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Jesse Van Genugten: Foreign companies should beware of lopsided FCPA enforcement

In a novel, even if rather obscure manner, the Trump Administration has found a new way to put America first.

Both Deputy Attorney General Rod Rosenstein and the new head of the SEC’s anti-bribery division, Charles Cain, have expressed an interest in “leveling the playing field” for U.S. companies, and their agencies’ actions prove the validity of those statements.

Earlier this month, the Department of Justice announced it would halt its prosecution (pdf) of Credit Suisse’s Hong Kong subsidiary, which it had been investigating for violations of the Foreign Corrupt Practices Act. The bank admitted it had set up a preferential hiring arrangement for individuals connected to government officials in China and Hong Kong in hopes of quid pro quo actions by those government officials. The termination of the investigation was prompted by the Swiss parent company’s agreement to pay fines of $47 million to the DOJ and $30 million to the Securities and Exchange Commission.

The FCPA has proven to be one of the world’s most active enforcement mechanisms against corporate bribery of foreign officials over the last two decades. Even so, upon enactment in 1977, the FCPA faced sharp criticism that it would damage U.S. competitiveness. Foreign companies would, in theory, be able to outbid their U.S. counterparts for lucrative business contracts by simply setting aside a multi-million dollar bribe.

Fear, however, that the enactment of the anti-bribery laws would stifle U.S. competitiveness has proven unfounded. In part, the law conditioned U.S. market involvement by foreign companies on compliance with the same standards the U.S. domestic companies faced. Additionally, the previous two U.S. Administrations have enforced the FCPA at vastly disparate rates for foreign companies.

The foreign focus of the FCPA and the long grasp of the U.S. legal system is evinced in the Credit Suisse settlement agreement. Credit Suisse is Switzerland-based company with headquarters in Zurich, and its Hong Kong subsidiary has no direct connection to the U.S. market. Nevertheless, the U.S. government has the authority to extend its powerful reach to foreign companies that have issued securities in the U.S. markets, including, as in this case, the sale of the parent company’s shares on the New York Stock Exchange. Thus, even the Hong Kong subsidiary could not escape the jurisdiction of the U.S. government. 

Further assuaging the fears described above, recent U.S. anti-bribery enforcement practices have proved rather lopsided — limiting the reach of the largest sanctions to foreign companies. Under the Obama Administration, nearly 200 companies were sanctioned under the FCPA, 115 of which were U.S. registered companies. There was, however, a vast divergence between the sanctions assessed against the U.S. companies and foreign counterparts. On average, the foreign companies faced fines roughly four times the size of the sanctions assessed against U.S. companies.    

Not to be outdone, the Trump Administration has slapped foreign companies with sanctions amounting to roughly 15 times those faced by U.S. companies, on average $154 million to a mere $12.8 million.

Of the $2.8 billion that the Trump Administration’s DOJ and SEC has collected under the anti-bribery laws, only $167 million came from its domestic companies. Not that we should be surprised. It appears par for the course for an Administration that has endeavored to assist, in any manner, domestic companies in the global marketplace.


Jesse Van Genugten, pictured above, is a Summer Associate at Shearman & Sterling LLP in the firm’s New York City office. He’s a rising 3L at Georgetown University Law Center
. He can be contacted here.

The views expressed above are those of the author only, and not of Shearman & Sterling LLP.

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  1. 3 billion people, 115 million company's,+, 45000 + listed company's.

    I really don't think you have to worry. USA is already losing the race.

    But if you feel a need to worry then think about that we already have rudimentary AI, solid printing machines and technological advances are turning logarithmical without anybody noticing.

    That might turn the ratrace a tad bit unfair.

    Well intensional FCPA won't make a dimple on the global effect but hopefully collar some of the crooked, and fine the hell out of them.

  2. Um… $154M / $12.8M = about 12, not "roughly 15".

  3. I respectfully disagree with Hylnur. My sense is that the U.S. is winning the race. This is because the U.S. is wisely using the strategy of Obliquity (the oblique or indirect method to solve difficult problems). They have done this with few people noticing. Progress is of course slow,but the effect is unstoppable. Nations that are important and wish to remain important will be coming around to the U.S. view of FCPA enforcement. Witness the UK adopting the 5th EU money laundering directive. Nations that stubbornly resist these moves will be relegated to corruption tolerant, back water status.

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