Trump Justice Dept. Comes Into View

Compliance officers have a few more clues this week about what the incoming Trump Administration might mean for corporate compliance programs, although we still have many questions still outstanding too. Today let’s take a fresh look at what we do know, what we still don’t, and what we could deduce about the gap between those two points.

For starters, we know whom Donald Trump wants to run the Justice Department. At the top is Matt Gaetz, nominee for attorney general. Gaetz is a newly former Florida congressman — and he’s newly former because he resigned this week, just before the House Ethics Committee was scheduled to release a report looking into allegations that Gaetz has engaged in sexual misconduct, human trafficking, and drug use. 

Let’s be clear: Gaetz is a terrible choice to lead the Justice Department. He has no experience as a prosecutor or government lawyer, and accomplished little during his time in Congress other than antagonizing pretty much everyone else in the chamber while preening in front of TV cameras and spouting hysterics about the deep state. Senate Republicans hate that Trump has put them in the position of needing to confirm this guy, and there are rumblings that it won’t happen. My prediction: Senate Republicans will cave as always, and Gaetz gets confirmed.

All that said, the attorney general isn’t the most important person at the Justice Department for corporate compliance officers. The most important person to CCOs is the deputy attorney general, followed by the associate attorney general and (for financial firms) the U.S. attorney for the Southern District of New York (SDNY). The personnel news there is actually kinda sorta sane. 

More Justice Department Nominees

Trump has nominated Todd Blanche to be deputy attorney general and Emil Bove to be associate AG. Blanche and Bove worked as Trump’s personal attorneys for the last 18 months, successfully defending him against the federal criminal charges filed by special counsel Jack Smith and unsuccessfully against the hush-money case in New York. 

The key point for compliance officers is that before Blanche and Bove went to work for Trump, both men worked in SDNY as senior federal prosecutors. Representing Trump was quite a career shift, but the rest of their records do make them plausible candidates for senior Justice Department roles. They understand how prosecution of corporate offenders works. They know what a corporate compliance program should look like, and presumably have ideas on how those programs should be improved in the future. 

Sure, they’ll ride along with Gaetz as he wages his Revenge 2025 tour on Trump’s behalf; but they’ll also have day jobs running the Justice Department and setting policy for corporate offenders. Some people might dislike those policy choices, especially if Blanche and Bove want to retreat from holding companies to high standards of accountability — but nobody can say the two aren’t qualified to make those choices. Everybody can say that about Gaetz. 

We should also note that Trump has nominated Jay Clayton as U.S. attorney for SDNY. Clayton was chairman of the Securities and Exchange Commission during the first Trump Administration, and since then has been making gobs of money as head of Apollo Global Management. 

Clayton is a reasonable choice to run SDNY in a Republican administration. Democrats hate him, and routinely blasted him as taking a light touch on enforcement when he ran the SEC — but then again, what else would Democrats say about a Republican appointee? Clayton is smart and experienced, and knows his way around corporate crime, which is crucial to run SDNY. Let’s remember Trump even tried to install Clayton in that role in 2020, although that was more a ham-fisted attempt to interfere with investigations into Trump than anything else. 

One might even speculate that Trump’s inner circle is parking Clayton at SDNY for the short term, so they can move him into a higher role at the Justice Department later if (a) Gaetz fails to be confirmed; or (b) Gaetz burns out as AG after a few months since he has no idea what he’s doing, and Trump needs a successor. Clayton then could serve as AG, a job that makes more sense for someone as powerful and rich as him than working as a U.S. attorney.

Scenarios like that do imply a level of strategic thinking beyond someone like Trump; but not beyond some of his close aides, such as chief of staff Susie Wiles.

The bottom line is that Trump is larding the Justice Department with lawyers who can foremost help him with his revenge tour and the power grabs he will inevitably try; but many of these same men can also run the more mundane duties of the Justice Department, such as investigating companies for corporate misconduct and imposing resolutions that involve compliance programs. 

So even if you dislike Trump’s politics and actions, the wheels of corporate compliance will continue to turn. 

Other Compliance Questions

We won’t know how Blanche, Bove & Co. want to change the approach to corporate compliance until they’re confirmed and in office, but we can identify a few key issues compliance officers should watch closely.

First, how might they change the department’s guidelines for the evaluation of corporate compliance programs? This is something just about every deputy attorney general does. For example, we might see them relax expectations for sharing materials generated from internal investigations or trying to claw back executive compensation. Then again, the basic premise of the Corporate Enforcement Program — that companies self-disclose early, cooperate, and remediate; in exchange for lenient treatment — seems like a fundamental principle likely to endure. 

Second, will they continue requiring CCOs and CEOs to certify the effectiveness of the compliance program at the end of a deferred- or non-prosecution agreement? After all, nobody has certified one of these things yet, because the idea is not quite three years old and most DPAs and NPAs run for three years. Perhaps this goes into the dustbin.

Third, how will the department respond to qui tam whistleblower lawsuits under the False Claims Act? False Claims Act lawsuits are big money-makers for the federal government, although earlier this year a federal judge ruled that qui tam lawsuits are unconstitutional. The judge was a Trump appointee, naturally; and her ruling flies in the face of decades of jurisprudence and the language of the statute. I’d love to know what Blanche thinks on that one.

Fourth, how will the department alter its mix of prosecutions for FCPA violations, sanctions, and cybersecurity attacks? I can’t imagine Gaetz will care about any of this stuff, assuming he’s ever thought about it at all. Blanche and Bove have encountered these enforcement issues before. Sanctions enforcement is likely to go up under Trump, since sanctions will be his go-to diplomatic weapon. FCPA enforcement can also be a nifty club to wield against businesses in countries Trump doesn’t like, such as what we saw last week with the Telefónica Venezolana case.

Or maybe Trump will be so busy deporting undocumented immigrants that all of this will take a back seat. As one heavily bronzed septuagenarian likes to say, we’ll see. What questions am I forgetting? Email me at [email protected] and let me know.