FCPA and ‘Under Pressure From the President’

One of the great puzzles (to me, at least) about President Trump’s pause of FCPA enforcement was why he might want to allow U.S. companies to engage in corruption with foreign government officials. Now we can conduct a useful thought experiment, courtesy of the news that BlackRock is buying two ports that control access to the Panama Canal.

To be clear, I am not accusing BlackRock of any FCPA violations or other types of corruption related to this acquisition. There is no evidence of any misconduct here. What caught my eye was simply an article about the deal in the Financial Times, which described how BlackRock agreed to do the $22.8 billion acquisition “following pressure from Donald Trump.” 

Well, that’s the sort of scenario that might lead to a company to violate the FCPA while the Trump Administration looks the other way — or perhaps even forces a company to do the corrupt deal, FCPA risk be damned.

Let’s recall Trump’s supposed rationale for pausing FCPA enforcement. His executive order 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.” 

Clearly the Panama Canal is an asset critical to U.S. national interests. So if an American company had the opportunity to acquire control of the canal’s ports, but had to pay a bribe to some scuzzy Panamanian transportation official as part of the deal or risk losing out to a Chinese rival — does anyone really believe Trump would allow FCPA risks to complicate the closing of that deal and the advancement of U.S. interests? Of course not.

Again, we have no evidence that any scuzzy Panamanian official actually exists, or that any bribes were offered or solicited. BlackRock’s acquisition of the canal ports simply gives us a framework to consider how Trump might want to ignore FCPA enforcement to achieve various political goals.

FCPA, Corruption, and High-Stakes Deals

In reading articles about BlackRock’s acquisition, you get a sense of the white-knuckle ride it must have been to put this deal together. The current owner, Hong Kong-based CK Hutchison, understood after Trump’s election in November that its continued ownership of the canal ports would become exceedingly difficult. So CK Hutchison started shopping the ports around. Eventually it found a buyer in BlackRock, with an assortment of smaller investors in tow.

One telling paragraph from the Financial Times article:

To navigate the potential political fallout, BlackRock chief executive Larry Fink briefed senior leaders in the Trump administration, including the president, to secure their backing for the takeover, two people briefed on the matter said. One of the people added that the consortium would not have gone forward with its bid if they believed the U.S. government would not support the deal.

I have to admit, that last part — “the consortium would not have gone forward with its bid if they believed the U.S. government would not support the deal” — strikes me as a bit absurd. Of course Trump would support this deal; it’s a great political feather in his cap. 

A better question for companies to ponder is whether your company would go forward with a deal you didn’t really want, at the behest of an insistent Trump Administration. Because you can bet your mortgage payment that scenario is coming next.

Indeed, perhaps the ultimate question here is to what extent does Trump see corporate deal-making as an instrument to advance his foreign policy goals? 

Remember that his executive order pausing FCPA enforcement expressly says that U.S. national security interests “depend in substantial part on the United States and its companies gaining strategic business advantages.” So will Trump ever try to strong-arm businesses into unsavory deals that carry severe ethics and compliance risks, if he believes those deals are necessary to achieve what he wants? 

To me the answer seems obvious: of course he will. Trump will try anything that might advance his interests. This is the guy who led the Jan. 6 insurrection, after all.

Longer-Term Implications

Let’s game out this scenario a bit further. 

Imagine that Trump leans on big mining or construction interests to pursue mineral extraction projects in Ukraine, or a redevelopment project in Gaza, or a joint venture with Russia (our new BFFs, apparently) to conduct undersea oil drilling in the Arctic. The compliance team promptly documents the terrifyingly high corruption and fraud risks inherent in any of those projects, but the Justice Department promises not to bring any FCPA enforcement because the project is so vital to the president’s foreign policy objectives.

So where do those corruption risks go? Could a future president bring them back, and suddenly you’re facing FCPA enforcement for a project the company was never really eager to pursue in the first place? Could Trump himself bring them back, if your company refuses some other request of his in the future? (Again, the answer to that one should be obvious.) 

What assurances would a company want from the government before agreeing to proceed with a corruption-laden project? Would an FCPA opinion release from the Justice Department suffice? What about other jurisdictions that might still bring anti-corruption enforcement against you for the same deal? 

One can see the slippery slope here. If a company decides to proceed with a corrupt deal because the Trump Administration says it’s OK, the camel’s nose has entered the tent. Trump will only offer more promises of less enforcement for even more unsavory and unpalatable corporate actions — first for his foreign policy goals, then for domestic political goals, and ultimately for the ironclad grip on power he so clearly wants. 

More broadly, what does all this say about corporate anti-corruption programs as a whole, if Trump defines some instances of corruption as OK? How do we scale up that message to a global workforce: “Corruption is bad, except for these few circumstances where the president says it’s fine?”

Like I said, it’s a slippery slope — and Trump is all too eager to stand behind Corporate America and give a good shove.