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“Foreign Official” Is A “Significant Claim of First Impression” Not Merely An “Academic Discussion”

It is tough to distill the logic of this post yesterday on the FCPA Blog.

Of course, as stated in the post, “putting any law to the test … always requires ‘putting human beings through the trial and error of our criminal justice system.'”  This is to state the obvious.  But to question challenging (in the absence of any case law of precedent) a key element of the most important U.S. law governing international business transactions – and in the process advancing false information regarding FCPA enforcement – is off-base.

The FCPA Blog states as follows.  “Other FCPA defendants have gone to trial and won. That’s a sign of health in our criminal justice system. But — and here’s our point today — those victorious defendants always won on grounds other than defects in the FCPA itself.”

“Always won on grounds other than defects in the FCPA itself?”

When a judge grants a motion to dismiss or a motion for acquittal or when a jury returns a not guilty verdict or fails to reach a verdict, by definition the judge or jury has concluded that the DOJ has not satisfied its burden of proof as to the FCPA elements.  In the Africa Sting case alone, Judge Leon (as noted in this prior post) dismissed charges against a defendant under 78dd-3 and called the DOJ’s position “novel.”  Also in the Africa Sting case and as demonstrated by this prior post from the jury foreman, one defendant – in the eyes of most of the jurors – was “clearly innocent” and the jury had significant concerns with the corrupt intent element as to the other defendants found not guilty or on which the jury failed to reach a verdict.

As noted in this prior post, the scorecard when an enforcement agency is put to its burden of proof on the enforcement theory that payments outside the context of foreign government procurement fall under the FCPA’s anti-bribery provisions is: US – 1; Defendants – 3; or if you prefer US – .5; Defendants – 3.5 (recognizing that the 5th Circuit decision in Kay is equivocal).  As noted in this previous post, several other FCPA defendants have prevailed when putting the enforcement agencies to their burden of proof.

And it is not just individual FCPA defendants who have prevailed in trials when putting the DOJ to its burden of proof.  Dismiss the Lindsey Manufacturing end-result if you like given that Judge Matz threw out the case on prosecutorial misconduct grounds (see here for the prior post).  However, as noted in this prior post, in the other only apparent instance in FCPA history of a corporate defendant putting the DOJ to its burden of proof, Harris Corp. (and certain of its executives) prevailed when the judge granted their motion of acquittal after the DOJ’s case.  As noted in the prior post, the judge reportedly stated that the DOJ failed to show any intent by the defendants to enter into a criminal conspiracy.

In short, while I have respect for the FCPA Blog and much of its writing, it is just plain wrong to assert that “victorious [FCPA] defendants always won on grounds other than defects in the FCPA itself.”

Sure, challenging the DOJ and testing one’s innocence (see here for the prior post) involves an element of risk and can impact real lives.  But is the answer – as the FCPA Blog seems to advance – for FCPA individual defendants (like the vast majority of corporate defendants) to roll over and play dead regardless of the intent of Congress (the law maker) in passing the FCPA?  If your answer is yes, I submit that answer leads to broader harm and more significant policy concerns than specific individuals testing innocence claims.

The FCPA Blog is similarly off-base when it stated, not once but twice in the past few days (see here and here) that in the Carson case Judge Selna “found” that neither side could support its position about foreign officials in the FCPA’s legislative history.  The FCPA Blog is correct that Judge Selna in his ruling (see here) declined to review the FCPA’s legislative history.  However, the FCPA Blog then states that Judge Selna “in a footnote [said] that neither the DOJ nor the defendants could point to any quotes in the legislative history that supported their arguments.”

The relevant footnote (13) states as follows.

“Defendants include a comprehensive review of the legislative history of the FCPA with their motion. (See Decl. of Prof.Michael J. Koehler, Feb. 2, 2011, ECF No. 305.) The Government argues that “nowhere in the vast review of legislative history can the defendants point to a single quote that supports the position that the FCPA should not apply to employees of [state-ownedenterprises].” (Opp’n at 35.) Defendants reply that “the inverse is equally true, that is, the Government ‘cannot point to a singlequote’ from a member of Congress that supports the position that the FCPA should apply to employees of [state-owned enterprises] (Reply at 17).”

Where in this footnote is there a judicial finding?

Yesterday’s FCPA Blog post concludes as follows.

“How will the 11th Circuit rule when it becomes the first appellate court to consider who’s a ‘foreign official’ under the FCPA? No one knows. But Esquenazi and Rodriguez face long odds. Few federal criminal defendants win on appeal — only about 5%. There’s no existing appellate record that points to potential success. And there’s nothing from any FCPA trial to give Esquenazi and Rodriguez (or any other defendants) much hope of winning on the ‘foreign official’ question.  Maybe they’ll somehow beat the odds. We hope that happens. Not because we believe the FCPA is defective. But because Esquenazi and Rodriguez are more than part of an academic discussion about who’s a ‘foreign official.’ They’re real human beings.”

I will conclude as follows.

“There’s nothing from any FCPA trial to give Esquenazi and Rodriguez (or any other defendants) much hope of winning on the ‘foreign official’ question.”?

Perhaps the FCPA Blog is unaware (as noted in this prior post) that in the Carson “foreign official” challenge, Judge Selna issued an order (here) regarding certain jury instructions including “knowledge of status of foreign official” in which he instructed as follows –  “the payment or gift at issue … was to (a) a person the defendant knew or believed was a foreign official or (b) any person and the defendant knew that all or a portion of such money or thing of value would be offered, given, or promised (directly or indirectly) to a person the defendant knew or believed to be a foreign official. Belief that an individual was a foreign official does not satisfy this element if the individual was not in fact a foreign official.”  Prior to the Carson “foreign official” challenge, I don’t believe that jury instruction (or anything close to it) had ever been given.

Perhaps the FCPA Blog overlooked the transcripts in the O’Shea trial in which Judge Hughes (as will be explored in a future post) allowed evidentiary testimony as to the nature and status of the Mexican entity at issue in the case and incorporated OECD Commentary 15 issues into the jury instructions.  After the testimony, Judge Hughes stated as follows.  “The Government can’t say the Convention is part of American law; but when we don’t like it, we are going to ignore it. It has to bind the Government, or it can’t.”  Prior to the O’Shea “foreign official” challenge, I don’t believe that a Judge ever incorporated OECD Commentary 15 issues into a jury instruction.

[Commentaries 14 and 15 to the OECD Convention are set forth below.

14. A “public enterprise” is any enterprise, regardless of its legal form, over which a government, or governments, may, directly or indirectly, exercise a dominant influence. This is deemed to be the case, inter alia, when the government or governments hold the majority of the enterprise‟s subscribed capital, control the majority of votes attaching to shares issued by the enterprise or can appoint a majority of the members of the enterprise‟s administrative or managerial body or supervisory board.

15. An official of a public enterprise shall be deemed to perform a public function unless the enterprise 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, without preferential subsidies or other privileges.]

As the academic who has been most vocal on the “foreign official” issue in my writing, scholarship and in my “foreign official” declaration (here), I have raised this issue precisely because it is affecting real human beings.  One can only assume that various members of Congress (from both parties) have raised questions about the “foreign official” issue not because Congress occupies itself with “academic discussions,” but because Congress is concerned about how law enforcement affects real human beings.

Moreover, the implicit suggestion from the FCPA Blog post that real human beings are being used as pawns in an “academic discussion” ignores the obvious fact that those real human beings who have challenged the DOJ’s position on “foreign official” have engaged real lawyers who have real fiduciary duties to their real clients and that those real lawyers and their real clients are the ones making the real decisions as to litigation strategy.

“Foreign official” as an “academic discussion”?

Apparently not in a joint motion filed earlier this week by the defendants and the DOJ in the Haiti Teleco appeal in which the parties jointly request additional time for briefing.  The joint motion says that the foreign official issue is a “significant claim of first impression.”

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