Why Trump’s Takedown of an Anti-Bribery Law Could Backfire
The president has said the law is unfair to U.S. businesses. But lawyers say weakening it could end up costing corporate America big.
President Trump has long argued that a law barring companies from bribing officials of foreign governments stifles deal-making abroad and puts American companies at a disadvantage.
But when he effectively put the Foreign Corrupt Practices Act out of commission this week, the order did not elicit the cheers from corporate America that you might have expected. Lawyers who specialize in corporate corruption cases told DealBook that moves to potentially weaken the law could backfire on multinationals by actually raising the cost of doing business overseas.
The F.C.P.A. has ensnared the likes of McKinsey, Petrobras and Goldman Sachs in some of the biggest corporate bribery scandals of the past half century. It is supposed to send the message that paying or seeking bribes to win business will not be tolerated anywhere, said William Garrett, a legal expert who manages the Foreign Corrupt Practices Clearinghouse, a project developed by Stanford Law and the law firm Sullivan & Cromwell.
The F.C.P.A. isn’t dead. But it’s up for review, and the concern is it could be weakened or shelved. That could create an open season for kickbacks — a price no business wants to pay. “It’s kind of the same idea like you don’t pay kidnappers, right? Because you just embolden the kidnappers to keep doing it,” Garrett said.
A recap: Trump ordered the Justice Department to cease enforcing the F.C.P.A. for the next six months and instructed prosecutors to refrain from bringing F.C.P.A. cases until Pam Bondi, his attorney general, reviews and potentially recommends new enforcement guidelines. Bondi can extend the review period if needed.
The order raises questions about the law’s future. While it does not eliminate the F.C.P.A., it’s unclear what changes Bondi may make. And what about the S.E.C., another agency that enforces F.C.P.A. violations? Will it, too, demand a second look? Paul Atkins, Trump’s pick to run the agency, has a track record of taking a light touch to corporate enforcement actions.
Trump, too, is a wild card. Killing off the F.C.P.A. was a priority in his first term. “I need you to get rid of that law,” Trump told Rex Tillerson, his first secretary of state and a former oil executive, who played a big part in stopping that idea cold.
Now Trump is unrestrained by such obstructions.
The law has its critics. It carries harsh penalties — a maximum criminal sentence of 15 years. And the legal costs can be enormous. Goldman Sachs, a first-time violator, had to pay more than $2 billion in penalties for its role in the 1MDB embezzlement case in Malaysia. The Supreme Court has recently begun to challenge federal corruption statutes deemed too broadly written, rulings that could affect the F.C.P.A.
But the act’s suddenly shaky future is creating confusion about what is legally permissible business behavior under the Trump administration. One law firm published a blunt advisory: “Yes, bribes are still illegal.”
The F.C.P.A. has become a global standard for fighting bribery. It was ratified in 1977, but enforcement didn’t pick up until about 20 years ago. Companies found in violation of the law have paid $14 billion in fines, with roughly four in 10 defendants hailing from outside the United States, according to the Foreign Corrupt Practices Clearinghouse.
Similar anti-corruption laws can be found around the world, and U.S. and foreign multinationals are still subject to them. For that reason, Trump cannot completely overwrite the international rules of business conduct. But it might send the wrong message if one of the strongest of the laws were taken off the books.
The most immediate effect could be to the bottom lines of law firms. Trump’s pause alone isn’t likely to create a kind of bribesville on a global scale. But some legal experts wonder if multinationals will scale down their compliance operations. “If the F.C.P.A. becomes something that is not enforced, that is certainly going to hit some law firms,” Garrett said.