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ICE Again Gets A Chilly Response From The 11th Circuit

If bribery is not a victimless crime, as many including the DOJ frequently state, then why do FCPA fines and penalties simply go directly into the U.S. Treasury with no apparent effort to identify the victims of FCPA violations and to compensate those victims?  A judicial challenge in 2011 that dragged into this year and resulted in a per curiam 11th Circuit decision last week (see here [1]) raised this interesting and legitimate issue.

Before turning to the 11th Circuit decision, a bit of background.

In May 2011, Instituto Constarricense de Electricidad of Costa Rica (“ICE”) petitioned for victim status of Alcatel-Lucent’s wide-ranging bribery scheme.  (See here [2] for the prior post).   The petition followed the December 2010 announcement that Alcatel-Lucent and certain subsidiaries agreed to resolve a wide-ranging FCPA enforcement action, including conduct in Costa Rica involving payments to ICE officials.  (See here [3] for the prior post).  Even though ICE acknowledged that “three disloyal and corrupt [ICE] Directors and two disloyal and corrupt employees” were the recipients of Alcatel Lucent’s bribe payments, it nevertheless claimed it was a victim because the corrupt activities of Alcatel-Lucent caused the company “massive losses” and “catastrophic harm.”  ICE argued that it was universally recognized that a victim includes an entity whose employees accept improper benefits to affect corporate decisions and that it was “nonsense” for an entity to be considered an active participant in a bribery scheme just because five of its 16,500 employees were implicated.  In opposition, the DOJ argued that given the “profound and pervasive corruption at the highest levels of ICE, the government does not believe it is appropriate to consider ICE a victim” and that “it does not follow that the state-owned entity at which corruption was so pervasive in the tender process should now be permitted status as a victim or awarded restitution …”.

ICE’s petition was factually difficult from the start and it is not surprising that ICE did not prevail at the trial court level or in its writ of mandamus to the 11th Circuit.  (See here [4] for the prior post).  In June 2011, a two judge panel of the 11th Circuit held that “the district court did not clearly err in finding that [ICE] actually functioned as the offenders’ coconspirator” and that the district court did not “err in finding that ICE failed to establish that it was directly and proximately harmed by the offenders’ criminal conduct.”

ICE continued to fight and the per curiam opinion considered whether ICE may appeal a district court’s denial of victim status under the Crime Victims Rights Act.  The opinion noted that it was not a matter of first impression in the 11th Circuit whether the court has jurisdiction to hear an appeal from a victim in a criminal case.  After reviewing prior cases, the per curiam opinion noted that the “default rule in this circuit is that crime victims have no standing to appeal a defendant’s sentence in a criminal proceeding.”  Accordingly, the opinion concludes as follows.  “Because we lack jurisdiction to hear ICE’s direct appeal under the Crime Victims’ Rights Act, we dismiss the appeal.”

ICE’s petition did however succeed in raising victim issues in Foreign Corrupt Practices Act enforcement actions and caused those interested in bribery and corruption issues to ponder the valid and legitimate questions of victims a bit more closely.  For other recent posts on victims issues, see here [5] and here [6].