As the authors of one of the articles that contributed to the Foreign Extortion Prevention Act (“FEPA” or the “Act”), we would like to address some of the points made in Professor Koehler’s post on the FCPA Professor of August 5 entitled “Bill Seeks To Capture The Demand Side of Foreign Bribery Through Amendment to 18 USC 201.” (See here )
As an initial matter, we applaud Professor Koehler’s longstanding attention to this issue and understand that despite his criticisms of the text of the bill, Professor Koehler supports the concept of criminalizing the demand side of bribery. He just believes that this should be accomplished through an amendment to the FCPA, rather than to 18 USC §201, as the Act would do and as we suggested in our original article. In support of this argument, he raises several questions about FEPA.
First, he expresses concern that the Act “is sure to suffer from jurisdictional hurdles in prosecuting corrupt foreign officials and butt up against the presumption against extraterritoriality.” However, as courts have held, the presumption against extraterritoriality does not apply if there is clear Congressional intent to the contrary, which need not be explicitly expressed in the statute and can be inferred from context and legislative history. For example, as the Supreme Court stated in Morrison v. National Australia Bank, “We do not say . . . that the presumption against extraterritoriality is a ‘clear statement rule,’ . . . if by that is meant that a statute say “this law applies abroad.” Assuredly context can be consulted as well.” 561 U.S. 247 (2010). Moreover, “the title of a statute and the heading of a section’ are ‘tools available for the resolution of a doubt’ about the meaning of a statute.” Almendarez-Torres v. United States, 523 U.S. 224 (1998).
In this case, Congress’ intent that the statute apply extraterritorially can be inferred from the fact that the Act is entitled the Foreign Extortion Prevention Act, is explicitly designed to criminalize bribe demands by foreign government officials, and simply could not function absent extraterritorial application, See, e.g., Stone v. INS, 514 U.S. 386 (1995) (“When Congress acts to amend a statute, we presume it intends its amendment to have real and substantial effect.”). Congress’ intent that the statute apply extraterritorially can also be inferred from the Act’s legislative history. When introducing the bill, Rep. John Curtis (UT-03), explained: “U.S. businesses abroad are regularly targeted by foreign extortionists. . . . The Foreign Extortion Prevention Act would protect U.S. businesses from these individuals by punishing the demand side of bribery. Currently, a business being extorted for a bribe can only say ‘I can’t pay you a bribe because it is illegal and I might get arrested.’ This long-overdue bill would enable them to add, ‘and so will you.'” Similarly, Rep. Tom Malinowski (NJ-07) said: “Americans who pay bribes overseas can be prosecuted — with this bill, our prosecutors will be able to go after the foreign officials who demand those bribes.” To the extent any doubt remains about whether Congress intended extraterritoriality, this potential problem could be easily addressed by adding a statement in the statute that it is intended to apply extraterritorially by a provision stating “An offense under subsection (f) of this Section shall be subject to extraterritorial federal jurisdiction.”
Second, Professor Koehler argues that placing this provision in 18 USC §201 rather than the FCPA could lead to several areas of incongruity between liability for the bribe payor and the bribe demander. However, both statutes clearly capture improper payments designed to influence officials in the performance of official acts. To the extent that there is any incongruity, this is not problematic given that the two statutes are designed to capture different kinds of wrongs. The FCPA is designed to capture attempts by companies to obtain a competitive advantage by improperly influencing foreign officials. FEPA is designed to capture extortion of US companies by foreign government officials. For the same reason, the Hobbs Act’s provision on extortion under “color of official right” is not exactly congruent with 18 USC §201’s prohibition on domestic active bribery.
Third, Professor Koehler suggests that FEPA is flawed because it is silent on the issue of “what happens if what the foreign official is demanding, seeking, etc. qualifies as a facilitation payment under the FCPA’s anti-bribery provisions?” However, because the FEPA is not an amendment to the FCPA, it does not create any ambiguity as to whether the facilitation payments exception applies to foreign government officials. FEPA’s silence on this point makes clear that foreign bribe receivers would not be able to avail themselves of the facilitation payments exception. Moreover, the facilitation payments exception is designed to protect companies that are forced to pay bribes to expedite the provision of routine governmental services. It is not designed to protect the foreign officials who make such demands. There is no reason why foreign officials should be able to rely on the facilitation payments exception, which is designed to protect companies that are forced to pay bribes, and it would undermine the purpose of FEPA to allow them to do so.
Fourth, he points out that FEPA is also silent on the question of “what happens if what the foreign official is demanding, seeking, etc. qualifies as a reasonable and bona fide expenditure under the affirmative defense to the FCPA’s anti-bribery provisions?” Again, however, there is no reason for FEPA to address this issue. Like the facilitation payments exception, the reasonable and bona fide expenses defense is designed to protect companies. If the payment really was a “reasonable and bona fide expenditure,” it seems likely, though not certain, that the recipient lacked corrupt intent as required by FEPA. Allowing a foreign government official to automatically rely on an affirmative defense that is designed for companies risks exempting certain acts that should be covered. Rather, such situations should be adjudicated on a case by case basis depending on the evidence of the foreign government official’s intent.
The FCPA is part of the Securities Exchange Act and jurisdiction under it is based primarily (though not exclusively) on the issuance of securities under the Act. It is focused on those seeking to secure an “improper advantage” in “obtaining or retaining business” abroad, but also recognizes that companies can sometimes be forced into paying bribes and therefore includes certain exceptions and affirmative defenses, as Professor Koehler points out. As part of the Securities Exchange Act, it also contains accounting provisions applicable to issuers. Trying to shoehorn official extortion into such a nuanced statute designed to regulate the U.S. securities markets would create more confusion than it would alleviate. In fact, the questions raised by Professor Koehler about facilitation payments and reasonable and bona fide business expenditures illustrate this point clearly. As the Supreme Court stated in Hertz Corp. v. Friend, 559 U.S. 77 (2010) “administrative simplicity is a major virtue in a jurisdictional statute …. courts benefit from straightforward rules.” Following this maxim, we believe that including FEPA in 18 USC 201, rather than the FCPA is a simpler and more straightforward solution, avoiding the potential issues raised by Professor Koehler and facilitating more robust and effective enforcement.
In conclusion, we reiterate our appreciation to Professor Koehler for stimulating debate on this important issue and look forward to continued discussion.
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