President Trump has suspended the enforcement of federal laws that he has long grieved: the Foreign Corruption Practices Act prohibits businesses from bribing foreign officials.
The law, enacted in 1977, makes it illegal for businesses operating in the United States to pay foreign government officials to ensure business transactions. Trump's order on Monday prohibits federal prosecutors from launching a new 180-day investigation or enforcement action. The Trump administration also said it would consider existing investigations to “restore appropriate boundaries” of the law.
The law, enacted by the Department of Justice and the Securities and Exchange Commission, has been heavily utilized over the past 20 years to crack down on bribery, including the state, a common business practice.
It is unclear how Trump's executive order suspending criminal investigations will apply to the SEC, which often allows civil lawsuits to be filed in parallel with the Department of Justice. Civil and criminal penalties include millions of fines and individual prison hours.
Here's what you need to know about the Anti-Corruption Act:
Why is Trump suspending law enforcement?
By adhering to the suspension, Trump argued that the law puts American businesses at a disadvantage and reflects long-standing criticism by the business community. The White House said in a fact sheet on Monday that US companies are “prohibited from engaging in common practices among international competitors and creating uneven playing field.” He writes that he caused harm.
During his first term at the White House, Trump asked administrative officials to make efforts that he had not gained traction. But Democrats and Republicans alike criticize the enforcement, said Mike Kohler, a scholar of foreign corrupt practices law who teaches at Texas A&M and other universities.
“Many of these substantial issues have been spoken by many people for several years in that executive order,” Kohler said. The Justice Department in the previous administration “already had been tinkering with the enforcement of the FCPA,” he added, saying the incident had been removed for national security reasons.
Critics also argue that the US increases corporate compliance costs by being more aggressive than other countries prosecuting foreign bribery cases. The influential New York City Bar Association questioned these costs in a 2011 report.
How have anti-bribery rules been applied recently?
Federal prosecutors and securities regulators are actively pursuing large corporations for violations. Last year, there were about 30 FCPA enforcement measures. In 2004 there were four.
One recent notable incident was an investigation into Goldman Sachs' involvement in a scandal with Malaysia's 1MDB Sovereign Wealth Fund. The investment bank was charged with paying bribes to Malaysian officials so they could manage billions of dollars in bonds issued by the fund.
The investigation peaked with Goldman's subsidiary pleading guilty to foreign bribery charges and paying fines and penalties of more than $2.9 billion. The former Goldman banker was sentenced to 10 years in prison.
Last year, FCPA enforcement measures included a $220 million settlement with multinational software company SAP to resolve investigations into a scheme that would pay government officials in South Africa and Indonesia. Ta. Deere & Company has also agreed to pay nearly $10 million to resolve SEC claims arising from a bribery claim paid by a Thai subsidiary.
What does the execution of a pause mean?
Some pending investigations could end as a result of Trump's orders, but it is unclear whether the case will be removed. In November, US prosecutors accused Indian tycoon Gautam Adani of bribeing Indian officials and accused him of indicting fraud. His company, Adani Group, calls the allegations baseless.
The suspension of enforcement could lead to an increase in corrupt activity, said Karen Woody, a law professor at Washington and Lee University, focusing on securities law and financial regulations. Woody criticized “forced prosecutions” under the Foreign Corruption Practices Act, but said halting the case would help businesses avoid bribery prosecutions.
“It's a big deal for multinational companies that this isn't enforced,” Woody said. “It's a really big ocean change.”
However, she added, “That doesn't mean they're out of hooks for foreign bribery and shady foreign business practices.” Other countries, including the UK and Germany, have anti-corruption clauses, she said.
Even before Trump's executive order, his new Attorney General Pamela Bondi had shown that her office had a less broad view of foreign bribery cases. In a memo outlining her priorities, Bondy said the FCPA incident would focus on investigations involving drug cartels or international criminal groups.
And if Washington's Department of Justice retreats, local US lawyers may be able to file their own lawsuits, said a former Department of Justice official who is a partner at Winsbury Winthrop Shaw Pittman in Pillsbury. One Richard Donogue said. He added that there is likely a transition to prosecution of individuals who paid the bribes rather than businesses.
“Now this will increase the chances of companies claiming prosecutors should not be held liable for employee misconduct,” Donohue said.
Matthew Goldstein and Isabella Kwai reported.
