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The Importance Of The FCPA’s Legislative History

To some, the legislative history of the Foreign Corrupt Practices Act is not important.

However, there is one category of persons who rightly care about the motivations of Congress in passing the FCPA, the competing bills Congress considered in enacting the FCPA, and Congress’s intent as to various elements of the FCPA.

That group is federal court judges.

As readers no doubt know, judicial scrutiny of FCPA enforcement theories is sparse.  Yet when it does occur, a common thread in most FCPA judicial decisions is discussion and analysis of the FCPA’s legislative history, often but not exclusively because the judge found various provisions of the FCPA ambiguous.

The recent decision (see here [1] for the prior post) by  Judge Janet Bond Arterton (D. Conn.) trimming the DOJ’s FCPA enforcement action against Lawrence Hoskins by granting in part his motion to dismiss and denying a DOJ motion in limine was based primarily on the FCPA’s legislative history and what it revealed about Congress’s intent in capturing a certain category of defendant.

Likewise, although the 11th Circuit completely bungled its analysis of the FCPA’s legislative history relevant to the “foreign official” element in its 2014 U.S. v. Esquenazi opinion (see this article [2]at pgs. 24-42 for a detailed analysis), the opinion nevertheless contained much discussion of the FCPA’s legislative history.

Several FCPA commentators object to the notion that the FCPA is ambiguous or that resort to legislative history is important. This Forbes article titled “Top 5 Misconceptions About The FCPA” set out to “clear up a few misconceptions about the FCPA.”  Number one on the list of misconceptions was that ‘the FCPA is a vague statute.”  The FCPA Blog has long maintained (see here [3] and here [4] for examples) that FCPA lawyers say that the law is “complicated, technically challenging, obscure, poorly drafted and badly organized” but warns,” don’t believe it. There’s no evidence in the record that judges or juries have any trouble understanding the FCPA.”

The above protestations and observations are just plain wrong.  There is abundant ”evidence in the record” that the FCPA is an ambiguous statute and/or that the FCPA’s legislative history is important.

In addition, to the recent Hoskins and Esquenazi cases, this post summarizes the many other instances in which federal court judges have found various provisions of the FCPA to be ambiguous and/or have consulted the FCPA’s legislative history.

In SEC v. Straub,  921 F.Supp.2d 244 (S.D.N.Y. 2013) Judge Richard Sullivan (see here [5] for the prior post) found the FCPA’s jurisdictional element ambiguous and thus consulted the legislative history.

In SEC v. Jackson, 908 F.Supp.2d 834 (S.D.Tex. 2012)Judge Keith Ellison consulted the FCPA’s legislative history regarding: the need to identify the “foreign official,” the facilitation payments exception, and the corrupt intent element.

In U.S. v. Jensen, 532 F.Supp.2d 1187 (N.D. Cal. 2008), Judge Charles Breyer stated as follows regarding  § 78m(b)(5) which makes “knowing” violations of the FCPA books and records and internal control provisions a crime.  “Because the plain language of § 78m(b)(5) is not unambiguous, the Court turns to legislative history.”

In U.S. v. Kozeny, 582 F.Supp.2d 535 (S.D.N.Y. 2008), Judge Shira Scheindlin consulted the legislative history in a decision concerning the FCPA’s local law affirmative defense.

In U.S. v. Kozeny, 493 F.Supp.2d 693 (S.D.N.Y. 2007), Judge Scheindlin stated as follows concerning the statute of limitations applicable to FCPA criminal violations.  “I find that [18 U.S.C. § 3282] is ambiguous, and turn to its legislative history for guidance on its proper interpretation.”

In U.S. v. Bodmer, 342 F.Supp.2d 176 (S.D.N.Y. 2004), Judge Scheindlin addressed the question “whether prior to the 1998 amendments, foreign nationals who acted as agents of domestic concerns, and who were not residents of the United States, could be criminally prosecuted under the FCPA.”  Judge Scheindlin concluded that the FCPA’s language, as it existed prior to the 1998 amendments, was ambiguous and she thus resorted to legislative history.  Judge Scheindlin further commented in dismissing the FCPA charges against Bodmer as follows.  “After consideration of the statutory language, legislative history, and judicial interpretations of the FCPA, the jurisdictional scope of the statute’s criminal penalties is still unclear.”

In Stichting v. Schreiber, 327 F.3d 173 (2d Cir. 2003), the Court stated as follows.  “It is difficult to determine the meaning of the word “corruptly” simply by reading it in context. We therefore look outside the text of the statute to determine its intended meaning. […]  (“Legislative history and other tools of interpretation may be relied upon only if the terms of the statute are ambiguous.”

In U.S. v. Kay, 200 F.Supp.2d 681 (S.D. Tex. 2002), Judge David Hittner concluded that the FCPA’s “obtain or retain business” element was ambiguous and thus turned to an analysis of the legislative history.  On appeal, the Fifth Circuit (see 359 F.3d 738 (5th Cir. 2004)) likewise stated as follows prior to an extensive review of the FCPA’s legislative history.

“[T]he district court concluded that the FCPA’s language is ambiguous, and proceeded to review the statute’s legislative history.  We agree with the court’s finding of ambiguity for several reasons. Perhaps our most significant statutory construction problem results from the failure of the language of the FCPA to give a clear indication of the exact scope of the business nexus element; that is, the proximity of the required nexus between, on the one hand, the anticipated results of the foreign official’s bargained-for action or inaction, and, on the other hand, the assistance provided by or expected from those results in helping the briber to obtain or retain business. Stated differently, how attenuated can the linkage be between the effects of that which is sought from the foreign official in consideration of a bribe (here, tax minimization) and the briber’s goal of finding assistance or obtaining or retaining foreign business with or for some person, and still satisfy the business nexus element of the FCPA?”

In U.S. v. Blondek, 741 F.Supp. 116 (N.D.Tex 1990), Judge Harold Sanders consulted the FCPA’s legislative history in concluding that “foreign officials” can not be charged with conspiracy to violate the FCPA.

To some, the FCPA’s legislative history is nothing more than a history lesson.

However, federal court judges who interpret the FCPA in the rare occasions they are given an opportunity to do have consistently reminded us otherwise.

This is why the Story of the FCPA (see here [6] for the article) remains important today.