Steven M. Witzel and Arthur Kutoroff (Courtesy photos)
President Donald Trump was inaugurated at the height of an era of aggressive and record-breaking enforcement of the Foreign Corrupt Practices Act, a law Congress passed 40 years ago to combat international bribery and corruption.1 The Trump administration, however, has expressed concerns that U.S. regulators and companies are playing by a stricter set of rules on an unlevel playing field, especially in developing countries. Before he was President, Donald Trump condemned the FCPA as a “horrible law” that “should be changed” because it penalizes American businesses for “going over to China and Mexico and other countries and getting business”; Attorney General Jeff Sessions has expressed concern about “unfair competition” from non-U.S. companies that are not bound by the FCPA; and while in private practice, SEC Chairman Jay Clayton advocated for the United States to “reevaluate its approach” due to “significant costs” imposed on American business by the “unique” and “zealous” enforcement of the FCPA.
Notwithstanding Trump administration antipathy to “zealous” anti-corruption enforcement, and perhaps assuaged by post-election expressions of support from administration officials and confidence in line prosecutors, commentators have near-unanimously predicted a steadfast continuation of this robust FCPA enforcement.2 The facts to date do not support these initial predictions.
As of Sept. 1, 2017, the Trump administration had only brought three FCPA enforcement actions—a stark contrast with the 24 FCPA enforcement actions (eight DOJ; 16 SEC) that the Obama administration brought between Jan. 20 and Sept. 1, 2016.3 Although it is early in the Trump presidency, the transition between presidential administrations did not prevent President Trump’s predecessors from hitting the ground running. By Sept. 1, 2009, the Obama administration had filed 25 FCPA enforcement proceedings, surpassing the 17 FCPA enforcement proceedings the Bush administration filed between Jan. 20 and Sept. 1, 2008.4
This column analyzes this FCPA standstill. First, this column surveys the decline in FCPA enforcement proceedings at the Department of Justice and the Securities and Exchange Commission. This column then surveys potential causes of these developments in enforcement, and posits that the most compelling explanation for the decline in FCPA proceedings is the combination of the pro-business regulatory posture of the Trump administration and the DOJ Pilot Program, which deemphasizes the role of enforcement proceedings and provides a framework for regulators to decline prosecution. Third, this column concludes by reflecting on the implications of a shifting emphasis in FCPA enforcement away from initiating enforcement actions, and towards leniency and cooperation with companies that have self-disclosed FCPA violations.
DOJ Enforcement Under Trump
In 2010, Assistant Attorney General Lanny Breuer announced “a new era of FCPA enforcement” in which the DOJ aggressively enforced the FCPA, which he characterized as “vital to ensuring the integrity of our markets.”5 Breuer proclaimed that this new era was “here to stay”6 and by the end of the Obama administration he was right. In 2016, the DOJ brought 26 FCPA enforcement actions, making the last full year of the Obama administration one of the busiest years in the history of FCPA enforcement.7 The last few weeks of the Obama administration also saw a flurry of activity, as the DOJ brought five new FCPA enforcement actions between Jan. 1 and Jan. 19, 2017.8
But as of Sept. 1, 2017, the DOJ had only reported one new FCPA enforcement action since President Trump took office: United States v. Richers.9 In 2011, the DOJ indicted Amadeus Richers for his role in bribing officials at a telecommunications company owned by the Republic of Haiti,10 and on July 19, 2017, Richers pleaded guilty to conspiring to violate the FCPA.11
This decline in enforcement proceedings may herald a strategic pivot away from aggressive enforcement towards voluntary self-disclosure and settlement as the preferred means of enforcing the FCPA. Although Attorney General Jeff Sessions declared his intention to “continue to strongly enforce the FCPA and other anti-corruption laws”12 he also expressed concern about “unfair competition” from non-US businesses that are not subject to the FCPA.13 Further, in April 2017, Acting Principal Deputy Assistant Attorney General Trevor N. McFadden proclaimed that the DOJ’s “aims are not to prosecute every company we can, or break our own records for the largest fines or longest prison sentences.”14 The DOJ inherited a number of FCPA investigations from the Obama administration, such as United States v. Richers, and Trevor McFadden explained that “the Fraud Section leadership and I are focused on wrapping up old investigations.”15 Although the Trump administration has plainly continued to investigate potential FCPA violations,16 the DOJ has recently closed various FCPA-related investigations without charges.17
Meanwhile, McFadden encouraged companies to cooperate with the DOJ and “prioritize internal investigations[.]“18 McFadden noted that the DOJ “takes into consideration voluntary self-disclosures, cooperation and remedial efforts when making charging decisions.”19 Accordingly, under President Trump, the DOJ renewed the FCPA Pilot Program that the DOJ initiated in 2016.20 Under the Pilot Program, DOJ can consider a declination of prosecution for companies that voluntarily self-disclose FCPA violations, cooperate with the DOJ, and take steps to remedy the FCPA violation.21 During the Obama administration, the DOJ declined to prosecute five companies under the Pilot Program.22
Since the inauguration of President Trump, the DOJ has announced two additional declinations under the Pilot Program. First, in June 2017, the DOJ closed its investigation into Linde North America energy companies that bribed government officials at a company affiliated with the Republic of Georgia.23 Second, also in June 2017, the DOJ closed its investigation into CDM Smith, a construction and engineering firm that bribed government officials in India.24 The embrace of the Pilot Program, in contrast to aggressive FCPA enforcement proceedings, allows for an increased emphasis and symbiosis on cooperation between the DOJ and self-reporting companies.
SEC Enforcement Under Trump
In 2010—when Lanny Breuer announced “a new era of FCPA enforcement”25—Cheryl Scarboro, Chief of the FCPA Unit at the SEC, declared “[c]onsistent and aggressive enforcement” of the FCPA a “vital part of the [SEC's] Enforcement program.”26 Yet, as of Sept. 1, 2017, the SEC had only initiated two FCPA enforcement proceedings under the Trump administration.27 First, in January 2017, the SEC brought actions against two former employees of hedge fund Och-Ziff Capital Management Group LLC, who were charged in connection with a bribery scheme in Africa.28 Second, in July 2017, the SEC initiated a proceeding against Halliburton Company, which paid almost $30 million to settle charges arising from payments to an Angolan company in the course of winning oilfield service contracts.29 Both of these proceedings had roots in the Obama administration: Och-Ziff previously settled charges with the SEC and DOJ in connection with the same bribery scheme last year,30 and in 2009 Halliburton paid approximately $580 million to settle charges that it bribed Nigerian officials.31
A more limited SEC enforcement regime is consistent with views the new SEC chair Jay Clayton expressed in a white paper that he co-authored in 2011 for the New York City Bar Association. This white paper recommended that the “United States … . reevaluate its approach to the problem of foreign corruption” in light of the “significant costs [imposed] on companies” because of “zealous enforcement of the FCPA” in recent years.32 These costs include costs associated with due diligence, compliance programs, and enforcement actions, as well as costs associated with abandoning transactions that would have otherwise been completed were it not for the FCPA.33 After commentators expressed concerns that Clayton would weaken FCPA enforcement,34 Clayton reassured the Senate Committee on Banking, Housing, and Urban Affairs during his confirmation hearings that “the FCPA can be a powerful and effective means” for “combatting corruption[, which] is an important governmental mission.”35
Why Has Enforcement Declined?
Although there are numerous potential causes for the decline in FCPA enforcement proceedings, this column will consider the four most plausible reasons: vacancies and administrative issues associated with the transition between the Obama and Trump administrations; a decline in corruption, at least by U.S. companies; the Pilot Program; and the pro-business regulatory posture of the Trump administration.
First, the decline in FCPA enforcement may be the result of the vacancies and administrative issues associated with the transition between the Obama and Trump administrations.36 But as this column has noted, such a decline in FCPA enforcement is not the inevitable result of the transition between administrations: both Presidents Barack Obama and George W. Bush had brought more FCPA actions by September 1 of their respective first year in office than their predecessors had in the previous years. The 24-3 ratio between the Obama administration’s Jan. 20 to Sept. 1, 2016 filings and the Trump administration’s filings for the same period perhaps may have been exacerbated by the Obama administration’s flurry of activity (five filings) in January 2017, which may have somewhat cleared the pipeline. In light of the historical record, however, it is unlikely that the vacancies and administrative issues associated with the transitions between presidents are alone sufficient to cause the sharp decline in FCPA enforcement actions.
Second, the decline in FCPA enforcement may be the result of the successes of prior enforcement actions. The era of aggressive FCPA enforcement may have effectively deterred improper conduct, in part by incentivizing companies to invest in anti-corruption due diligence and compliance efforts designed to prevent bribery and corruption. Thus, the decline in FCPA enforcement actions may be the result of an actual decline in bribery and corruption. But such a decline in bribery and corruption would likely be gradual, consistent with a shift in corporate culture and governance towards anti-corruption compliance, rather than occurring suddenly with the inauguration of a new president.
Third, the DOJ’s continuation of the Pilot Program may contribute to the decline in FCPA enforcement proceedings. As noted above, the Pilot Program encourages companies to voluntarily self-disclose FCPA violations and cooperate with the DOJ to avoid being charged with violating the FCPA. Under President Trump, the DOJ has already announced two declinations of prosecution for companies that self-reported FCPA violations,37 and only one enforcement action. But since the Pilot Program is a DOJ, not SEC, initiative, the Pilot Program can only explain a decline in the DOJ enforcement proceedings.
Fourth, the decline in FCPA proceedings may reflect a broader pro-business shift in regulatory posture under the Trump administration.38 In keeping with this pro-business perspective and the concerns regarding the costs that aggressive enforcement of the FCPA imposes on American businesses, the Trump administration may take a relatively light touch toward FCPA enforcement by bringing fewer enforcement actions while maintaining the DOJ’s Pilot Program. Such a light touch is part of a broader trend: As the Wall Street Journal noted in August, the first six months of the Trump administration have also seen a sharp decline in penalties against Wall Street, compared to a comparable period in 2016.39 To the extent that the Trump administration’s pro-business orientation informs this shift in approach toward the FCPA, we can expect the Trump administration to increasingly rely on cooperation with companies that voluntarily self-disclose and remediate FCPA violations as a means of enforcing the FCPA.
Although FCPA enforcement actions have relatively declined under President Trump, the FCPA is not falling into desuetude: the Trump administration has continued to investigate potential FCPA violations,40 publicly committed to enforcing the FCPA,41 and maintained the DOJ Pilot Program.42 If successful, the evolving character of FCPA enforcement can continue to incentivize companies to detect and deter corruption, while minimizing the costs that enforcement proceedings impose on both private enterprise and the American taxpayer. But there must be a balance: a continued sharp decline in FCPA enforcement proceedings has the potential to undermine the credibility of the United States’ commitment to combatting international corruption and could reverse the progress made during the “new era of FCPA enforcement.”43
1. Foreign Corrupt Practices Act, 15 U.S.C. §§78dd-1, et seq. (1997); Mike Koehler, “The FCPA’s Record-Breaking Year,” CONN. L. REV. (forthcoming) (“On a number of levels, 2016 was a record-breaking year for Foreign Corrupt Practices Act enforcement.”).
2. See, e.g., Samuel Rubenfeld, “FCPA Dry Patch Means Little for Enforcement Efforts,” WALL ST. J., July 27, 2017 (“There has been a relative paucity of foreign-bribery cases by the U.S. government since President Donald Trump took office, but the U.S. Justice Department and defense attorneys don’t believe there is any letup in enforcement efforts.”); Robert J. Anello & Peter Janowski, “Corporate FCPA Enforcement in The Era of Trump,” 24 L. J. NEWSL. BUS. CRIMES BULL. 9 (June 2017) (“[O]ne might anticipate a marked drop-off in FCPA enforcement. Other evidence, however, convincingly suggests the trend of increased international cooperation and direction of enforcement resources in the FCPA arena is likely to continue.”); Marc Bohn, et al., “13 FCPA Enforcement Actions Resolved in 2017 So Far,” LAW360, May 4, 2017 (“Public comments by newly appointed DOJ officials suggest that the department plans to continue to prioritize FCPA enforcement.”); Lisa Prager, et al., “Court, Trump and the FCPA: Perception is not Reality,” MONDAQ, April 7, 2017 (“When it comes to FCPA Enforcement, expect more of the status quo.”); Brian F. Saulnier, et al., “FCPA Enforcement Under Trump: Don’t Call Off the Cavalry Just Yet,” K&L GATES LLP, Jan. 6, 2017 (“Though it is difficult to predict in which direction Trump’s administration may take FCPA enforcement, it is also hard to imagine that it will shape a policy soft on corruption.”); Sumit Makhija & Anshuk Megharikh, “FCPA Enforcement under Trump administration,” DELOITTE (suggesting that early evidence from the Trump administration “point[s] toward continued aggressive enforcement of the FCPA”). But see, e.g., Matthew Stephenson, “US Anticorruption Policy in a Trump Administration: A Cry of Despair from the Heart of Darkness,” GLOB. ANTICORRUPTION BLOG (Nov. 10, 2016) (predicting that, under President Trump, the FCPA “is likely to be substantially weakened, perhaps even repealed”).
3. Foreign Corrupt Practices Act (FCPA), Chronological List, DEP’T OF JUSTICE; SEC. & EXCHANGE COMM’N, SEC ENFORCEMENT ACTIONS: FCPA CASES. There are multiple methodologies for counting FCPA proceedings, but this column counts each proceeding listed separately on the DOJ and SEC websites as a separate proceeding. This methodology includes United States v. Richers as a Trump-era proceeding because the DOJ website identified the action as filed in July 2017, even though the proceeding began under the Obama administration. However, this methodology does not include one FCPA enforcement action filed under the Trump administration, United States v. Baptiste, because this proceeding was not included in the DOJ website’s list of FCPA proceedings. In United States v. Baptiste, a retired U.S. army colonel was charged with conspiracy to violate the FCPA by bribing government officials in Haiti. Compl., Aug. 28, 2017, United States v. Baptiste (1:17-mj-06216-MPK, Doc. No. 3). We know of no other FCPA enforcement proceeding filed under the Trump administration that could be included in counting FCPA proceedings.
4. Chronological List, supra note 3; SEC ENFORCEMENT ACTIONS, supra note 3. By Sept. 1, 2001 the Bush administration had brought six FCPA enforcement proceedings, whereas the Clinton administration had not brought any FCPA proceedings between Jan. 20 and Sept. 1, 2000.
5. Assistant Attorney General Lanny A. Breuer Speaks at the 24th National Conference on the Foreign Corrupt Practices Act, DEP’T OF JUSTICE, Nov. 16, 2010 (Breuer speech).
7. Foreign Corrupt Practices Act (FCPA) Related Enforcement Actions: 2016, DEP’T OF JUSTICE, updated June 6, 2017.
8. Foreign Corrupt Practices Act (FCPA) Related Enforcement Actions: 2017, DEP’T OF JUSTICE, updated July 26, 2017.
9. United States v. Richers, 09-CR-21010-JEM, S.D. Fla.; FCPA Related Enforcement Actions: 2017, supra note 8. This sparse record of FCPA enforcement presents a striking contrast with the Obama administration’s DOJ, which had brought eight FCPA enforcement actions between January 20 and September 1, 2016. Foreign Corrupt Practices Act (FCPA), Chronological List, supra note 3.
10. Superseding Indictment, July 12, 2011, United States v. Richers (09-CR-21010-JEM, Doc. No. 419).
11. Plea Agreement, July 19, 2017, United States v. Richers (09-CR-2010-JEM, Doc. No. 976). Jeff Sessions also questioned whether it is “just to punish a corporation for wrongdoing that only one member of the corporation did?” Id.
12. Attorney General Jeff Sessions Delivers Remarks at Ethics and Compliance Initiative Annual Conference, DEP’T OF JUSTICE, April 24, 2017 (Sessions remarks). In a similar vein, before President Trump’s inauguration, Jeff Sessions vowed to “enforce all federal laws, including the Foreign Corrupt Practices Act” if confirmed as Attorney General. Jeff Sessions, Nomination of Jeff Sessions to be Attorney General of the United States, Questions for the Record, submitted Jan. 17, 2017.
13. Cogan Schneier and Katelyn Polantz, “Sessions Puts White-Collar Focus on Individual Prosecution,” NAT’l L.J., April 24, 2017.
14. Acting Principal Deputy Assistant Attorney General Trevor N. McFadden Speaks at Anti-Corruption, Export Controls & Sanctions 10th Compliance Summit, DEP’T OF JUSTICE, April 18, 2017 (McFadden speech).
16. Michael Skopets & Marc Bohn, “A Summer Update on FCPA: Part 1,” LAW360, Aug. 14, 2017 (“In parallel with the recent drop in resolved enforcement actions and uptick in declinations, we have identified 22 new FCPA investigations initiated by the agencies in 2017 to date, which is a substantial number considering the lag inherent in identifying new investigations.”).
17. Samuel Rubenfeld, “The Morning Risk Report: DOJ Cleans Out FCPA Docket,” WALL ST. J., Aug. 21, 2017 (“A number of companies in the last few weeks have said U.S. prosecutors dropped their investigations into potential foreign-bribery violations.”).
18. McFadden speech, supra note 14.
20. Acting Assistant Attorney General Kenneth A. Blanco Speaks at the American Bar Association National Institute on White Collar Crime, DEP’T OF JUSTICE, March 10, 2017 (Blanco speech).
21. The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance, DEP’T OF JUSTICE, April 5, 2016.
22. Foreign Corrupt Practices Act (FCPA) Pilot Program Declinations, DEP’T OF JUSTICE, updated June 29, 2017.
25. Breuer speech, supra note 5.
26. Speech by SEC Staff: Remarks at News Conference Announcing New SEC Leaders in Enforcement Division, SEC. & EXCHANGE COMM’N, Jan. 13, 2010.
27. FCPA CASES, supra note 3. The scarcity of FCPA enforcement proceedings under the Trump administration’s SEC marks a striking contrast with the record of the Obama administration’s SEC, which between Jan. 20 and Sept. 1, 2016 had initiated 16 FCPA proceedings. FCPA CASES, supra note 3.
28. Compl., Jan. 26, 2017, SEC v. Cohen (1:17-cv-00430-PKC-LB, Doc. No. 1).
29. Order Instituting Cease-and-Desist Proceedings Pursuant to §21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Case-and-Desist Order, July 27, 2017, In re Halliburton (File No. 3-18080). Halliburton reported that the DOJ initiated a separate investigation of these underlying facts but subsequently closed this investigation and will not be taking any action. Press Release, Halliburton Co., Halliburton Resolves Investigations Regarding Angola and Iraq Operations (July 27, 2017). This proceeding was not the first time Halliburton settled charges for violating the FCPA.
30. Order Instituting Cease-and-Desist Proceedings Pursuant to §21C of the Securities Exchange Act of 1934, and §§203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Case-and-Desist Order, and Notice of Hearing, Sept. 29, 2016, In re Och-Ziff Capital Mgmt. Group (File No. 3-17595); Plea Agreement, Sept. 29, 2016, U.S. v. Oz Africa Mgmt. GP (1:16-cr-00515-NGG, Doc. No. 11); Deferred Prosecution Agreement, Sept. 29, 2016, United States v. Och-Ziff Capital Mgmt. Group (1:16-cr-00516-NGG-1, Doc. No. 11); Compl. and Aff. in Supp. of Appl. for Arrest Warrant, Aug. 12, 2016, U.S. v. Mebiame (1:16-mj-00752-PK, Doc. No. 1).
31. Consent of Defendant Halliburton Company, SEC v. Halliburton, Feb. 17, 2009 (4:09-399, Doc. No. 10); Plea Agreement, United States v. Kellogg Brown & Root, Feb. 11, 2009 (4:09-cr-00071-1, Doc. No. 12).
32. Jay Clayton, et al., “The FCPA and its Impact on International Business Transactions—Should Anything be Done to Minimize the Consequences of the U.S.’s unique position on Combatting Offshore Corruption?,” N.Y. CITY BAR COMM. ON INT’L BUS. TRANSACTIONS at 3, December 2011.
33. Id. at 1.
34. Carmen Germaine, “Trump’s Wall Street Ally Pick Signals Enforcement-Light SEC,” LAW360, Jan. 4, 2017.
35. Jay Clayton, Committee on Banking, Housing, and Urban Affairs, Questions for the Nomination of Mr. Jay Clayton to be a Member of the Securities and Exchange Commission, from Ranking Member Sherrod Brown, March 23, 2017.
36. Michael Skopets & Marc Bohn, Summer Update On FCPA, Part 2, LAW360, Aug. 15, 2017 (providing an overview of FCPA-related staffing changes during the Trump administration); Kristen Savelle, “Mid-Year FCPA Enforcement Report,” WALL ST. J., July 21, 2017 (“[B]oth the SEC and the DOJ are in a period of transition, with top leadership stepping down at both agencies, and many key roles remaining vacant for much of the first half of 2017. […] The slow pace of new enforcement activity may be a symptom of these transitions and vacancies.”).
37. FCPA Pilot Program Declinations, supra note 22.
38. Steven M. Witzel & Michael A. Kleinman, “Cybersecurity and the Incoming Trump Administration,” 257 N.Y.L.J. 3 (Jan. 5, 2017), (“Trump prognosticators have typically read the tea leaves to be business flavored—how will Trump, the businessman, view a particular issue?”).
39. Jean Eaglesham et al., “Regulators’ Penalties Against Wall Street Are Down Sharply in 2017,” WALL ST. J., Aug. 6, 2017.
40. Michael Skopets & Marc Bohn, supra note 16 (“In parallel with the recent drop in resolved enforcement actions and uptick in declinations, we have identified 22 new FCPA investigations initiated by the agencies in 2017 to date, which is a substantial number considering the lag inherent in identifying new investigations.”).
41. See, e.g., Sessions remarks, supra note 12.
42. Blanco speech, supra note 20.
43. Breuer speech, supra note 5.