Trump Administration Limits Criminal Enforcement of the Foreign Corrupt Practices Act

In an unprecedented February 10 executive order, President Trump ordered Attorney General Bondi to pause criminal enforcement of the Foreign Corrupt Practices Act (FCPA). Unless the Attorney General personally approves an individual exception, the order requires the Justice Department to refrain from opening any new investigation or filing any enforcement action until the Attorney General issues new guidance that “prioritize[s] American interests” and promotes “American economic competitiveness.” The order also instructs the Attorney General to “review in detail” pending investigations or enforcement actions and to revisit completed cases in light of the impending new guidance.”¹Exec. Order, Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security (Feb. 10, 2025), https://www.whitehouse.gov/presidential-actions/2025/02/pausing-foreign-corrupt-practices-act-enforcement-to-further-american-economic-and- national-security/.

According to the executive order’s preamble, the FCPA has been “stretched beyond proper bounds and abused in a manner that harms the interests of the United States.” The order cites “overexpansive and unpredictable FCPA enforcement against American citizens and businesses” that penalizes “routine business practices in other nations” and thereby “harms American economic competitiveness.”²Id.

The executive order supplements Attorney General Bondi’s February 5 memorandum instructing federal prosecutors and agents to make a “fundamental change in mindset and approach”; “prioritize” foreign bribery cases that involve drug cartels and transnational criminal organizations, such as human smuggling rings and those who traffic in narcotics and firearms; and “shift focus away” from other foreign bribery allegations.³Total Elimination of Cartels and Transnational Criminal Organizations to all Dep’t of Justice Emps. (Op. Att’y Gen. Feb. 5, 2025), https://aboutblaw.com/bg8D.

The new FCPA policies reflect two separate goals: stop deterring American companies from paying bribes in countries where their foreign competitors pay bribes, and redirect FCPA enforcement resources to cases that involve drug cartels and transnational organized crime.

Both policies depart sharply from the Department’s long-standing commitment to criminal FCPA enforcement. The future of FCPA enforcement remains uncertain because the order imposes a 180-day freeze on federal criminal enforcement and conditions lifting the enforcement freeze on the adoption of new FCPA guidance.

This Client Alert addresses the impact of the President’s executive order and the Attorney General’s memorandum on past, present, and future FCPA cases. It recommends that targets of investigations or prosecutions assemble any available evidence that their FCPA violations did not involve drug dealing or transnational organized crime and that their foreign competitors engaged in similar conduct. Such factors generally are not admissible to secure acquittals from judges or juries, but under the new policy they might elicit declinations or reduced penalties from prosecutors.

HISTORY OF THE FOREIGN CORRUPT PRACTICES ACT

Congress enacted the FCPA in 1977 to deter American companies from engaging in the then-common practice of paying bribes to foreign government officials and intermediaries.⁴S. Comm. on Banking, Housing, & Urban Affs., 94th Cong., Report of the SEC on Questionable and Illegal Corporate Payments and Practices (Comm. Print 1976), https://www.sec.gov/spotlight/fcpa/sec-report-questionable-illegal-corporate-payments-practices-1976.pdf. In many countries, officials treated governmental authority as a tool to enrich themselves, their families, and their political allies in a pay-to-play system with little consideration for the notion that public office is a public trust. Because Congress can legislate only as far as American jurisdiction extends, the FCPA is not universal in application. Instead, the statute makes it unlawful for companies that issue stock listed on a U.S. stock exchange—or their officers, directors, employees, or agents—to pay foreign officials in return for assistance in obtaining or retaining business.⁵15 U.S.C. §78dd. The FCPA also added broad accounting provisions to the federal securities laws, requiring issuers to keep accurate books and records, and to maintain adequate internal controls.⁶15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(2)(B). Upon a criminal FCPA conviction, an issuer faces a fine of up to $2 million for each violation, and an officer, director, employee, or agent may be imprisoned up to five years per violation.⁷15 U.S.C. § 78ff.

In addition to criminal enforcement authority, the Department of Justice can pursue civil actions against entities and individuals accused of violating the anti-bribery provisions of FCPA.⁸See, e.g., A Resource Guide to the U.S. Foreign Corrupt Practices Act, 2d Ed., by the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission (July 2020) at 70, https://www.justice.gov/criminal/criminal- fraud/file/1292051/dl?inline= (“DOJ has exercised this civil authority in limited circumstances in the last thirty years.”). The Department can pursue such actions against domestic concerns, as well as foreign entities for violations committed while in the United States. It can bring such actions against both public and private entities and their officers, directors, employees, agents, or stockholders, impose civil penalties, and seek to enjoin ongoing or future violations.⁹15 U.S.C. §§ 78dd–2(g)(1)(B); 2(g)(2)(B). The statute calls for fines of $10,000 per violation, which as of January 15, 2025, is $26,262 when adjusted for inflation. “Inflation Adjustments to the Civil Monetary Penalties Administered by the Securities and Exchange Commission,” S.E.C. (Jan. 15, 2025), https://www.sec.gov/enforce/civil-penalties-inflation-adjustments.

The Securities and Exchange Commission also exercises civil authority over the FCPA’s antibribery and accounting provisions, although that authority is limited to issuers of U.S. registered securities, companies required to file reports with the SEC, and the officers, directors, employees, shareholders, and agents of those companies.¹⁰15 U.S.C. § 78dd-1(a). This jurisdiction extends to foreign-domiciled issuers that have securities registered within the United States. The Commission has prioritized FCPA enforcement, relying on a specialized unit in the Enforcement Division.¹¹“Foreign Corrupt Practices Act (FCPA),” S.E.C. (Sept. 13, 2023), https://www.sec.gov/enforcement/foreign-corrupt-practices-act. SEC investigators routinely ask how improper payments may have been recorded in the company’s books and records, how payments were presented to outside auditors, why internal controls failed to identify the improper payments, whether the company’s public disclosures were falsified, and whether senior management knew or should have known about the violations.

Like the Department, the Commission can impose civil penalties for FCPA violations that include fines,¹²15 U.S.C. §§ 78dd-2(g), 78dd-3(e). injunctive relief,¹³15 U.S.C. § 78u(d)(1)-(3). and the imposition of a company-funded, independent compliance monitor.¹⁴See, e.g., Revised Memorandum on Selection of monitors in Criminal Division Matters, U.S. Department of Justice (Mar. 1, 2023), https://www.justice.gov/archives/opa/speech/file/1571916/dl?inline=. It also can require disgorgement of ill-gotten gains,¹⁵15 U.S.C. §§ 78u(d)(1)-(3); 15 USC § 78u-3(a), (e). and individual officer and director bars.¹⁶15 U.S.C. § 78u-3(a).

During the first Trump Administration, the Department of Justice adopted policies that incentivized companies to self- report FCPA violations and cooperate in governmental investigations by offering leniency, including specified penalty reductions. The Department also adopted a policy encouraging prosecutors to coordinate with other domestic law enforcement agencies as well as foreign agencies so companies and individuals who admitted committing FCPA violations would not face prosecutors piling on multiple penalties for the same course of conduct. Department officials sought through these policies to “strike a reasonable balance” with FCPA enforcement.¹⁷See Deputy Attorney General Rod J. Rosenstein Delivers Remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act, U.S. Department of Justice (Nov. 29, 2018), https://www.justice.gov/archives/opa/speech/deputy-attorney-general-rod- j-rosenstein-delivers-remarks-american-conference-institute-0.

In the Biden Administration, the Department issued repeated modifications to its FCPA policies, including offering rewards to whistleblowers for reporting violations.¹⁸See Principal Deputy Assistant Attorney General Nicole M. Argentieri Delivers Remarks on New Corporate Whistleblower Awards Pilot Program, (Aug. 1, 2024), https://www.justice.gov/archives/opa/speech/principal-deputy-assistant-attorney-general-nicole-m-argentieri-delivers-remarks-new. FCPA cases during the Biden Administration generated large financial penalties ranging from hundreds of millions to more than one billion dollars.¹⁹See, e.g., Press Release, U.S. Dep’t of Justice, Raytheon Company to Pay Over $950M in Connection with Defective Pricing, Foreign Bribery, and Export Control Schemes (Oct. 16, 2024), https://www.justice.gov/archives/opa/pr/raytheon-company-pay-over-950m-connection-defective-pricing- foreign-bribery-and-export; Press Release, U.S. Dep’t of Justice, Glencore Entered Guilty Pleas to Foreign Bribery and Market Manipulation Schemes (May 24, 2022), https://www.justice.gov/archives/opa/pr/glencore-entered-guilty-pleas-foreign-bribery-and-market-manipulation-schemes.

ATTORNEY GENERAL BONDI’S MEMORANDUM

Attorney General Bondi’s memorandum directs the Department to “prioritize investigations related to foreign bribery that facilitates the criminal operations of [drug] Cartels and [transnational criminal organizations], and shift focus away from investigations and cases that do not involve such a connection.”²⁰Total Elimination of Cartels and Transnational Criminal Organizations to all Dep’t of Justice Emps. (Op. Att’y Gen. Feb. 5, 2025), https://aboutblaw.com/bg8D. As examples of appropriate FCPA targets, her memorandum mentions “bribery of foreign officials to facilitate human smuggling and the trafficking of narcotics and firearms.”²¹Id.

Prioritizing violations linked to organized crime will not necessarily reduce the total number of FCPA cases, because the Attorney General’s memorandum expands the universe of prosecutors who may enforce it. The memorandum divests the Fraud Section of its exclusive power to investigate and prosecute FCPA violations. Prosecutors in the 93

U.S. Attorney’s Offices may now investigate and prosecute alleged FCPA violations “relating to” drug cartels and transnational criminal organizations.²²Id. And the memorandum authorizes U.S. Attorneys to pursue those FCPA cases without authorization from the Department’s Criminal Division.²³Id.

PRESIDENT TRUMP’S EXECUTIVE ORDER

President Trump’s Executive Order directs the Justice Department to (1) develop new FCPA enforcement guidance; (2) cease initiating any new FCPA investigations or enforcement actions until the new guidance is in place; and (3) review all current and past FCPA actions and consider taking “remedial measures” for cases inconsistent with new policies.²⁴Exec. Order, Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security (Feb. 10, 2025), https://www.whitehouse.gov/presidential-actions/2025/02/pausing-foreign-corrupt-practices-act-enforcement-to-further-american-economic-and- national-security/.

The White House fact sheet issued with the Order justified the directives as addressing competitive disadvantages U.S. companies face relative to their international competitors. The White House noted that the FCPA punishes U.S. companies for “engaging in practices common among international competitors,” which suggests that companies seeking protection under the new policy might need to show that foreign competitors engaged in similar conduct.²⁵Fact Sheet: President Donald J. Trump Restores American Competitiveness and Security in FCPA Enforcement (Feb. 10, 2025), https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-restores-american-competitiveness-and-security-in-fcpa- enforcement/.

There is an inconsistency between the Order and Attorney General Bondi’s directive concerning authority to bring FCPA actions. The Order directs the Attorney General to approve all future enforcement actions, whereas Attorney General Bondi delegated authority from the Criminal Division to U.S. Attorneys for certain types of FCPA cases.

ANALYSIS OF THE POLICY CHANGES

The Bondi Memorandum and President Trump’s Executive Order portend a sea change in FCPA enforcement. Attorney General Bondi directed prosecutors to “fundamental[ly] change” their mindset and approach,” “prioritize” foreign bribery cases that involve drug cartels and transnational criminal organizations, and “shift focus away” from other foreign bribery.²⁶Total Elimination of Cartels and Transnational Criminal Organizations to all Dep’t of Justice Emps. (Op. Att’y Gen. Feb. 5, 2025), https://aboutblaw.com/bg8D. President Trump then ordered the Attorney General to pause future FCPA enforcement until she implements new guidance to “prioritize … American economic competitiveness,” and to remediate previous FCPA enforcement actions inconsistent with the forthcoming guidance.²⁷Exec. Order, Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security (Feb. 10, 2025), https://www.whitehouse.gov/presidential-actions/2025/02/pausing-foreign-corrupt-practices-act-enforcement-to-further-american-economic-and- national-security/.

Many questions remain to be answered, including:

• Can companies now under criminal investigation for undisputed FCPA violations escape prosecution entirely by arguing that their cases do not involve drug cartels or transnational organized crime?
• Can companies now under criminal investigation escape prosecution by arguing that their foreign competitors engaged in similar conduct?
• Will the Department enforce the FCPA against foreign companies even absent links to a drug cartel or organized crime group?
• Will the Department rule out any FCPA enforcement when the conduct did not undermine American competitive interests and was not linked to a drug cartel or transnational criminal organization?²⁸See, e.g., Press Release, U.S. Dep’t of Justice, Raytheon Company to Pay Over $950M in Connection with Defective Pricing, Foreign Bribery, and Export Control Schemes (Oct. 16, 2024), https://www.justice.gov/archives/opa/pr/raytheon-company-pay-over-950m-connection-defective-pricing- foreign-bribery-and-export.
• Will the Department presume that bribes paid to officials in certain countries were linked to organized crime? For instance, one of President Trump’s executive orders describes an “an intolerable alliance” between Mexican drug cartels and the Mexican Government,²⁹Exec. Order No. 14194, 90 Fed. Reg. 9117 (Feb. 1, 2025), https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address- the-situation-at-our-southern-border/. which suggests an FCPA violation involving a Mexican official might be treated as linked to a drug cartel.
• What steps will the Department take to “remediate” prior enforcement actions, such as concluded cases against companies that paid bribes to win business and companies whose bribes did not fund a drug cartel or organized crime group? The discretionary considerations specified by the President and the Attorney General are not elements of the offense and therefore might not have been considered during federal investigations.
• Will the Order impact the SEC’s authority to investigate and file civil FCPA actions?

PRACTICAL IMPLICATIONS

The new policies should not lead companies to dismantle their FCPA compliance efforts. It remains unlawful to violate the FCPA regardless of whether the Department of Justice intends to pursue criminal charges, and a future President could reinstitute criminal enforcement. In any event, companies and individual perpetrators may face severe civil sanctions from the SEC, as well as private litigation and foreign criminal and civil enforcement.

The most immediate impact will be on companies and individuals targeted by the Justice Department in past or pending criminal FCPA investigations. They should immediately begin gathering information to support arguments that the actual or alleged criminal violations in their cases do not implicate the new federal priorities. For open cases, companies should seek declinations or settlements with reduced penalties. For cases that have already been resolved, companies should prepare to explain why the facts might justify the extraordinary remedy of revisiting a completed prosecution without a claim of innocence. President Trump’s executive order portends a new world order with considerable uncertainty, and anyone convicted or suspected of a criminal FCPA violation might now have an unanticipated lifeline.