- Cadwalader attorney says Trump order could harm companies
- Companies will be less protected from unscrupulous practices
With an executive order halting enforcement of the Foreign Corrupt Practices Act, the Trump administration suspended a law that long regulated corporate corruption and imposed significant penalties on bribery.
The modern FCPA leveled the playing field by instituting an effective tariff on foreign corporations engaged in corruption. With its global reach, the FCPA helped facilitate billions of dollars in settlements for the Treasury while bringing to heel foreign corporations that engage in bribery—enforcement that significantly benefits US corporations.
Beyond its financial advantages, the FCPA has served as a shield for corporations and their employees that want to conduct business ethically. Before the FCPA's enactment, corporations may have been strong-armed into corruption to stay competitive. That landscape changed significantly over the last couple of decades.
In 1992, as a young federal prosecutor in Atlanta, I handled my first FCPA case involving an informant from the Lockheed Corp. reporting alleged corruption related to the Egyptian parliament. At the time, the FCPA was rarely enforced, with modest sanctions that pale in comparison to today's standards. Even the federal agent by my side and I were only vaguely familiar with the statute. Lockheed eventually pleaded guilty to one count of conspiring to violate the FCPA, agreeing to the biggest FCPA fine of that time: $21.8 million in criminal fines and $3 million in civil penalties.
The FCPA was truly isolated regarding anti-corruption laws in those days, with no equivalent statute in any other country. US companies were placed at a competitive disadvantage because they faced legal and financial consequences for engaging in bribery, while their foreign competitors could continue to pay their way into securing contracts.
The 1995 Lockheed settlement heightened international awareness of the FCPA's power and global reach, likely contributing to the adoption of the Anti-Bribery Convention by the Organization for Economic Cooperation and Development two years later. With this, the FCPA was no longer an isolated initiative in corporate accountability—it had prompted other countries to establish their own anti-corruption frameworks and look to the US to pave the way for a coordinated global fight against corporate corruption.
The early 2000s ushered in a new era of global anti-corruption enforcement, with the UK, France, and Germany, among others, establishing their own anti-bribery laws. But they looked to the US to spearhead enforcement on a transnational scale.
In the 2008 case, Siemens, the German conglomerate and a competitor of US companies, agreed to pay a record-breaking $800 million to US authorities for conduct that took place mainly in Germany and other foreign nations.
The Department of Justice and Securities and Exchange Commission worked with the Munich public prosecutor's office. The collaboration demonstrated that using the FCPA in conjunction with the cooperation of foreign nations—motivated by a combination of legal obligations, diplomatic pressure, and domestic anti-corruption efforts—could help hold foreign companies accountable and deliver significant financial penalties to the Treasury.
The FCPA compelled German authorities to investigate and
prosecute one of their own corporations, but it also proved that no
major foreign corporation was beyond reach regardless of its home
country's enforcement posture.
In the last 20 years, the FCPA has evolved from an obscure US
statute focused on US corporations to a dominant force in global
corporate accountability, holding foreign corporations to the same
standard as their US competitors. Through amendment and aggressive
enforcement, the FCPA has become an inescapable statute for any
corporation seeking to operate in the global economy. The
jurisdiction of DOJ prosecutors, by virtue of corporations availing
themselves of US capital markets, can reach nearly any major
corporation regardless of its home country.
The world's largest foreign companies—most of them competitors of US corporations— adjusted to the FCPA's standards. Those that didn't found themselves on the hook for massive penalties.
Nine out of the 10 largest FCPA sanctions in history have involved foreign corporations—including Airbus SE ($3.9 billion), Odebrecht SA ($3.5 billion), Petrobras ($1.8 billion), Siemens ($1.6 billion), Ericsson ($1 billion), Telia Company ($965 million), Mobile Telesystems ($850 million), VimpelCom Ltd. ($795 million), and Alstom ($772 million)—with billions of those dollars being paid directly to the Treasury. The lucrative settlements from foreign corporations that engaged in corruption make the statute more than just an anti-corruption tool and government revenue generator. It's essentially a tax or tariff on foreign corporations that seek to do business corruptly to the disadvantage of their US competitors.
The FCPA has provided a bulwark against the pressure of corruption and incentivized corporations to refuse bribery without fear of losing contracts to less scrupulous competitors. The leveling of the playing field allows US corporations to win based on merit. Without such safeguards as the FCPA, US businesses will be left to compete in a global marketplace where bribery, not merit, could dictate success. How can they say no when our president signals yes?
It's entirely appropriate for President Donald Trump to reflect on the utility and impact of the FCPA on US corporations. However, by halting FCPA enforcement, employees of US corporations will be less protected from unscrupulous foreign government officials pressuring them to make payments, and US taxpayers deprived of potentially billions of dollars in fines.
As an effective instrument of US power and global influence, the FCPA has ensured that foreign corporations may not avail themselves of US capital markets without fear of prosecution for corrupt practices that harm US competitors. Abandoning the FCPA would harm rather than help US companies, leaving them in a Wild West of competition-by-bribery.
Originally published by Bloomberg Law
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