COLUMN | Foreign Corrupt Practices – America not enforcing its own law makes bribery worse everywhere; everyone loses, except the usual suspects [Offshore Accounts]

In 2015, as the sordid depths of the multi-billion 1MDB bribery and corruption scandal in Malaysia were seeping out, I remember speaking to a senior manager in Murphy Oil, which operated the deepwater Kikeh oil field in the South China Sea.

The Bersih movement of civil activists was in full force, protesting at the country’s slide towards criminality and autocracy. The wily crook running the country, and milking it for millions, Malaysia's then-Prime Minister Najib Razak, had deployed a rent-a-mob crowd of Malay activists in the capital to protest against Bersih in an attempt to divide the opposition on racial grounds.

“Can you imagine those idiots?” the Murphy Oil man said to me over drinks near the Twin Towers. “If you are protesting against the anti-corruption movement, then it means you are in favour of corruption. Duh!”

His words came back to mind last week, with the news that President Donald Trump has passed an executive order to suspend the implementation of the world’s oldest and most significant anti-bribery legislation, the Foreign Corrupt Practices Act (FCPA).

Why would anyone want to water down four decades of successful legislation against corruption?

First accused were the Japanese prime minister and the Italian president

The FCPA is a very simple piece of legislation. It makes it illegal for Americans to bribe foreign officials, and it came into force in December 1977 for good reason.

President Jimmy Carter signed the FCPA into law after two years of public hearings held by the US Senate’s subcommittee on multinational corporations, chaired by Senator Frank Church. These hearings revealed the astonishing levels of corruption in international business.

At the time, paying bribes was expected and normal in many countries, and American companies, like their international competitors, were only too happy to grease a few palms to get deals done.

The Church Committee heard how American aerospace company Lockheed had paid US$3 million in bribes in Japan to sell 21 of its L-1011 TriStar commercial passenger jets to All Nippon Airways (ANA) after hiring a member of the Yakuza criminal underworld as a consultant.

Additionally, Lockheed was found to have bribed government officials in Germany and Italy and elsewhere in order to sell its military fighter jets and other planes over the preceding quarter century. In Italy (surprise!), President Giovanni Leone was forced to resign in 1978 after he was accused of taking bribes from Lockheed to buy C-130 Hercules military transport aircraft.

The Lockheed revelations created an enormous scandal in Japan and led to the arrest of then-Prime Minister Kakuei Tanaka. The dramatic disclosures, which (surprise!) Henry Kissinger had tried to keep secret, added momentum in the US Congress in support of the FCPA.

In October 1983, Mr Tanaka was found guilty in Japan and sentenced to four years in jail and a 500 million yen fine, which he attempted to appeal, and he refused to give up his seat in parliament despite the conviction.

It is important to note that he was convicted in Japan not the US – and that pursuing bribe takers is as important as pursuing bribe payers. As we have observed in the Glencore indictments for millions of dollars of bribery across Africa, too often bribe payers in corrupt countries get off scot-free.

But prosecutions under the FCPA bust open sordid details that despots and crooks in foreign states would desperately like to be kept hidden.

A recent survey by the OECD found that foreign officials who demand or receive bribes are only criminally punished by their home governments some 20 per cent of the time, Transparency International reported. Therefore, maintaining the momentum against bribe paying is important, as bribe receiving is simply ignored in too many corrupt states.

FCPA as groundbreaking

The list of oil and gas companies that have been charged or have made settlements under the FCPA is lengthy. Along with pharmaceuticals, oil and gas has been at the epicentre of bribery cases these last twenty years – and it is not just American companies that have found themselves in the spotlight.

Swiss freight forwarding house Panalpina basically imploded in 2010 when it was found guilty of paying over US$27 million in bribes to foreign officials in at least seven countries, including (shock!) Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan. Panalpina paid US$70 million in fines to the Department of Justice in the US and exited many of its major markets, having been shunned by its clients and hamstrung by the huge penalties.

Many Panalpina customers were also criminally charged and made settlements, including rig owners Transocean and Noble Corporation, and Shell’s local subsidiary, for bribes paid to issue customs documents and permits in Nigeria.

Supply vessel operator Tidewater admitted it had paid approximately US$160,000 in bribes through its employees and agents to tax inspectors in Azerbaijan to improperly secure favourable tax assessments, and approximately US$1.6 million in bribes paid through Panalpina to Nigerian customs officials to induce the officials to disregard Nigerian customs regulations relating to the importation of foreign flag vessels into Nigerian waters.

To resolve the matter, in 2010 Tidewater entered into a deferred prosecution agreement, whereby it paid the US government a US$7.35 million criminal penalty.

Rig owner Pride, later bought by the predecessor company of Valaris, admitted to paying US$800,000 in bribes directly and indirectly to (shock!) government officials in Venezuela, India and Mexico.

The bribes were paid to extend drilling contracts for three rigs operating offshore in Venezuela; to secure a favourable administrative judicial decision relating to a customs dispute for a rig imported into India; and to avoid the payment of customs duties and penalties relating to a rig and equipment operating in Mexico.

Pride was fined US$32 million. How much has changed in those countries?

More recently in 2024, the US authorities reached a plea agreement with Singapore-based trading house Trafigura over US$20 million in bribes the company had made in Brazil to win business with state-controlled oil company Petrobras, and Trafigura agreed to pay US$126 million in penalties.

The importance of FCPA

The importance of the FCPA cannot be underestimated.

As Casey Michel has written, this legislation was not only the first in the world that criminalised this kind of bribery, but it has long galvanised anti-corruption efforts elsewhere. It is a measure of how far we have come in fighting corruption that most readers find it bizarre that such rules did not exist earlier.

Those readers might be surprised to find that as recently as the 2000s, German conglomerate Siemens had paid out over US$1.3 billion in bribes in the time between its US stock market listing in 2001 and 2007. This included around US$555 million that was remitted for unknown purposes, comprising an estimated US$341 million in direct payments to so-called business consultants for unknown purposes.

The company then used the remaining US$805 million as direct corrupt payments to foreign officials using mechanisms such as slush funds and so-called cash desks, where salesmen collected wads of cash that they would hand over to officials themselves as bribes (or keep, but this possibility was never discussed, although the Bourbon trial in Marseille revealed this particular risk).

Siemens ended up paying US$450 million as a total criminal fine, plus disbursements. The FCPA and actions by the OECD ended such cash desks.

The FCPA was template for the OECD Anti-Bribery Convention, signed at the end of 1997, which has been ratified by 46 countries, including non-members. But (surprise) it was not ratified by China, Russia, Angola, Azerbaijan, and Nigeria.

The FCPA has been a powerful template for many other countries to pass regulations and laws designed to criminalise both individuals and companies which bribe foreign government officials, like the British Bribery Act. This is a good thing.

Big penalties – US$24 billion in fines from US$12 billion in bribes

The FCPA has also been absurdly profitable for the American government.

Stanford Law School collates a database of FCPA penalties and fines. In the last ten years from 2015 to 2024, enforcements of the law by both the Department of Justice (for criminal cases) and the Securities and Exchange Commission (for civil violations) have resulted in companies paying over US$24 billion to the US government.

Where the amount of the bribes was quantified, the Stanford database shows that at least US$11.8 billion in corrupt payments were made by the companies investigated. And guess what? China, Brazil and India were among the countries where bribes were most frequently paid by those found guilty of breaking the FCPA. Again, surprise!

The 1MDB case, which triggered the Bersih protests in 2015, involved the largest ever FCPA fine up to that time, US$1.66 billion against Goldman Sachs for its alleged illicit actions in the financing the rotten Malaysian sovereign wealth scam.

The 1MDB case involved investigations by US, British, Australian, Singaporean, Kuwaiti, Hong Kong, Swiss and Malaysian authorities, and it shows how bribery and money-laundering enforcement has spread beyond the US and the FCPA.

Foreigners pay the biggest fines

However, over 40 per cent of defendants have been from outside America after the FCPA was widened in 1998 to include foreign firms and foreign individuals connected to the US. As a result, eight of the ten biggest fines for FCPA violations have been paid by foreign firms, including Siemens, not by American ones.

European commercial jet maker Airbus tops the list after it agreed to a €3.6 billion (US$3.8 billion) penalty in 2020 after a Department of Justice investigation into its use of bribe-paying middlemen to help it sell its planes. Many non-American companies – like Panalpina, Keppel in Singapore, and SBM Offshore in Monaco – have found themselves on the receiving end of Department of Justice enforcement, by virtue of their ties to the US.

Adani off the hook?

Most recently, executives at India’s Adani Group were indicted in the US for a bribery scheme in November. Adani recently bought UAE-based offshore supply operator Astro Offshore. President Trump’s decision to suspend the implementation of the FCPA means that this investigation into Adani is now likely on hold.

This is ironic, as the President specifically named deepwater ports as an example of strategic US investments that might be impeded by the enforcement of the FCPA. One might have thought that enforcing the anti-bribery law against one of India’s largest ports and terminal operators could have helped American players in this segment (not that we can think of many).

The executive order states that FCPA enforcement is “draining resources from both American businesses and law enforcement.” The facts show the opposite – it raises billions for the treasury, and the largest penalties have been against foreign companies, not American ones.

Is the FCPA suspension merely the beginning?

President Trump has also abolished the FBI’s Foreign Influence Task Force, which tries to stop foreign powers from meddling in American democracy. He has also disbanded a Justice Department task force that goes after Russian oligarchs who evade US sanctions.

He also moved to drop the criminal charges against New York Mayor Eric Adams for receiving bribes from foreign agents and donors, which potentially opens the door for other officials to solicit illegal foreign funds. Two federal prosecutors resigned as a result.

We should emphasise that Mayor Adams has denied all the charges, but won’t have the chance to prove his innocence in court now that the case has been dropped.

These moves have concerned anti-corruptions campaigners, and rightly. But I don’t see his executive order on the FCPA as changing things in the short term, even if Russian billionaires and potential foreign donors like 1MDB’s Jho Loh can sleep more easily.

The crook paid US$40 million through lobbyists to get his Christmas photo taken with the Obamas in 2012.

Why do this now?

What reasons does the American president give for his decision to suspend the enforcement of the FCPA?

"It’s going to mean a lot more business for America," President Trump said after he signed the executive order. "[FCPA] sounds good on paper, but in [practice] it’s a disaster."

A White House official told The Financial Times that America’s “national security depends on America and its companies gaining strategic commercial advantages around the world. President Trump is stopping excessive, unpredictable FCPA enforcement that makes American companies less competitive.”

The Executive Order itself states that the country's national security hinges on the ability to gain strategic business advantages “whether in critical minerals, deepwater ports, or other key infrastructure or assets,” and that the “over expansive and unpredictable” use of the FCPA “for routine business practices in other nations” actively harms the country’s economic competitiveness and national security, and wastes prosecutorial resources that “could be dedicated to preserving American freedoms.”

Competitive advantage through bribery?

There is a lot to unpack here but these reasons seem flawed. One of the main findings from the 1970s was that American companies were competing against each other to offer ever higher bribes to foreign officials.

One of the reasons Lockheed was paying bribes in Japan in the 1970s was to overcome competition from American rival McDonnell Douglas, which had offered ANA its DC-10 plane, and had signed a provisional deal with the airline. The bribe to the Japanese premier overturned that award.

The fine against Airbus in 2020 directly advantaged Boeing by making it clear that Boeing could not pay bribes either. Once the threat of FCPA enforcement is removed, both Airbus and Boeing, or Tidewater and Bourbon, or ExxonMobil and Chevron, or Transocean and Noble, could face demands for bribes from foreign government officials, which will be hard to reject if bribe paying is decriminalised.

Instead of making American businesses more competitive, demanding bribes will become more lucrative for crooks in state oil companies and customs departments in places like Angola, Nigeria, Indonesia and Azerbaijan (and all the usual suspects). The costs of business will rise, and only the crooks and middlemen will benefit, from Russian judges to Nigerian oil ministry officials and PDVSA managers.

Does President Trump really believe that American companies will be suddenly empowered to pay “bigly” bribes, and their foreign competitors will sit by and do nothing as cash-toting American players sweep all before?

Instead, the amounts demanded as bribes and the frequency of such demands will rise. American companies may raise the bribe, but you can be sure Chinese state companies will likely match and raise again.

In a market where bribes become normalised again, nobody wins except the bribe takers, the officials who collect money in brown envelopes to make decisions and approve processes.

Competitive advantage through bribery is easy – the biggest bribe payers win, not the most efficient, not the lowest priced, not the company with the best technology or the best service.

There is no competitive advantage in bribery – just bigger and bigger bribes, and a worse and worse business environment.

FCPA is still the law

And the move to pass an executive order to suspend the enforcement of the FCPA is hardly likely to have any American business leader reaching for a wad of Benjamin Franklins to give to the tender board in a foreign state oil company just yet.

The FCPA remains the law. Only an act of congress can revoke it. It still has force.

Mr Trump’s executive order sets an initial 180-day review period during which time the Attorney General Pam Bondi has three tasks. Firstly, she should prevent the initiation of any new FCPA investigations or enforcement actions… unless she makes an individual exception and decides to prosecute a case.

So, nobody violating the FCPA today can be sure that even with the pause in enforcement, they will not be prosecuted by Ms Bondi, although the standard for such an exception is not set forth in the executive order.

Secondly, the order calls on the Attorney General to review all existing FCPA investigations and enforcement actions in light of the order, so presumably Ms Bondi will be looking at the Adani case and seeing whether it is worth pursuing. Perhaps she will decide it is.

Finally, the Attorney General should issue updated guidelines and/or policies that “adequately promote the President’s Article II authority to conduct foreign affairs and prioritize American interests, American economic competitiveness with respect to other nations, and the efficient use of Federal law enforcement resources.”

The Attorney General may extend the initial 180-day review period by an additional 180 days if Ms Bondi deems it appropriate.

The critical issue for readers to remember is that FCPA remains the law. The executive order does not change that. The statute of limitations for FCPA violations will outlast the current Trump administration, unless the law is revoked (would you want to be a lawmaker voting to strike down the most successful anti-corruption legislation in the world?).

The FCPA has a statute of limitations of five years for violations of the anti-bribery provisions. Pay a bribe in 2025 under Trump and you can still be investigated and prosecuted by the Department of Justice under whoever is president in 2030.

Thus, businesspeople considering caving in to the demands of some future Isabelle Dos Santos or Diezani Alison-Madueke should be reminded that any FCPA violations occurring over the next four years may be the subject of enforcement actions under a new administration after President Trump. And the executive order will not be a defence.

And foreign governments must surely be relishing the prospect of applying some extra-territorial legislation against American bribe payers.

Casey Michel concluded his review of the executive order with the pessimistic words that “Trump entered his second administration unafraid to allow America’s legacy of anti-corruption leadership to implode, and to undo decades of progress made by anti-corruption crusaders.”

I disagree. The risks for American companies of paying bribes based on an executive order remain too great. The FCPA remains the law, and it has been copied by many other laws in many other countries.

To paraphrase my conversation with the Murphy manager in 2015, if you are repealing the anti-corruption legislation, then it means you are in favour of corruption.

In a democracy, that is not a good look, especially when the enforcement of the law earned the government US$24 billion in ten years. If the FCPA is revoked, then all bets are off, but I seriously doubt any major American companies (nor most foreign ones) want to return to the wild west of the 1970s, when Lockheed was furiously paying bribes to overcome American competitors.

Times and attitudes have changed, and Trump’s executive order does not remove the stigma and legal risk that bribe paying engenders, either in the US or elsewhere in the OECD.

Just say no.

Background reading

For more information on the Bersih movement of civil activists in Malaysia and the counter Red Shirt rally of 2015, see this account, and see Paul Millar here for the race baiting element. Bersih is short for Gabungan Pilihanraya Bersih dan Adil — the Coalition for Clean and Fair Elections.

Millar observes how the Redshirts’ threats to riot served as a smokescreen to shift attention away from then Prime Minister Najib Razak’s involvement in the ongoing 1MDB scandal, and highlights how the counter-demonstration against Bersih in 2015 had been bolstered by some 10,000 Federal Land Development Authority-sponsored settlers – drawn overwhelmingly from the rural poor – who had been bussed in to boost the ranks of the protesters in return for money, despite being entirely ignorant of the rally’s intent. 

Shipbuilding and bribery have a connection as old as the hills. The wonderful Wikipedia page on the battle between Vickers in Britain and (surprise!) Siemens in Germany to bribe decision makers in the Imperial Japanese Navy over the construction of the battleship Kongo is a salutary warning for what happens when bribe paying becomes the norm in business.

Siemens had secured a virtual monopoly over Japanese naval contracts in return for a secret 15 per cent kickback to the Japanese naval authorities responsible for procurement.

However, Vickers (via their Japanese agents Mitsui Bussan) offered the Japanese naval authorities a more lucrative deal, involving a 25 per cent kickback, including 40,000 yen for Vice Admiral Matsumoto Kazu, the former Chief of the Navy Technical Department to build Kongo in Barrow in Furness in Britain.

The ship was ordered there in 1911, but in 1914, details of the bribery emerged, complete with stolen documents, Siemens employees sent to prison, riots by the enraged public in Tokyo, and confessions from Admiral Fujii Terugoro of the navy procurement office about the cash he had received from Vickers. Let’s not go back there.