The Troubling Smartmatic FCPA Indictment

Last week the Justice Department indicted Smartmatic, a voting technology company, for violating the Foreign Corrupt Practices Act. For compliance professionals it’s a bizarre moment: after 10 months of the Trump Administration telling us it would limit FCPA enforcement severely, the department turned around and took one of the most forceful actions it can against FCPA offenses.

Why does that matter to compliance officers? Because it’s not clear that Smartmatic deserved to be indicted; certainly not after many years of the Justice Department settling FCPA misconduct with deferred-prosecution agreements, non-prosecution agreements, and outright declinations. Instead, there’s ample reason to suspect that this is just vindictive prosecution of a company that President Trump doesn’t like — and if that’s the case, then the compliance community needs to revisit our thinking about voluntary self-disclosure of corporate misconduct. 

Let’s start with the FCPA allegations in question. Smartmatic is based in London, with a U.S. subsidiary in Florida. Last year, the Biden Administration indicted two of the company’s now-former senior executives for conspiring with others to bribe government officials in the Philippines in the 2010s. Prosecutors accused the two men of funneling $1 million in bribes to the former head of elections in the Philippines to secure voting equipment contracts worth $182 million. The two men await trial.

OK; all routine FCPA enforcement stuff so far. Then last week federal prosecutors issued a superseding indictment that added Smartmatic to the case. It seems to be the first time the Justice Department has criminally indicted a company on FCPA charges (that is, not a settlement with a deferred- or non-prosecution; but an actual indictment with intention to take the company to trial) since 2010. 

Well, why? Why Smartmatic, and why now? 

The cloud hanging over this case is that perhaps the Trump Administration indicted Smartmatic because Smartmatic is locked in bitter civil litigation with Fox News, and Fox News is a valuable piece of President Trump’s political apparatus. 

Smartmatic has accused Fox of deliberately spreading lies that the company helped to steal the 2020 election for Joe Biden. Fox faced a similar lawsuit from another voting equipment company, Dominion Voting Systems, and settled with Dominion in 2023 for $787 million. Smartmatic reportedly has just as strong a case against Fox, and is suing for $2.7 billion. 

So quite simply, perhaps Trump is doing Fox News a favor. He indicts Smartmatic, which makes the company look bad in the public eye and could end up barring the company from bidding on government contracts in the United States. In exchange, Fox continues its fawning coverage of all things Trump and Republican. 

Given the corruption and venality of the Trump 2.0 Administration, that’s all quite plausible. 

What About the FCPA Misconduct Here?

Sure, it’s also possible that sometime in the last 10 months, Trump Administration prosecutors discovered damning new facts about Smartmatic’s conduct that were so bad, a corporate criminal indictment was warranted. We can’t rule out that scenario.

Except, the superseding indictment from last week is essentially  the exact same indictment issued last year, only with Smartmatic added as a defendant. If prosecutors did find any damning new facts, those facts haven’t been disclosed yet. Why wouldn’t prosecutors disclose at least some of them to defang the suspicions we’re raising right now?

And if Smartmatic’s corporate behavior was so terrible, why doesn’t the press release announcing the indictment include any statement from prosecutors about why they decided to indict the company now? Not even one single quote, which typically is Press Release Writing 101.

Let’s also recall that earlier this year, the Justice Department announced new criteria for deciding to proceed with FCPA charges against a corporation. The four primary criteria were:

• Cases that involve drug cartels or other transnational criminal organizations;
• Cases where the corruption of one company blocks other, U.S. companies from a fair chance at the same business;
• Cases that involve U.S. national security interests, such as access to critical ports or mineral resources;
• Cases that allege serious misconduct, such as “substantial bribe payments, proven and sophisticated efforts to conceal bribe payments … and efforts to obstruct justice.” 

Of those four criteria, the one that might apply best to Smartmatic is that fourth, final criteria. But if that’s so, and the Biden Administration didn’t indict Smartmatic before, that means the Trump Administration is taking a harder line on executive misconduct now. Which seems rather contrary to the messages Justice Department leadership has communicated since Trump 2.0 returned to office in January. (Remember when the department ranked its 10 white-collar enforcement priorities in May? Enforcement of anti-corruption placed ninth.)

Plus, Trump has already politicized criminal enforcement against individuals he perceives as enemies, such as New York attorney general Letitia James and former FBI director James Comey. It’s not much of a jump to conclude that he’d do the same against corporations too. 

In short, yes it’s possible that the criminal indictment against Smartmatic is warranted — but that runs contrary to everything the Justice Department has said this year about when and why it would bring corporate FCPA cases. Given Trump’s vengeful nature and corrupt impulses, the appearance of vindictive prosecution is very real, and the department isn’t doing much to dissuade anyone from that fear. 

The Bigger Questions Here for Compliance

The obvious question from the mess is whether corporations really can trust the Justice Department to handle corporate misconduct cases fairly. To me, it seems pretty clear that the answer is no.

Well, if we can’t trust that the Justice Department will follow its own prosecution guidelines — if we can’t rule out that Trump might wake up cranky some day and order a politically motivated prosecution, and lackeys in the Justice Department will go along with it — then why on earth would you self-disclose corporate misconduct in the first place? Why willingly give prosecutors potential ammunition against you? 

It’s not clear from the indictment that Smartmatic ever did self-disclose its FCPA misdeeds to the Justice Department, but that detail isn’t relevant to compliance officers anyway. The Justice Department learned about Smartmatic’s misconduct somehow; and now the department is trying to nail Smartmatic to the wall rather than follow stated policies that typically result in settlement. That latter part is what matters to compliance and legal officers now. 

The fundamental problem here is that nobody can trust the Trump 2.0 Administration to act consistently and honestly, because Trump himself is not a consistent and honest person. Even if the Justice Department published a statement today explaining that Smartmatic is an exception and truly deserves indictment rather than settlement efforts — what corporate compliance or legal officer would take that statement at face value? Look at the totality of how the Justice Department behaves and what Trump says about law enforcement. Companies can no longer trust the department to be an honest and impartial broker of justice.

Given that risk, suddenly it’s not so crazy to second-guess the merits of voluntary self-disclosure. That’s a sad statement about corporate ethics and compliance today, but it is where we are.