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Yet Again, The Supreme Court Rejects The DOJ’s Overly Expansive Interpretation Of A Criminal Law

Today’s post is very similar to this post [1] from last month. In other words, yet another post (see here [2] and here [3] for prior posts) generally regarding the topic “if only the Supreme Court accepted the “foreign official” challenge” in 2014.

In a statutory interpretation case released yesterday that was very similar to the statutory interpretation issues in the “foreign official” challenge, the Supreme Court in a 7-2 opinion authored by Justice Breyer once again rejected the DOJ’s overly expansive interpretation of a criminal law.

As stated by the opinion, the issue presented in Marinello v. U.S. [4] was: “A clause in §7212(a) of the Internal Revenue Code makes it a felony “corruptly or by force” to “endeavo[r] to obstruct or imped[e] the due administration of this title.” 26 U. S. C. §7212(a). The question here concerns the breadth of that statutory phrase. Does it cover virtually all governmental efforts to collect taxes? Or does it have a narrower scope?”

The Supreme Court opted for a narrower scope and in doing so stated in pertinent part as follows (internal citations omitted).

We “have traditionally exercised restraint in assessing the reach of a federal criminal statute, both out of deference to the prerogatives of Congress and out of concern that ‘a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.’”

[…]

We have found nothing in the statute’s history suggesting that Congress intended the Omnibus Clause as a catchall applicable to the entire Code including the routine processing of tax returns, receipt of tax payments, and issuance of tax refunds.

[…]

A broad interpretation would also risk the lack of fair warning and related kinds of unfairness that led this Court in Aguilar to “exercise” interpretive “restraint.”

[…]

A broad interpretation would also risk the lack of fair warning and related kinds of unfairness that led this Court in Aguilar to “exercise” interpretive “restraint.”

[…]

Had Congress intended that outcome [favored by the DOJ], it would have spoken with more clarity than it did in §7212(a).

[…]

Neither can we rely upon prosecutorial discretion to narrow the statute’s scope.

[…]

[T]o rely upon prosecutorial discretion to narrow the otherwise wide-ranging scope of a criminal statute’s highly abstract general statutory language places great power in the hands of the prosecutor. Doing so risks allowing “policemen, prosecutors, and juries to pursue their personal predilections,” which could result in the nonuniform execution of that power across time and geographic location. And insofar as the public fears arbitrary prosecution, it risks undermining necessary confidence in the criminal justice system. That is one reason why we have said that we “cannot construe a criminal statute on the assumption that the Government will ‘use it responsibly.’” And it is why “[w]e have traditionally exercised restraint in assessing the reach of a federal criminal statute.”

[5]

I was directly involved in the “foreign official” challenges (i.e. are employees of so-called state-owned or state-controlled enterprises “foreign officials” under the FCPA) between 2011 and 2014.

Among other things: (i) I was engaged in connection with the original Carson challenge which relied in part on my “foreign official” declaration [6]; (ii) I was engaged in connection with the Lindsey Manufacturing challenge which also relied in part on my declaration; (iii) I assisted the families of Joel Esquenazi and Carlos Rodriguez secure competent appellant FCPA counsel and assisted the pro bono counsel in that case; and (iv) after the 11th Circuit’s flawed “foreign official” decision in Esquenazi in 2014 (for a full discussion, see this article [7]), I urged the Supreme Court in this amicus brief [8] to accept cert.

In short, I am very familiar with the challenges and the statutory interpretation issues presented to the Supreme Court.

Because of how the DOJ has enforced the FCPA (the vast majority of corporate enforcement actions are resolved without any meaningful judicial scrutiny and the vast majority of corporate enforcement actions lack individual prosecutions), it was not a huge surprise that the Supreme Court denied cert. After all, the “foreign official” issue was only addressed by one appellate court and ordinarily the Supreme Court prefers to let issues percolate in the lower courts before agreeing to hear a case.

Even though the Supreme Court denied cert in Esquenazi, in recent years the Supreme Court has heard several cases concerning aggressive theories of federal criminal prosecution and/or implicating the same general statutory interpretation issues at issue in Esquenazi. Yesterday’s decision in Marinello was just the latest.

In each of the analogous decisions the Supreme Court (often by wide margins) rejected the government’s statutory interpretation and if the Supreme Court had accepted cert in Esquenazi it is probable that the Supreme Court would have overturned the convictions.

Even though the current Supreme Court is often ideologically divided, the Court has shown remarkable consistency in decisions in which the Court was called upon to interpret federal criminal statutes or other issues using accepted cannons of statutory interpretation.

For instance in U.S. v. Skilling [9] (2010), the Supreme Court rejected the DOJ’s “honest services fraud” theory of criminal prosecution. Instead of the broad construction the DOJ urged, the Court adopted a narrow interpretation of the relevant statute and reiterated  “if Congress desires to go further, it must speak more clearly.”

Likewise in Bond v. U.S. [10] (2013), the Supreme Court unanimously rejected the DOJ’s theory of criminal prosecution. Instead of the expansive construction of the term “chemical weapons” the DOJ urged, the Court adopted a narrow interpretation stating that the DOJ’s interpretation “would sweep in everything from the detergent under the kitchen sink to the stain remover in the laundry room.”

Similarly, as highlighted in this prior post [3], in U.S. v. Yates [11] (2015), the Supreme Court again rejected the DOJ’s theory of criminal prosecution in the infamous are fish “tangible objects” case. Calling the DOJ’s enforcement theory an “unrestrained” and “unbounded” reading of relevant statute, the Court reversed the 11th Circuit’s opinion affirming the criminal conviction.

In U.S. v. McDonnell [12] (2015) (see here [13] for the prior post), the Supreme Court again rejected the DOJ’s theory of criminal prosecution. Calling the DOJ’s theory of prosecution “boundless,” the Court adopted a narrow interpretation of the meaning of “official action” (a term that also appears in the FCPA) in the federal bribery statute. As stated by the Court:

“There is no doubt that this case is distasteful; it may be worse than that. But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the Government’s boundless interpretation of the federal bribery statute. A more limited interpretation of the term “official act” leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this Court.”

The McDonnell court further stated (internal citations omitted)

“[W]e cannot construe a criminal statute on the assumption that the Government will “use it responsibly.” The Court in Sun-Diamond declined to rely on “the Government’s discretion” to protect against overzealous prosecutions under §201, concluding instead that “a statute in this field that can linguistically be interpreted to be either a meat axe or a scalpel should reasonably be taken to be the latter.” A related concern is that, under the Government’s interp0retation, the term “official act” is not defined “with sufficient definiteness that ordinary people can understand what conduct is prohibited,” or “in a manner that does not encourage arbitrary and discriminatory enforcement.” Under the “‘standardless sweep’” of the Government’s reading, public officials could be subject to prosecution, without fair notice, for the most prosaic interactions. “Invoking so shapeless a provision to condemn someone to prison” for up to 15 years raises the serious concern that the provision “does not comport with the Constitution’s guarantee of due process.” Our more constrained interpretation of §201(a)(3) avoids this “vagueness shoal.””

In Digital Realty Trust v. Somers (2018) (see here [1] for the prior post) the Supreme Court once again reminded us that the law means what actual words in a specific statute say (not what other similar statutes may say) and not what the SEC interprets words in a statute to mean.

And then of course there were Supreme Court benchslaps of SEC statute of limitations positions in Gabelli v. SEC (2013) (see here [14] for the prior post) and Kokesh v. SEC (2017) (see here [15] for the prior post).

The Esquenazi cert petition presented the Supreme Court with many of the same statutory interpretation issues addressed by the Supreme Court in Skilling, Bond, Yates, McDonnell and Somers.

Indeed, the statutory interpretation issues in Esquenazi were even more compelling because: (i) competing versions of the FCPA Congress considered yet rejected, specifically included state-owned or state-controlled enterprise (SOE) concepts; and (ii) laws passed both before the FCPA and after the FCPA contain the term “instrumentality” as well as SOE concepts.

Many people in the FCPA space view the “foreign official” issue as settled because of one appellate court decision, flawed as it was.

Yet, as indicated by the above cases, the current Supreme Court has clearly, and consistently, rejected the government’s boundless interpretation of other federal criminal statutes or laws and it is probable that if the Court had accepted the Esquenazi case it would have done the same.

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