The Legacy and Possible Demise of the FCPA
By Tanner Clegg, May 2, 2025
Amid the bedlam ignited by Watergate and national intelligence agencies’ abuses of power in the 1970s, Idaho Senator Frank Church mounted a Senate investigation into glaring corruption in the world of international business. This investigation, conducted by Church’s Senate Subcommittee on Multinational Corporations, laid the groundwork for the Foreign Corruption Practices Act (FCPA). By criminalizing the act of bribing foreign government officials the landmark law, passed by Congress in 1977, placed the US at the forefront of anti-corruption efforts.
Despite the FCPA’s demonstrated impact over the past four decades, the Trump administration unilaterally paused enforcement of the law on February 10. President Trump’s Executive Order froze enforcement for at least 180 days, pending a review of the law’s enforcement record and updated guidelines.
In an interview with corruption and governance expert Dr. Jodi Vittori, she described the historical context from which the FCPA sprung, including revelations of corruption connected to the Vietnam War and Watergate. She said investigations into the Watergate scandal “not only” revealed companies were secretly bankrolling Nixon’s campaign, but that “these same corporations…[were] bribing foreign governments.”
The Securities and Exchange Commission, which had been investigating several such corporations, tapped Church’s Subcommittee for help. The subcommittee began investigating the defense company Northrop Corporation, which “had made foreign bribes as well as domestic payoffs.” In a public hearing, a Northrop representative testified the company had bribed two Saudi generals with nearly half a million dollars. But Northrup was not Church’s only target. Between the late 1950s and the time Church’s Subcommittee began investigating, Lockheed had been on a worldwide bribery jag, paying “at least” $22 million in bribes to foreign officials. Recipients of Lockheed’s largesse included officials in Indonesia, Italy, Japan, the Netherlands, Saudi Arabia, and West Germany. The bribes were all the more incendiary because in the early 1970s Lockheed had been slouching toward bankruptcy. In a controversial decision, Congress extended Lockheed $250 million in loan guarantees, a bailout worth nearly $2 billion today.
The Lockheed scandal sent political shockwaves around the globe. Former Japanese Prime Minister Kakuei Tanaka was arrested and his home raided. The news rocked the Netherlands’ monarchy and spurred a troubling uptick in support for the Italian Communist Party. The fallout also included the suicide of a top Lockheed official, a veritable kamikaze-style assassination attempt on Yakuza confrère Yoshio Kodama (through whom Lockheed had funneled $7 million in bribery payments), and a chilling death threat made against Senator Church.
If such weighty, continent-spanning upheaval could be triggered by the impropriety of a single American firm – let alone those of several others coming to light under the subcommittee’s lens – then something had to be done. Members of Congress believed such upheaval directly impinged the US government’s foreign policy aims. “While certain existing laws did indirectly deal with various aspects of the problem,” FCPA expert Mike Koehler writes, “the prevailing view was that existing laws were deficient and that a new and direct legislative remedy was needed.”
But the scope of the legislative remedy still had to be worked out. Dr. Vittori noted that the Ford Administration favored a records transparency approach, in which companies would be required to disclose foreign bribery payments but would not be sanctioned for them. The FCPA ultimately signed into law by President Carter, however, went several steps further by criminalizing foreign bribery payments.
Donald Trump has had a bone to pick with the FCPA since at least 2012, when he called it a “horrible law” that “should be changed.” After claiming that “every other country goes into these places and do [sic] what they have to do,” he seems to suggest if American firms don’t participate in behavior sanctioned by the FCPA, “you’ll do business nowhere.”
Trump’s claim that the FCPA hamstrings American firms in the global market is not an original one. Rather, it’s one of the central arguments raised by critics since its inception. As journalist Irving Kristol wrote in The New York Times in 1976, “To the degree that serious efforts are made to enforce these regulations and laws, they will merely result in contracts going to French or German…or Czechoslovak companies rather than American ones”
Dr. Vittori believes that instead of putting American businesspeople on equal ground, a world without the FCPA “breaks the capitalist system.” She expounded: “The capitalist system says the most efficient and highest quality [businesses] should win, and bribes undermine that,” since bribery funnels business success toward those who pay off the relevant officials. “You’re saying American businesses can’t compete on price or efficiency…if I was a business person, I’d be insulted.”
The inherent irony of the “competitiveness” argument is that US firms compete against other US firms for foreign business. In fact, Lockheed paid bribes to Japanese officials precisely because it was eager to crowd out competition from two other American firms. Legal expert Alan Sykes, who has studied the competitiveness argument closely, also points out that the FCPA often targets foreign firms and individuals. The Trump Administration is correct to say the FCPA has been “stretched” since its inception, but such stretching has expanded the US’s jurisdiction to prosecute non-US firms and non-US nationals, which it has done with verve.
While some businesses may yearn to pluck the FCPA thorn from their side the FCPA provides a bulwark to US businesses when they are badgered by foreign officials to pay bribes. Robert Dorsey, then Gulf Oil’s Board Chair, appeared before Church’s Subcommittee and testified the company had paid $4 million in bribes to a South Korean political party and “substantial” amounts to officials in Bolivia, Canada, and Sweden. He told the Senate, “You can help us . . . by enacting legislation which would outlaw any foreign contributions by an American company. Such a statute . . . would make it easier to resist the very intense pressures which are placed upon us. . . .”
As it happens, both Frank Church and President Trump have placed foreign policy at the heart of the FCPA debate, albeit in diametrically different ways. For Church, a world without the FCPA undermined US foreign policy by corrupting fledgling democracies, bolstering groups antagonistic to the US, and generating instability among allies through scandals and warped budgeting. For President Trump however, the FCPA has “[impeded] the United States’ foreign policy objectives,” because ostensibly the US President’s “foreign policy authority is inextricably linked with the global economic competitiveness of American companies.” To Professor Vittori, this theory of foreign policy is troubling, as it suggests President Trump views American companies as the government’s foreign policy instruments.
Referencing the FCPA in 2017, then-Attorney General Jeff Sessions said, “Companies should succeed because they provide superior products and services, not because they pay off the right people.” It is unclear if this credo will be upheld by the second Trump administration. It is also unclear how much the White House can alter FCPA enforcement without Congress’s approval. Efforts to dismantle the financial structures of cartels and transnational criminal organizations ought to be lauded. Efforts to shrug away the costs of dirty business should not. While the FCPA is in some ways an inconvenient law – and good-faith actors incur real costs to comply – the alternative is far costlier.