More Muddled Messages From DOJ
An update on anti-corruption enforcement in the United States: one week after the deputy attorney general lectured compliance officers that no, really, the Trump 2.0 Administration is serious about enforcement and not just targeting foreign business rivals, prosecutors have dropped two corruption cases related to FIFA while preparing to hammer Chinese telecom giant ZTE Corp.
The optics of all this are terrible and confusing, which in the Trump 2.0 era usually means that those optics are accurate. Justice Department officials are saying that the fight against corporate crime is alive and well in the Trump Administration, but the Administration is acting in ways that contradict that message — and one prime actor here is President Trump himself, as he pardons one convicted fraudster after another.
We all see it. We all know it. The Justice Department is saying one thing while doing another, and nobody in senior positions is trying to reconcile the two so that the corporate legal and compliance community can understand what’s going on.
Let’s start with deputy attorney general Todd Blanche. On Dec. 4, Blanche delivered an angry speech to hundreds of compliance professionals at the ACI Anti-Corruption Conference in Washington. He said he didn’t appreciate people saying publicly that the Trump Administration isn’t serious about anti-corruption and white-collar crime, while complaining about over-zealous prosecution of their own cases. He not so subtly threatened that if lawyers do say the Trump Administration is soft on corporate enforcement, prosecutors might give their corporate clients a harder time in settlement talks.
“If folks in this room are going to be honest brokers when counseling clients, posting on LinkedIn or writing client alerts, the public narrative should match the private one,” Blanche told the audience. “If you publicly claim we are not enforcing white-collar crime aggressively enough, but privately insist that your clients are the victims of overreach, we notice that inconsistency.”
First, Blanche knows full well there is no inconsistency there. The department can pursue fewer prosecutions overall, while being twice as vicious energetic in those prosecutions it is pursuing. He’s really just unhappy that voices beyond his control (outside counsel) are saying things he doesn’t like, so he’s threatening to punish them until they parrot the party line.
Those are the Justice Department’s words. Now let’s look at the actions.
The FIFA and ZTE News
On Wednesday, Justice Department officials in New York moved to drop two corruption cases connected to the scandal-plagued FIFA soccer association. One case involved Hernán López, a former Fox employee convicted in 2023 of offering bribes to Latin American government officials in exchange for broadcast rights for sporting games; the other involved Full Play Group, an Argentine marketing business convicted along with him.
Those two cases had been winding their way through a long, complicated appellate process. Then prosecutors filed a terse, one-paragraph dismissal motion saying “dismissal of this criminal case is in the interests of justice.”
Except, just days earlier, FIFA gave Trump its first-ever “FIFA Peace Prize” in a gaudy spectacle at the Kennedy Center in Washington. That venue is not to be confused with FIFA’s new U.S. offices, which opened earlier this year at the Trump Tower in New York.
Obviously this looks like a quid pro quo: FIFA gives the boss a participation trophy; and the boss orders the Justice Department to drop those cases. That’s one reasonable interpretation of events, given Trump’s history of corruption and “you scratch my back, I scratch yours” tendencies.
Except, there’s an alternative theory here too. These cases were on appeal to the Supreme Court. Perhaps prosecutors worried that the high court would issue some broad ruling that would jeopardize future corruption cases, so they chose a tactical defeat today to avoid a strategic setback for the future.
I don’t know which of those theories (or even some other theory) might be true — but that’s my point; that’s the problem here. Corporate compliance and legal teams can’t act with any certainty because this Administration acts erratically and doesn’t explain why.
Meanwhile, another primary message from Justice Department speakers at that conference last week was that, yes really, the department will still bring FCPA enforcement actions against U.S. companies if prosecutors believe a U.S. offender deserves it. That had been a big question since the Justice Department rolled out its new FCPA enforcement priorities last June, with talk of only bringing cases that harmed U.S. competitiveness abroad.
Now word on the street is that prosecutors are nearing a settlement with ZTE Corp. that could see the Chinese telecom maker pay more than $1 billion to settle FCPA charges. This would be on top of the nearly $2 billion that ZTE paid in the past to settle export control violations.
Does one settlement with a Chinese company mean that no U.S. companies will ever face FCPA charges again? Of course not. Given all the other corruption at ZTE and in China broadly, I assume the case against ZTE is warranted all on its own. But it does add more confusion to an already confusing picture.
And Then the Pardons
Amid all those mixed messages we also have Trump’s pardons. The hotshot executive his own Justice Department indicted just five months ago on big-rigging charges; the pardon Trump gave to the former president of Honduras, who had been convicted in U.S. courts on drug trafficking charges; or the pardon Trump gave to Changpeng Zhao, the former head of cryptocurrency exchange Binance (and who is now enmeshed in the Trump family’s own crypto interests); or the pardons that Trump has given to other fraudsters and criminals too.
The pardons matter in two important ways.
First, they undermine employees who might want to speak up as whistleblowers or cooperators in an investigation; why would you risk your career like that, if the senior executive you’re accusing might score a pardon from Trump and then have a chance at revenge? The more Trump hands out pardons willy-nilly, the more our entire speakup, investigation, and prosecution processes are weakened.
Second, Trump is the top of the Trump Administration. He sets the tone. Right now, that tone seems to be one of corruption, incompetence, pettiness, and arbitrary whim.
I say “seems” because (don’t laugh here) maybe there actually is a plausible logic to all this — but nobody in the Administration is telling us what that is; not Trump, not Blanche, not anyone else. So we, the larger group of stakeholders in the corporate prosecution world, are left to guess. Given Trump’s history, we assume the worst.
It’s another important lesson in leadership: leaders are not just responsible for what they say; they are responsible for what others hear.
If you hear any logical sense in all this, please let me know.