President Trump has long argued that a law barring companies from bribing officials of foreign governments stifles deal-making abroad and puts American companies at a disadvantage.
But when he effectively put the Foreign Corrupt Practices Act out of commission this week, the order did not elicit the cheers from corporate America that you might have expected. Lawyers who specialize in corporate corruption cases told DealBook that moves to potentially weaken the law could backfire on multinationals by actually raising the cost of doing business overseas.
The F.C.P.A. has ensnared the likes of McKinsey, Petrobras and Goldman Sachs in some of the biggest corporate bribery scandals of the past half century. It is supposed to send the message that paying or seeking bribes to win business will not be tolerated anywhere, said William Garrett, a legal expert who manages the Foreign Corrupt Practices Clearinghouse, a project developed by Stanford Law and the law firm Sullivan & Cromwell.
The F.C.P.A. isn’t dead. But it’s up for review, and the concern is it could be weakened or shelved. That could create an open season for kickbacks — a price no business wants to pay. “It’s kind of the same idea like you don’t pay kidnappers, right? Because you just embolden the kidnappers to keep doing it,” Garrett said.
A recap: Trump ordered the Justice Department to cease enforcing the F.C.P.A. for the next six months and instructed prosecutors to refrain from bringing F.C.P.A. cases until Pam Bondi, his attorney general, reviews and potentially recommends new enforcement guidelines. Bondi can extend the review period if needed.
The order raises questions about the law’s future. While it does not eliminate the F.C.P.A., it’s unclear what changes Bondi may make. And what about the S.E.C., another agency that enforces F.C.P.A. violations? Will it, too, demand a second look? Paul Atkins, Trump’s pick to run the agency, has a track record of taking a light touch to corporate enforcement actions.
Trump, too, is a wild card. Killing off the F.C.P.A. was a priority in his first term. “I need you to get rid of that law,” Trump told Rex Tillerson, his first secretary of state and a former oil executive, who played a big part in stopping that idea cold.
Now Trump is unrestrained by such obstructions.
The law has its critics. It carries harsh penalties — a maximum criminal sentence of 15 years. And the legal costs can be enormous. Goldman Sachs, a first-time violator, had to pay more than $2 billion in penalties for its role in the 1MDB embezzlement case in Malaysia. The Supreme Court has recently begun to challenge federal corruption statutes deemed too broadly written, rulings that could affect the F.C.P.A.
But the act’s suddenly shaky future is creating confusion about what is legally permissible business behavior under the Trump administration. One law firm published a blunt advisory: “Yes, bribes are still illegal.”
The F.C.P.A. has become a global standard for fighting bribery. It was ratified in 1977, but enforcement didn’t pick up until about 20 years ago. Companies found in violation of the law have paid $14 billion in fines, with roughly four in 10 defendants hailing from outside the United States, according to the Foreign Corrupt Practices Clearinghouse.
Similar anti-corruption laws can be found around the world, and U.S. and foreign multinationals are still subject to them. For that reason, Trump cannot completely overwrite the international rules of business conduct. But it might send the wrong message if one of the strongest of the laws were taken off the books.
The most immediate effect could be to the bottom lines of law firms. Trump’s pause alone isn’t likely to create a kind of bribesville on a global scale. But some legal experts wonder if multinationals will scale down their compliance operations. “If the F.C.P.A. becomes something that is not enforced, that is certainly going to hit some law firms,” Garrett said.
— Bernhard Warner
IN CASE YOU MISSED IT
Investors largely brushed off tariffs. Trump unveiled his plan for reciprocal tariffs against all trading partners, and set levies on steel and aluminum imports, but the markets reaction was mixed. Along with his unresolved threats against Canada and Mexico, the tariffs could upend global trade and risk intensifying inflation.
OpenAI rejected Elon Musk’s bid. Musk and other investors made a $97.4 billion offer for the assets of the nonprofit that controls OpenAI, escalating a yearslong feud between Musk and OpenAI’s chief executive, Sam Altman, who is in the middle of shifting control of the company from the nonprofit to OpenAI’s investors, including Microsoft.
Missouri sued Starbucks for hiring a work force that’s “more female and less white.” In one of the first direct attacks against employing women and people of color since Trump took power, Missouri’s attorney general accused the coffee giant of waging a hiring campaign focused on diversity, equity and inclusion that effectively discriminates against white men. The suit cites the recent Supreme Court decision banning affirmative action and highlights civil rights cases in its argument, a new tactic many scholars have called a gross distortion of the 1964 Civil Rights Act. It seems timed to Trump’s edict to shut down D.E.I. programs across the federal government and his executive order directing government agencies to investigate D.E.I. programs at publicly traded firms. Companies like Goldman Sachs, Amazon, Google, Lowe’s, Molson Coors and Toyota have already scaled back D.E.I. efforts.
What executives are saying about Secretary Kennedy
Food businesses, drug companies, farmers and other industries are bracing for the potential impact of Robert F. Kennedy Jr.’s policies as health secretary.
Kennedy has attacked genetically modified food, certain pesticides, corn syrup and, perhaps most notably, vaccines. He said he would shake up the Food and Drug Administration, which approves new drugs, and the National Institutes of Health, a big funder of biomedical research.
But when it comes to what he’ll actually do, “well, there’s no way of knowing,” as Randall Fields, the chief executive of ReposiTrak, a maker of software used by grocery stores, put it on an earnings call this week.
While companies generally see little upside in commenting on the appointment, their investors aren’t being as quiet about it. That includes investors in companies not directly affected by Kennedy’s policies, because all kinds of businesses rely on the firms he will regulate. The chatter on earnings calls shows just how far-reaching his impact could be.
Pfizer was asked about Kennedy’s views on vaccines and general skepticism of the pharmaceutical industry. Albert Bourla, the company’s C.E.O., said he’d had dinner with Kennedy and President Trump, and found common ground on chronic diseases, cardiovascular diseases and cancer. “We expect that we will have a collaboration,” he said.
He added that any attempt to scale back vaccines was likely to face opposition from “the total medical community and the total scientific community.” Nobody wants to reduce vaccinations, he said, since they are a cost-effective way to manage health care costs. “This is not what the Trump administration would like to see, another health crisis,” he added.
Meta was asked about how much it relies on pharma ads. Mark Kelley, a managing director at the investment bank Stifel, noted, “We’ve been asked about pharma advertising across the digital companies.“ Meta’s chief financial officer, Susan Li, said those marketing dollars weren’t weighing on the company’s 2025 outlook.
Healthpeak, a medical real estate investor, downplayed the potential impact on the medical sector. Peter Scott, the company’s chief financial officer, highlighted the benefits of deregulation: “I mean, it takes 10 to 15 years to get through the drug approval process in the U.S. right now. Anything that would shorten that timeline would be a massive win for the sector.”
Despite “plenty of headline risk” with Kennedy, “I think the reality is that this administration will be positive for our business,” Scott said.
AAK, a Swedish company that makes vegetable oils and fats, was asked about potential regulation. Kennedy has falsely claimed that Americans are being “poisoned” by seed oils. Erik Johan Westman, the company’s C.E.O., said, “We have a broad portfolio, and we are very strong at helping customers reformulate.” He added: “I think we, in general, should be very careful on kind of black-and-white opinions on what is good or bad. It needs to be fact-driven.”
Cannabis companies are stoked. Kyle Kazan, the chief executive of Glass House Brands, pointed to a social media post from Kennedy that said legalizing marijuana “can actually help solve America’s drug addiction problem.” Michael DeGiglio of Village Farms, which has a large cannabis subsidiary, said he was bullish on Kennedy because “it’s time for a change, not just on the cannabis side but also on the food side.”
What you told us about carried interest
On Monday, we asked for your views on the carried interest “loophole,” the practice of taxing the amount that hedge funds, private equity firms and venture investors take from their profits as capital gains, and therefore at a lower rate than ordinary income.
After President Trump called for ending the carried interest exemption, Andrew got into a heated debate with the financier Joe Lonsdale about the wisdom of changing the tax code, with Lonsdale arguing that keeping the exemption is a valuable incentive for investment and Andrew saying that ending it would change the incentives just for managers of others’ money, not for investors.
Here’s what some of you said:
Shelley Reynolds, a Realtor in Utah, responded to the argument that real estate agents, who don’t benefit from the carried interest exemption, take no risk:
“As Realtors, no we’re not risking funds per se, but we too work with clients for months and some for years (commercial agents), and sometimes after all that time, those deals fall apart before they close and we don’t see a penny for our months or years of work.”
Harry Kopelman, who had a career as both a cardiologist and a venture capitalist, argued that the exemption should be applied only with a condition:
“A good year, financially speaking, was one in which my after-tax income as a physician covered my taxes from venture R.O.I.,” he said. If a managing investor wants to benefit from the carried interest tax exemption, he added, “then one should invest money in their own fund. A) L.P. investors will expect and appreciate it, and B) the income taxed as such from working long hours will cover their investment R.O.I. tax, just like mine did.”
Isaac Lightman, an undergraduate student at the University of Michigan’s Ross School of Business, argued that the tax arbitrage created by the carried interest loophole could affect the quality of investments:
“Fund managers being able to earn higher income through fund performance and additional ‘tax arbitrage’ could lead to looser investment criteria.”
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