Some Thoughts on the Trump-Tillerson FCPA Exchange

Dexter Filkins’ terrific New Yorker piece on US Secretary of State Rex Tillerson earlier this month included an anecdote about an exchange between Tillerson and President Trump concerning the Foreign Corrupt Practices Act (FCPA). For those who haven’t seen it, here’s the basic gist: In February 2017, shortly after Tillerson was sworn in as Secretary, he was meeting with Trump about an unrelated personnel matter when Trump launched into a tirade about the FCPA, and how it put US businesses at an unfair disadvantage. (That Trump holds this view is no surprise: He had expressed similar criticisms of the FCPA in public prior to his election.) But Tillerson pushed back, using an anecdote about how, when Tillerson was CEO of Exxon, senior officials from Yemen had demanded a $5 million bribe to close a deal that Exxon was pursuing in that country. Tillerson told Trump that he refused to pay, and made it clear to the Yemenis that this wasn’t how Exxon does business—and in the end Exxon got the deal anyway. According to Mr. Filkins’ source, “Tillerson told Trump that America didn’t need to pay bribes—that we could bring the world up to our own standards.”

Though it’s only a minor part of Filkins’ piece, the alleged exchange about the FCPA has attracted a fair bit of attention and commentary over the past month (see, for example, here, here, here, and here), much of it expressing or implying concern about this further evidence of President Trump’s hostility to the FCPA. It’s slightly puzzling that this anecdote is attracting more attention now, since the alleged exchange (which took place in February) was actually reported in early March—though Filkins’ piece has a little bit more detail (like the name of the country involved). Perhaps it’s because a news item about the FCPA was drowned out in early March by more pressing and immediate matters. (Trump issued the second version of his travel ban two days before the March report about the Trump-Tillerson FCPA exchange, and the federal district judge in Hawaii issued its injunction temporarily blocking enforcement of the ban a week later.) And perhaps the renewed attention to this item also has something to do with recent reports of an increasingly strained relationship between Trump and Tillerson.

Ultimately, though, it’s not so important to figure out why this anecdote is getting more attention now than it did back in March. The more interesting question is what, if anything, it reveals about the state of thinking—in government and the private sector—about the FCPA. There’s only so much that one can or should draw from a single vignette, but I do think it invites a few observations:

  • First, while a great deal of the commentary has expressed dismay at Trump’s hostility to the FCPA—dismay that I generally share—it’s worth noting that Trump’s position, in particular the idea that the FCPA in its current form puts US businesses at an unfair disadvantage—is not all that far from the position long advanced by “mainstream” lobbying organizations (like the US Chamber of Commerce) and some scholars. Indeed, when Andrew Weissmann, who is now part of the team assembled by Special Counsel Robert Mueller to investigate possible collusion between Trump’s presidential campaign and Russia, was in private practice, he was one of the principal co-authors of the Chamber of Commerce’s Restoring Balance report, which proposed various amendments to the FCPA that would substantially weaken it. The proffered justification for these proposals was primarily the claim that the FCPA, in its current robust form, places US businesses at a disadvantage. True, the Chamber’s report appears to be more sophisticated and moderate than Trump’s crude rant (even though, as I’ve argued before, Weissmann’s report is deeply flawed and misleading). But it’s a little puzzling that Trump’s comments seem to be viewed as so shocking in some quarters. But I guess this is a pattern we’ve seen before: Trump says out loud, in crude, unvarnished terms, something that other activists (especially but not exclusively conservative Republicans) have been implying or suggesting or dressing up in more sophisticated packaging for years, and suddenly everyone is shocked. This doesn’t mean we shouldn’t be upset that the US President wants to do away with the FCPA as we know it. We should, and I am. But we should be similarly bothered when essentially the same arguments get advanced by more “respectable” voices.
  • Second, the fact that Trump’s hostility to the FCPA hasn’t (yet) seemed to translate into a substantial slowdown in FCPA enforcement should perhaps give us cause for hope. It’s true that there was something of a lull in the first few months of the administration, but more recently there have been a number of major settlements. These, of course, were cases that were still in the pipeline from the Obama Administration, and I still think there are reasons to worry about the longer term. But the strong version of the conjecture that FCPA enforcement would grind to a halt under a Trump presidency seem not to have been borne out. For this, I think we can thank two factors, both of which are illustrated, albeit indirectly, by the Tillerson anecdote: (1) resistance, or simple inertia, in the bureaucracy (more the line attorneys at the Justice Department than the Secretary of State, but still, Tillerson’s pushback illustrates the phenomenon), and (2) Trump’s short attention span and general incompetence in translating most of his preferences into actual policy change, especially when they’re not supported by his more capable advisors and subordinates. (Tillerson’s Exxon-Yemen story apparently left the president “at least momentarily mollified.”)
  • Third, to me the most interesting part of the story – and the one that’s gotten the least attention – is the fact that Tillerson chose to push back so hard against Trump when Trump started ranting about how bad the FCPA was for US business. Keep in mind that this wasn’t actually a policy discussion – Tillerson was there to talk about a personnel matter. Keep in mind also that Tillerson used to be CEO of Exxon, and he is no friend of many transparency efforts endorsed by anticorruption advocates, such as more stringent rules for extractive industry transparency. He could have easily agreed with the President, either out of genuine agreement or to placate him – after all, Tillerson is head of the State Department, not the Justice Department or SEC, and so has no direct role in FCPA enforcement. Tillerson could have agreed with the general gist of the President’s rant – that FCPA is unfair to US businesses – but suggested that instead of getting rid of the law, it should be “reformed” along the lines suggested by the Chamber of Commerce. He could have just smiled and nodded. But instead, he pushed back, fairly hard by the standards of this administration, and in doing so he invoked an argument that anticorruption advocates, and some business leaders, have been trumpeting for years: that the FCPA (not its mere existence, but its aggressive enforcement) does not harm (ethical) US businesses, because US businesses have sufficient competitive advantages on other dimensions, and also that adhering to the FCPA is consistent with the values that US businesses ought to embrace. Now, might there be some hypocrisy here, given Exxon’s blemished record both on foreign corruption and other issues? Of course. But the fact that the former CEO of Exxon could have internalized this basic message to the point that he would push back against the President’s complaints about the FCPA in a closed-door meeting should actually be taken as a great sign of progress, and something that anticorruption community and the US enforcement agencies can justifiably celebrate. If in 1981 President Reagan had complained about the FCPA to the CEO of a major US oil company in a closed-door meeting, I very much doubt the CEO would have responded the way that Secretary Tillerson did. This is a sign of genuine cultural and attitudinal change in the US business community, and is to my mind the most important and newsworthy aspect of the Trump-Tillerson story.

3 thoughts on “Some Thoughts on the Trump-Tillerson FCPA Exchange

  1. Thanks for this very interesting piece. It is encouraging to see how the forceful enforcement of FCPA throughout these years has shaped and helped internalize the value businesses should embrace — the deal between Exxon led by Tillerson and Yemen, as well as Tillerson’s pushback against President Trump’s hostile comments on FCPA clearly demonstrate it. Especially when Tillerson stressed time and again he is no diplomat but a businessman, it reinforces the cultural and attitudinal change that anticorruption is accepted as a value of the business community, not simply an aspect of US foreign policy.
    One thing I have noticed from the New Yorker article, however, is that his actions and reactions have a lot to do with the way he was brought up and educated: he came from a humble family in Texas, was an Eagle Scout member, extolled the virtue of capitalism, is known for being straight, ethical, domineering and less folksy, among others. His strong belief that one’s reputation and one’s company’s reputation is the first rule of running the company also seems to play a big part in explaining why he so responded. This observation makes me rethink whether such cultural change has been widely spread across the business community or is only manifested in corporations greatly influenced by their helmsmen and their strong character.

  2. See below for additional commentary including facts including that some of the most forceful comments about the FCPA made during the 2010 Senate hearing were from Democratic senators.

    The New Yorker article broadly speaking was about ethics and transparency, funny though how the biggest ethical breach seemed to be from the New Yorker in NOT mentioning that the purported Tillerson / Trump exchange was widely reported in the media by other sources.

    Professor Mike Koehler

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