- FCPA Professor - http://fcpaprofessor.com -

Harder Files Motion To Dismiss

As highlighted in this [1] previous post, in January 2015 the DOJ criminally charged Dmitrij Harder (pictured), the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co., for allegedly bribing an official with the European Bank for Reconstruction and Development (“EBRD”).

The enforcement action was notable in that it invoked the rarely used “public international organization” prong of the FCPA’s “foreign official” element.

Recently, Harder filed this motion to dismiss [2]:  In summary fashion it states:

“The Indictment fails to accurately allege the elements of a violation under the Foreign Corrupt Practices Act (“FCPA”) – it is devoid of any allegations that Mr. Harder paid an allegedly corrupt payment to a “foreign official,” fails to state required allegations when an allegedly corrupt payment is made to a third party, and impermissibly substitutes “public international organization” in the charging language against Mr. Harder. The FCPA counts should also be dismissed because the provision permitting the President to expand the term “foreign official” by identifying “public international organizations” as authorized by 15 U.S.C. § 78dd-2(h)(2)(B) is unconstitutional. Finally, the Travel Act counts fail to state an offense under the Pennsylvania anti-bribery statute and because the Travel Act does not apply extraterritorially to the facts of this case.”

As relevant to the FCPA’s third-party payment provisions, the motion states:

“Under the FCPA, when an allegedly corrupt payment is made to a person who is not a “foreign official” (like “EBRD Official’s Sister”), it is a crime only if the payment is made by the defendant “while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official.” 15 U.S.C. § 78dd-2(a)(3). The statutory language of the FCPA does not mention the phrase “for the benefit of.” The Indictment therefore fails in two ways: (1) it purports to expand the statute’s reach and criminalize payments made “for the benefit” of a foreign official; and (2) it fails to set forth any factual allegations that the allegedly corrupt payments were made by Mr. Harder “while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official.” The Indictment also fails to state an offense because it charges Mr. Harder with inducing a foreign official to use his influence with a public international organization under 15 U.S.C. § 78dd-2(a)(3)(B), but that prong of the FCPA only addresses acts intended to influence a “foreign government” and not a “public international organization.”

As relevant to the FCPA’s “foreign official” element and specifically the “public international organization” component of the “foreign official” definition, the motion states:

“The FCPA counts in the Indictment (Counts One through Six) should be dismissed because the FCPA statute is unconstitutional to the extent criminal liability is premised upon allegedly corrupt payments in connection with “public international organizations.” In this regard, the FCPA states, without any explanation or limitation, that the President of the United States is empowered to designate entities as “public international organizations,” whose employees are then considered to be “foreign officials” covered by the FCPA. But Congress cannot delegate its legislative powers to the President in criminal matters without providing some direction (such as policy, scope, or limitations), and Congress failed to do this in the FCPA. Further, because the FCPA is vague as to what conduct is criminal – because the term “public international organization” is not clearly defined nor are the designated entities so easily identified – this portion of the FCPA is void for vagueness, particularly because an individual can be convicted without proof that the defendant knew that the entity in question was a “public international organization” and therefore covered by the FCPA. Mr. Harder believes this to be the first case where the government has charged anyone under the “public international organization” prong of the FCPA, and the constitutional defects arising from that portion of the statute are readily apparent.

Mr. Harder has not found any case that has reviewed the constitutionality of the definition of “public international organization” for purposes of the FCPA – the key element to the government’s case against Mr. Harder. The term “public international organization” was not in the FCPA when it was originally enacted in 1977. Only when the FCPA was amended as of November 10, 1998, was the term “public international organization” inserted into the FCPA. See PL 105-366 (Nov. 10, 1998). This term, as utilized in the FCPA, violates two important constitutional doctrines: the non-delegation doctrine and the void for vagueness doctrine.

[…]

Congress cannot delegate its legislative powers to the President in criminal matters without providing some direction (such as policy, scope, or limitations), and Congress failed to do this in the FCPA. Further, because the FCPA is vague as to what conduct is criminal – because the term “public international organization” is not clearly defined nor are the designated entities so easily identified – this portion of the FCPA is void for vagueness, particularly because an individual can be convicted without proof that the defendant knew that the entity in question was a “public international organization” and therefore covered by the FCPA. Mr. Harder believes this to be the first case where the government has charged anyone under the “public international organization” prong of the FCPA, and the constitutional defects arising from that portion of the statute are readily apparent.4 Mr. Harder has not found any case that has reviewed the constitutionality of the definition of “public international organization” for purposes of the FCPA – the key element to the government’s case against Mr. Harder. The term “public international organization” was not in the FCPA when it was originally enacted in 1977. Only when the FCPA was amended as of November 10, 1998, was the term “public international organization” inserted into the FCPA. See PL 105-366 (Nov. 10, 1998). This term, as utilized in the FCPA, violates two important constitutional doctrines: the non-delegation doctrine and the void for vagueness doctrine.”

Harder is represented by Ian Comisky [3] (Blank Rome) and Stephen LaCheen (LaCheen, Wittels & Greenberg).

U.S. District Court judge Paul Diamond (E.D. Pa.) is presiding over the case.