I’ve been writing about the difference between the Foreign Corrupt Practices Act (the statute) and how the FCPA is often enforced for nearly 20 years. In part, this topic has been a major focus of my professional life.

As I stated during my 2010 testimony during a Senate hearing titled “Examination of the Foreign Corrupt Practices Act”:

The FCPA is a fundamentally sound statute that was passed by Congress in 1977 for a specific reason. […] That the FCPA is a fundamentally sound statute does not mean that the FCPA could not be improved by a future Congress consistent with the original intent of the 95th Congress in enacting the FCPA. […] That the FCPA is a fundamentally sound statute does not mean that FCPA enforcement is always fundamentally sound. FCPA enforcement has materially and dramatically changed during the past six years.”

My Senate testimony continued:

“The individual perhaps most qualified to answer the question of why we are in a new era of FCPA enforcement and why FCPA enforcement has materially changed during the past six years is Mark Mendelsohn. Between 2005 and April 2010, Mendelsohn was the Deputy Chief of the DOJ Fraud Section and the person “responsible for overseeing all DOJ investigations and prosecutions under the FCPA” during the period of its resurgence.

Like most DOJ FCPA enforcement attorneys, Mendelsohn, after his government service, became a partner at a major law firm where he now provides FCPA defense and compliance services. In a recent interview with “The Boardroom Channel” Mendelsohn was asked about the increase in FCPA enforcement actions and candidly stated that “what‟s really changed is not so much the legislation, but the enforcement and
approach to enforcement by U.S. authorities.”

It is this new approach to FCPA enforcement that is most in need of examination. As I highlight in the “Façade of FCPA Enforcement” in most instances there is no judicial scrutiny of FCPA enforcement theories and the end result is that the FCPA often means what the DOJ says it means. In many cases, what the DOJ says the FCPA means is contrary to Congressional intent.”

The 2010 Senate FCPA hearing occurred during a period in which FCPA reform was widely discussed.

The leader of this movement – so it seemed – was Andrew Weissmann (hardly a fan of current President Donald Trump). Just one month prior to the November 2010 Senate hearing, Weissmann was the lead author of “Restoring Balance:  Proposed Amendments to the FCPA” written on behalf of the U.S. Chamber Institute for Legal Reform.

Weissmann wrote:

“[T]he primary statutory interpretive function is still being performed almost exclusively by the DOJ
Fraud Section and the SEC. Notably, these enforcement agencies have been increasingly aggressive in their reading of the law. The DOJ has expressed its approach primarily through its opinion releases, but also in its decisions as to what FCPA enforcement actions to pursue. Many commentators have expressed concern that the DOJ effectively serves as both prosecutor and judge in the FCPA context, because it both brings FCPA charges and effectively controls the disposition of the FCPA cases it initiates.”

Weissmann’s report contained a specific section titled “The FCPA’s Impact on Business” which stated in pertinent part:

“The current FCPA enforcement environment has been costly to business. Businesses enmeshed in a fullblown FCPA investigation conducted by the U.S. government have and will continue to spend enormous sums on legal fees, forensic accounting, and other investigative costs before they are even
confronted with a fine or penalty, which, as noted, can range into the tens or hundreds of millions. In fact, one noteworthy innovation in FCPA enforcement policy has been the effective outsourcing of investigations by the government to the private sector, by having companies suspected of FCPA violations shoulder the cost of uncovering such violations themselves through extensive internal investigations.

From the government’s standpoint, it is the best of both worlds. The costs of investigating FCPA
violations are borne by the company and any resulting fines or penalties accrue entirely to the government. For businesses, this arrangement means having to expend significant sums on an
investigation based solely on allegations of wrongdoing and, if violations are found, without
any guarantee that the business will receive cooperation credit for conducting an investigation.

There is also reason to believe that the FCPA has made U.S. businesses less competitive than their
foreign counterparts who do not have significant FCPA exposure. For example, a 1999 report to Congress authored by the Congressional Research Service (“CRS”), a division of the Library of Congress that provides nonpartisan analysis on current legislative issues, references an estimate that the FCPA’s anti-bribery provisions have cost up to $1 billion annually in lost U.S. export trade. Critics of the FCPA have also argued that ambiguous areas of the law, where what is permitted may not be clear, have had a chilling effect on U.S. business because many companies have ceased foreign operations rather than face the uncertainties of FCPA enforcement.”

Speaking on the conference circuit, Weissmann stated: “The Department of Justice and SEC can in many circumstances be judge and jury in the sense that they’re interpretation of gray areas in the statute are going to govern.” Weissmann specifically stated that it was “very easy for the people at the DOJ and SEC to basically impose a tax for doing business” in certain countries.

Democratic Senator Amy Klobuchar (D-MN), who would subsequently run for President, directed the following comments to a DOJ witness at the 2010 hearing:

“[O]ne of the basic principles of due process is that people in companies have to be able to know what the law is in order to comply with it. And I will tell you that I have heard from many very good standing companies in my State that they do not always know what behavior will trigger an enforcement action. As we know, the goal is not just to punish bad actors after a violation is committed, but rather to prohibit actions from happening in the first place. So a lot of my questions are focused on how we can incentivize corporations to make sure they have appropriate compliance procedures in place and that they voluntarily disclose violations when a rogue employee violates the law. I head up the Subcommittee on Exports and Commerce, a big believer in the President’s focus of trying to double exports. I believe this is the way that we are going to get ourselves out of this economic downturn. And I have a State where we truly believe in exporting all over the world and it is what I think has given our State a leg up when you look at our unemployment rate compared to other States. At the same time, I have heard a lot of concerns about any little conduct is going to trigger some kind of investigation.”

Shortly after the Senate’s 2010 hearing, Lanny Breuer (Assistant Attorney General Lanny Breuer during the Obama administration) stated that we are in a “new era of FCPA enforcement and we are hear to stay.” (See here for a prior post).

This new era of FCPA enforcement saw an increase in non-prosecution agreements and deferred prosecution agreements to resolve alleged instance of FCPA scrutiny. These alternative resolution vehicles yielded a higher quantity of enforcement, but often lower quality enforcement (indeed enforcement in which it was an open question whether the FCPA was violated). Yet because the agreements made it so “easy” for business organizations to “get rid” of the DOJ and because the DOJ still got the settlement money it wanted – these agreement flourished and I have long called for abolishing these agreements in the FCPA context. (Among other things, see here for the article titled “Measuring the Impact of NPAs and DPAs on FCPA Enforcement.”). 

As highlighted in this prior post, one of the ironies of the OECD’s Phase 3 (2010) report of FCPA enforcement was that while loudly praising the U.S. for its “high level” of enforcement, the Report quitely criticized and questioned many of the policies and enforcement theories which yield the “high level” of enforcement. For instance, the Report noted that the FCPA’s language “does not specifically convey” that cases concerning “an operating license or permit to operate a business, or a reduction in tax or import duty” are in violation of the statute. Yet, many FCPA enforcement actions are based on this theory. Further, the Report noted that “due to an absence of explicit language in the definition of foreign official” it is an open question whether employees of so-called state-owned or state controlled enterprises are “foreign officials” under the FCPA. Yet, numerous FCPA enforcement actions are based on this theory. The Report noted that the increase in NPAs and DPAs “are one of the reasons for the impressive FCPA enforcement record in the U.S.” yet also notes that these agreements are subject to little or no judicial scrutiny.

The more recent OECD Phase 4 (2020) rightly noted rightly acknowledged that the U.S.’s “high volume of concluded cases is largely attributed” to the buffet of resolution vehicles used by the enforcement agencies. Elsewhere, the Report rightly stated that in certain instances “the DOJ’s interpretation and related implementation of the FCPA” has not “not been tested in court.” (See here for the prior post).

One of the interesting things about following FCPA enforcement as closely as I have for 20 years is how often former DOJ enforcement attorneys are critical of various aspects of current FCPA enforcement. For instance, looking for support for the following statements:

  • “it is often difficult to determine where the lines  [regarding the FCPA’s anti-bribery provisions] are to be drawn,”
  • the enforcement agencies “push[] the boundaries of jurisdiction for substantive FCPA charges,”
  • “U.S. enforcement personnel have interpreted the language [of the obtain or retain business element] broadly,”
  • that it is “not necessarily easy to identify the dividing line between a permitted facilitating payment and a prohibited bribe,” and
  • that various public policy issues are raised because “virtually all DOJ and SEC enforcement cases against business entities are settled.”?

That’s easy.

All of the above quotes are from writings of the self-described “architect and key enforcement official of the DOJ’s modern FCPA enforcement program.”  (See here).

As discussed in this 2024 post, during a podcast with three former DOJ FCPA Unit Chiefs, Mendelsohn stated that the DOJ “introduced creativity” to FCPA enforcement and compliance and that a lot of what DOJ did was “smoke and mirrors for a while.”

As highlighted in this prior post, in 2011 the International Business Transactions Committee of the Association of the Bar of the City of New York released (here) a report titled “The FCPA and its Impact on International Business Transactions – Should Anything Be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption?”

The report explored the FCPA and FCPA enforcement, in part, from an economic perspective and stated as follows. 

“Companies that are subject to the FCPA—including all U.S. companies and non-U.S. companies that have equity securities listed on a U.S. exchange—have become increasingly wary of purchasing businesses that have not operated under the Act for fear of acquiring very costly liabilities. Similarly, companies that are not subject to the FCPA express substantial reservations about engaging in transactions that would bring them under the Act’s jurisdiction, including listing their equity securities on a U.S. exchange through an IPO or capital raising transaction or by acquiring a U.S. company in a stock-for-stock merger or exchange offer.  The effects of the FCPA on transactions are manifested principally in (1) transaction costs (e.g., increased due diligence efforts), (2) post-transaction integration costs (e.g., adding appropriate FCPA compliance procedures to an acquired company or across a company that was not previously subject to the FCPA), (3) the increased risk of exposure to an enforcement action and related costs (e.g., internal investigations and fines) and (4) as a result of the foregoing and other effects of the FCPA, the nonpursuit or abandonment of transactions that otherwise would have been completed. These FCPA-driven costs and considerations put companies covered by the FCPA (mostly U.S. companies and large, mature European companies) in a distinctively different regulatory position as compared to their non-covered competitors. In our experience, and in particular, recently, this asymmetry in regulation has had significant direct and indirect effects on companies subject to the FCPA as well as knock-on effects on the U.S. markets more generally.”

The report concluded:

“While the task is daunting and the discomfort of admitting that the current approach has significant flaws is unavoidable, that does not mean that action should not be taken. Any such action should begin with an assessment of the current circumstances and a recognition that, in today’s global economy, meaningful international alignment of the world’s leading economic powers is a necessary condition for combating foreign bribery.”

As highlighted in this prior post, in 2013 the Manhattan Institute for Policy Research released a paper titled “The Foreign Corrupt Practices Act:  Aggressive Enforcement and Lack of Judicial Review Create Uncertain Terrain for Businesses.” The paper stated:

“Although the ever-widening interpretations of the FCPA seem to go beyond a commonsense understanding of the statute and its purpose, these interpretations are not being subjected to adequate judicial review because the high costs associated with potential criminal conviction have generally led targeted corporations to resolve cases without trial through “deferred-prosecution agreements” (DPAs) or “non-prosecution agreements” (NPAs).”

[…]

“DOJ’s expansive readings of the FCPA, along with the lack of judicial review over the department’s interpretations, are problematic. Invoking the statute to prosecute payments intended to help obtain licenses or permits is clearly at odds with Congress’s express facilitating-payments exception.”  (see here for my article detailing legislative history and judicial scrutiny concerning non-foreign government procurement payments).

“In its current guise, the FCPA has helped generate an essentially unaccountable DOJ bureaucracy …”.

As highlighted in this prior post, Larry Thompson (who has experienced with the Foreign Corrupt Practices Act from a number of vantage points few can claim:  DOJ Deputy Attorney General in the Bush administration, a lawyer in private practice, and a general counsel of a major multinational company) wrote a 2014 article as follows:

“The uncertainty of precisely what the FCPA forbids and allows harbors frightening potential for prosecutorial abuse and over-criminalization – topics that have preoccupied me, both as a private attorney and as Deputy Attorney General of the United States, for many years.  This uncertainty in the FCPA is particularly troubling when one is dealing not just with individuals, who have control over all their own actions, but also with large corporations – artificial ‘persons’ consisting of hundreds, or thousands, or even hundreds of thousands, of individuals for whom the corporation can be held accountable.”

As highlighted in this prior post, in 2019 as SEC Chair, Jay Clayton, gave a specific FCPA speech in which he noted that “in many areas of the word, our [FCPA] work may not be having the desired effect.” He stated:

“To be clear, I do not intend to change the FCPA enforcement posture of the SEC.  We should, however, recognize that we are acting largely alone and other countries are incentivized to play, and I believe some are in fact playing, strategies that take advantage of our laudable efforts.

[…]

“Taking a step back, this experience, including the FCPA-driven withdrawal of U.S. and U.S.-listed firms from certain jurisdictions, illustrates that globally-oriented laws, with no, limited or asymmetric enforcement, can produce individually unfair and collectively suboptimal results.  I assure you that this reality is at the front of my mind when I engage with my international counterparts on matters where common, cooperative enforcement strategies are essential.”

In fact, during Clayton’s confirmation hearings to become SEC Chair he stated that because of exposure to the FCPA and related laws “there are some jurisdictions where in the vast majority of cases it may make sense just not to participate.” 

So here we are with reports suggesting that President Trump has (or will be) signing an executive order to “pause” FCPA enforcement and direct Attorney General Bondi to prepare new guideline for FCPA enforcement.

Given the information contained above – information once articulated by Republicans and Democrats alike (including seemingly some of Trump’s harshest critics), is there any other specific law that is perhaps more deserving of a “pause” in enforcement?