Stepping into the Void? State and Local Authorities Pledge to Be Active in White-Collar Enforcement

For decades, the Foreign Corrupt Practices Act (“FCPA”) has been the United States’ primary tool for combating overseas bribery, with the U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) sharing responsibility for enforcing it. However, as we reported in a recent client alert, President Trump issued an executive order in February pausing the DOJ’s enforcement of the FCPA for six months while the DOJ conducts a review to determine whether future enforcement is consistent with the administration’s policy objectives. The SEC has announced that it will “follow the DOJ’s lead” in bringing its own enforcement actions, and senior SEC personnel responsible for FCPA enforcement have left the agency in recent weeks. 

Despite this “pause,” FCPA enforcement is not non-existent. For example, in two criminal FCPA prosecutions against individuals, the DOJ recently stated that it had completed its review of the matters and intended to take them to trial. Others have announced DOJ and SEC probes into FCPA compliance in recent weeks, and Merit Medical Systems, Inc. has disclosed active negotiations with the SEC to resolve an investigation into a subsidiary’s dealings with Chinese hospitals and healthcare officials.

The new administration has just passed its 100-day mark, with the new chairman of the SEC only being sworn in last week. Accordingly, despite commentary suggesting otherwise, it is too soon to know how the new Administration’s approach to the FCPA and other areas of focus in white-collar enforcement will develop. In the meantime, however, state and local authorities have made it clear that they are ready to be active in scrutinizing potential white-collar matters. 

On April 15, Manhattan District Attorney Alvin Bragg spoke at a conference on white-collar crime, noting that his office has a “significant white-collar presence” and that it would be “looking at those areas” where the DOJ may not be as focused. Bragg further explained that his office would be stepping up enforcement in relation to crypto currencies, especially given the DOJ’s pivot away from aggressive enforcement in the crypto space in certain respects.

New York State authorities likewise have a variety of tools that enable them to bring white-collar enforcement actions. Late last year Adrienne Harris, the head of New York’s Department of Financial Services (“DFS”), affirmed that deregulation efforts at the federal level would “certainly increase the volume of consumer protection cases that [DFS] may bring on the enforcement side.” New York law has its own enforcement mechanisms, including the Martin Act for fraud cases and other consumer protection laws, under which it can prosecute financial crimes.

The story is similar in California. California law, including its Unfair Competition Law (the “UCL”), allows the state to bring enforcement actions predicated on a violation of federal law. In early April, California Attorney General Rob Bonta issued a legal advisory “to remind businesses operating in California that it is illegal to make payments to foreign-government officials to obtain or retain business.” The advisory noted that the FCPA remains binding federal law, and reminded companies that companies should “continue complying with all applicable laws, including the FCPA, regardless of the federal administration’s pronouncements” and that failure to do so may lead to UCL enforcement by California.

A close review reveals that the federal “pause” in FCPA enforcement is not absolute and it does not mean bribery is legal or that there will not be consequences for U.S. companies or non-U.S. companies (with a sufficient U.S. nexus) that engage in misconduct. The federal government’s stated priorities may not include enforcing white-collar crime with its prior vigor, but it is too early to tell how the white-collar space will ultimately be impacted by the new Administration’s policies. Moreover, influential states are reminding the business community that they have the tools to step in if they deem it necessary. Accordingly, it is as important as ever for companies to be vigilant in their anti-corruption efforts and to take all necessary steps to identify and remediate wrongdoing as it is possible that their efforts will be scrutinized one way or the other.