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

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Even though the current Supreme Court is often ideologically divided, the Court has shown remarkable consistency in recent years in rejecting (often times unanimously) overly expansive interpretations of a criminal statute by the Department of Justice.

The latest example occurred last week in Kelly v. U.S. (the so-called Bridgegate case in which the DOJ charged former public officials who worked at or with the Port Authority of New York and New Jersey and had political ties to former New Jersey Governor Chris Christie).

The DOJ charged the individuals under federal statutes prohibiting wire fraud and fraud on a federally funded program or entity. As stated by the court in an opinion authored by Justice Kagan “both those laws target fraudulent schemes for obtaining property.” After being convicted of the offenses by a jury and upheld by an appellate court, the individuals petitioned the Supreme Court to decide whether the defendants committed property fraud.

In a unanimous opinion, the Supreme Court reversed the convictions even though “the evidence the jury heard no doubt shows wrongdoing – deception, corruption, abuse of power.” In so doing, the court stated that “the federal fraud statutes at issue do not criminalize all such conduct” and that “not every corrupt act by state or local officials is a federal crime.”

Stated differently, the Supreme Court once again held that actual words in a statute have meaning and that federal criminal statutes are not all-purpose ethics statutes.  The Kelly decision follows a clear trend over the last decade of the Supreme Court overturning overly expansive DOJ interpretations of federal criminal statutes.

For instance in U.S. v. Skilling (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. (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, in U.S. v. Yates (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 (2015) (see here 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 interpretation, 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 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 for the prior post) and Kokesh v. SEC (2017) (see here for the prior post).

What do the above cases have to do with the Foreign Corrupt Practices Act?

In the FCPA’s modern era, the FCPA enforcement agencies seem in certain instances to have converted the FCPA into an all-purpose corporate ethics statute. However, the FCPA has specific elements that must be met for there to be a violation.

Yet, given how the DOJ and SEC have chosen to enforce the FCPA – that is through resolution vehicles not subjected to any meaningful judicial scrutiny – courts are rarely given the opportunity to interpret the FCPA’s actual elements and in the FCPA’s 42 year history the Supreme Court has never heard an FCPA case.

It was presented with the opportunity in the Esquenazi “foreign official” challenge (i.e. are employees of SOE’s “foreign official” under the FCPA’s anti-bribery provisions) in 2014 but declined to hear the case. If the Supreme Court had accepted the Esquenazi case, many of the same statutory interpretation issues addressed by the Supreme Court in Skilling, Bond, Yates, McDonnell, Somers, and Kelly would have been relevant.

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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