Trump Enforcement of Foreign Bribery Law Uncertain

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By John T. Aquino

There’s “tremendous uncertainty” in the life sciences industry about how the incoming Trump administration might enforce the law prohibiting corporate bribery of foreign officials.

President-elect Donald Trump called the Foreign Corrupt Practices Act (FCPA) a “horrible law” that “should be changed” in a May 2012 CNBC interview, saying it places U.S. companies at a disadvantage when seeking business abroad. These and other Trump comments have caused some to speculate that once he’s sworn in as president on Jan. 20, his administration may lessen enforcement of the FCPA or even repeal it.

Matthew Stephenson, a professor of law at Harvard University, posted on the Global Anti-Corruption Blog soon after the election, “I fully expect the era of vigorous FCPA enforcement, which ran from about 2000 (give or take a couple years) up to the present, is over.” In a subsequent post, Stephenson acknowledged the well-reasoned views of other analysts that FCPA enforcement may not change much under President Trump but said he continued to feel it is unlikely the new administration will make continued FCPA enforcement a significant priority.

“I’m more pessimistic than others,” Stephenson told Bloomberg BNA in a Dec. 19 phone interview. “I don’t expect much to change in the short term, but I am concerned about the mid- and long-term. There is a tremendous amount of uncertainty,” he said.

Others agreed the future for the FCPA is unclear and there may be a change in the government’s emphasis. But they also saw reasons for continued strong FCPA enforcement.

“The globalization of anti-bribery enforcement will make it difficult to pivot away from FCPA enforcement, and it may benefit U.S. companies with international operations for the Department of Justice to stay in the game and not cede the field to international enforcement partners, especially given recent efforts to advance earlier and more practical resolutions,” Katie McDermott, a partner focusing on government enforcement and compliance for Morgan, Lewis & Bockius LLP, Washington, told Bloomberg BNA in a Dec. 20 e-mail.

Life Sciences in Crosshairs

The FCPA, enacted in 1977, generally prohibits paying bribes to foreign officials to assist in obtaining or retaining business. The Securities and Exchange Commission (SEC) and the DOJ are jointly responsible for its enforcement.

Since 2012, the life sciences industry has increasingly been in the crosshairs of SEC and DOJ FCPA enforcement. The two agencies issued a 120-page resource guide that year, after drug and medical device companies’ marketing activities abroad became the subject of enforcement actions. In December 2012, Eli Lilly and Co. paid $29.4 million to settle SEC/DOJ charges that its subsidiaries abroad violated the FCPA by making improper payments to foreign officials in China, Russia, Brazil and Poland. Seven months later, British drugmaker GlaxoSmithKline (GSK) said it would conduct a rigorous review of compliance procedures in China in response to SEC/DOJ allegations that several key executives there bribed medical industry groups, hospitals, doctors and government officials to increase sales ( 07 LSLR, 7/26/13 ).

The government’s focus on life sciences industry FCPA violations continues through 2016. Enforcement actions followed by settlements as high as $25 million were filed against five life sciences-related companies, according to statistics compiled by Mike Koehler, an associate professor at the Southern Illinois University Law School. The biopharmas involved were GSK,AstraZeneca, SciClone Pharmaceuticals and Novartis and the Canadian-based Nordion, which produces radioisotope technology used to prevent, diagnose and treat disease.

SEC Enforcement Director Andrew Ceresney said at a March 2015 conference most life sciences cases brought by the SEC under the FCPA involve three main categories of misconduct: bribes to doctors and hospitals for prescribing certain drugs, bribes designed to get drugs listed on formularies and bribes disguised as charitable contributions.

‘Reform’ Could Weaken FCPA

After the Nov. 8 election, attorneys and law professors weighed in on whether the Trump Administration would lessen the government’s efforts on enforcing the FCPA and the wisdom of this approach.

In a Nov. 10 blog, Stephenson wrote that it would be difficult to imagine the Trump administration “would devote substantial resources to this area” and, instead, would make continuing enforcement “much more politicized than it has been in the past,” targeting foreign companies.

Twelve days later, Stephenson wrote another post suggesting that he may have been too pessimistic about FCPA enforcement under the Trump administration. He noted experts have a tendency to overpredict dramatic change and that analysts such as Houston-based attorney Tom Fox suggested FCPA enforcement is unlikely to change much under President Trump. And yet, while agreeing with Fox that Congress under the Trump administration was unlikely to repeal the FCPA, he worried about “FCPA reform” designed to significantly weaken the statute.

“Mr. Fox is perhaps more confident than I am that the legislative process will effectively reveal (in his words) the ‘true intention’ of those seeking FCPA reform, and that even a Republican Congress would recognize that ‘U.S. companies obtaining business through illegal actions is not in the interest of the U.S,’” Stephenson wrote. He did take comfort in “the simple inertia of the U.S. legislative process” and “the fact that some of the items on the FCPA ‘reform’ crowd’s wish-list—especially their Holy Grail of a ‘compliance defense'—are unlikely to have that much effect.”

As to Fox‘s argument that going after non-U.S. FCPA violators would be in keeping both with Trump’s anti-corruption rhetoric and his rhetoric on trade and foreign competition, Stephenson wrote, “True enough. But that doesn’t make me feel that much better because FCPA enforcement that is biased against foreign companies is both wrong and likely to undermine support for the statute (and U.S. leadership on this issue) in the longer term.”

Enforcement Risk Remains

Health-care attorney Linda D. Bentley took the position in a Dec. 20 e-mail to Bloomberg BNA that it is just too early to speculate what will happen. “The FCPA is still the law, and no one is publicly suggesting that it be repealed, and we don’t know who will be heading the SEC. Also, although Trump made some comments about the law during the campaign, how and whether those pre-election statements transition into enforcement policy during a Trump administration remains to be seen,” said Bentley, who practices in the health-care section and biotechnology group of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston.

Others, like Fox, anticipate or at least hope for little change in the U.S.'s FCPA enforcement policy.

Koehler noted in his FCPA Professor Blog seven of the top 10 FCPA case settlements in dollar amount are based on the actions of non-U.S. companies. This fact, he suggested, takes away the argument of FCPA critics, like President-elect Trump, that it puts U.S. businesses at a disadvantage. It can be argued that the FCPA prompted the creation of anti-overseas bribery statutes in the U.K., France and Holland and a pro-compliance culture in Russia, he wrote.

McDermott told Bloomberg BNA, “There are many forecasts about how a change in administration may impact law enforcement. But like the weather, conventional wisdom does not always play out as expected. The Arthur Andersen indictment [for obstruction of justice by shredding documents in the 2002 Enron accounting fraud scandal] and policy for charging the highest level offenses came under the Bush Administration as did the ramp up in FCPA enforcement. It has not proven true that particular parties or administrations will be uninterested in important enforcement issues. Pending cases are likely to be unaffected, but policy changes at DOJ may, over time, emphasize and fund different enforcement initiatives.”

Companies remain at risk for enforcement in a variety of circumstances, McDermott said, and support for protected whistle-blower activity that generates FCPA cases will continue.

Coming Full Circle

Michaeline Daboul, chief executive officer of the life sciences consulting company MMIS/MediSpend, also addressed Trump’s contention that the FCPA puts companies at a disadvantage in a Dec. 20 phone interview with Bloomberg BNA.“In his statements, he fails to see that there are provisions in the FCPA to allow conformance with local cultures and customs in order to get the business done sooner,” she said.Discussing what approach the Trump administration will take, Daboul said much of it depends on appointments Trump has yet to make, including two at the SEC. “But I don’t see companies pulling back from global compliance practices because there are other laws such as the UK bribery statute and those of other countries to deal with.”It is possible that the Trump administration will take a more lenient approach to the FCPA, Daboul said. “But I think it will be a challenge for it to do so. These enforcement agencies have been working together and there are more and more investigations occurring now in the life sciences. They have been looking at data, and enforcement will trend as a result of the data.”

She addressed the focus of China in the 2016 FCPA life sciences settlements by saying, “As to abuse in China, you have to look at how business is done in China. But who knows, maybe Trump will use the FCPA as a stick in his dealings with China.” Daboul noted that, if a company is prosecuted for FCPA violations and settles, it has to put in place a compliance program. “I see this coming full circle, with companies developing good business practices, becoming better companies and strengthening the life sciences industry as a whole.”

Continue Compliance Culture

Stephenson discussed with Bloomberg BNA in his phone interview the impact of Trump’s proposed nomination of Sen. Jeff Sessions (R-Ala.) to be attorney general.“Sessions really doesn’t change my assessment one way or the other,” Stephenson said. “Sessions has been kind of neutral in this regard. I still don’t think there’s a sense FCPA enforcement will be a high priority for the Trump administration.”Daboul took a different approach as to Sessions. “He has in the past done the right thing, and I think he will continue to do so about companies who should be prosecuted for FCPA violations. I think he will strike the right balance with Trump’s more off-the-cuff, black-and-white approach.”She added, “It will be interesting to see what happens in the next few months as Trump fills out his administration and his policies develop. But I don’t see the DOJ stepping back on the FCPA. And companies have been doing the right thing in looking at compliance as an objective.”McDermott said, “The practical approach for life science companies is to remain steady and invested in their cultures of corporate responsibility and ethics and not worry too much about which way the wind blows. The global enforcement climate will not likely relent enough to lower the risk of non-compliance.”

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at RKubetin@bna.com

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