A prior post (here) detailed how the Carson “foreign official” challenged moved to the jury instruction and the post summarized the defendants’ and the DOJ’s dueling jury instructions.
As discussed in the prior post, the DOJ’s proposed jury instruction stated, in full, as follows.
“The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.
An “instrumentality” of a foreign government is any entity through which a foreign government achieves an end or purpose, and can include state-owned entities. In determining whether an entity is an instrumentality of a foreign government, you should consider the following:
(1) the circumstances surrounding the entity’s creation;
(2) the foreign government’s characterization of the entity and the entity’s employees, and whether the entity is widely perceived and understood to be performing official (i.e., governmental) functions;
(3) the foreign government’s control over the entity, including the foreign government’s power to appoint key directors or officers of the entity;
(4) the purpose of the entity’s activities, including whether the entity provides a service to the citizens of the jurisdiction;
(5) the entity’s obligations and privileges under the foreign country’s law, including whether the entity exercises exclusive or controlling power to administer its designated functions;
(6) the extent of the foreign government’s ownership of the entity, including the level of financial support by the foreign government (e.g., subsidies, special tax treatment, and loans)
These factors are not exclusive, and no single factor is dispositive. In addition, in order to conclude that an entity is an instrumentality of a foreign government, you need not find that all of the factors listed above weigh in favor of such a determination.”
In sum, defendants objected as follows. “Significant portions of the Indictment in this case may survive or fall based upon the jury’s ultimate conclusion regarding whether the specific state-owned enterprises (“SOEs”) identified in the substantive FCPA counts qualify as government ‘instrumentalities’ under the FCPA and their employees ‘foreign officials.’ Yet rather than propose a jury instruction that sets forth a clear legal yardstick against which this central factual determination must be measured, the government instead proposes a vague and amorphous ‘foreign official’ and ‘instrumentality’ jury instruction that (1) is legally incorrect, and (2) provides no concrete guidance to the jury to intelligently determine which SOEs qualify as ‘instrumentalities’ and which do not.”
Taking aim at the DOJ’s proposed instruction that an “instrumentality of a foreign government is any entity through which a foreign government achieves an end or purpose,” defendants argue that “foreign governments achieve an ‘end’ or ‘purpose’ through virtually every business enterprise operating in their countries since those enterprises employ workers, pay taxes, and engage in myriad other activities that are beneficial to those governments.”
Defendants further assert that “foreign governments also achieve an ‘end’ or ‘purpose’ through every private company they hire or contract with, such as engineering, procurement, and constructions firms, law firms, information technology firms, and the like” and that “every company that sells a product or service to a foreign government helps that government achieve an end or purpose…”. Defendants maintain that “adopting the government’s proposed instruction […] would place no practical limits on the definition of ‘instrumentality.'”
Defendants further argue that the DOJ’s “end” or “purpose” test “has no grounding in the text of the statute or the statute’s legislative history” and “now that the issue is being actively litigated […] the government has cherry-picked the most expansive dictionary definition possible.” However, defendants state, “the government can point to no evidence – and there is no evidence – that Congress ever intended such an expansive definition of the term” – “in fact all of the evidence is to the contrary.”
In addition, defendants argue that “the government’s proposed instruction does not provide adequate guidance to the jury to intelligently determine whether a particular SOE is or is not a foreign government ‘instrumentality.”” Defendants maintain that the DOJ’s “instruction is devoid of a clear benchmark that must be met before the jury may conclude that the government has satisfied its burden to prove beyond a reasonable doubt that a particular SOE is a foreign government ‘instrumentality’ under the FCPA” and that “such a vague, amorphous, and standardless instruction cannot be permitted.” For instance, in discussing certain of the “proposed factors” in the DOJ’s instruction, defendants state as follows. “… factor 1 tells the jury to consider ‘the circumstances surrounding the entity’s creation,’ but it never explains precisely what circumstances the jury should consider and how those circumstances are relevant to the ‘instrumentality’ inquiry.” “Similarly,” defendants state, “factor 2 instructs the jury to consider, among other things, ‘whether the entity is widely perceived and understood to be performing official (i.e. governmental) functions.” However, defendants ask – “perceived and understood by whom” – “the citizens of that country” “the defendants” “the Department of Justice” – “the government’s instruction does not say.”
In sum, the DOJ states that the “Court should reject the defendants’ proposed ‘instrumentality’ instruction primarily because it contradicts this Court’s prior ruling on the defendants’ motion to dismiss the indictment. For a copy of that ruling – see here. Elsewhere, the DOJ states that “the defendants have proposed a convoluted and flawed ‘instrumentality’ instruction that […] ignores and contradicts this Court’s May 18 holding and supporting analysis.”
The DOJ argues that defendants proposed instruction “appears designed solely to limit as much as possible the number of entities in the world that might qualify as foreign government instrumentalities” and that it “should be rejected for several reasons.” “First,” the DOJ asserts, “the defendants cite no authority whatsoever for such an all-or-nothing approach.” “Second, the proposed instruction is in direct contravention of this Court’s recent opinion …”. “Third, adopting the defendants’ profoundly prescriptive definition approach would lead to absurd results, even in the United States” and the DOJ asks “is the United States Postal Service not an instrumentality of the United States government merely because the Postal Service seeks to maximize profits?”
In response to the portion of defendants’ proposed instruction that states – “to conclude that a business enterprise is an “instrumentality” of a foreign government, you must conclude beyond a reasonable doubt that the business enterprise is part of the foreign government itself” – the DOJ states that this “proposed jury instruction is not grounded in existing case law, but instead reflects the defendants’ desire for a whole-scale revision of the FCPA.” In a phrase that some may want to keep handy for future reference, the DOJ then states as follows. “But contrary to the defendants’ suggestion, only Congress has the power to re-write a statute.” (emphasis added).
A portion of defendants’ proposed instruction stated as follows. “A business enterprise is not a foreign government instrumentality if it is a mere subsidiary of a state-owned company. To qualify as a foreign government instrumentality, the business enterprise must, as set forth above, be directly and majority owned by the foreign government itself. Therefore, an employee of a business enterprise that is merely a subsidiary of another entity that is majority owned by the foreign government is not an employee of a foreign government instrumentality and is not a “foreign official.””
In reply, the DOJ stated as follows. “Simply put, if the entity qualifies as a foreign government instrumentality, it should make no difference where in the corporate chain that entity might sit.” (emphasis added). Elsewhere, the DOJ asserts that “application of the Court’s factors – especially ‘the foreign government’s control over the entity’ and “the extent of the foreign government’s ownership of the entity’ – are likely to result in findings that subsidiaries low ‘in the corporate chain’ […] are not instrumentalities.”
A portion of defendants’ proposed instruction stated as follows and cited OECD Convention Commentary 15 in support. “A business enterprise that operates on a normal commercial basis in the relevant market, i.e., on a basis which is substantially equivalent to that of a private enterprise, is not a foreign government instrumentality, and its employees therefore are not “foreign officials.”” The DOJ has pledged allegiance to the OECD Convention throughout the “foreign official” challenges (and elsewhere when it serves its interest -see here for a prior post), but it has consistently avoided discussion of Commentary 15. Responding to Commentary 15, the DOJ states as follows: “… the government did not argue in its motion response that every aspect of the OECD Convention should be incorporated into the definition of ‘instrumentality'”.