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By Liz Crampton
The Trump administration will likely chase core foreign bribery cases and may divert resources from prosecuting other violations or indirect hiring that became a hallmark of his predecessor’s aggressive enforcement, legal experts told Bloomberg BNA.
Comments by President Donald Trump and his nominees to lead the Justice Department and Securities and Exchange Commission, which conduct parallel FCPA investigations, suggest the new administration may take a different approach.
“It’s possible that there will be some dialing back of those cases, both at the SEC and DOJ,” said Philip Urofsky, a partner at Shearman and Sterling LLP. “I think there is a possibility that the message will be ‘focus on bribery cases.’ ”
Much is at stake for companies including Wal-Mart Stores Inc., HSBC Bank USA Inc. and The Goldman Sachs Group, which have all disclosed they are the subject of ongoing Foreign Corrupt Practices Act probes. In October, Wal-Mart walked away from a U.S. offer to settle alleged bribery of officials in Mexico, India and China if the company paid at least $600 million in penalties, according to Bloomberg News.
An early test of the new administration’s approach could come in April when Justice Department officials will have to decide whether to extend, make permanent or eliminate the FCPA Pilot Program as it reaches its one-year mark.
The program was designed to reward companies for voluntarily disclosing FCPA-related misconduct and cooperating in investigations. Companies that abide by the requirements may be eligible for a declination of criminal prosecution and reduced sentences.
For now, the best clues about the Trump administration’s potential approach come from past statements by the president and his cabinet nominees.
In a 2013 interview on CNBC, Trump said the FCPA is a “horrible law and should be changed” when speaking about the Wal-Mart bribery investigation.
“Let Mexico or let China or these other countries prosecute,” Trump said. “Why are we prosecuting people to keep China honest? Now every other country goes into these places and they do what they have to do. We’re like the policeman for the world; it’s ridiculous.”
Trump’s nominee to head the SEC, Jay Clayton, a corporate lawyer at Sullivan and Cromwell LLP, was commissioned by the New York City Bar Association to lead a paper on how the FCPA affects international business deals. The report argued against the “zealous” enforcement of the anti-bribery law and called for a “reevaluation of the United States’ strategy in fighting foreign corruption” because U.S. companies bound by the law face different rules and costs than companies in other countries.
“The current anti-bribery regime — which tends to place disproportionate burdens on U.S. regulated companies in international transactions and incentivizes other countries to take a ‘lighter touch’ — is causing lasting harm to the competitiveness of U.S. regulated companies and the U.S. capital markets,” the report said.
The federal government should either increase enforcement pressure on companies that aren’t covered by the FCPA or turn it down for companies that are, the paper said.
Attorney General nominee Jeff Sessions, a Republican U.S. senator from Alabama, wasn’t asked about the FCPA during his two-day confirmation hearing earlier this month, and he doesn’t appear to have taken a public position on the law.
The closest Sessions has come to commenting on FCPA issues was during former Deputy Attorney General James Cole’s 2010 confirmation hearings, during which he said, “I was taught if they violated a law, you charge them. If they didn’t violate the law, you don’t charge them.
The new administration is inheriting a record of aggressive FCPA enforcement that relies on officials in different countries collaborating in their investigations. Recent enforcement actions indicate officials in multiple jurisdictions are willing to work together in investigating conduct spreading across borders and that enforcement trend will likely continue, experts say.
2016 was a record year for FCPA prosecutions, resulting in more than $2 billion in corporate fines levied by U.S. officials, according to a report by law firm Gibson Dunn & Crutcher. The targets included Och-Ziff Capital Management Group LLC, the first time a hedge fund was charged under the FCPA.
One of the most significant enforcement actions of the year involved Brazilian construction conglomerate Odebrecht SA, which reached a multibillion resolution with authorities in Brazil, Switzerland and the U.S., marking the largest global foreign bribery settlement ever.
As required by the settlement, Odebrecht and its subsidiary Braskem SA pleaded guilty to DOJ charges of conspiring to violate the FCPA’s anti-bribery provisions and Braskem also settled SEC charges of violating anti-bribery and accounting provisions [see related story in this issue]. The settlement arises from a long-running money laundering investigation dubbed “Operation Car Wash” that has amounted to the largest corruption investigation in Brazilian history.
Increased cooperation among countries in enforcement of bribery laws was also shown by Embraer SA, a Brazilian aircraft manufacturer, resolving bribery charges with the DOJ, SEC and Brazilian authorities in October. The company paid a $107 million fine as part of a deferred prosecution agreement alleging violations of the FCPA’s internal controls provision.
In the U.K., pharmaceutical company GlaxoSmithKline Plc agreed to a consent order with the SEC stating violations of the FCPA’s accounting provisions and paid a $20 million fine. In 2014, Chinese authorities charged GlaxoSmithKline’s Chinese subsidiary on the same basis as the SEC charges, resulting in several executives being sentenced to prison and the company being fined $489 million.
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