As regular GAB readers have likely figured out, I’m not terribly good at providing timely “hot take” reactions to news items—I’m too slow and get too distracted with other things, and by the time I weigh in on some recent development that caught my eye, I’m usually a couple of news cycles behind. So it will be with this post. But I did want to say a bit about the mini-controversy over comments a couple weeks back from Larry Kudlow, the Director of the White House National Economic Council, about the Trump Administration’s views on the Foreign Corrupt Practices Act (FCPA). For those who might have missed the reports, here’s the basic gist:
A forthcoming book about the Trump Administration includes the story (which had already been reported multiple times) that back in 2017, President Trump had vigorously complained to then-Secretary of State Rex Tillerson that the FCPA put U.S. companies at an unfair disadvantage and ought to be scrapped or drastically altered. (Tillerson, to his credit, pushed back, and no action was ultimately taken.) Several pre-release commentaries on the book focused on this anecdote (see here and here), and a couple weeks back a reporter asked Kudlow about it. Kudlow responded, “We are looking at [the FCPA], and we have heard some complaints from our companies…. I don’t want to say anything definitive policy-wise, but we are looking at it.” When pressed for details, Kudlow said, “I don’t want to say anything definitive policy-wise…. Let me wait until we get a better package [of reforms].”
Kudlow’s comments triggered a great deal of critical reaction, including statements supporting the FCPA from civil society organizations like Transparency International and the Coalition for Integrity. These statements were forceful but measured, mainly emphasizing the benefits of the FCPA. Some other media reactions were more impassioned, playing up the narrative that the Trump Administration was planning to push for the legalization of (foreign) bribery (see here and here). That latter strain in the commentary, in turn, provoked pushback from other analysts, who saw Kudlow’s remarks (and perhaps also the President’s own statements and actions in this area) as no big deal (see here and here).
My own take is somewhere in the middle. On the one hand, we shouldn’t exaggerate the significance of Kudlow’s remarks. But neither should we dismiss them as meaningless or harmless.
There are a few reasons why we shouldn’t exaggerate the significance of Kudlow’s comments, and shouldn’t treat them as a signal of an imminent threat to the FCPA:
- First, the comments themselves were in reaction to a reporter’s question about excerpts from the forthcoming book, and were fairly noncommittal. It’s not like Kudlow called a press conference to announce the Administration’s plan to pursue FCPA reform. He was asked the question during a general interaction with a scrum of reporters. Moreover, his statement wasn’t terribly forceful. “We’re looking it at” sounds like the generic response a senior government official might give when questioned on just about any topic that the official doesn’t know much about and doesn’t have any specific plans to address. I haven’t seen any other reports that the Trump Administration has made FCPA reform a priority. And even if Kudlow has no intention of actually putting this on the agenda, pretty much every senior official in the Trump Administration knows not to get caught on TV saying anything that the president might not like, so of course Kudlow would try to at least gesture in the direction of characterizing the FCPA as a problem.
- Speaking of President Trump’s own views, his hostility to the FCPA is well-documented, but so far he hasn’t been able to translate this hostility into actual policy change. As I’ve suggested before (see here and here), I think the explanation for continued vigorous FCPA enforcement under the Trump Administration is a combination of several factors: (1) inertia, (2) the continued commitment of the career lawyers in the Department of Justice to enforcing the statute (hooray for the Deep State!), and (3) President Trump’s short attention span and general ineptitude as a manager. These factors haven’t changed much (yet), and I don’t think either the forthcoming book or Kudlow’s remarks present us with new information that should cause us to update our assessment of either the President’s hostility to the FCPA or the likelihood of significant changes to the statute or its enforcement.
- Speaking of which, there’s a plausible argument that Trump’s overt hostility to the FCPA, which the book and Kudlow’s remarks put back into the news, may actually reduce the (already low) probability of legislative “reforms” that would weaken the statute. There was a time, not too long ago, when proponents of such FCPA changes had attracted some degree of bipartisan interest, and had tried to peddle some of these changes as “technical” or “clarifying” modifications that would make the statute more “fair” or “balanced.” But the Trump Administration is so polarizing—and, as is obvious to everyone except the most deluded right-wing partisans, Trump and his cronies are so blatantly corrupt—that the Trump Administration’s hostility to the FCPA would likely make an “FCPA reform” agenda politically toxic, scaring away Democrats who ten or fifteen years ago might have at least been open to arguments about altering the statute in ways that the Chamber of Commerce and corporate defense bar would have liked. And at least for now, a Democratic majority in the House of Representatives means that without bipartisan support, any package of FCPA reforms would likely be dead-on-arrival in Congress.
So, while Kudlow’s remarks were certainly not encouraging, and groups like Transparency International and the Coalition for Integrity were right to use the opportunity to weigh in with public statements defending the FCPA, the critics of the more hyperbolic reactions to Kudlow’s statement have a point when they tell everyone to take a deep breath and calm down.
At the same time, I think would also be a mistake to dismiss Kudlow’s remarks as untroubling or irrelevant. Even if they do not signal any imminent threat to weaken the FCPA through legislative amendments, there are a few aspects of this whole incident that are genuinely worrisome:
- First, the contrasting approaches of Tillerson and Kudlow to President Trump’s hostility to the FCPA are a depressing reminder that those senior officials in the administration who were willing and able to restrain some of the president’s worst instincts during his first few years in office have steadily departed and been replaced by a collection of sycophants, con artists, and ideologues. Tillerson’s response to Trump’s ranting about the FCPA was to push back, emphasizing the benefits of the law and the importance of bringing other countries up to the U.S. level, rather than eroding U.S. standards. Kudlow’s response was to indulge the president’s hostility by intimating that weakening the law is “worth looking into.” True, Kudlow’s response was mainly a dodge rather than a genuine announcement of an FCPA reform agenda. And in fairness, Tillerson was speaking in private, while Kudlow was speaking in public. But there were so many other ways that Kudlow could have responded to the reporter’s question about Trump’s 2017 exchange with Tillerson. He could have said, “I’m not going to respond to questions about unconfirmed rumors of internal White House conversations.” He could have said, “Our Administration firmly opposes all forms of corruption, as well as maintaining a level playing field for American business.” He could have said, “The President has never discussed this matter with me.” He could have said, “You should address matters regarding the FCPA to the Department of State or Department of Justice.” But he said none of those things. He chose to emphasize “complaints from our companies” and that he would “look into” weakening the FCPA. This does not give one a lot of confidence that Kudlow will follow Tillerson’s example of pushing back internally against the President’s anti-FCPA instincts.
- Second, and building on one of the hypothetical alternative responses I suggested above, it’s not great that the Director of the National Economic Council is weighing in on the FCPA at all, and certainly not good that in doing so he’s referencing “complaints from our companies.” This creates the impression that the Administration is considering weakening the FCPA or scaling back FCPA enforcement for the purpose of benefiting U.S. companies. That’s a bad look for a few reasons. First of all, for years the U.S. has been trying to press other countries to enforce their own foreign bribery laws against their own companies, and to resist the impulse to elevate the profits of domestic firms (especially “national champions”) over ethical overseas business practices. Relatedly, the suggestion that the U.S. might weaken the FCPA could easily be read as a suggestion that the U.S. would no longer honor its commitments under the OECD Anti-Bribery Convention, which both requires signatories to maintain effective laws against foreign bribery and prohibits “considerations of national economic interest” from influencing the enforcement of such laws. Kudlow’s remarks were too vague and equivocal to be characterized as a statement that the Administration was actually considering actions that would contravene the Convention. But the OECD Convention is one of the most important instruments out there for “leveling up”—getting other countries to enforce their foreign bribery laws. And while I don’t want to exaggerate either the effectiveness of the OECD Convention or the significance of Kudlow’s remarks, it seems to me distinctly unhelpful, if one wants to pressure other countries to live up to their commitments under the Convention, for a top U.S. official to imply that the United States is “looking into” taking steps that might violate the letter or spirit of the Convention, in the name of addressing “complaints” from American companies.
- Third, and continuing on that theme, anything that contributes to the perception that U.S. enforcement of the FCPA is politicized—designed to help U.S. firms and hurt foreign competitors—is deeply unhelpful. Here, while Kudlow’s remarks in isolation don’t say much, consider them in conjunction with the 2018 memo from then-Attorney General Jeff Sessions announcing the Department of Justice’s “China Initiative.” That memo stated (in what may have been a stray sentence added without much thought or internal vetting) that one of DOJ’s priorities would be to “[i]dentify [FCPA] cases involving Chinese companies that compete with American businesses.” So, one senior U.S. official announces an intention to aggressively enforce the FCPA against foreign businesses that compete with American companies, and then a little over a year later another senior U.S. official makes noises about adjusting the FCPA in ways that will lighten the burden on American companies. This is not a good look. For the record, I don’t think that FCPA enforcement decision-making in the Department of Justice or Securities and Exchange Commission is actually politicized, nor do I think there’s a bias against foreign companies. I also suspect that Kudlow was completely unaware of that line in the China Initiative memo. But for those who want to advance the narrative that the U.S. doesn’t really care about promoting ethical business practices, and that the FCPA is really just a neo-mercantalist (or, worse, neo-imperialist) tool that the U.S. uses to advance its domestic economic interests, the Trump Administration is sure providing a lot of talking points.
- Finally, and most generally, the failure of Kudlow to respond to the reporter’s question with a full-throated condemnation of corruption and an affirmation of the U.S. government’s commitment to the fight against bribery contributes further to the free-fall of U.S. global leadership on the anticorruption issue during the Trump Administration. Now, just to be clear, support for FCPA “reform” doesn’t necessarily imply one doesn’t care about corruption. (I happen to think that most of the items on the FCPA reform agenda are bad ideas, often supported with false or disingenuous factual claims, but that’s not the point right now.) Yet even if one thinks some form of FCPA reform would be a good idea, consider the various ways that Kudlow could have responded to the reporter’s question. He could have at least said something along the lines of, “As you know, this Administration is committed to fighting global corruption and ensuring ethical business practices,” before proceeding to say something like, “That said, we are aware of many criticisms of the law as it stands, and we’re looking into possible reforms.” But Kudlow didn’t think to (or couldn’t bring himself to) even pay lip service to the idea that the FCPA’s goals are laudable and important. The sad truth is that this Administration doesn’t even pretend to care about global corruption, except when opportunistically advancing a clearly pretextual rationale for the President’s blatantly improper conduct with respect to Ukraine. And that’s depressing, dangerous, and demoralizing to anticorruption fighters around the world.
So, let’s not make too much of Kudlow’s off-the-cuff remarks, or the underlying anecdote on which they were based. But let’s not make too little of them either. The remarks don’t portend any imminent threat to amend or repeal the FCPA. But they do send a very bad signal, both domestically and internationally, and anticorruption groups are right to take the opportunity to reaffirm the value of the FCPA and the importance of U.S. leadership on the anticorruption issue.