruption]," says Mr. Aaron in an interview. "The public just won't put up with it any more. They want to hold their leaders to a higher standard."

OECD officials say they have been surprised at how quickly support has developed for these proposals. In the past, European and Japanese officials resisted efforts to take action on bribery.

This year, both Britain and Germany will begin clamping down on tax deductions for bribes. British officials say they will begin using existing legislation to deny tax deductibility for corporate bribes. And a new German law limits tax deductibility in cases where the recipient of a bribe has been convicted in a German court of law. Norway and Denmark are considering similar legislation.

"What appears to be coming out is that bribery comes back to roost, so countries and companies who think it's in their interest to continue corrupt economic practices will realize its high cost, both in the short and long term," says Peter Eigen, chairman of Transparency International, a nonprofit anticorruption group based in Berlin.

For Dassault Aviation, the bribery flap could not have come at a worse moment. The company is engaged in tense negotiations with the French government over a merger with Aerospatiale, the state-owned aircraft and defense manufacturer. Similar investigations by Belgian courts into bribery of Socialist officials over defense contracts prompted then-NATO Secretary General Willy Claes to resign last October.

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Leading French business publications have come to Dassault's defense, however, which suggests that enforcing anticorruption laws may be difficult.

"The penal code denounces such pots-de-vin [bribes], calling them corruption. But the tax code, closer to earth, allows such arrangements to be deducted. In France, as in Belgium, this contradiction is clear," said the conservative French daily Le Figaro.

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