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Next Up For The Second Circuit – An Opportunity To Construe The FCPA’s Corrupt Intent And Obtain And Retain Business Elements

Judicial Decision

Fresh off its recent decision in U.S. v. Hoskins (see here and here for prior posts), the Second Circuit has another Foreign Corrupt Practices Act appeal on its docket.

This July post previewed the FCPA (and related) appeal of Ng Lap Seng who was convicted of two counts of violating the FCPA, one count of paying bribes and gratuities, one count of money laundering and two counts of conspiracy “for his role in a scheme to bribe United Nations ambassadors to obtain support to build a conference center in Macau that would host, among other events, the annual United Nations Global South-South Development Expo.”

Recently Seng formally filed this appellate brief. The FCPA issues on appeal concern the corrupt intent element and the obtain or retain business element. There is an abundance of information in the legislative history regarding these topics, the open question is whether Seng’s lawyers will fully take advantage of it.

In terms of corrupt intent, the brief argues:

“[T]he government failed to meet its burden of proof on the central requirement under both §666 and the FCPA that the payments in question were paid “corruptly.” As this Court has squarely held, that term requires the government to prove that payments were made to induce a violation of a duty owed to the government or the public at large. Yet the government presented no evidence whatsoever of what duties (if any) a foreign ambassador to the UN owes either to the UN or to the global public. That failure was especially problematic in the distinct international context of this case, as an American jury cannot be expected to have any common understanding of the duties a foreign public official might owe to an international body like the UN. The government’s attempt to simply assume the existence and scope of those duties would eliminate the “corruptly” element from the statute altogether.”

In terms of the obtain or retain business element, the brief argues (internal citations omitted):

“[T]he FCPA does not criminalize all payments to foreign officials; it applies only to payments intended to obtain or retain business. That requirement was not met under the unusual circumstances of this case: an alleged bribery scheme seeking support for a project to build the UNOSSC a convention center for free. The government’s attempt to link that alleged scheme to some future business, by claiming that the defendant intended to profit from hypothetical future development around the convention center, is far too tenuous to satisfy the FCPA’s “obtaining or retaining business” requirement.”

[…]

The FCPA charges also fail because the government did not prove, and the jury was not required to find, that any payments were made to obtain or retain any business, as the FCPA requires. The FCPA is not a global good-governance act prohibiting all payments to foreign officials; it prohibits only bribes paid for the purpose of “obtaining or retaining business for or with, or directing business to, any person.” That limitation was deliberate. In enacting the FCPA, Congress specifically chose to criminalize only “commercial bribery” of foreign officials, and rejected a competing House proposal that contained no “business nexus” element.  And by its plain terms, the statute requires payments to be made not just for advancing the payer’s broader financial interests, but for the specific purpose of “obtaining or retaining business for or with, or directing business to, any person.”

That statutory limit went by the wayside here. At trial, the government never sought to prove that the purported bribes were intended to obtain any paying government contract or other business from the UN. To the contrary, the government did not dispute—as the pro bono agreement expressly states—that Sun Kian Ip Group planned to build the proposed convention center “at no cost to the UNOSSC” and to provide it for the UNOSSC to use “without any charge.” The government likewise did not claim that the payments at issue were made to secure any license, permit, or other regulatory action that Ng or his companies would need to build the convention center in Macau. Nor did the government even allege the kind of indirect regulatory assistance to the Macau project that the Fifth Circuit considered in United States v. Kay, which reached the highly debatable conclusion that bribes made in exchange for reduced taxes and customs duties could fall within the scope of the FCPA if the defendant sought those tax savings “to assist in obtaining or retaining business.”

Instead, the government claimed that the “business” Ng sought to “obtain or receive” was not the conference center itself, but the “business” of the third parties that he hoped would patronize the as-yet unbuilt shops, restaurants, and apartments that he planned to build around the center. Paying someone to support a non-commercial enterprise, in hopes that its existence might lead to undifferentiated “business” with unidentified third parties at some unknown point in the future, cannot plausibly be understood as paying someone for the purpose of “obtaining or retaining business for or with, or directing business to, any person.” Indeed, if such an exceedingly tangential connection to business were enough to satisfy the statute, then the “obtaining or retaining business” element would be a nullity, as the government could always claim that any bribe had some conceivable relationship to improving the bribe-payer’s economic position.

This case proves the point. As the evidence at trial showed, building the Macau convention center would have required a substantial financial investment, including the cost of reclaiming much of the land on which the center would be built. The government presented no evidence whatsoever of any revenue forecast or other financial analysis showing that Ng had any realistic hope of recouping those costs through any hypothetical future business at the undeveloped properties around the proposed center, or that Ng ever even undertook any such analysis. It is difficult to imagine that a “sophisticated” and “incredibly successful … international businessman,” as the government described Ng could realistically have considered this project a business venture rather than a philanthropic one when the basic premise of the project was to build the UNOSSC a high-end conference center for free. If a jury could infer here that the efforts to obtain support for the Macau project had “a sufficient nexus to garnering business … or to maintaining or increasing business operations,” then that inference could be drawn in any case.

Because any connection between the purported bribes and any hypothetical future business was too tenuous to satisfy the FCPA, Ng’s conviction on those counts must be reversed. But even if such a remote connection to business could suffice, Ng’s conviction on these counts would still have to be vacated because the jury was never instructed that any nexus to identifiable commercial business was required. At trial, the defense proposed an instruction to inform the jury that “business” in the FCPA means “transactions of a commercial nature, for profit or financial gain.” As defense counsel explained in the charge conference, that instruction was “absolutely critical” to ensure the jury understood that the FCPA was limited to commercial bribery. The court rejected that instruction, and gave the jury no definition of “business” in the FCPA context leaving the jury with no way to know whether “business” referred to commercial business or more broadly to any transaction.

That failure to define “business” raised a substantial risk of confusion, as the jury may well have believed that the conference center itself qualified as “business,” even though Ng was not trying to get the UN to pay for that pro bono project or to help him get any third party to do so. Moreover, even the government conceded after trial that Ng may have had “patriotic and/or philanthropic motivations” for supporting the Macau center, further undermining any claim that he was trying to obtain commercial business. By failing to inform the jury that the FCPA requires the intent to obtain or retain commercial business, the instructions allowed the government to invite the jury to convict for something that the FCPA does not criminalize.”

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