Dear Fellow Industry Seamy Underside Historians,
Long before my career began, our industry could occasionally be somewhat more, shall we say, colorful. Corruption, while not rife, was a feature of the landscape. Even the corruption itself was kind of…colorful. From the New York Times, 41 years ago: “In 15 deliveries, Deak & Company moved $8.3 million to Hong Kong, where a Spanish-born priest representing Lockheed took the cash and carried it to Japan in a flight bag or in cardboard boxes labeled ‘oranges.’” Aerospace bribes to foreign governments and customers didn’t always resemble a Monty Python sketch, but it’s safe to say that things were a bit more picaresque back then.
In 1977, the Foreign Corrupt Practices Act (FCPA; history lesson here) made this kind of thing a crime. But this week, the Trump administration said FCPA criminal prosecutions would be “paused,” as in, “Kids, we had to pause the family dog.” Upshot: things might get colorful again! But we all have questions about this new policy. Here’s a few to think about:
Okay, so now that US companies may now be able to bribe foreign officials, will foreign entities now be able to bribe US officials? Probably! International reciprocity is a key feature of the modern legal world! FCPA regulations also apply to foreign entities operating in the US. And so, also this week the Trump administration pressured the Manhattan US attorney’s office to drop charges against NY Mayor Eric Adams, accused of taking bribes from a foreign entity. The US is open for business!
Will US companies also be able to bribe US officials? Probably! US companies also need to compete with foreign entities on their home turf! Also this week the Trump administration pardoned former US Representative and total crook Rod Blagojevich. As Jonathan Chait observed in The Atlantic, “It’s infrastructure week, but for bribery.”
Will domestic corrupt defense practices be okay too? Great question! If so, I’d have doubts about that Iron Dome. Maybe that backyard bomb shelter isn’t the worst idea.
Will killing FCPA help with US defense exports? The administration’s ostensible reason for kneecapping FCPA, according to Trump’s executive order, is that FCPA “actively harms American economic competitiveness and, therefore, national security.” Not in our industry. Before FCPA, the US dominated the world defense export market. After FCPA, the US still dominated the world defense export market, and, if anything, this dominance has increased in recent years. So, this move is the perfect solution to a non-existent problem. Importantly, any foreign aerospace company wishing to do business in the US (that’s all of them, outside Russia and China) needs to abide by the terms of FCPA, or risk prosecution (commentary here).
Further, the F-35 is the most successful defense export program of this century, and perhaps ever, and despite all the criticism of the program, to the best of my knowledge, there have been zero accusations of corruption. And I shouldn’t point fingers, but okay, I will: China is the likeliest weapons producer in the world to use bribes, and bribes (real or not) haven’t done their weapons export market share any good at all.
I could be wrong, since I don’t know from other industries. If your company exports something other than aerospace equipment and you think that bribes would help, please let me know. If your company exports aerospace equipment and you think that bribes would help, please don’t let me know.
Will these bribes to foreign entities be tax deductible? DOGE is likely to gut the IRS. Deduct what you like! But seriously, this has been an issue before. A US industry executive once lamented, “Here it’s illegal. There, it’s tax deductible.” Believe it or not, pre-FCPA this was a serious matter, as reported in 1977 by the New York Times. So, who knows?
Will US companies be forced to compete with each other for contracts abroad, with bribes? This is somehow getting even darker, isn’t it? But yeah, I guess so!
Do we really want this? Of course not! Aside from the crap morals, optics, and sheer tackiness, there’s the fallout associated with getting caught. That Japanese scandal in the first paragraph, related to L-1011 Tristar sales to ANA, brought down a Japanese prime minister in 1976, and didn’t do Lockheed’s global reputation any favors either (the L-1011, however, is still my favorite jetliner).
There may be an economic cost to abolishing FCPA, too. One reason companies liked the FCPA is that, frankly, bribes are expensive, and FCPA was a good excuse to turn down requests for bribes. Compare bribes with tariffs, just because it’s interesting: Tariffs are meant to do something good (protect domestic producers) but wind up making things more expensive for consumers in the country that imposes tariffs; Bribes are meant to do something bad (give money to corrupt people in order to promote sales abroad against competitors), in order to do something good (enhance US company market share), but just wind up making things more expensive for everyone involved. Ergo, somehow, bribes are even worse than tariffs.
Does this new post-FCPA reality call for a different type of executive? Great question! In my 37 years in the industry, most people I’ve met have been buttoned-down, belt-and-suspenders types. I just can’t imagine them stuffing pillowcases full of cash, handed to a to-be-defrocked Spanish priest. So, we might have a shortage of sleazebags, for now. But sadly, the ecosystem will likely adapt. They’ll show up.
If I want to pursue foreign corrupt practices, any pointers? Crypto, baby, crypto! Conveniently, this administration loves crypto.
Yours, ‘til Fat Leonard Replaces DoD’s Fired Inspector General,
Richard Aboulafia