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The Purported Trump / Tillerson FCPA Exchange Is Old News … In Any Event, Some Context

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As one who closely follows news related to the Foreign Corrupt Practices Act, I was surprised over the past few days about the amount of coverage given to a purported exchange between President Trump and Secretary of State Rex Tillerson about the FCPA.

The originating source for this coverage was a relatively minor blurb in this New Yorker article. What surprised me (and you certainly would not know this from reading the New Yorker article because it doesn’t mention this) is that the purported exchange was widely reported back in March.

This post highlights how this is an “old news” item, provides facts about FCPA enforcement during the first 8 months of the Trump administration, and demonstrates that President Trump is far from the only politician to raise concerns about the FCPA and its enforcement. Indeed, Democrats and Republicans have long done the same thing.

The minor blurb in the New Yorker article was as follows:

“In February, a few weeks after Tillerson was confirmed by the Senate, he visited the Oval Office to introduce the President to a potential deputy, but Trump had something else on his mind. He began fulminating about federal laws that prohibit American businesses from bribing officials overseas; the businesses, he said, were being unfairly penalized.

Tillerson disagreed. When he was an executive with Exxon, he told Trump, he once met with senior officials in Yemen to discuss a deal. At the meeting, Yemen’s oil minister handed him his business card. On the back was written an account number at a Swiss bank. “Five million dollars,” the minister told him.

“I don’t do that,” Tillerson said. “Exxon doesn’t do that.” If the Yemenis wanted Exxon on the deal, he said, they’d have to play straight. A month later, the Yemenis assented. “Tillerson told Trump that America didn’t need to pay bribes—that we could bring the world up to our own standards,” a source with knowledge of the exchange told me.”

You would not know it from reading the New Yorker article, but in substance this is what was reported back in March by the Washington Post. This March 9, 2017 article states:

“An example of the role Tillerson could play is an exchange in February about the Foreign Corrupt Practices Act. During a White House meeting, Trump complained that the anti-bribery statute cost the United States billions of dollars in lost sales overseas and millions of jobs. According to one insider, Tillerson dissented and described how he had walked away from an oil deal in the Middle East after a leader there demanded a payoff — but later was invited back.” “You’re Exxon!” Trump countered, but the former chief executive dissented again. “No, people want to do business with America.” This pushback from an experienced person is what Trump needs …”.

The purported Trump / Tillerson FCPA exchange reported in March 2017 was also picked up by several other sources (see here) including this law firm FCPA client.

Predictably, on social media the past few days a conga line of supposed compliance and ethics gurus pounced on the recent New Yorker article, but it appears that the only actual ethical breach is the New Yorker article does not mention that the substance of the purported Tillerson / Trump FCPA exchange was widely reported months before its article.

In any event, it seems that much of what passes for “journalism” these days is journalists reporting on what others journalists are writing about and thus, not surprisingly, the FCPA blurb in the New Yorker article quickly spread. (See here and here among other links). The articles use “click-bait” headlines to drive a narrative, yet provide little context for how the narrative is actually false. You would think that a journalist writing an article inferring that President Trump wants to ditch the FCPA would spend an extra few minutes before hitting the publish button to actually learn about FCPA enforcement in the Trump administration.

Here are some facts.

In the first 8 months of the Trump administration there have been more DOJ corporate FCPA enforcement actions than certain prior years in the Obama administration.

In the first 8 months of the Trump administration there have been 5 corporate FCPA enforcement actions with over $535 million in aggregate FCPA settlement amounts. This aggregate settlement amount exceeds aggregate FCPA settlement amounts secured during three years of the Obama administration: 2015, 2012, and 2011 (see here for more information). True, the bulk of this approximate $535 million amount comes from one enforcement action, but this dynamic has always been present in FCPA enforcement statistics regardless of administration.

In seeming efforts to ignore or dismiss facts concerning FCPA enforcement in the Trump administration, I have already seen on social media – and predict this will continue – some discounting FCPA enforcement thus far during the Trump administration because the enforcement actions originated in a prior administration. This is true, but again this dynamic has always been part of FCPA enforcement and FCPA enforcement actions during the first few years of the Obama administration originated during a prior administration.

Regarding FCPA enforcement during the Trump administration, the fourth quarter of each year has traditionally been an active quarter for FCPA enforcement. In short, FCPA enforcement in the Trump administration appears to be following a normal path as predicted in this post.

Some additional context.

The notion that Trump purportedly expressed concern about how FCPA enforcement impacts U.S. business hardly makes him unique as politicians (both Democrats and Republications) have articulated similar concerns since the FCPA was enacted in 1977.

For instance, in 1980, the Carter administration (recall that President Carter signed the FCPA into law in 1977) sent a report to Congress prepared by the Secretary of Commerce and the U.S. Trade Representative titled “Report of the President on Export Promotion Functions and Potential Export Disincentives.” In pertinent part, the report stated:

“The [FCPA] is identified by businessmen and attorneys as one of the most significant export disincentives.  […]  The Act inhibits exporting because of uncertainty within the business community about the meaning and application of some of its key provisions.

“Uncertainty about the meaning of key provisions of the FCPA and how it will be applied is having a negative effect on U.S. exports.  Many of the businessmen and attorneys consulted expressed the view that this uncertainty has a far greater impact than the actual prohibition against bribery.  The problem described, in essence, is that what conduct is prohibited and what conduct is not prohibited under the Act is often unclear.  In order to avoid possible violations of the Act, attorneys often give such cautious guidance that their clients simply forego any transactions where the FCPA could possibly become an issue.”

“The effects of these uncertainties reportedly manifest themselves in various ways.  Consultations with the private sector revealed instances in which U.S. companies:

withdrew from joint ventures for fear they later could be held responsible for the acts of their foreign partners; incurred substantial legal and investigative costs to check the backgrounds of their sales agents abroad; were unable to obtain the services of effective sales agents; lost contracts simply because of the time needed to investigate sales agents abroad and institute safeguards; withdrew from existing markets; and declined to enter new markets.”

“Finally, companies point out that the extent to which companies have been successfully prosecuted under the FCPA does not define the extent of the disincentive.  Uncertainty can be a disincentive without any prosecutions and, moreover, exports are inhibited merely by the possibility of public charges and the adverse publicity surrounding them.  Even where a company is totally convinced that a court would find that it had not violated the FCPA, it nonetheless may forego the export opportunity for fear that an enforcement agency could publicly charge it with a violation of the Act.”

In 1981, the Government Accounting Office (“GAO”), the investigative arm of Congress, released a report titled “Impact of Foreign Corrupt Practices Act on U.S. Business.” The report was based in part on a GAO questionnaire survey of 250 companies randomly selected from the Fortune 1000 list of the largest industrial firms in the U.S. and the questionnaire addressed the FCPA’s relationship to the following four areas: (1) corporate policies and/or codes of conduct; (2) corporate systems of accountability; (3) cost burdens, if any, incurred by management to comply with the FCPA; and (4) corporate opinions regarding the: (i) FCPA’s effect on U.S. corporate foreign sales; (ii) the clarity of the FCPA’s provisions; (iii) the potential effectiveness of an international anti-bribery agreement; and (iv) perceived effectiveness of the FCPA in reducing questionable payments.

The GAO found that while the FCPA “has brought about efforts to strengthen corporate codes of conduct and systems of internal accounting control,” corporations reported that “their efforts to comply with the [the FCPA] have resulted in costs that were greater than the benefits received” and that a substantial number of businesses “reported that they had lost oversees business as a result” of the FCPA.  The GAO report noted concerns that the FCPA’s anti-bribery provisions were “vague and ambiguous” and stated that while “unambiguous requirements may be impractical and could provide a roadmap for corporate bribery” companies operating in the global marketplace “should be subject to clear and consistent demands by the Government agencies for enforcing the act.”

As noted in this previous post, President Reagan’s administration sought decriminalization of foreign payments subject to the FCPA.

Fast forward to the FCPA’s modern era and some of the most forceful critiques of the FCPA during the Senate’s 2010 FCPA hearing came from Democratic Senators. For instance, Senator Amy Klobuchar (D-MN) directed the following comment to the DOJ representative at the hearing:

“[O]ne of the basic principles of due process is that people in companies have to be able to know what the law is in order to comply with it. And I will tell you that I have heard from many very good standing companies in my State that they do not always know what behavior will trigger an enforcement action.”

Likewise at the hearing Senator Christopher Coons (D-DE) directed the following statement to the DOJ representative at the hearing:

“Has there been any reported appreciable change in the conduct or behavior of public officials overseas in response to our more aggressive enforcement or, as some companies have suggested, is this simply putting U.S.-headquartered companies at a disadvantage in not actually having some positive or desirable impact on the conduct of foreign officials?”

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