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INSIGHT: FCPA Benefits, Advantages Outweigh Opposition’s Arguments

Feb. 18, 2020, 9:01 AM

It wouldn’t surprise anyone that an aggressive American businessman doing business with foreign governments might be heard to complain that the United States continues to criminalize corrupt payments to foreign officials under the Foreign Corrupt Practices Act.

Obviously, the businessman would complain he is at a competitive disadvantage if his significant competitors are from other countries that don’t criminalize foreign bribe payments and are willing to risk such payments, confident also that the bribe won’t be prosecuted in the country where the bribe-receiving official is located.

We’re not suggesting that “businessman Trump” did or would have been willing to make foreign corrupt payments to foreign officials where the Trump Organization did business—his calling card was, after all, the “Art of the Deal.” That said, one could easily imagine him wondering aloud, as a private citizen, about the unfairness of it all, in terms of his own bottom line.

As reported in a new book by Carol D. Leonnig and Philip Rucker, “A Very Stable Genius: Donald J. Trump’s Testing of America,” almost as soon as he attained office, President Trump reportedly asked then-Secretary of State Rex Tillerson to “get rid of” the FCPA, citing its unfairness to American businesses—as if a cabinet secretary could unilaterally undo an existing federal criminal statute passed by Congress and signed into law by a president.

Undeterred, Trump reportedly asked Stephen Miller—although it apparently didn’t ultimately happen—to draft an executive order for the president’s signature to repeal the statute. Outrageous, right?

Delegating Corruption Enforcement

But what about it? Should the U.S. leave to the “victim nation” whose officials are taking bribes the duty to enforce conduct inimical to that country’s interests? We’re not suggesting that it is morally right for an American businessperson to bribe a foreign official when the latter’s nation is lax in prosecuting corruption affecting that nation.

We’re just asking—forget about the requirements of how to do it—if President Trump is totally off base in essentially arguing that the United States should stand down and leave the task of fighting corruption in foreign nations to those nations, even when American citizens are implicated.

This is not a new argument. When the FCPA was proposed and debated, and sometimes in the years since, some members of the U.S. business community complained that U.S. corporations would be disadvantaged in their dealings with foreign officials if bribing those officials was outlawed for them but not their foreign-based competitors.

But the argument—always requiring a big pinch of salt given who was advancing it—has been shown to be demonstrably overstated in the more than 40 years since the FCPA’s enactment, for two major reasons.

First, many other countries have now adopted their own versions of the FCPA, so the U.S. is not alone in insisting that its corporate citizens refuse to bribe foreign officials, undermining any notion that American companies are at a disadvantage as compared to their competitors from many other nations.

And second, U.S. corporations have already expended significant resources, in the form of money and employee time, to ensure that they are in compliance with the law and have adequate training and reporting structures in place to avoid an investigation into whether they have violated the law, resulting in numerous benefits.

Benefits to U.S. Companies

In part because of these investments, the FCPA actually has resulted in numerous benefits to U.S. corporations. The law gives corporations a strong tool to fight corruption. No corporate official wants to be the victim of a shakedown. The FCPA gives companies the ammunition to say: “As you know it’s illegal for us to pay a bribe, and we can’t get caught doing that,” which is helpful to those officials.

Equally important is that companies like predictability. Knowing that their employees will not be subject to widely varying demands for bribes to do business allows corporate officials to operate with more predictability in terms of the costs of doing business overseas.

In addition, as indicated above, American businesses have already built out the required infrastructure to ensure compliance with the law, and those investments have fringe benefits in the form of stronger internal controls, improved quality control, and general gains in efficiency.

Moreover, in the last few decades, it has become clear that there is a strong link between corruption and human rights violations in many countries around the world. Corporations that care about human rights issues in countries where they do business have come to understand that cracking down on corruption is important to ensuring that the country’s human rights record remains acceptable for U.S. business involvement.

Finally, in practice, concerns that the FCPA would target for investigation largely U.S. companies have not come to pass; indeed, enforcement has been mostly against non-U.S. countries.

Law’s Success is Well Established

Of course, this is not the only time that the president has attempted to use his office to do something that may benefit his business interests. And it’s not the only time he has attacked anti-corruption efforts. But his efforts thus far to thwart the FCPA are also concerning because they fly in the face of the success and benefits of this now well-established anti-corruption law.

Yes, the Justice Department, as in all cases that it brings, must be careful and fair in enforcing this particular U.S. law. If Congress believed that American businesses were unable to compete with other countries in the international marketplace, it should study that issue carefully, and promote valid and meaningful ways to level the playing field for American companies.

But the answer is not to repeal or undermine an important anti-corruption tool; and it certainly is not an executive order to simply do away with a law that the president wakes up one day and decides isn’t in the best interests of businesspeople like him.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Joel Cohen is senior counsel at Stroock & Stroock & Lavan LLP. Previously, he served as a prosecutor at the New York State Special Prosecutor’s Office and at the Department of Justice’s Organized Crime & Racketeering Section. He is an adjunct professor of law at both Fordham and Cardozo law schools and is co-author of the recently published “I Swear: The Meaning Of An Oath.”

Jennifer Rodgers is a lecturer-in-law at Columbia Law School where she teaches courses in the public corruption field and the former executive director of the Center for the Advancement of Public Integrity at CLS. She is also a CNN legal analyst and a former federal prosecutor.

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