Almost exactly one year ago, the day after the U.S. presidential election, I published a deeply pessimistic post about the likely future of U.S. anticorruption policy under a Trump presidency. As I acknowledged at the time, “the consequences of a Trump presidency are potentially so dire for such a broad range of issues–from health care to climate change to national security to immigration to the preservation of the fundamental ideals of the United States as an open and tolerant constitutional democracy–that even thinking about the implications of a Trump presidency for something as narrow and specific as anticorruption policy seems almost comically trivial.” That statement is, alas, still true. But what about the impact on anticorruption specifically? In my post last year, I made a bunch of predictions about the likely impact of a Trump presidency on corruption, anticorruption, and related issues. What did I get right and where did I go wrong?
This may seem a bit self-indulgent, but I think it’s often useful to go back and assess one’s own forecasts, not only in the interests of accountability and self-criticism, but also because examining where we got things right and, more importantly, where we went wrong can help us do a better job in the future. Of course, one difficulty in assessing my own predictions is that many of them concerned longer-term effects that we can’t really assess after one year (really 9+ months). And in some cases the predictions concern things that it’s hard to assess objectively. But it’s still a useful exercise. So, here goes:
Prediction #1: A Renewed Push in Congress to Weaken the Foreign Corrupt Practices Act (FCPA) Through Legislative Reform.
Last year, I predicted:
[T]he Foreign Corrupt Practices Act (FCPA) is likely to be substantially weakened, perhaps even repealed (though I think the latter possibility is still relatively unlikely). The FCPA “reform” crowd–the Chamber of Commerce, the defense bar, and their various supporters–will now have a Congress that is likely to support “reforms” that substantially weaken the statute, and a President who is already on record as calling the FCPA a “horrible law.” It may not be a top priority of the Republican Congress and the Trump Administration, but I expect that the Chamber and others will seize this legislative opportunity to push through many of the reforms that have been on their wish list for quite some time.
Here I was totally wrong, at least so far. To the best of my knowledge, there hasn’t been any concerted lobbying effort to amend the FCPA, and the usual suspects pushing for such reforms, like the Chamber of Commerce, don’t seem to be seizing the opportunity that I perceived. Why is this? I can think of three main possibilities:
- First, it may be that the legislative agenda has been so crowded with things that the relevant lobbying groups care about much more—like the ultimately unsuccessful push to repeal the Affordable Care Act, and the current debate over tax reform—that FCPA reform simply isn’t a priority right now.
- Second, and relatedly, it may be that FCPA reform was never that much of a high-priority issue for the Chamber and other groups in the first place. Sure, they wrote reports and occasionally got some people in hearings to say grumpy things about the FCPA, but that was mainly for show, or perhaps to indirectly influence the DOJ and SEC by implying that there could be a more aggressive legislative reform push if the enoforcement agencies were too aggressive. But it could be that the main business lobby groups don’t actually care enough to invest the time and energy necessary to get a bill through Congress, even under the most politically favorable circumstances.
- Third, it may be that it’s politically tricky for business groups to make an aggressive push for FCPA reform right now, precisely because Trump has expressed such crude opposition to the law, and because Trump’s conduct in other areas—such as his travel ban and his remarks after the white supremacist rally in Charlottesville—have made business leaders wary about being seen as cozying up too much to the administration. Part of the Chamber of Commerce’s lobbying strategy in earlier attempts to weaken the FCPA seemed to involve a combination of packaging statutory changes as common-sense reforms rather than veiled attempts to re-legalized foreign bribery, and cultivating bipartisan support for such efforts. Trump has made both aspects of that strategy more difficult, and I can imagine corporate leaders saying to themselves, “This isn’t really a good time to push for FCPA reform, as it will make us look like we agree with Trump about the FCPA being a horrible law, and we’re going to get a lot of bad PR.” (These three alternatives aren’t mutually exclusive; indeed, some combination of the three may be the most plausible explanation.)
Prediction #2: A Waning of Aggressive FCPA Enforcement
Also on the subject of the FCPA, last year I further predicted:
[T[he era of vigorous FCPA enforcement, which ran from about 2000 (give or take a couple years) up to the present, is over. It’s hard for me to imagine that the Attorney General of a Trump Administration (Rudy Giuliani, perhaps?) would make prosecuting foreign bribery a significant priority, or would devote substantial resources to this area. It might take a little while for the change to become apparent–there are still some cases in the pipeline, after all–but I’d be shocked if the US maintained anything like its current level of FCPA enforcement.
Here too I was mostly wrong (including about Trump’s choice for Attorney General), though perhaps not quite as wrong as I was in predicting a renewed push in Congress to amend the FCPA. At the risk of sounding defensive of apologetic, I’ll point out that, as I made clearer in a subsequent post, I didn’t think that we’d see that much of a short-term effect precisely because, as I noted in the original prediction, there are so many cases in the pipeline. And it is also the case that Trump continued to rail against the FCPA after getting elected, and his picks to head the SEC, and to head the Criminal Division at DOJ, have both been associated with reports or statements criticizing aspects of FCPA enforcement. For these and other reasons, I am still concerned about what might happen to FCPA enforcement under the Trump Administration in the longer term. But in retrospect, I think that in making my original prediction I was insufficiently attentive both to the influence of the career bureaucracy at DOJ and SEC, and to the extent to which aggressive FCPA enforcement has permeated the enforcement culture in those agencies. So while I remain worried about what might happen in the next two or three years, I would no longer say that I’d be “shocked if the US maintained anything like its current level of FCPA enforcement.” I don’t think we should be complacent, either, and if pressed, I would still predict that over the next few years, once the cases currently in the pipeline have been resolved, that FCPA enforcement won’t be as aggressive as it had been over the previous decade.
Prediction #3: Politicized Anticorruption Enforcement
I made two separate but closely related predictions about greater politicization of anticorruption prosecutions, once concerning the FCPA and the other concerning domestic anti-bribery law:
Insofar as the US continues to enforce the FCPA, I expect that enforcement will become much more politicized than it has been in the past, with more deliberate targeting of foreign companies (especially those that compete with firms close to Trump and his business associates) and more targeting of perceived political enemies. The complaint that FCPA enforcement is politicized, which I never took seriously before, is about to become much more plausible….
Domestically, I think that there is a very serious risk that enforcement of US anticorruption laws will become much more heavily politicized. Keep in mind that President George W. Bush apparently fired several US attorneys for either pursuing corruption cases against Republicans, or not pursuing corruption cases against Democrats. And there’s more systematic evidence of some partisan bias in domestic anticorruption prosecutions more generally. But I expect this problem to increase by an order of magnitude under a President Trump, who has already indicated his desire to use the powers of the presidency to go after his political opponents. And I’m not even talking about anything so brazen as Trump’s pledge to appoint a special prosecutor to go after Hillary Clinton–I have in mind more systematic targeting of Democratic politicians and officials, as well as a systematic shielding of Trump allies.
Here I don’t think we yet have enough information to assess whether my prediction was right or wrong, though in retrospect I clearly exaggerated the extent of the effect. (If the problem actually increased ten-fold or more, I think we would already have some fairly clear and tangible evidence.) Part of the issue here is that, as with the previous prediction about FCPA enforcement, the time it takes from the initiation of an investigation to a prosecution (or a final decision not to prosecute) is sufficiently long that even if Attorney General Jeff Sessions were crudely and cravenly pressuring DOJ prosecutors to weaponize corruption prosecutions, we probably wouldn’t see clear evidence of this yet. At the same time, I do think there have been some troubling early signs that this prediction was not at all paranoid or totally off-base: President Trump did fire former US Attorney Preet Bharara, allegedly because Bharara resisted Trump’s implied efforts to stop Bharara from aggressively investigating cases implicating Trump’s close associates. And of course President Trump fired former FBI Director James Comey over his refusal to terminate investigations into collusion between the Trump campaign and Russia. So the jury’s still out on this one, but the concern about politicization of anticorruption enforcement is still very much a live concern, even if the rhetoric of my original prediction may have been a bit over-the-top.
Prediction #4: Weakening of Asset Recovery Efforts
In addition to predicting a weakening of FCPA enforcement, I also predicted that the DOJ’s Kleptocracy Asset Recovery Initiative, would be in trouble. As I put it last year:
The DOJ’s Kleptocracy Initiative, which had been making so much exciting progress in its relatively short lifespan, is also likely to be on the chopping block. It seems to me highly unlikely that going after foreign kleptocrats–or indeed highlighting kleptocracy as a problem–is something that a Trump Administration will have much interest in. This is especially the case for kleptocrats with whom Trump, his family, his businesses, or his close associates do business. We don’t know for sure who these might be, but let’s just say I’m skeptical that the Kleptocracy Initiative, even if it survives, will spend much time looking into unlawfully obtained assets from associates of former Ukrainian President Viktor Yanukovych (a Putin ally) or Putin and his cronies.
As with my predictions of declining FCPA enforcement, in hindsight I think the rhetoric of my original prediction implied—wrongly—a much shorter timeframe in which we might see these effects than was reasonable. The Kleptocracy Initiative has still been active, for example in seizing assets apparently misappropriated by Uzbekistan’s ruling family. Here again, in my original prediction I overestimated the ability of the White House to induce rapid change in the behavior of the mission-driven career bureaucracy. The longer term effect of the Trump Administration on the Kleptocracy Initiative still remains to be seen, however. My sense is that the case to watch is the Malaysian 1MDB case, as Prime Minister Najib Razak already seems to be trying to influence President Trump directly. And of course the other difficulty with trying to assess my predictions regarding asset recovery efforts is that it’s hard to assess whether the DOJ is not looking into certain possible targets. So on this one I’m not sure I’m willing to concede that I was totally off base, but I’ll acknowledge that I exaggerated the speed at which things would go wrong.
Prediction #5: Weakening of Domestic Anticorrution Laws, Mainly Through Narrow Judicial Interpretations
With respect to domestic anticorruption laws, I also worried about a weakening, less through statutory amendments than through judicial (re-)interpretation. I wrote:
I also expect that domestic anticorruption laws will be weakened overall, as Trump’s power to fill several Supreme Court vacancies will accelerate the trend, which we have already seen in the current court, of reading anticorruption statutes narrowly.
It’s obviously too soon to tell whether I was right or wrong about this one, as we haven’t yet had a post-McDonnell Supreme Court decision on the interpretation of U.S. anti-bribery laws. I suspect that the case to watch here will be the case against New Jersey Senator Bob Menendez. This one’s interesting, because the defendant is a sitting Democratic Senator, and if one subscribes to a very crude partisan theory of judicial decision-making, then one might think that could make a difference. But on further reflection, I don’t think having Justice Garland instead of Justice Gorsuch (or whomever Hillary Clinton might have appointed) will make that much difference to the construction of federal anti-bribery laws. McDonnell, after all, was a unanimous decision, as were previous Supreme Court decisions in this area, like Sun-Diamond and Skilling. So while I do worry that the Supreme Court will continue to cut back on the scope of domestic anti-bribery laws, I no longer think Trump, and his judicial appointments, will have a significant impact on this trend.
Prediction #6: A Dead End for Efforts to Push Legislation Promoting Corporate and Financial Transparency
Last year, in the months leading up to Trump’s election, there’d been new efforts to promote greater corporate and financial transparency, including lobbying for new legislation in this area. I was extremely pessimistic about the prospects for these efforts, and said so in no uncertain terms:
[T]he recent big push by civil society advocacy groups and others to push for more corporate transparency, for example beneficial ownership transparency and stronger know-your-customer rules? Dead. If anything, I would expect a Trump Administration to be actively hostile to efforts to establish such measures elsewhere.
So here I was partly right but mostly wrong. The place where I was partly right was actually one that I didn’t mention explicitly in the original post, mostly because I wasn’t thinking about it specifically at the time: transparency in the extractive industry, particularly through “publish what you pay” (PWYP) rules. The Trump Administration’s hostility here bore immediate and bitter fruit: Congress passed and Trump signed a revocation of the SEC’s PWYP rule, and the administration is now pushing for a broader repeal or substantial modification of the statute that authorized those rules in the first place. And the Administration just last week announced that the US would withdraw from the Extractive Industries Transparency Initiative.
But it looks like I was flat wrong when I predicted that other legislative efforts to promote things like beneficial ownership transparency were dead in the water. In fact, though nothing has been enacted yet, civil society groups seem to have made considerable headway in getting new federal legislation cracking down on anonymous companies onto the congressional agenda. Again, it’s too early to celebrate – most legislative proposals go nowhere, and Trump himself may prove an obstacle if the opponents have his hear – but it’s worth pausing to consider why there seems to be some appetite for new legislation on this topic. While I haven’t followed the issue closely, I think at least part of the reason has to do with how civil society activists and other proponents have framed the issue. In short, they’ve emphasized the ways in which anonymous companies facilitate drug trafficking, sanctions evasion, terrorism, and other domestic or national security issues, rather than playing up the foreign corruption angle. That strategy seems to be working, and in retrospect in my post last year I think I underestimated the ability of advocates to find ways to engage with a seemingly hostile Congress and administration by framing issues in the right way. Of course, advocates tried a similar strategy on the PWYP rule and it didn’t work, but still, we’ve seen some encouraging signs on the possibility of legislative progress on the anonymous shell company problem, progress that a year ago I thought was impossible.
Prediction #7: An Intimidated Press
Last year, I was worried that Trump’s unprecedented threats against media outlets might cause them to temper their coverage:
Trump’s threat to strengthen defamation laws to allow him (or others) to sue media outlets for unfavorable coverage is, I hope, less likely to become a reality, as I hope that even the more conservative Justices of the existing Supreme Court would hold the line on that issue, no matter who else Trump appoints. But a chilling effect on the media is nonetheless a serious concern, as we have seen time and time again that a vigorous press is vital to exposing public corruption.
Here again, I was totally wrong – not because Trump hasn’t continued to try to bully the media, but because the media has, if anything, become more aggressive in covering Trump and investigating alleged malfeasance than it was during the election. In looking back at my original post, I see that I didn’t so much frame the possibility of a chilling effect as a “prediction,” but rather as a “serious concern”—I suspect because even then I thought that an actual chilling effect was unlikely. But I’m nonetheless heartened and encouraged by the degree to which the media has resisted attempts at intimidation.
Prediction #8: Treating the Presidency as a Profit-Making Opportunity
In addition to worrying about the impact that a Trump presidency would have on US anticorruption policy, I also worried about corruption in the Trump administration, and in particular that Trump, his family, and his cronies would use the presidency as a means for self-enrichment. I wrote:
I expect that Trump himself will likely be, if not a kleptocrat in the most brazen sense, then at least a quasi-kleptocrat–not directly stealing from the US Treasury, but shaping US policies in ways that are designed to enrich Trump and his associates.
Here, alas, I fear that I was basically right. We’ve been keeping track of credible allegations that Trump and his close associates have been profiting from the presidency. The list is long and troubling, and seems to get longer every month. I won’t belabor the matter, but it certainly appears that Trump and his inner circle are just as greedy and unscrupulous as the pessimists feared.
Prediction #9: A Decline in U.S. Leadership in Fighting Grand Corruption Around the World
In addition to my predictions about the impact of a Trump presidency for specific areas of anticorruption law and policy, I closed with a broader prediction about the decline of US leadership on this topic:
[G]rander plans to create a stronger international anticorruption architecture will go nowhere under a Trump presidency…. [U]nder a Trump Administration, the US is unlikely even to engage in a serious way with meaningful proposals to help fight grand corruption around the world. Anticorruption advocacy groups are going to have to re-think their overall strategies in a world where the United States not only has abdicated its traditional leadership role, but is likely to be actively obstructionist.
“Actively obstructionist,” was, in retrospect, probably going a bit too far, at least based on what we’ve seen this past year. But this is another prediction that, I’m sorry to say, seems to have been basically accurate. This one is hard to gauge, but my distinct impression is that the US isn’t taking much of a leadership role on this issue, and isn’t viewed by advocates or other governments as likely to do so anytime soon. And I do think that I was correct in my view that anticorruption advocacy groups are going to have to rethink their overall approach in a world where active US leadership on anticorruption is not something we can expect.
So, in taking stock of my overall predictions, I’ll make two concluding related observations:
- For my predictions that turned out to be most wrong (at least in the short term), a consistent theme was my underestimation of the influence of the career bureaucracy, and my overestimation of the ability (or desire) of the White House to effect major changes. I certainly overestimated the speed with which the change in administration would have an observable impact on policy. Perhaps things might look different in a few years, or might look different if the White House were more effectual, but for now it looks like I didn’t fully appreciate how much of a gap there would be between what Trump likely wants and what the US government actually does.
- Those of my predictions that were most accurate generally concerned the behavior and preferences of Trump himself. In this area and others, he is who we thought he was. He is either personally corrupt or at least so venal that he doesn’t know or care what corruption is; he is at best indifferent, and likely hostile, to anticorruption as a legal or policy objective; and he prizes personal loyalty and the protection of his own interests (and those of his family and close friends) above norms and principles. And that should still worry us, even if my direst predictions last year turned out to be overstated.
Recent withrawal from EITI & repeal of Section 1504 of Dodd-Frank may be better measures to evaluate the Trump Administration’s short & long-term anti-corruption efforts & intentions. Clearly appeasing the oil & gas industry has been their first priority. You can be assured the FCPA’s time will come.
I fear you may be right, and that was very much my original instinct when I wrote my pessimistic post a year ago. But I do think the fate of the FCPA is a bit more uncertain, for the reasons I lay out in the most recent post. Secretary Tillerson was, I gather, a driving force behind the elimination of the Section 1504 rules, and almost certainly had a hand in the EITI withdrawal. Yet he apparently has defended the FCPA. And at least right now, the FCPA appears to be a sufficiently low priority for the President that the career lawyers are continuing to do their thing without much interference. I’m still worried about what will happen in the longer term, though.
Kudos to you, for the reasons you mention, for taking a step back and a deep breath as I encourage all to do last November.
Professor Mike Koehler
You mentioned that you underestimated the influence and power of the career bureaucracy, people who didn’t leave after this election and will presumably be in their agencies for many election cycles. In addition to that effect, do you think it’s possible that political appointees are being captured by their agencies? In other words, do you think top enforcement officials at DOJ and SEC might start to develop different positions from when they were in private practice representing industry, now that their mission (and colleagues) have changed?
Yes, that’s definitely possible. It’s been known to happen (for good or ill, depending on the issue and one’s perspective) in many agencies. I think it’s especially likely that lawyers will be zealous advocates of whatever side they happen to be on, and if that side happens to be the government, they’ll instinctively want to enforce the law aggressively. But there’s still a fair bit of priority-setting that happens at a more senior level. If the President (or the Attorney General) really decided that FCPA enforcement wasn’t so important any more, we could very well see a shift, though there might be some internal resistance.