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Verdict In … Greens Found Guilty

The third FCPA trial of the summer has concluded and Gerald and Patricia Green (two Los Angeles area film executives) have been found guilty by a federal jury of conspiracy to violate the FCPA, substantive FCPA violations, and other charges (see here for the DOJ New Release).

According to the DOJ release, evidence introduced at trial showed that “beginning in 2002 and continuing into 2007, the Greens conspired with others to bribe the former governor of the [Tourism Authority of Thailand] in order to get lucrative film festival contracts as well as other TAT contracts.” According to the release, the evidence also established that the Green’s attempted to disguise the bribe payments by labeling them “sale commissions” and by making the payments “for the benefit of the former governor through the foreign bank accounts of intermediaries, including bank accounts in the name of the former governor’s daughter and friend.”

Reacting to the verdict, Assistant Attorney General Breuer stated that the DOJ “will not waiver in its fight against corruption, whether perpetrated within our borders or abroad” and that the FCPA “is a powerful tool that the [DOJ] will continue to use in an effort to stop individuals like the Greens who seek to further their own business interests through bribes paid to foreign officials.”

The Greens are to be sentenced in December and the conspiracy and FCPA charges each carry a maximum penalty of five years in prison.

As mentioned, the Green trial was the third FCPA trial of the summer.

The other two were the Bourke matter (see here) and the Jefferson matter (see here).

Leading up to these trials, the FCPA bar and the enforcement officials themselves, predicted that one result of these trials would be greater clarity of some of the FCPA’s murky elements.

While the verdicts were, on balance, pro-DOJ verdicts, the verdicts reached in these trials were not exactly uniform.

Bourke was convicted of conspiracy to violate the FCPA (the case did not proceed to trial on a substantive FCPA violation).

Jefferson was also convicted of conspiracy (although it is not entirely clear if the jury found him guilty of conspiracy to violate the FCPA). However, Jefferson was found not guilty on the substantive FCPA charge (the charge predicated on the “cash in the freezer” allegations).

Have these trials provided any greater clarity as to various FCPA elements as widely predicted?

I think it is far to say that as a result of the Bourke verdict (even though it was not a substantive FCPA trial), the FCPA’s knowledge standard has never been broader, and can be satisfied even when an investor, like Bourke, does not actually pay a bribe, but is merely aware that others may be making bribe payments in a widely viewed corrupt country for the potential benefit of an entity in which he is an investor (see here and here).

Beyond this, I’m not sure that any further clarity as to substantive FCPA elements has resulted from these trials, but I would be interested to hear what others have to say.

Will these trials and the largely pro-DOJ verdicts send a “proceed with caution” message to any individual or corporation faced with an FCPA enforcement action and stiffle legitimate defense theories based on the FCPA’s elements?

I expect so, yet that is indeed unfortunate as a significant portion of FCPA enforcements are based largely on DOJ/SEC’s untested and unchallenged interpretations of the law.

Mixed FCPA Verdict (It Would Seem) in Former Congressman Jefferson Trial

You may have forgotten his name, but you likely have not forgotten the headline grabbing “cash in the freezer” allegations against former Congressman William Jefferson (Louisiana), the first member of Congress ever charged with FCPA violations.

This week, a federal jury delivered a split-verdict on the FCPA charges – or so it would seem (see below).

While Jefferson was found guilty of a variety of other charges (solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy)(see here for the DOJ release), he was acquitted on the substantive FCPA antibribery charge. That charge, according to the indictment (see here), was principally based on allegations that Jefferson attempted to bribe Nigerian officials (including the former Nigerian Vice President) to assist himself and others obtain or retain business for a Nigerian telecommunications joint venture. The famous “cash in the freezer” was allegedly part of the bribery scheme.

However, the jury did convict Jefferson on a conspiracy count that the indictment charged as conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA. As reported by Jefferson’s home-state newspaper, the Times-Picayune (see here), “the law only require[d][that] the jury find [Jefferson] guilty on two out of three of those counts — solicit bribes, deprive honest services and violate the Foreign Corrupt Practices Act– and in announcing the verdict, the deputy clerk did not specify which counts the jury agreed on. It may or may not have included conspiracy to violate the Foreign Corrupt Practices Act.”

Perhaps the FCPA portion of the Jefferson verdict will become more clear in the days to come.

The Bourke Jury Instructions

As those who follow the FCPA are already aware, Frederic Bourke, Jr. was recently found guilty by a federal jury of (among other charges) conspiracy to violate the FCPA for his role in a scheme to bribe “foreign officials” in Azerbaijan in connection with the privatization of the State Oil Company of Azerbaijan. See here for the DOJ News Release.

Contrary to numerous media reports, Bourke was not on trial for “violating the FCPA” (the original indictment against Bourke contained substantive FCPA charges, however the superseding indictment removed the substantive FCPA charges in favor of conspiracy charges).

Regardless, the Bourke trial was closely followed by the FCPA bar as FCPA trials are very rare. Because FCPA trials are rare, so too are FCPA jury instructions. The Bourke jury instructions (see here) provide for an interesting, albeit frustrating, read. In instructing the jury on the conspiracy counts, the jury was instructed on the seven elements of an FCPA violation.

“Big picture” these FCPA instructions (which begin on Pg. 23 and which the jury was duty-bound to accept) are a mess.

The problem starts with the second element “interstate commerce” and contains a fundamental misstatement of the law. The instructions say (on pg. 24) that a “domestic concern” (as Bourke is under FCPA-speak) “must have intended to make use of the mails or a means or instrumentality of interstate commerce” in order to violate the FCPA. This is the so-called “territorial” jurisdictional provision found at 78dd-2. However, the 1998 amendments to the FCPA expanded the jurisdictional reach of the FCPA, as applied to “domestic concerns,” by adding an alternative “nationality” jurisdictional provision found at 78dd-2(i) which removes the interstate commerce / U.S. territorial nexus requirements. Thus, a “domestic concern” can be charged and found liable for a substantive FCPA violation even if the prohibited activity took place entirely outside of the U.S. The jury instruction that the “domestic concern” “must have intended to make use of the mails or a means or instrumentality of interstate commerce” is thus just plain wrong.

The second problem is found in what the instructions say is the fifth element of a substantive FCPA violation – the knowledge of payment to a foreign official. The instructions say (on pg. 26-27) that a “foreign official” is: (1) an officer or employee of a foreign government; (2) any department, agency, or instrumentality of such foreign government, or (3) any person acting in an official capacity for or on behalf of such government or department, agency, or instrumentality. So far so good as the instruction merely tracks the language of 78dd-2(h)(2). The problem is the next sentence of the instruction – “[a]n ‘instrumentality’ of a foreign government includes government-owned or government-controlled companies” (see pg. 27).

Where did that come from? Certainly not the text of the FCPA, as the statute does not define the term “instrumentality.” While it is true the the Department of Justice and the Securities and Exchange Commission take the position that government-owned or government-controlled companies are “instrumentalities” of a foreign government and that all employees of such companies (regardless of rank or title) are thus “foreign officials” under the FCPA, this is an unchallenged and untested legal theory.

As I am exploring in a current work-in-progress, DOJ/SEC’s aggressive interpretation of the “foreign official” element – to include employees of government-owned or government-controlled companies – is ripe for challenge in that it is, among other things, not supported by the FCPA’s extensive legislative history and is undermined by reference to other U.S. statutes which cover foreign or domestic government instrumentalities. Another way to look at it is this way – if the DOJ/SEC’s interpretation were to be applied in an intellectually honest fashion, would not all GM or AIG employees be considered U.S. “foreign officials” because the U.S. government owns or controls those companies?

A further problem with the instructions, is that even accepting the broadness by which the instructions define “foreign official” that term is not used consistently throughout the instructions. For instance, in discussing the sixth element of an FCPA violation – purpose of payment, the instructions interchangeably use the terms “foreign official” and “foreign public official.” (see Pg. 28). Even more confusing is that the instructions, when discussing that solicitation of a bribe is not a defense, (see Pg. 29) say that “[i]t is not a defense that the payment was demanded by a government official as a price for gaining entry into a market or to obtain a contract or other beneift.” Thus, literally in the span of three pages, the instructions refer to the key “foreign official” element of an FCPA violation three different ways – “foreign official,” “foreign public official,” and “government official” even though the later two terms appear nowhere in the statute.

What a mess!

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