On Feb. 10, the White House announced a new executive order (“EO”) entitled “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security.” This EO essentially directs the U.S. Department of Justice (“DOJ”) to cease initiation of any new Foreign Corrupt Practices Act (“FCPA”) investigations and pause any pending FCPA investigations or enforcement actions while the attorney general (“AG”) conducts a review of the relevant DOJ guidelines and polices governing such matters. This unprecedented action is apparently premised on the belief that the FCPA has been “stretched beyond proper bounds and abused in a manner that harms the interests of the United States.” The EO further requires that the AG issue updated guidance, as appropriate, for future FCPA enforcement in line with “the President’s Article II authority to conduct foreign affairs and prioritize American interests, American competitiveness with respect to other nations, and the efficient use of Federal law enforcement resources.” This new presidential directive marks a significant departure from the approach of every presidential administration since the FCPA’s enactment more than four decades ago. This client alert provides some context surrounding this development and offers some insights for corporate general counsels and compliance officers as they try to navigate this new enforcement reality.
FCPA Background
The FCPA was enacted in 1977 in the wake of several scandals involving the bribery of foreign government officials by some of America’s largest and most well-known companies. An investigation by the Securities and Exchange Commission (“SEC”) in the years leading up to the FCPA’s enactment revealed the significant scope of the problem, which was estimated to include more than $300 million (not adjusted for inflation) in bribes to foreign government officials, politicians and political parties by some 400 U.S. companies in the years leading up to the law’s introduction. The typical scheme involved payments by companies to foreign government officials who were in a position to influence the awarding of lucrative government contracts. With enactment of the FCPA, payments by “domestic concerns” (private companies) and companies that issue stock listed on a U.S. stock exchange (“issuers”)—or by their employees, officers, directors or agents—to foreign officials for the purpose of obtaining or retaining business were outlawed.
This marked the U.S. government’s initial effort to set the standard for ethical leadership and integrity within the international business environment. The FCPA also includes accounting provisions enforced by the SEC, which require issuers to keep accurate books and records and maintain adequate internal controls. As amended over time, the FCPA became a staple of U.S. criminal enforcement with DOJ and the SEC pursuing hundreds of enforcement actions between them over more companies and individuals during the past four decades. Under the law, DOJ can pursue cases against both U.S. companies and foreign entities for violations committed in the United States. Criminal penalties can include fines and imprisonment. Eventually, other countries followed the U.S. lead, most notably with the UK adopting its Bribery Act in 2010.
Reaction and Criticism In Response to the FCPA
As FCPA enforcement took off, companies subject to its jurisdiction came to understand that the U.S. government was serious about pursuing such investigations and cases. And, as some very prominent companies paid ever-increasing penalties to resolve enforcement actions, corporate anti-corruption policies focused primarily on the FCPA became a standard part of the corporate compliance program for every U.S. company whose business model in any way exposed the company to potential FCPA violations. By 2024, regular training for employees, executives and even members of corporate boards of directors at companies with potential FCPA exposure became an accepted part of corporate life across nearly every industry.
At the same time that the corporate world was adapting to the reality of the FCPA and its increasingly robust enforcement by DOJ and the SEC, critics pointed to compliance challenges and the potential for U.S. companies to suffer competitive disadvantages because of the perception that U.S. companies would be constrained in a way that might make them lose a competitive advantage to foreign companies that were not so constrained. Moreover, criticism has also focused on the record-keeping aspects of the law and, specifically, the materiality standard. However, on the whole, companies subject to the law’s jurisdiction have more or less accepted the underlying premise of the law, which, simply stated, is that it is not OK to seek to obtain or retain foreign business through corrupt means.
Trump and the FCPA
Significantly, however, President Trump has long held a contrary view. In 2012, well before he could do anything about it, he criticized the FCPA for making it more difficult for U.S. companies to compete abroad. More recently, during his first term as president, Trump reportedly complained to his then secretary of state that the FCPA unfairly penalizes American businesses. Nevertheless, during the first Trump administration, FCPA enforcement more or less kept pace with the Obama administration’s record. In fact, from 2017 through 2020, FCPA enforcement actions actually increased relative to the number from the preceding four years and was also greater than the number from the four years of the Biden administration. It is also important to note that the majority of defendants in FCPA enforcement actions over the past at least 10 years or so have actually been foreign companies and individuals who were nevertheless subject to U.S. jurisdiction for FCPA purposes. Indeed, among the top 10 largest monetary recoveries in corporate FCPA cases, eight involved foreign companies.
Thus, it appears that despite Trump’s apparent disdain for the FCPA, the traditionalists who largely populated DOJ and the SEC during his first term clearly managed FCPA enforcement with the view that the law existed for a good reason and should be robustly enforced. Indeed, the national security strategy announced in 2017 reiterated the view that was also part of the Bush and Obama strategies—“[t]errorists and criminals thrive where governments are weak, corruption is rampant, and faith in government institutions is low.” The 2017 Trump strategy further acknowledged the importance of its goal to uncover “corrupt foreign officials and work with countries to improve their ability to fight corruption so U.S. companies can compete fairly in transparent business climates.” The Biden administration continued this emphasis by declaring the fight against corruption to be a “core national security interest.” It is now clear that on this issue and many others, the traditional view held by both Republican and Democratic administrations for decades, however well-grounded it may have been, is not necessarily the approach that the current administration intends to take.
The EO’s New Approach
While the new EO marks a very clear departure from the recent history summarized above, what is less clear is whether the ordered pause and review will be followed by a resumption of enforcement actions along basically the same lines as before, if major changes in how the FCPA is interpreted and enforced are in store, or if enforcement of the law will be deprioritized to the point of being more or less nonexistent. Also unclear is how, exactly, this EO, which references DOJ only, may impact the SEC’s role in FCPA enforcement. The EO also raises a few other questions:
- How are already indicted cases affected? While DOJ obviously has the unilateral authority to refrain from initiating new investigations, courts will have something to say about pausing already indicted cases. How DOJ prosecutors navigate this reality in the context of pending cases will be interesting to watch.
- How will the SEC’s investigative and enforcement authority be affected? Although the EO is directed at the attorney general only, the statistics cited include both DOJ and SEC enforcement actions.
- Will foreign companies subject to the FCPA enjoy the same benefits as U.S. companies? On its face and certainly according to related White House statements, it is clear that this EO is intended, in part, to help U.S. companies be more competitive in the international marketplace. Does this mean a more aggressive approach to foreign targets after the pause and review? If so, serious arguments about fairness and selective prosecution will certainly be raised.
- What about the EO’s reference to “remedial measures” that are part of past FCPA resolutions? The EO specifically raises the possibility that the elimination of requirements for remedial measures related to “inappropriate past FCPA investigations and enforcement actions” could be warranted following the pause and review. What this could mean in practice is not clear. What about ongoing monitorships and other compliance enhancements agreed to as part of past resolutions? It seems possible that any and all such settlement agreements could be open for renegotiation or abandonment by DOJ.
What All of This Means for Corporate Compliance
As noted above, FCPA compliance has been a big deal for many companies across a broad range of industries. Despite the uncertain future of FCPA enforcement suggested by this EO, companies subject to the FCPA would be well-advised to continue to ensure they are focused on the FCPA as part of their broader anti-corruption policies and training. As always, this is especially true for companies whose risk profile is relatively high because they routinely sell products or services to foreign governments. Although many companies may read the EO as suggesting an end to FCPA enforcement, that would not be the best way to interpret it. While it is possible that this truly is the beginning of the end for FCPA enforcement by DOJ, at least during this administration, it is also possible that the pause and review phase will be followed by business as usual, i.e., aggressive enforcement, even by this administration. More likely, the newly ordered pause and review period will be followed by a relatively lax enforcement reality, at least as against U.S. companies. But even this reality could be short-lived and followed by a new administration committed to a return to robust enforcement and with the ability to reach back to the preceding few years to look for violations. Moreover, the FCPA is also not the only U.S. anti-bribery law. Therefore, if during DOJ’s FCPA “moratorium,” bribery could still constitute a deficiency under the Sarbanes-Oxley Act’s reporting requirements or constitute an honest services fraud issue or other fraud-based charge.
Moreover, for corporate compliance programs to be effective, they must be consistent in their own right, in terms of culture, training and enforcement. Any company that allows compliance to slip for whatever reason, including a perceived decrease in the likelihood of risk of enforcement, is sure to have a very difficult time rebuilding that corporate muscle memory should the enforcement reality change in the future. The better approach for any corporate compliance program that is properly focused on avoiding FCPA issues is to continue to do what it is doing—vetting agents, training employees, executives and board members, and testing compliance. One executive order does not make a criminal statute go away, and even this one doesn’t disclaim any investigative or enforcement activity for the entirety of this presidential term.
If you have any questions about this EO, about FCPA enforcement by DOJ or the SEC, or about corporate compliance generally, please contact one of the members of Brownstein’s Government Investigations & White Collar Defense practice group.
Brownstein will continue to track all of President Trump’s executive orders.
This document is intended to provide you with general information regarding President Donald Trump's FCPA executive order. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.