Donald Trump has gone on the record as saying the Foreign Corrupt Practices Act (FCPA) is a “horrible law and it should be changed” and that it puts US businesses at a “huge disadvantage.” This statement was made in the context of allegations of facilitation payments by Wal-Mart in Mexico which reached as high $24,000. Yet, even President-Elect Trump realized the invidiousness of bribery and corruption in the international business context as, in the same interview, as he said that other countries should clean up the corruption which occurs in their countries. What does all of this and a Trump administration mean for FCPA enforcement and, more importantly, FCPA compliance going forward?
I think it unlikely that a Trump administration will change much in the way of FCPA enforcement for several reasons: some political, some practical, some legal and one optical. On the political side, the FCPA is a key component in the international fight against terrorism. The direct link between corruption and terrorism is not only well-founded but has (unfortunately) been demonstrated again and again. Even low level corruption in the form of facilitation payments, which are exempted out of the FCPA, have been seen to directly lead to terrorism; in the form of porous borders. While I doubt that businessman Trump understood the link between terrorism and corruption, I am certain that President Trump will either learn about this link very quickly or will be told multiple times by his security advisors. With his emphasis on US security from terrorism, the Trump Administration will not want to be seen as softening the war on terrorism by even making things easier for the bad guys.
Peter Henning, writing the New York Times (NYT) Dealb%k column in a piece entitled “How Trump’s Presidency Will Change the Justice Dept. and SEC”, wrote, “The roots of the government’s crackdown on overseas corruption can be traced to the administration of George W. Bush, and it was continued aggressively by President Obama. Many of the cases involve foreign companies that have paid millions of dollars in fines, and they are a way to show the public that global enterprises are being overseen to ensure compliance with American law.” Currently seven of the top 10 places on the Top 10 FCPA enforcement actions of all-time are held by foreign domiciled entities. It is certainly in the US interest to prosecute companies which play unfairly and cheat, through bribery and corruption, against American companies. With Trump’s protections sentiments translated into policies, continued vigorous enforcement of the FCPA is right in line with such a trade policy.
The practical reasons that FCPA enforcement will not significantly change under a Trump administration relate to the unique prosecution and enforcement model which was developed and has now been memorialized in the Department of Justice’s (DOJ) Yates Memo and the FCPA Pilot Program. Under the Yates Memo for companies to receive any cooperation credit they must investigate and turn over information on potential culpable individuals. Under the FCPA Pilot Program, companies can receive up to a 50% discount off the bottom end of the range of penalties under the US Sentencing Guidelines. However, in practice since the announcement of the Pilot Program in April several companies have received full declinations to prosecute for robust internal investigations, self-disclosure and effective remediation.
The bottom line is that the current FCPA enforcement model leads to companies doing the hard work of leading the investigations into FCPA violations and handing those investigations over to the DOJ. This self-sustaining model benefits both companies and the government and no one administration will likely overturn an enforcement model that is so efficient. The Yates Memo directs government prosecutors to focus on individuals so they will do so going forward. Moreover, companies no more want criminals working in their midst than the government wants companies to violate the law. This current model of FCPA investigation and enforcement then benefits both a business goal and legal goal. In other words, it is a business response to a legal problem.
Equally important is the self-funding mechanism to the DOJ’s FCPA investigation convention. As companies bear the costs of these FCPA investigations, the government does not have incur these expenditures. When the inevitable budget cuts come to the DOJ, one area which will not be impacted is FCPA enforcement. Henning noted, “The benefit of how the foreign bribery cases are pursued is that the cost is borne by the private sector. Although prosecutors proclaim they do not necessarily accept the findings of the law firms hired to ferret out misconduct inside a company, there have been few cases in which the government committed significant resources to investigate on its own.” Even if the DOJ budget and resources are reduced, the financing of FCPA investigations is borne by companies and this will continue. While the Fraud Unit, FCPA Section could have its staff cut, that would only slow down resolutions from their current pace. No one wants that to occur, certainly not businesses and not even President Trump.
Finally, is the legal reason. The FCPA will celebrating its 40th anniversary in the same year President-Elect Trump takes his oath of office. There is no serious practitioner or commentator who has called for the repeal of the FCPA. Those who have called for its lessening have been debunked as those who simply want to lessen the effectiveness of the world’s leading anti-corruption law. In short, there is no clarion call to repeal the FCPA.
President-Elect Trump cannot overturn the law via Presidential fiat, the law can only be overturned by full Congressional hearing and legislation. To do so would make clear the true intention of those seeking to repeal the FCPA; they want to allow US companies to engage in bribery and corruption. The problem with this argument is that US companies obtaining business through illegal actions is not in the interest of the US or in the interests of US business engaged in commerce outside the US and even a GOP Congress recognizes this clear fact.
Finally, there is the optics. As Peter Henning noted, “It is unlikely that Mr. Trump would want to be seen as going soft on corruption after some of his rhetoric during the campaign, so the Foreign Corrupt Practices Act is likely to remain a featured player in white-collar enforcement.”
There are political, legal, practical and business reasons that FCPA enforcement will not lessen under Trump.Click to tweet
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© Thomas R. Fox, 2016