Compliance in the Trump Era, Part II: FCPA

Last week we began an occasional series about how the incoming Trump Administration might affect the world of corporate compliance. Today we continue with a look at the future of the Foreign Corrupt Practices Act.

First, let’s knock down the prospect of Congress revising the FCPA itself. Regardless of what Republican lawmakers say to score political points, changing this law is neither a priority nor in the party’s best interests. Come 2017, Republicans will want to fulfill dreams like tax reform, deporting illegal immigrants, and dismantling Obamacare. Amending a 40-year-old anti-bribery statute that hardly any conservative voters know about anyway is not high on the wish list.

Yes, Donald Trump did once call the FCPA a horrible law. Well, Trump says that about every law (other than the bankruptcy code). He also flip-flops on countless issues, depending on what stance gets him the most applause at whichever rally he is attending that day. What he said about the FCPA years ago is meaningless now.

We probably can assume that like many conservative business executives, Trump dislikes FCPA enforcement as Corporate America has experienced it in the last decade—but again, why waste political capital changing the law? He can bring about the relief that FCPA critics want by changing how the Justice Department (presumably led by Attorney General-designate Jeff Sessions) enforces it.

That’s where compliance officers will need to pay attention. The grand question is whether the Trump Administration will reverse course on FCPA enforcement so sharply, and so publicly, that your board and CEO will no longer consider compliance programs a priority.

I think the answer is no.

Executive Branch Changes

First consider Jeff Sessions himself. Regardless of what else people might say about him as an attorney general, remember that he is a prosecutor. When he sees a crime, he will want to prosecute it. The FCPA is going to remain on the books (see above) and bribery will still be a crime, so when violations of that law do occur, somebody somewhere in your organization will still risk prosecution. Compliance officers can start by repeating that truth to your board, CEO, and coworkers immediately.

If you want a bit more color on Sessions personally, listen to this recent episode of Everything Compliance, a podcast featuring me and a few other compliance thinkers—including Michael Volkov, a long-time FCPA lawyer who worked with Sessions and knows him well. As you can hear in the first portion of the program, Volkov believes Sessions will not turn a blind eye to corporate misconduct any time soon.

The better question is ask is how the Justice Department will prosecute FCPA violations, and what those changes to enforcement might mean for compliance officers arguing the necessity of a compliance program. The truth is we won’t know until Sessions takes office, names a deputy attorney general and an assistant attorney general for the Criminal Division (who are much closer to FCPA enforcement than the attorney general ever is), and those two people start announcing policy and prosecuting cases.

Still, we can ponder a few questions right now. An as best as I can deduce, the answers suggest that compliance programs will still be a valuable part of Corporate America’s operations.

Three FCPA Questions to Ponder

First, what happens to the FCPA Pilot Program? The FCPA Pilot Program, rolled out last April, offers companies a path to avoid onerous FCPA sanctions. The parameters are simple: companies that self-disclose a violation, cooperate fully, and remediate their problems can win sharp reductions in the penalties they might ultimately suffer. If the offense is small enough and the company does everything right, the Justice Department might decline to prosecute. We’ve already seen declinations for Nortek, Akamai Technologies, Johnson Controls, and others.

The pilot program is a success and popular. Not only do I believe it will continue; I believe a Sessions-led Justice Department will embrace its principles as a way to avoid prosecuting companies in favor of pursuing individuals. That is, if your company self-discloses, cooperates fully, and remediates, the DoJ will automatically decline to prosecute the company.

That idea may be a stretch, but it eases the regulatory enforcement against companies, still lets the Justice Department hold individual offenders responsible, and blunts accusations that the Trump Administration is soft on corruption. Which is what the Trump Administration wants.

Second, what happens to DPAs and NPAs? Deferred- and non-prosecution agreements took root during the Bush Administration. Prosecutors needed some way to force reforms at companies that experienced misconduct, short of issuing a criminal indictment and bringing the company to trial. DPAs and NPAs seemed like logical tools to use.

How will Sessions and his minions view those tools? We don’t know. While in the Senate, Sessions wasn’t thrilled with them. The FCPA Professor blog dug up some comments Sessions made in 2009, where he clearly was skeptical about them. His words: they “seem to go beyond strict enforcement of the law and try to preserve corporations who perhaps should be charged and suffer whatever consequences might result from their criminal acts.”

Sessions has a point—but it’s an easy one to make when you’re a senator, much more difficult to make when you’re attorney general. When the accounting firm Arthur Andersen was indicted in 2002 for its role in the Enron scandal, the firm went out of business. More than 80,000 people lost their jobs for misconduct committed by only a handful. That is where the push for DPAs and NPAs came from.

Keeping DPAs and NPAs would be a wise move for Sessions. They still provide the vehicle to avoid draconian steps like an indictment, and prosecutors could still take a light touch to penalties imposed.

Third, what about the Yates Memo? The Yates Memo, adopted in 2015, says that if a company under investigation wants to win any cooperation credit, it must hand over all information it can find about individuals suspected of misconduct.

Even if a new deputy attorney general publishes another guidance memo, I can’t imagine the spirit of this policy going away. It gives Sessions and his future prosecutors what they want: the ability to pursue individuals, which gives the reason not to pursue companies. Especially if the company meets the Pilot Program standards for disclosure and cooperation, and then gets a settlement with no significant penalties.

Bottom Line for Compliance Officers

None of the above works well if a company guts its FCPA compliance program. Whistleblower programs will still be necessary to help launch investigations so you can self-disclose. Document retention policies will still be necessary so you can meet the demands of the Yates Memo or whatever successor memo comes along. The CEO and board will still need to set a strong tone at the top, so that prosecutors focus on the middle managers and third parties paying bribes rather than the top brass.

Will the Trump Administration give companies an easier path out of FCPA trouble? Probably. But a compliance program is going to be the vehicle that lets the company drive down that path. Tell that to the audit committee and CEO when they ask about taking away your gas money.