- FCPA Professor - http://fcpaprofessor.com -

Democratic Senator Asks The DOJ, “As Rapidly As Possible,” To Issue An Advisory Opinion “Whether Executives Of The Trump Organization And Related Companies – Including President Trump Himself” Are Violating The FCPA

Last Friday, Senator Richard Blumenthal (D-CT) issued this press release [1] (with an accompanying letter) asking the DOJ, “as rapidly as possible,” to issue an advisory opinion “whether executives of The Trump Organization and related companies – including President Trump himself” are violating the FCPA.

As highlighted in this post, there are certain deficiencies in Senator Blumenthal’s letter. Moreover, while the FCPA expressly authorizes the DOJ to issue FCPA advisory opinions, Senator Blumenthal clearly does not qualify as a requestor.

There are several deficiencies in Senator Blumental’s request (the full letter is set forth below), but even accepting other portions of the letter the most glaring is any discussion of corrupt intent (a required statutory element for there to be a violation of the FCPA’s anti-bribery provisions). For instance, there are numerous DOJ FCPA opinion procedure releases [2] that have blessed various things of value being provided, directly or indirectly, to a foreign official because of, among other things, lack of corrupt intent.

In terms of legislative history, a House Report stated as follows concerning corrupt intent:

“The word ‘corruptly’ is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipients to misuse his official position; for example, wrongfully to direct business to the payer or his client, to obtain preferential legislation or regulations, or to induce a foreign official to fail to perform an official function.  The word ‘corruptly’ connotes an evil motive or purpose such as that required under 18 U.S.C. 201(b) which prohibits domestic bribery.  As in 18 USC 201(b), the word “corruptly’ indicates an intent or desire wrongfully to influence the recipient.  It does not require that the act [be] fully consummated or succeed in producing the desired outcome.”

A Senate Report further stated:

“[The anti-bribery provisions] cover payments and gifts intended to influence the recipient, regardless of who first suggested the payment or gift.  The defense that the payment was demanded on the part of a government official as a price for gaining entry into a market or to obtain a contract would not suffice since at some point the U.S. company would make a conscious decision whether or not to pay a bribe.  That the payment may have been first proposed by the recipient rather than the U.S. company does not alter the corrupt purpose on the part of the person paying the bribe.  On the other hand extortion situations would not be covered by this provision since a payment to an official to keep an oil rig from being dynamited should not be held to be made with the requisite corrupt purpose.”

Regarding corrupt intent, the DOJ/SEC issued 2012 FCPA Guidance [3] stated:

“To violate the FCPA, an offer, promise, or authorization of a payment, or a payment, to a government official must be made “corruptly.” As Congress noted when adopting the FCPA, the word “corruptly” means an intent or desire to wrongfully influence the recipient:

The word “corruptly” is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position; for example, wrongfully to direct business to the payor or his client, to obtain preferential legislation or regulations, or to induce a foreign official to fail to perform an official function

[4]

Speaking of the above-referenced DOJ FCPA opinion procedure releases, the FCPA expressly authorizes the DOJ to issue FCPA advisory opinions to “issuers” or “domestic concerns” regarding “conformance of their conduct with the Department of Justice’s present enforcement policy.” (emphasis added).

Senator Blumenthal clearly does not qualify as a requestor.

Moreover, in the FCPA Guidance the DOJ/SEC state: “The opinion procedure cannot be used to obtain opinions on purely historical conduct or on hypothetical questions.”

The full text of Senator’s Blumenthal’s letter is set forth below.

“Dear Mr. Kim [Acting U.S. Attorney for the Southern District of New York] and Mr. Weissmann [Chief of the Fraud Section at the Department of Justice]:

I am writing to seek an advisory opinion regarding whether executives of the Trump Organization and related companies – including President Trump himself in his role as Chairman – may have violated or be at risk of violating of the Foreign Corrupt Practices Act (FCPA), which bars U.S. corporations or individuals from bribing foreign officials in order to obtain or retain business.

The FCPA declares that “anything of value” provided to a foreign official may constitute a bribe that could result in an FCPA violation.  In this case, ample public information reveals that top Trump Organization officials may have indeed offered something of value – access to and the good will of the President of the United States – in exchange for action by foreign officials to “obtain or retain” business for the Trump Organization.

Absent any action by President Trump to completely eliminate all financial conflicts of interest, these concerns will continue as long as he is President.  The President’s announcement on January 11, 2017 that he would turn control of his company over to his two sons has not addressed these FCPA concerns, because he has obviously remained in contact with his children and has retained his interest in the Trump Organization.

The SEC’s top enforcement official noted in 2015 that “bribes come in many shapes and sizes. . . . [T]he FCPA is properly read to cover providing valuable favors to a foreign official.”  An offer or grant of access to or beneficial treatment by the President-elect or President of the United States would, by any reading, qualify as a “valuable favor” provided to a foreign official. In fact, such access already proved to be worth billions of dollars to foreign companies during President Trump’s transition. If these activities violate the FCPA, significant evidence exists that could implicate the leadership of the Trump Organization, who also happen to be the President and members of his family.  I therefore ask that you provide me with a DOJ opinion on whether these actions may potentially trigger a violation of the FCPA as soon as possible.

The remainder of this letter provides additional details on my concerns.

The Foreign Corrupt Practices Act

The FCPA was signed into law by President Carter in 1977 to prevent abuses identified during the Watergate investigation by ensuring that American businesses were not obtaining unfair business advantages via bribery or illegal payments to foreign officials.  In simple terms, the FCPA prohibits American business officials from engaging in bribery or offering illicit payments to foreign officials to get their way:  they must play by the rules of the country in which they are conducting business or pay a steep price.

The law applies to “any individual who is a citizen, national, or resident of the United States” and “any corporation … which has its principal place of business in the United States,” including “any officer, director, employee, or agent of” these corporations.  The Trump Organization and its leadership and employers clearly are covered by this definition.

The FCPA prohibits covered individuals or corporations from making “any offer, payment, promise to pay, or authorization of the payment of money or anything of value . . . to a foreign official to influence the foreign official in his or her official capacity . . . or to secure any improper advantage in order to assist in obtaining or retaining business . . . or directing business t[o] any person.”  Individuals or businesses that violate the FCPA are subject to criminal penalties, enforced under DOJ authority.

A key question to ask in evaluating the Trump Organization’s conduct is whether the FCPA’s definition of “anything of value” applies narrowly, including only items of cash value for the foreign recipient. Although there have been no specific cases regarding access to or the good will of the President or other high-ranking U.S. government officials as an item “of value,” several recent cases indicate that the DOJ has interpreted the provision broadly.  In 2015 and 2016, DOJ settled FCPA cases in which U.S. corporate officials provided unpaid internships to family members of foreign officials in order to influence their behavior.  Similarly, earlier cases involved U.S. corporations’ donations to charities run by foreign officials that provided no direct compensation to those officials, but were viewed under the FCPA as bribes designed to induce favorable treatment.

Recently, former SEC Director of Enforcement Andrew Ceresney described the relevant interpretation of the statute:

“[A]nything of value” is a broad term and is not limited to cash or tangible gifts but includes less traditional items of value that have been given in order to influence foreign officials. . . .  When these benefits are given to influence a foreign official in the performance of their official duties to assist an issuer in obtaining or retaining business, the FCPA is violated.

In 2015 Mr. Ceresney similarly noted that “bribes come in many shapes and sizes. . . . [T]he FCPA is properly read to cover providing valuable favors to a foreign official, as well as providing cash, tangible gifts, travel or entertainment.”

Several events during President Trump’s transition showed the financial value to foreign companies of good – or poor – relations or access to the incoming President.  In December 2017, the Washington Post reported that “the chief executive of SoftBank, [a Japanese company,] crossed the lobby of Trump Tower and put his arm around the new U.S. president-elect.”  Following this brief photo opportunity, “[s]hares in Sprint, the U.S. telecom company that is controlled by SoftBank, surged 10 percent that day and the next, creating a windfall worth $3.3 billion for Sprint’s shareholders. Sprint’s stock price spiked on Wall Street’s belief that the meeting was an attempt to ensure that Donald Trump will look favorably on Sony’s plans for expansion in the United States.”

By contrast, in early January 2017, Toyota stock fell by 2% in five minutes – losing over $1 billion in value – after the then-President-elect threatened the company on Twitter. Similarly, pharmaceutical company stocks declined rapidly on January 11, 2017 after he asserted that pharmaceutical manufacturers were “getting away with murder” because of high prices, company stock value dropped rapidly.

Trump Organization Activities Potentially Relevant to the FCPA

Numerous public reports following President Trump’s election reveal that top Trump Organization officials – including the President, while he retained the role of Chairman, as well as those of his children who serve as top Trump Organization executives – may have used access to his Presidency to as a valuable enticement to foreign officials in a position to advance the Trump Organization’s business interests abroad.  For example:

  • President Trump’s first meeting with a foreign official during the transition was with Japanese Prime Minister Shinzo Abe.  The only other American individual in the room was the President’s daughter Ivanka.  Ms. Trump was, at the same time, working on a licensing deal with Sansei Bank, a wholly owned subsidiary of the Japanese government, to expand her apparel line to Japan.
  • According to some reports, when Argentinian President Mauricio Macri called to congratulate President Trump on his victory, the then-President-elect “asked Macri to deal with the permitting issues that are currently holding up” a Buenos Aires office building project planned by Trump and his Argentinean partners.
  • President Trump’s Philippine business partner Jose E.B. Antonio – with whom he is building a $150 million tower in Manila – was named a special envoy to the United States by Philippine President Rodrigo Duterte and met privately with the Trump children after the election.
  • Amid reports that top Trump Organization officials had visited Taiwan within a week of the election, that Eric Trump would soon visit, and that President Trump was “considering constructing a series of luxury hotels and resorts in the northwest Taiwanese city of Taoyuan,” the then-President-elect broke with decades of U.S. policy and spoke by phone to the President of Taiwan on December 1, 2016. When the Chinese ambassador to the United States called the White House to express displeasure, “the White House did not call the president-elect’s national security team. Instead, it relayed that information through [President Trump’s son-in-law Jared] Kushner, whose company was not only in the midst of discussions with Anbang but also has Chinese investors.”
  • The Kuwaiti Embassy, after “members of the Trump Organization contacted the Ambassador of Kuwait . . . and encouraged him,” moved its National Day celebration to the Trump International Hotel in Washington, D.C., in what “appear[ed] to be an effort to gain favor with [the] president-elect through his business entanglements.”
  • On January 11, 2017, then-President-elect Trump announced that he had received – but turned down – a “$2 billion to do a deal in Dubai with a very, very, very amazing man, a great, great developer from the Middle East,” Emirati billionaire, Hussain Sajwani. Mr. Sajwani had earlier commented on his close relationship with President-elect Trump’s children, and the benefits of the Trump Presidency on their joint projects, stating, “Naturally, I think we will benefit from the strength of the brand going forward.”
  • The Chinese government has sought to influence U.S. government decision-making by seeking to create and strengthen connections with the President’s family members. “The access Trump’s family enjoys to the president has empowered their role in decision-making as formal responsibilities in the administration remain in flux.” The President’s son-in-law Jared Kushner, in seeking to advance his own business interests, met with the chairman of a Chinese company who “declared his desire to meet the president-elect.”
  • China’s trademark review board granted President Trump trademark protection for the use of the Trump name in construction. “Trump fought unsuccessfully in Chinese courts for years to try to gain control of the trademark, but his fortunes changed suddenly last year during the latter stages of his campaign for the White House.”
  • According to the Wall Street Journal, Donald Trump Jr. was “likely paid at least $50,000” to speak at a French think tank “whose founder and his wife are allies of the Russian government in efforts to end the war in Syria.” Randa Kassis, the founder’s wife, “is the leader of a political faction endorsed by Russia in negotiations” over the Syrian conflict.

The details of these contacts are unclear, and it is possible that not every call or contact involved Trump Organization business or was initiated by Trump Organization officials.  Whether representatives of the Trump Organization provided valuable access to the President for the purposes of seeking influence to obtain or retain business would have to be determined by a fact-specific examination.  But these reports clearly suggest that President Trump mixed his role as President-elect and Trump Organization Chairman during the transition, and that since President Trump took office, he and his children have not hesitated to make foreign officials aware of the Trump Organization’s interests in their countries.

Many opportunities continue to exist for similar problems to arise, and will continue as long as President Trump is in office.  The Trump Organization has “deep [business] connections” to countries like China, Libya, and Turkey, [and] [o]rganization officials … have expressed interest in expanding [the business] into … Ukraine and Russia. Mr. Trump’s extensive business dealings with oversees partners “make it impossible for him to conduct foreign policy in many countries without padding or depleting his wallet.” 

At a press conference on January 11th, 2017, Mr. Trump outlined his plan to attempt to absolve conflicts of interests regarding the Trump Organization. President Trump indicated he would resign from all officer and other positions he held with the Trump Organization entities and that his sons, Don and Eric, along with Trump Executive Allen Weisselberg, would run the Trump Organization. This plan also included appointing an ethics adviser to the management team, requiring the ethics adviser to sign off on any domestic deals, having no foreign deals made during the time of his presidency, donating the foreign profits from Trump Hotel to the U.S. Treasury, and limiting the President’s information rights.

Office of Government Ethics Director Walter M. Shaub, Jr. immediately responded that the plan would not remove conflicts of interest. According to Mr. Shaub, the proposed arrangement would not obviate concerns about potential FCPA violations.  Mr. Trump would continue to have extensive contact with the people in charge of running his business – his children – who would have ample opportunities to offer valuable access to the President or his good will to foreign officials to try to influence decisions affecting their business interests abroad.

Richard Painter, who served as chief ethics lawyer for the White House under President George W. Bush, described the precise FCPA concerns that would be present if Mr. Trump’s children took control of his business:

There is a big risk that anyone discussing Trump business and U.S. government business in the same conversation or with the same people could be accused of offering or soliciting a bribe — e.g. ‘I want you to do this for the Trump organization — and I can get the US government to do this for you.’ That could be a criminal offense.

Such a violation of the law would require DOJ action.  As recently explained by former Deputy Attorney General Sally Yates:

When we’re talking about Foreign Corrupt Practices Act (FCPA) enforcement . . . we cannot forget that behind every bribe and illegal payment is one or more individuals who knew what they were doing was wrong and nonetheless broke the law. . . .  [W]e must do our best to ensure that whoever is responsible is held accountable.  As I’ve seen over and over again during my career, the best way to deter individual conduct is the threat of going to jail.  That’s what truly changes behavior.  That’s what changes the calculus as employees and executives decide whether to participate in an illegal scheme.

Conclusion

Due to reports indicating that President Trump and his children have not taken appropriate steps to insulate the office of the President from the financial interests of the Trump Organization, I ask that you provide me with answers to the following questions:

  1. Is the Trump Organization covered by the bribery provisions of the FCPA?
  2. Are President Trump and his children, as owners or senior officials in the Trump Organization, subject to the bribery provisions of the FCPA?  Would they be subject to the FCPA’s criminal penalties if found to be in violation of the FCPA?
  3. Are non-tangible but beneficial favors provided to foreign officials considered to be “anything of value” under the bribery provisions of the FCPA?
  4. Would access to or the good will of the President-elect or President of the United States or members of his family be considered such a beneficial favor?
  5. What criteria would the DOJ use to determine if the provision of access to or the good will of the President-elect, President of the United States, or members of his family represent a violation of the FCPA?
  6. How might these decisions be complicated by the fact that the President and his family currently have significant interests aligned with a large, privately held, domestic business organization?
  7. How have the actions that President Trump has taken to step back from the day-to-day operations of the Trump Organization affected concerns related to potential FCPA violations by Trump Organization officials, including his family members, who are in position to provide access to the President?

This is an urgent and important matter, and I ask that you provide answers to my questions as rapidly as possible.”

Strategies For Minimizing Risk Under The FCPA

A compliance guide with issue-spotting scenarios, skills exercises and model answers. "This book is a prime example of why corporate compliance professionals and practitioners alike continue to listen to Professor Koehler."

Order Your Copy [5]