Trump Administration Backs Broad Reach of FCPA –UPDATE

(Two days after this post appeared Washington Post columnist David Ignatius offered an important insight into where the Trump Administration policy on the FCPA is likely to end up in his March 10 column on former Exxon chief and now Trump Secretary of State Rex Tillerson:

“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.”)

Presented with a first opportunity to narrow the reach of the Foreign Corrupt Practices Act, the Trump Administration refused, choosing instead to back the Obama Administration’s view that the act reaches those who help bribe an official of a third country no matter whether the defendant ever steps foot in the United States or works or acts for a U.S. company.  In endorsing this broad reading of the act, the Administration rejected pleas from FCPA defense lawyers that such a reading was an “unwarranted” and “unprecedented attempt to … ensnare foreign individuals who fall outside the carefully-delineated categories of principals covered by the FCPA.”  To the contrary, its lawyers told an appeals court, if the act were read to exclude these individuals, executives of non-U.S. companies could orchestrate foreign bribery schemes involving American companies with impunity.

The case arose from allegations that executives of the American subsidiary of the French firm Alstom had bribed Indonesian officials to win a $118 million contract to build power plants for the government.  Among those the Justice Department charged with FCPA violations was Lawrence Hoskins, a citizen of the United Kingdom working for the Alstom parent in Paris. His role, if any, in the bribe scheme remains to be established at trial, but one possibility is he orchestrated or facilitated it from his Paris perch though never traveling to the U.S. nor working or acting for the American subsidiary. If these facts are proved at trial, the Department asserts Hoskins is guilty of violating the FCPA as an accomplice, either because he aided and abetted those who actually paid the bribe or conspired with them to do so.

The trial court rejected both theories, however.  It ruled that an accomplice to an FCPA violation is beyond the act’s reach if the accomplice remained outside the U.S. while the act was violated and did not work or act directly for the U.S. entity that violated it.   The Department appealed and written arguments were submitted before the Trump Administration took office.  The appeals court did not hear the case until March 2, giving the Trump Administration time to ask for a delay to reconsider the Obama Administration’s position.  It could have also backed away from the Obama Administration’s interpretation of the law at the March 2 hearing (as it has done twice in hearings involving civil rights cases) and endorsed the trial court’s narrow reading of the act.

That it did not pursue either option is another signal, like that recently sent by the Trump official immediately responsible for FCPA enforcement, that whatever changes the Administration has planned elsewhere, a more relaxed view of the reach of U.S. antibribery laws is not one of them.

(The FCPA Professor Blog excerpts the appeal briefs of the Justice Department and Hoskins as well as the friend of the court brief by FCPA defense counsel arguing the view of the act the Trump Administration is defending is “unwarranted” and “unprecedented” here.)

3 thoughts on “Trump Administration Backs Broad Reach of FCPA –UPDATE

  1. Pingback: Trump Administration Backs Broad Reach of FCPA | Matthews' Blog

  2. Pingback: FCPA News Galore This Week -. Radical Compliance

  3. The Trump Administration has certainly taken some steps backwards on the anticorruption front, and those steps may indeed be read by other governments and the private sector that America’s long-time commitment to fighting corruption is waning. But the signals don’t all point in the same direction. At the risk of being labelled a Trump supporter, the measures below the Administration has taken point in the opposite direction –

    * The Executive Order issued January 28 that, as a Washington Post article explained, “will make it harder for administration appointees to profit off their time in government as lobbyists” by among other things banning appointees from lobbying their agencies for five years after leaving office (by law it is one and Obama extended it to two with an order he issued) and from lobbying anyone in the executive branch for the rest of his administration. The order also banned appointees from ever working as lobbyists for a foreign government (neither ethics laws nor previous Presidential orders contain such a ban).

    * A February 16 pronouncement by a key Trump Justice Department appointee that enforcing the FCPA is a “solemn duty” of the Department “regardless of party affiliation.”

    * The Administration’s support before the Second Circuit Court of Appeals for an Obama-era interpretation of the FCPA that would allow prosecution of foreign persons as accomplices not matter how much contact, if any, they had had with the U.S.

    * The decision today to take over a healthcare fraud case brought by a whistleblower. Public Integrity quotes an associate director of Taxpayers Against Fraud saying that “This is a very big development and sends a strong signal that the Trump administration is very serious when it comes to fighting fraud in the health care arena.”

    There are surely policymakers in some countries looking for excuses to ease up on enforcing the anticorruption laws, and we can expect them to use any ammunition the Trump Administration provides to justify their actions. But let’s be sure those who oppose enforcement roll-backs have all the come-backs available.

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