United States: Trump And The FCPA: Perception Is Not Reality

Lisa Prager is a Partner for Holland & Knight's New York office.

Lara Covington is a Partner for Holland & Knight's Washington, D.C. office.

Michael Court is an Associate for Holland & Knight's Washington, D.C. office.

HIGHLIGHTS:

  • Many have questioned whether President Donald Trump, who as a businessman called the Foreign Corrupt Practices Act (FCPA) a "horrible law" in 2012, would seek to change the law, its enforcement or both.
  • However, recent consistent statements from top U.S. Department of Justice officials regarding FCPA enforcement, together with the enhancement of foreign law and foreign law enforcement, should send a strong signal to companies throughout the world that continued FCPA enforcement is the reality.

Since the start of the Trump Administration, there have been questions about whether President Donald Trump, who as a businessman called the Foreign Corrupt Practices Act (FCPA) a "horrible law," would seek to change the law, its enforcement or both. But with FCPA enforcement fed largely by companies voluntarily self-disclosing their violations and turning over evidence about their employees to the U.S. Department of Justice (DOJ), the better question focuses on what companies perceive rather than what this administration will actually do. If the perception is that the administration lacks resolve to enforce the FCPA, will companies use the "Trump card" and gamble on disclosure?

In the past few weeks, it has become clear that perception is not reality when it comes to President Trump and the FCPA. The consistent statements from top DOJ officials about continued FCPA enforcement, together with the enhancement of foreign law and foreign law enforcement, should send a strong signal to companies throughout the world that continued FCPA enforcement is the reality.

If his past public statements are any indication, as a businessman, Trump was not a fan of the FCPA. In May 2012, during an appearance by telephone on CNBC, he proclaimed that the FCPA was a "horrible law" and should be changed because it rendered the United States the "policemen for the world" and put U.S. business at a "huge disadvantage." He proclaimed that companies would "do business nowhere" if they abided by the FCPA.

In 2012, Trump was not alone in his criticism of the law. Indeed, his views were shared by others, including future members of his administration. In 2010, FCPA enforcement hit an all-time high, as measured by the number of actions by the DOJ and U.S. Securities and Exchange Commission (SEC). At the end of that year, the U.S. Chamber of Commerce waged a campaign against the FCPA, which included the publication of a white paper positing that the FCPA harmed American businesses by its lack of clarity, harsh legal standards for corporations and aggressive enforcement. Another critical voice was a committee of the New York City Bar Association chaired by Jay Clayton, who later would become President Trump's nominee for Chairman of the SEC. Clayton's committee published a paper arguing that the FCPA put disproportionate regulatory burdens on U.S. companies, and that unilateral and overzealous U.S. enforcement was not the most effective means of combatting global corruption.

By 2017, FCPA enforcement had evolved. Following critiques from the U.S. Chamber and others, in 2012 the DOJ and SEC issued the Resource Guide to the U.S. Foreign Corrupt Practices Act to provide greater clarity and guidance to companies subject to the law. Additionally, in 2016 the DOJ's Fraud Section launched a Pilot Program to incentivize companies to voluntarily disclose FCPA-related misconduct by offering greater transparency into its calculation of cooperation credit. And from 2012 to 2017, foreign countries enhanced their own anticorruption regimes while also increasing their cooperation and coordination with U.S. law enforcement agencies, and in some cases taking on a greater role in investigating and prosecuting corruption. For example, the Odebrecht and Braskem case resulted from Brazil's long-running investigation of Petrobras, and the settlements resulted from significant cooperation and assistance among government authorities in the Brazil, Switzerland and the United States. In other words, foreign anticorruption enforcement has become a reality.

Public Backing of Continued FCPA Enforcement

So far, top officials in the DOJ and SEC are sending a message of strong FCPA enforcement. On Feb. 16, 2017, Trevor McFadden, Deputy Assistant Attorney General in the DOJ's Criminal Division, said the FCPA's "fight against official corruption is a solemn duty of the Justice Department ... regardless of party affiliation."

Similarly, on March 10, Kenneth Blanco, Acting Assistant Attorney General for the Criminal Division, said at the American Bar Association's National Institute on White Collar Crime that FCPA prosecutions "are necessary to combat global corruption that stifles economic growth, creates an uneven playing field for businesses and corporations, and threatens the national security of the United States and other civilized nations," noting that usually the criminal acts are committed in foreign countries and often by foreign actors. In speaking about the rise of global investigations of corruption, Blanco said countries around the world are "all moving in the same direction, more together than ever, pursuing corruption. The Criminal Division remains committed to doing its part by vigorously investigating and prosecuting international crime when it violates U.S. laws."

Finally, on March 23, Clayton said in his SEC chairman nomination hearing that there is "zero room for bad actors in our capital markets" and that companies subject to the FCPA looking to do business in countries known for corruption should "think long and hard" about the "potential exposure to not...just the Foreign Corrupt Practices Act but ... thankfully now ... similar oversight and enforcement from other OECD countries."

Rex Tillerson, President Trump's Secretary of State and the former CEO of Exxon Mobil, appears to share the DOJ's view of the FCPA and has experience to back it up. According to The Washington Post, during a recent White House meeting, President Trump stated that the FCPA cost the U.S. billions of dollars in lost sales overseas and millions of jobs. According to the article, Secretary Tillerson dissented and described how he had walked away from an oil deal in the Middle East after a leader there demanded a payoff but then was later invited back for further discussions, explaining that "people want to do business with America."

Considerations for Companies

Companies with potential FCPA issues might still wonder whether President Trump is a wild card regarding the FCPA and gamble on not self-disclosing potential violations. While FCPA enforcement is driven by a combination of voluntary self-disclosures and government-initiated investigations, the proportions of each are unknown. Though the Pilot Program continues to run and offers financial incentives to companies to voluntarily self-disclose potential FCPA violations, some companies may feel that the better bet is to wait and see what FCPA enforcement under President Trump looks like. Without voluntary self-disclosures, does the Trump Administration have the resolve and resources to investigate and prosecute these cases on its own?

When it comes to FCPA enforcement, expect more of the status quo. First, as noted recently by top DOJ officials, we are in an era of coordinated and increasing global anticorruption enforcement that will not stop even if U.S. enforcement declines. In other words, U.S. companies operating overseas have more to worry about now than just the FCPA. Second, DOJ has stated its firm resolve to continue enforcing the FCPA throughout the world, and the agency certainly will not want to lose its leading position as other countries step up enforcement. Indeed, one might argue that with the spate of recent settlements against foreign companies, having the lead seat at the table is more protective of U.S. business interests. And third, there is persistent attention surrounding President Trump's own business holdings. Indeed, the activities of The Trump Organization itself shine a light on the FCPA. For example, this past month, Rep. Ed Perlmutter (D-Colo.) restated his interest in creating a private cause of action for violations of the FCPA.

In conclusion, President Trump and his business interests have brought more, not less, focus on the fight against corruption. Perhaps, like the FCPA itself, President Trump's view of FCPA enforcement has evolved. And in this era of global coordination and enforcement against corruption, companies should not make decisions regarding FCPA compliance or ongoing investigations based on the perception of what President Trump may do or say about the FCPA. The reality is that FCPA enforcement is here to stay, and companies subject to the law should remain vigilant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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