“Foreign Official” Rewind
Ten years ago this week, the 11th Circuit released its decision in U.S. v. Esquenazi. Set forth below is the post originally published on FCPA Professor on May 16, 2014 summarizing the decision.
***
Numerous prior posts (see here for instance) have highlighted the historic appeal in U.S. v. Joel Esquenazi and Carlos Rodriguez.
Although there were several issues on appeal, the appeal is best known as the first time in FCPA history in which an appellate court has the opportunity to weigh in on the prominent enforcement theory that employees of alleged state-owned or state-controlled entities are “foreign officials” under the FCPA. (The defense relied, in part, on my foreign official declaration and, as previously disclosed, I served as a pro-bono expert to the defense in this case).
Carlos Rodriguez: My Dad, My Hero
Many people in the FCPA space know the name Carlos Rodriguez.
His name, along with his co-defendant Joel Esquenazi, is synonymous with the “foreign official” issue. (See this article at pgs. 24-42 to learn more about the 11th Circuit’s flawed”foreign official” decision in May 2014).
Mr. Rodriguez of course is more than just a name associated with a legal concept.
He is a real person, with a real family, who is serving real time in federal prison away from that real family.
In this post, Mr. Rodriguez’s adult daughter, Angeli Rodriguez, shares her perspective on her dad and her hero.
*****
I’d argue every child has envisioned their parent as a superhero at some point, and no one can argue that all heroes need an alias that denotes their special ability. I was no exception to this naive imagination while growing up, and I’ve concluded the only fitting title for my dad would be the Human Shield.
The funny thing about superhero tales is whenever the protagonist thinks his work is done, the city under his protection is struck by peril worse than the last. While the obvious explanation for this irony is that it’s what keeps the comic industry in business, I like to think this element of comic books grants them the slightest bit of realism. Science deems it the simplest principle of physics, or what goes up must come down. But if you really think about it, a sequence of highs and lows is above all the perfect description for life itself. Unless, of course, you have the Human Shield.
I’m more than lucky to be able to say that my childhood was always one of highs. I had both of my parents who loved my siblings and me unconditionally and raised us in a beautiful home in South Florida. For years, my dad was the vice president of a successful telecommunications company while my mom put her nursing career on hold to care for all of us. When I was four, she was diagnosed with breast cancer but, thanks to the Human Shield, I knew nothing more than “Mommy’s a little sick.” Within a year or so, I was told Mommy was better.
The shielding, however, would only continue.There came a point in elementary school when I realized Dad was no longer wearing ties or coming home at dinnertime. Soon, he was the one picking the kids up from school and Mom was the one at work. I recognized these changes but never questioned them. Instead, I was delighted to see more of my father, who would tell elaborate stories about his day every car ride home. My brother, my sister, and I always knew he was lying and looked forward to laughing with him each time we’d call him out on it. I used to think Dad’s crazy stories were solely meant to entertain us, but I’ve come to realize they were really fabricated by the Human Shield. By the time I reached middle school, I was aware that Dad’s old company had gone bankrupt. He had made a couple of attempts to work from home, but it was evident Mom was the one supporting us now. Nothing seemed different, though. My siblings and I continued to receive a private school education, let alone everything else we ever wanted.
I began to worry something bad was bound to happen, that our lives would finally come down after being up for so long. The Human Shield, on the other hand, never lost a smile. His optimism was contagious and quickly eradicated any concerns I ever had. According to Dad, happiness was all about visualization. He became enthralled with the concept of a “dream board” and helped me paste printed images of my desired future on a poster. With activities like these, I gradually grew closer and closer to my father. By eighth grade, I was blind to the fact that he no longer joined us for family beach days and was careful not to go out too late at night. Those were probably his best acts of shielding but were soon to be his last.
I vividly remember the day my parents broke the news…news which had been on their radars for over a year but nowhere near mine. I did not cry, and I did not speak. I just sat there, half listening to words that could not possibly be true. My father is a good person and good people shouldn’t secretly be on house arrest nor are they supposed to go to prison. Superhero tales just don’t end that way, especially when the “villain” in question is innocent.
In the legal world, my dad’s case is regarded as the “foreign official” issue and considered by many, including the Supreme Court, as unimportant. To me, it stands as the one “low” I could not be protected from, which shattered my shield and changed life as I knew it. I guess I never really realized how powerful my hero was or how much I needed him until he was no longer always by my side. He went away in November of my freshman year of high school, but for months I denied his absence and refused to believe the injustice my family bore. After months of this delusion, however, I forced myself to face reality. It was time for me to garner my own strength and show my dad that I could be super, too. This was much easier to do when I realized how heroic the rest of my family was.
My older brother Giancarlos started college at the University of Florida the same year that Dad was imprisoned. As the only son, his relationship with our father was undeniably special, and the times he visited home were noticeably hard for him. This past December, Gian graduated from UF with three degrees. He now has a full-time job.
My younger sister Natalia was already in middle school when Dad left. Our mom could no longer afford her Catholic school education, however, and she had to transfer schools after attending the same one for nearly ten years. She and Dad had always bonded over her volleyball career and an extremely similar sense of humor. Natalia is now class president for the third year in a row and maintains the second highest GPA of the juniors at her high school.
And, lucky for the three of us, the Human Shield is married to Superwoman. My mom has surely struggled the most with Dad’s sentence yet has managed to not only keep her life in order but all of ours. She sold the house my siblings and I grew up in as well as works two jobs to provide for us. Her spirit, however, never falters and she amazes me each day with her strength. I was empowered by both her and my father to work hard throughout high school but accredit my full ride to Boston University to her encouragement. Had I any other mother, I am positive our situation would have affected me much more negatively.
Since he left, my dad has missed three Thanksgiving’s, four Christmas’s, my 15th-18th birthdays, my brother’s college graduation, and my high school graduation, plus all of the celebratory moments and memories in between. The only contact we have consists of letter exchanges and a restricted 15-minute phone call every two weeks. Courtesy of the U.S. government, my connection to my father will remain this way until January 2018. It’s absurd, surreal, ridiculous, and undeniably unfair, but somehow he has maintained his positive outlook on life. That’s why a very small part of me is grateful for this experience. Because of the “foreign official” issue, I’ve realized how much my father once protected me and, in losing that protection, how much strength I myself possess. I may not have the superpowers needed to free him or convince courts of his innocence, but I like to think that by mimicking his optimism I can one day be someone’s hero.
Friday Roundup
Wal-Mart related, request for a new trial, scrutiny alert, and for the reading stack. It’s all here in the Friday roundup.
Wal-Mart Related
Here is what Wal-Mart said in its recent 1Q FY2016 earnings call:
“FCPA and compliance related costs were approximately $33 million, comprised of $25 million for the ongoing inquiries and investigations, and $8 million for our global compliance program and organizational enhancements.”
Doing the math, Wal-Mart’s 1Q FCPA and compliance-related costs is approximately $516,000 in FCPA-related expenses per working day.
Over the past approximate three years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses. While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny. Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.
While $516,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have crested as the figures for the past six quarters have been approximately $563,000, $640,000, $662,000, $855,000, $1.1 million and $1.3 million per working day.
In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.
FY 2013 = $157 million.
FY 2014 = $282 million.
FY 2015 = $173 million.
FY 2016 = $33 million (overall projection of $160 – $180 million for entire year)
Request for New Trial
Carlos Rodriguez, an individual convicted in a Haiti Teleco-related enforcement action (the focus of the 11th Circuit’s “foreign official” decision) and currently serving a federal prison sentence, has requested a new trial in this recent pro se motion. In pertinent part, the motion states:
“In the instant case, an essential element of the FCPA charges hinged on whether Defendant had knowledge of the scheme to defraud Teleco . The factual predicate the Government relied upon at trial for proving that defendant had knowledge of the scheme to defraud Teleco was Perez ‘s [a cooperating witness] testimony .
Defendant has obtained new evidence , a sworn and notarized affiidavit from James Dickey , Terra ‘s General Counsel. Mr. Dickey ‘s affidavit states that ”he was never at any meeting at Terra or elsewhere where the subject of bribes to Antoine as International Director of Halti Teleco were discussed . Had the word ”bribe” been used in my presence in connection with the resumption of service with Haiti Teleco or the reduction of payments to that company, at any time during my tenure as general counsel, I would have remembered it and I would have immediately shut it down.
The affidavit demonstrates that ”facts” or ”evidence” the Government relied upon to show that Defendant had the requisite knowledge did not exist, and that the basis for his testimony against Defendant would have been completely impeached if this had been available at trial. In as much as the affidavit addresses an essential element of the FCPA offense, there is a reasonable likelihood that this new evidence would have affected the judgment of the jury, and, therefore, at a minimum, a new trial is required pursuant to Rule 33.”
Scrutiny Alert
Affinia Group (a North Carolina based company involved in design, manufacture, distribution and marketing of industrial grade products and services, including extensive offerings of aftermarket parts for automotive and heavy-duty vehicles) recently disclosed:
“As previously disclosed, the Company has conducted a review of certain allegations arising in connection with business operations involving its subsidiaries in Poland and Ukraine. The allegations raise issues involving potential improper payments in connection with governmental approvals, permits, or other regulatory areas and possible conflicts of interest. The Company’s review, which the Company considers to be substantially complete, has been supervised by the Audit Committee of Affinia’s Board of Directors and has been conducted with the assistance of outside professionals. Affinia voluntarily self-reported on these matters to the U.S. Department of Justice and the U.S. Securities and Exchange Commission and has cooperated fully with the U.S. government. No determination may yet be made as to whether, in connection with the circumstances surrounding the review, Affinia may become subject to any fines, penalties and/or other charges imposed by any governmental authority, or any other damages or costs that may arise in connection with those circumstances.”
For the Reading Stack
An informative read here by Eric Carlson (Covington & Burling) regarding the Chinese fapiao, a form of receipt that is often used in connection with various fraudulent practices.
*****
A good holiday weekend to all.
If Only The Supreme Court Had Accepted Cert In The “Foreign Official” Challenge
As highlighted here, here and here, last Fall the Supreme Court had the opportunity to correct the 11th Circuit’s flawed interpretation of the important “foreign official” element of the FCPA’s anti-bribery provisions in U.S. v. Esquenazi.
As highlighted here, the Supreme Court declined the opportunity to hear the case.
If only the Supreme Court had accepted cert the likely outcome would have been similar to last week’s Supreme Court decision in Yates v. U.S. in which the court reversed the 11th Circuit’s flawed statutory interpretation of Sarbanes Oxley in the (in)famous are “fish” a “tangible object” case.
The issues addressed by the Supreme Court in Yates were very similar to the issues the Court was asked to address in Esquenazi.
Indeed, the 11th Circuit’s flawed interpretation in Esquenazi was even more egregious because, as highlighted in my amicus brief, (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.
Despite the compelling arguments made for cert in Esquenazi, the Foreign Corrupt Practices Act community was left pondering what if (and because of how the DOJ and SEC have chosen to enforce the FCPA will likely be asking what if for some time).
The what if was likely answered by the Court in Yates and the below post highlights excerpts from the majority opinion written by Justice Ginsburg.
“Mindful that in Sarbanes-Oxley, Congress trained its attention on corporate and accounting deception and cover-ups, we conclude that a matching construction of §1519 is in order: A tangible object captured by §1519, we hold, must be one used to record or preserve information.”
[…]
“On appeal, the Eleventh Circuit found the text of §1519“plain.” Because “tangible object” was “undefined” in the statute, the Court of Appeals gave the term its “ordinary or natural meaning,” i.e., its dictionary definition, “[h]aving or possessing physical form.”
[…]
In the Government’s view, §1519 extends beyond the principal evil motivating its passage. The words of §1519,the Government argues, support reading the provision as a general ban on the spoliation of evidence, covering all physical items that might be relevant to any matter under federal investigation.
Yates urges a contextual reading of §1519, tying “tangible object” to the surrounding words, the placement of the provision within the Sarbanes-Oxley Act, and related provisions enacted at the same time, in particular §1520 and §1512(c)(1). Section 1519, he maintains, targets not all manner of evidence, but records,documents, and tangible objects used to preserve them, e.g., computers, servers, and other media on which information is stored.
We agree with Yates and reject the Government’s unrestrained reading. “Tangible object” in §1519, we conclude, is better read to cover only objects one can use to record or preserve information, not all objects in the physical world.
[…]
The ordinary meaning of an “object” that is “tangible,”as stated in dictionary definitions, is “a discrete . . . thing,” Webster’s Third New International Dictionary 1555 (2002), that “possess[es] physical form,” Black’s Law Dictionary 1683 (10th ed. 2014). From this premise, the Government concludes that “tangible object,” as that term appears in §1519, covers the waterfront, including fish from the sea.
Whether a statutory term is unambiguous, however,does not turn solely on dictionary definitions of its component words. Rather, “[t]he plainness or ambiguity of statutory language is determined [not only] by reference to the language itself, [but as well by] the specific context in which that language is used, and the broader context of the statute as a whole.” Robinson v. Shell Oil Co., 519 U. S. 337, 341 (1997). See also Deal v. United States, 508 U. S. 129, 132 (1993) (it is a “fundamental principle of statutory construction (and, indeed, of language itself) that the meaning of a word cannot be determined in isolation, but must be drawn from the context in which it is used”). Ordinarily, a word’s usage accords with its dictionary definition. In law as in life, however, the same words, placed in different contexts, sometimes mean different things.
[…]
In short, although dictionary definitions of the words “tangible” and “object” bear consideration, they are not dispositive of the meaning of “tangible object” in §1519.
[…]
The legislative history reveals that §1512(c)(1) was drafted and proposed after §1519. See 148 Cong. Rec. 12518, 13088–13089 (2002). The Government argues, and Yates does not dispute, that §1512(c)(1)’s reference to “other object” includes any and every physical object. But if §1519’s reference to “tangible object” already included all physical objects, as the Government and the dissent contend, then Congress had no reason to enact §1512(c)(1): Virtually any act that would violate §1512(c)(1) no doubt would violate §1519 as well, for §1519 applies to “the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States . . . or in relation to or contemplation of any such matter,” not just to “an official proceeding.”5
The Government acknowledges that, under its reading,§1519 and §1512(c)(1) “significantly overlap.” Brief for United States. Nowhere does the Government explain what independent function §1512(c)(1) would serve if the Government is right about the sweeping scope of §1519. We resist a reading of §1519 that would render superfluous an entire provision passed in proximity as part of the same Act.6 See Marx v. General Revenue Corp., 568 U. S. ___, ___ (2013) (slip op., at 14) (“[T]he canon against surplusage is strongest when an interpretation would render superfluous another part of the same statutory scheme.”).
[…]
Had Congress intended “tangible object” in §1519 to be interpreted so generically as to capture physical objects as dissimilar as documents and fish, Congress would have had no reason to refer specifically to “record”or “document.” The Government’s unbounded reading of“tangible object” would render those words misleading surplusage.
Having used traditional tools of statutory interpretation to examine markers of congressional intent within the Sarbanes-Oxley Act and §1519 itself, we are persuaded that an aggressive interpretation of “tangible object” must be rejected. It is highly improbable that Congress would have buried a general spoliation statute covering objects of any and every kind in a provision targeting fraud in financial record-keeping.
[…]
Finally, if our recourse to traditional tools of statutory construction leaves any doubt about the meaning of “tangible object,” as that term is used in §1519, we would invoke the rule that “ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity.” Cleveland v. United States, 531 U. S. 12, 25 (2000) (quoting Rewis v. United States, 401 U. S. 808, 812 (1971)).That interpretative principle is relevant here, where the Government urges a reading of §1519 that exposes individuals to 20-year prison sentences for tampering with any physical object that might have evidentiary value in any federal investigation into any offense, no matter whether the investigation is pending or merely contemplated, or whether the offense subject to investigation is criminal or civil. See Liparota v. United States, 471 U. S. 419, 427 (1985) (“Application of the rule of lenity ensures that criminal statutes will provide fair warning concerning conduct rendered illegal and strikes the appropriate balance between the legislature, the prosecutor, and the court in defining criminal liability.”). In determining the meaning of “tangible object” in §1519, “it is appropriate, before we choose the harsher alternative, to require that Congress should have spoken in language that is clear and definite.” See Cleveland, 531 U. S., at 25 (quoting United States v. Universal C. I. T. Credit Corp., 344 U. S. 218, 222 (1952)). See also Jones v. United States, 529 U. S. 848, 858–859 (2000) (rule of lenity “reinforces” the conclusion that arson of an owner-occupied residence is not subject to federal prosecution under 18 U. S. C. §844(i) because such a residence does not qualify as property “used in” commerce or commerce-affecting activity).
For the reasons stated, we resist reading §1519 expansively to create a coverall spoliation of evidence statute, advisable as such a measure might be. Leaving that important decision to Congress, we hold that a “tangible object” within §1519’s compass is one used to record or preserve information. The judgment of the U. S. Court of Appeals for the Eleventh Circuit is therefore reversed, and the case is remanded for further proceedings.”
Supreme Court Declines To Hear “Foreign Official” Challenge
As highlighted in previous posts (here, here and here), the defendants in U.S. v. Esquenazi (see here for the May 2014 11th Circuit decision) petitioned the Supreme Court to hear the case – principally on the “foreign official” issue. As previously noted, the cert petition was believed to be the first substantive FCPA cert petition in FCPA history and was supported by amicus briefs, including my own.
This morning, the Supreme Court, which decides its own docket, released this Orders List declining to hear the “foreign official” challenge in U.S. v. Esquenazi.
Cert denial in the case means that the 11th Circuit decision stands as a final decision. Cert denial does not mean that the Supreme Court agreed or disagreed with the 11th Circuit decision.
As noted in previous posts, the Supreme Court has never heard an FCPA case.
*****
The below statement may be attributed to Professor Koehler.
“The reasoning of the Supreme Court in declining to hear the petition is not known, but is likely due to the absence of a circuit split on the “foreign official” issue. This absence is largely a result of alternative resolution vehicles used by the DOJ (and SEC) as well as other discretionary decisions by the enforcement agencies. So long as these dynamics continue, Supreme Court review of the key elements of a top-priority federal criminal statute of significant importance to all businesses and individuals engaged in international commerce is unlikely.”
Counsel for Esquenazi (Markus Funk and Michael Sink – both of Perkins Coie) offered the following statement.
“Statistically speaking, having the Supreme Court hear Mr. Esquenazi’s case was of course a long-shot. But, as the amicus petitions highlighted, the confusion the appellate court’s ruling added to the ongoing muddle of what qualifies as an ‘instrumentality’ of a foreign government provided some hope that the Court might weigh in on this issue of great concern to the global business community. That the Court decided to pass on the opportunity is disappointing.”