qtq80-Bp02k5Last week, a colleague asked me what I thought the Trump administration might hold for Foreign Corrupt Practices Act (FCPA) enforcement specifically and for the greater compliance discipline in general. I have been exploring those questions this week as it turns out that many others in our profession (and outside as well) are also asking those same questions. I began this week by considering the practical and legal reasons that I do not think the incoming Attorney General will lessen FCPA enforcement and President-Elect Trump would overturn the law by executive fiat. Since that time I have spoken about the compliance discipline in an attempt to demonstrate that good compliance is really good business and for that reason alone, the compliance profession is not going away under the incoming administration. Today, I want to return to the FCPA to demonstrate the effectiveness of the law in assisting American business interests outside the United States and making America great when companies are in compliance with the law. I also want to show how FCPA compliance puts forward a much wider variety of US interests to make America great again and again.

There is no musical reference today but I begin with a quote from the memoirs of former Secretary of Defense Robert Gates, entitled “Duty: Memoirs of a Secretary at War”: 

“In a private meeting, the king [King Abdullah of Saudi Arabia] committed to a $60 billion weapons deal including the purchase of eighty-four F-15’s, the upgrade of seventy-15s already in the Saudi air force, twenty-four Apache helicopters, and seventy-two Blackhawk helicopters. His ministers and generals had pressed him hard to buy either Russian or French fighters, but I think he suspected that was because some of the money would end up in their pockets. He wanted all the Saudi money to go toward military equipment, not into Swiss bank accounts, and thus he wanted to buy from us. The king explicitly told me saw the huge purchase as an investment in a long-term strategic relationship with the United States, linking our militaries for decades to come.”

How many ways that the FCPA makes America great are contained in the above quotation? I can identify at least 5: (1) US security interests are made great; (2) US foreign policy interests are made great; (3) US military interests are made great; (4) US economic interests are made great; and (5) the American goal of the rule of law in international business transactions is made great; all by compliance with the FCPA.

Candidate Trump seemed to suggest that US security makes America great, which included the fight against terrorism. This fight against terrorism has many different tools and the FCPA as one of them. But this citation from former Secretary of Defense Gates clearly shows several other ways America is made great by compliance with the FCPA. If it had not been for the effective FCPA-based compliance programs of the US aerospace and armament industry, the Saudi Arabian ministers may have been able to advise the King to buy something other than American, which is clearly antithetical to American business interests. But because bribing such ministers would violate US law and put the US companies under potential legal liability, the King had confidence that the US companies were not bribing his ministers to get the Saudi business. Simply put, FCPA compliance means that governments which purchase goods and services from America will get the value of those goods and services and not some version cheapened because some of the sales price was used to pay bribes to government officials.

Why? Because paying a bribe to a foreign governmental official creates an instant conflict of interest (COI) between the person authorizing the purchase by putting his own self-interest in giving the business to a company that has bribed him for the business. As Jeff Kaplan would say, there is a clear conflict of interest by the bribe receiver because they are being paid to make a decision to award the business to a company which lines their pockets. Or, in the case of the Saudi ministers that the Saudi King referred to, their collective Swiss bank accounts.

The FCPA is a supply side focused law. It criminalizes the conduct of the bribe-giver and not the bribe-receiver. But because of this fact it means that US companies that comply with the law can help foster the US interests that I listed above and perhaps others that I have not identified. So just as I believe that FCPA compliance helps in the fight against terrorism, I also believe that FCPA compliance helps to foster US foreign policy, US economic interests and US legal interests.

I see this most clearly in Houston, Texas, which is generally recognized as the epi-center of FCPA enforcement. There have been more FCPA enforcement actions against companies based in Houston than in any other single city in the world. This is largely because Houston is the self-proclaimed energy capital of the world but this profusion of FCPA enforcement has also led to companies in Houston having some of the most mature compliance programs and it has also led to quite a bit of FCPA knowledge throughout businesses in the city. Nonetheless, the key is the business response to the issue has been the creation, implementation and then the doing of compliance. Buy American and the FCPA helps ensure that you get the full value of what you paid for.

FCPA compliance can be expressed through the formulation articulated by Paul McNulty and Stephen Martin, which they call the “Five Elements of an Effective Compliance Program”, which are leadership, performing a risk assessment, instituting standards and controls, then providing training and communication on those standards and controls and, finally, oversight of your compliance program. While both McNulty and Martin have written and spoken extensively on these elements to flesh them out, these basic concepts are usually quickly and easily understood. Further, and perhaps not said as often as it should be said, companies that have a robust compliance program are usually better run companies because of the controls that are in place.

While the world is not free of US companies that run afoul of the FCPA, to paraphrase Dick Cassin, there is certainly more anti-corruption compliance going on in the world, FCPA compliance does serve many interests of the US. Gates’ passage above makes clear that the FCPA is doing what it was intended to do and much more. But of even greater significance is that the King of Saudi Arabia recognized the effectiveness in a business context. President-Elect Trump should immediately understand just how powerful the FCPA is in making America great.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016