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

The Donald Goes Off And Conflates The Issues

Business mogul Donald Trump (who in recent years flirted with a Presidential run) recently went off on the Foreign Corrupt Practices Act on CNBC’s Squawk Box program.  (See here [1] for the video – the FCPA portion begins at approximately minute 14).  Joining Trump in the discussion was Tom Stemberg of Highland Capital Partners.  You will hear during the program views that FCPA enforcement has become “absolutely crazy,” and that the FCPA is a “horrible law.”

As with most post-News Corp. and post-Wal-Mart commentary, Trump conflates two issues:  (1) the FCPA as passed by Congress and (2) the FCPA as enforced by the DOJ and SEC.  Many of the concerns Trump and Stemberg raise were addressed by Congress when Congress elected not to capture payments to “foreign officials” in connection with ministerial or clerical acts.  For more on this issue, see this [2] previous post “Understanding Wal-Mart.”

You will also hear during the Squawk Box program a suggestion that instead of prohibiting improper payments, the FCPA should merely require disclosure of such payments.  I do not agree with the suggestion, but it is not an outlandish suggestion.  Indeed, as discussed in several prior posts (see here [3] for instance) in the mid-1970’s Congress considered two main competing legislative proposals to deal with the so-called foreign corporate payments problem:  prohibition vs. disclosure.

The disclosure regime was favored by the administration of Gerald Ford.  President Ford’s point person on the issue was Elliot Richardson (Secretary of Commerce) who, in a letter to Senator William Proxmire (a Congressional leader on the issue), summarized the work of the Ford Task Force as follows.  “The Task Force has concluded that the criminalization approach would represent little more than a policy assertion, for the enforcement of such a law would be very difficult if not impossible.  […] The criminal approach would represent poor public policy.  […]  At the same time, the Task Force perceived several very positive attributes of systematic disclosure.”  President Ford stated as follows.  “The reporting requirement covers a broad range of payments relative to government transactions as well as political contributions and payments made directly to foreign public officials.  By requiring reporting of all significant payments, whether proper or improper, made in connection with business with foreign government, the legislation will avoid the difficult problems of definition and proof that arise in the context of enforcement of legislation that seeks to deal specifically with bribery and extortion abroad.”

The disclosure regime was rejected by Congressional leaders.  A Senate Report stated as follows.  “The Committee concluded that an outright prohibition would be at least as feasible to enforce as any meaningful disclosure requirement.  […] Clearly, in order to enforce such a disclosure requirement and apply sanctions for failure to file reports, it would be necessary to prove that the undisclosed payment was actually made, and that it was made with an improper purpose.  Thus, the same evidence necessary to prove a violation of a direct prohibition would have to be marshalled in order to enforce a disclosure statute.  Accordingly, the Committee concluded that a disclosure approach has at least the same enforcement problems inherent in the direct prohibition approach and none of its advantages.”

Jimmy Carter (who favored a prohibition regime over a disclosure regime) defeated Ford in the 1976 election and the rest is history.