The first part of this two-part article discusses the history of the Foreign Corrupt Practices Act, the President’s recent executive order pausing investigations under the law (the “EO”), and legal questions that could be raised as a result. Here, in part two, Professor Donnella continues with an ethical inquiry into the executive order.
March 5, 2025
Ethics and Integrity Signaling
The ethics/integrity signaling raised by the EO, associated documents, and messaging of the president are at least as, if not more, troubling than the legal dilemmas raised by the text.
The FCPA is part of the U.S. securities laws, including the Sarbanes-Oxley Act of 2002. Section 406 of the Sarbanes-Oxley Act mandates that publicly traded companies have a code of conduct for senior financial officers or explain why not. One requirement of this code is the promotion of “honest and ethical conduct.” Does pausing the FCPA mean pausing the promotion of honest and ethical conduct?
Furthermore, section 404 of the Sarbanes-Oxley Act requires such companies to assess and report on the effectiveness of their internal controls over financial reporting, which has led to more active internal investigations, and therefore more disclosures, and presumably more compliance with the law. Does pausing FCPA enforcement mean pausing such effectiveness assessments by companies?
The FCPA’s anti-bribery and books and records provisions are foundational to honest and ethical conduct, as required by law—not just by some amorphous extralegal concern. However, the EO goes further than merely suggesting that honest and ethical conduct is irrelevant; it implies that honest and ethical conduct is, via FCPA requirements, harmful to American companies and interests, including foreign policy and national security. The facts suggest otherwise.
Argument that U.S. Companies are Disadvantaged by the FCPA is Out of Date
First, The FCPA does not penalize payments to government officials that are lawful in the country in which they occur. However, among the statements made by the president accompanying the signing of the EO (leaving aside the political hyperbole to the extent possible), was:
“If an American goes over to a foreign country and starts doing business over there legally legitimately or otherwise it’s almost a guaranteed investigation indictment.”
The above statement is very misleading. In fact, the FCPA specifically permits payments to foreign officials to the extent such payments are permitted under written local laws (Section 30A(c)(1) of the Securities Exchange Act of 1934).
Second, the international business landscape has changed dramatically since 1977, with the U.S. no longer the only country prohibiting bribery of foreign officials. This shift is largely due to the FCPA and U.S. leadership in promoting anti-bribery principles worldwide. U.S. leadership contributed to the 1997 OECD Anti-Bribery Convention, the 2005 UN Convention Against Corruption, and the widespread adoption of foreign anti-bribery laws—most modeled after the FCPA.
Third, the FCPA has leveled the field of competition in favor of the merits of goods and services offered rather than on the value of bribes paid. Foreign corporations with sufficient connections to the U.S., its banking system, or its capital markets (virtually all major ex-U.S. companies) are held to the same standards as their U.S. competitors. Indeed, 9 out of the 10 largest FCPA sanctions in history have involved ex-U.S. corporations.
Fourth, as my friend and former federal prosecutor Martin Weinstein has recently put forth, the FCPA has served as a protective shield for corporations and their employees that want to conduct business ethically. Before the FCPA, corporations may have been strong-armed into corruption to stay competitive.
Finally, for now, I will simply say that many observers so far find the national security justifications for the EO to be a stretch, at best.
Is the EO Simply Saying Bribery, Corruption, and Other Dishonest, Unethical Behaviors Are OK?
Section 2(ii) of the EO provides that the Attorney General shall review all existing FCPA proceedings to “restore bounds on FCPA enforcement.” One can only wonder what are proper bounds on the prohibition of bribing foreign officials and requiring accurate books and records? And since such bounds are to be “restored,” it is not at all apparent at what time they existed.
Thankfully, so far, most large companies and their legal advisors maintain that they will not reduce their compliance and ethics efforts due to the EO, though they are monitoring the situation. Some entities with high risk tolerance may view the EO as an opportunity to explore actions they might not otherwise have considered. Companies and individuals under FCPA investigations or enforcement actions are already using the EO to seek case dismissals or reduced liability, understandable as a defense tactic, if not agreeable as a matter of public policy.
Where does this leave Compliance & Ethics Officers, General Counsel, executives, and employees required to promote honest and ethical conduct under the Sarbanes-Oxley Act, SEC rules, and their organizational codes of conduct? Does the EO imply that bribery and corruption are acceptable if they benefit U.S. businesses—even temporarily? Does it make inaccurate books and records acceptable for 180 days? The EO raises these questions and suggests, perhaps with little consideration of consequences, that honest and ethical conduct is neither necessary nor respected.
Michael Donnella is a Practice Professor of Law and the Director of Temple’s Center for Compliance and Ethics.