More Musings on FCPA Enforcement
I wanted to share more thoughts today about President Trump’s order to pause all enforcement of the Foreign Corrupt Practices Act. Lots of corporate compliance professionals have been talking about it — and while nobody has any clear sense yet of what comes next, we do have a better sense of the important questions to contemplate right now.
For example, one corporate compliance officer from the financial services world sent me this message a few days ago:
I am no FCPA expert, but I’m wondering: What if the executive order is really saying that Trump might want U.S. companies to go ahead and pay bribes, if doing so will be in the country’s foreign policy interests as defined by Trump?
That’s a really good point. It squares with the language Trump used in his executive order, where he framed the FCPA as a potential constraint on the president’s freedom to conduct foreign policy and pursue national security interests as he deems best. Specifically, the executive order said U.S. national security interests “depend in substantial part on the United States and its companies gaining strategic business advantages whether in critical minerals, deep-water ports, or other key infrastructure or assets.”
Now, I don’t believe that’s true — but when a president believes that’s true, then yes, by that logic, enforcement of the FCPA should be subordinate to his or her foreign policy whims.
For example, perhaps Trump reaches an agreement with El Salvador to accept deportees from the United States, but El Salvador doesn’t have sufficient prison capacity. It puts out a tender for engineering firms to build a giant prison facility, and corrupt officials there want a kickback before awarding the contract. Trump wouldn’t want U.S. companies to decline to bid on that project for fear of an FCPA violation; hence he reaches the conclusion that not enforcing the FCPA is in the interests of national security.
We could spin up other examples, too: construction of ports for a new Panama Canal, mineral extraction rights the U.S. obtains in exchange for not invading Greenland, construction of pretty much everything in a U.S.-occupied Gaza Strip.
If Trump envisions some U.S. rival to China’s Belt-and-Road program (where China is developing infrastructure in emerging markets around the world), then this view of FCPA enforcement — that not enforcing it is in the interests of national security — does hold. It’s the most charitable interpretation of Trump’s action I’ve heard so far.
Concentration of Power in Trump’s Hands
I believe that the above rationale for FCPA non-enforcement is correct, but it’s only incidentally correct to the larger objective that Trump wants to achieve here: concentrating prosecution power in his hands.
Let’s remember that when new attorney general Pam Bondi first announced her own enforcement priorities last week, her plan was to decentralize decision-making power for FCPA prosecutions. Yes, she declared that the Justice Department would only prosecute FCPA cases that somehow tied to drug cartels or transnational crime gangs, which is weird and not really the point of the FCPA; but individual U.S. attorneys would still have discretion to bring such FCPA cases on their own, rather than leave enforcement decisions to the FCPA unit at Justice Department headquarters.
Trump’s executive order directly contradicted Bondi’s policy shift. His order says that no matter what future enforcement posture or guidance the Justice Department might adopt, all future FCPA investigations must specifically be authorized by the attorney general.
Well, when the attorney general is a Trump loyalist like Bondi, that really means future FCPA enforcement actions will only proceed with Trump’s blessing.
What Trump does not want is any formal policy or set of rules that might force his hand — say, a set of charging criteria that would lead objective observers to conclude that FCPA prosecution is warranted. That would open the door to holding him accountable, or at least pointing out that Trump isn’t following his own rules and is hypocritical. Trump wants to avoid accountability mechanisms whenever he can. That’s why the executive order is structured the way it is.
Other FCPA Questions to Ponder
From those foundations, we can ponder a few other questions more relevant to compliance officers, too.
What will happen to companies currently under deferred- or non-prosecution agreements?
Presumably those agreements will be terminated early. My question is which commitments companies made pursuant to those agreements will remain in force or also terminate early. For example, I assume all those obligations for interim reporting to the Justice Department will be gone. So what about compliance monitorships? What about any other undertakings the company agreed to make, such as ending reliance on third parties or abolishing percentage-based compensation agreements — will companies be allowed to resume such practices?
What will happen to the compliance evaluation guidelines?
One rumor I hear is that the department’s guidelines for evaluating compliance programs will be rescinded and removed from the Justice Department website. Except, those guidelines for an effective compliance program apply to all types of corporate misconduct, not just FCPA violations. More logical would be to vaporize the FCPA Resource Guide (which, as of this writing, was still posted), although the text of the FCPA does direct the attorney general to issue “general precautionary procedures which domestic concerns may use on a voluntary basis” to comply with the law.
Then again, all this material descends from the U.S. Sentencing Guidelines’ definition of an effective compliance program, and that ain’t changing any time soon. So no matter what de-documenting the Justice Department might do, I’m not sure that matters.
What will happen to SEC enforcement of the FCPA?
Again, it’s a safe bet that with someone like incoming SEC chairman Paul Atkins, enforcement of the FCPA’s books-and-records provisions will be relaxed dramatically — but Atkins couldn’t wish away the FCPA even if he wanted to, which I don’t believe he does. The Exchange Act expressly directs publicly traded companies to maintain an effective system of internal accounting controls, and those FCPA books-and-records provisions are inextricably knotted to the Exchange Act text.
How will global anti-corruption enforcement work?
As the Trump Administration keeps antagonizing countries around the world with trade wars, invasion threats, and the like, you can’t help but wonder whether more countries will now use their own anti-corruption laws against U.S. companies as a retaliatory measure.
Except, back in the old days, the U.S. Justice Department typically led a coordinated effort at anti-corruption enforcement. Now Trump has abdicated that role, and it’s not clear that any other country can (or would want to) emerge as a successor to that leadership role. So global companies might face a barrage of smaller, separate anti-corruption probes, which will do you no favors.
Anyway, that’s all for now. If you want to share your own thoughts (even confidentially), by all means email me at mkelly@radicalcompliance.com and let me know what your take is.