Did Richard Liedo Win Or Lose?
[This post is part of a periodic series regarding “old” FCPA enforcement actions]
This previous post highlighted the 1989 Foreign Corrupt Practices Act enforcement action against NAPCO International in connection with military sales to the Republic of Niger. The previous post noted that the DOJ also criminally charged the Vice President of the Aerospace Division of NAPCO and that this individual exercised his constitutional right to a jury trial and put the DOJ to its burden of proof.
That person was Richard Liedo and his enforcement action is worthy of its own post.
Among other things, the Liebo enforcement action resulted in a rare appellate FCPA decision, and an often overlooked one at that given that the court concluded that a jury could find that a subordinate who acted at his supervisor’s direction in providing a thing of value to a foreign official lacked “corrupt” intent.
In this lengthy 62 page criminal indictment, the DOJ charged Liebo in connection with the same bribery scheme alleged in the NAPCO action. In pertinent part, the DOJ alleged that in connection with aircraft sales to Niger, Liebo conspired with others to violate the FCPA by making payments or authorizing payments of money to “officials of the Government of Niger, that is, Tahirou Barke Doka [the First Counselor of the Embassy of Niger in Washington, D.C.] and Captain Ali Tiemogo [Chief of Maintenance for the air force component of the Niger Ministry of Defense] and “Fatouma Mailelel Boube and Amadou Mailele, both relatives of Tiemogo, while knowing that all or a portion of such money would be offered, given or promised, directly or indirectly, to foreign officials, namely Barke and Tiemogo” for the purpose of “influencing the acts and decisions of Barke and Tiemogo in their official capacities, and inducing them to use their influence with the Ministry of Defense.”
In addition to the conspiracy charge (count 1), the DOJ also charged Liebo with 10 counts of violating the FCPA’s anti-bribery provisions (counts 2 – 11), one count of violating the FCPA’s books and records provisions (count 12), three counts of aiding and abetting in the preparation of false corporate income tax returns (counts 13 – 15), and five counts of making false statements to the Defense Security Assistance Agency (DSAA) of the U.S. Department of Defense in connection with the sales (counts 16 – 20).
Liebo exercised his constitutional right to a jury trial and put the DOJ to its burden of proof.
The jury considered 19 charges against Liebo (on the first day of trial, the court granted the DOJ’s motion to dismiss one of the false statement charges) and he was acquitted of 17 charges. The only charges Liebo was convicted of was one count of violating the FCPA’s anti-bribery provisions and one count of making a false statement to DSAA. The FCPA charge related to the payment of $2,028 “for the airline tickets purchased for Barke’s wedding and honeymoon travel.”
As noted in this judgment, Liebo was sentenced to 18 months in federal prison. However, as noted in a Trace Compendium entry, “Liebo only served two of the 18 months, having petitioned for, and eventually received, a retrial.”
As noted in this Eighth Circuit opinion, Liebo appealed and argued on appeal that “his convictions should be reversed because of insufficient evidence and because the district court erred in instructing the jury” and that the “district court abused its discretion by denying his motion for a new trial based on newly discovered evidence.”
As to the FCPA anti-bribery charge Liebo was found guilty on, he argued on appeal that: (1) there was insufficient evidence to show that the airline tickets were given to obtain or retain business; and (2) that there was no evidence to show that his gift of honeymoon tickets was done corruptly.
After setting forth the standard of review (i.e. considering the evidence in the light most favorable to the government with all reasonable inferences and credibility determinations made in support of the jury’s verdict), the court stated as follows as to obtain or retain business.
“There is sufficient evidence that the airplane tickets were given to obtain or retain business. Tiemogo testified that the President of Niger would not approve the contracts without his recommendation. He also testified that Liebo promised to “make gestures” to him before the first contract was approved, and that Liebo promised to continue to “make gestures” if the second and third contracts were approved. There was testimony that Barke helped Liebo establish a bank account with a fictitious name, that Barke used money from that account, and that Barke sent some of the money from that account to Tiemogo. Barke testified that he understood Liebo deposited money in the account as “gestures” to Tiemogo for some “of the business that they do have together.”
Although much of this evidence is directly relevant to those counts on which Liebo was acquitted, we believe it appropriate that we consider it in determining the sufficiency of evidence as to the counts on which Liebo was convicted.
[…]
Moreover, sufficient independent evidence exists that the tickets were given to obtain or retain business. Evidence established that Tiemogo and Barke were cousins and best friends. The relationship between Barke and Tiemogo could have allowed a reasonable jury to infer that Liebo made the gift to Barke intending to buy Tiemogo’s help in getting the contracts approved. Indeed, Tiemogo recommended approval of the third contract and the President of Niger approved that contract just a few weeks after Liebo gave the tickets to Barke. Accordingly, a reasonable jury could conclude that the gift was given “to obtain or retain business.”
As to corrupt intent, the court stated as follows.
“Liebo also contends that the evidence at trial failed to show that Liebo acted “corruptly” by buying Barke the airline tickets. In support of this argument, Liebo points to Barke’s testimony that he considered the tickets a “gift” from Liebo personally. Liebo asserts that “corruptly” means that the offer, payment or gift “must be intended to induce the recipient to misuse his official position….” […] Because Barke considered the tickets to be a personal gift from Liebo, Liebo reasons that no evidence showed that the tickets wrongfully influenced Barke’s actions.
We are satisfied that sufficient evidence existed from which a reasonable jury could find that the airline tickets were given “corruptly.” For example, Liebo gave the airline tickets to Barke shortly before the third contract was approved. In addition, there was undisputed evidence concerning the close relationship between Tiemogo and Barke and Tiemogo’s important role in the contract approval process. There was also testimony that Liebo classified the airline ticket for accounting purposes as a “commission payment.” This evidence could allow a reasonable jury to infer that Liebo gave the tickets to Barke intending to influence the Niger government’s contract approval process. We conclude, therefore, that a reasonable jury could find that Liebo’s gift to Barke was given “corruptly.” Accordingly, sufficient evidence existed to support Liebo’s conviction.”
As to Liebo’s argument on appeal that the “district court abused its discretion by denying his motion for a new trial based on newly discovered evidence,” Liebo noted that “two months after his conviction, a NAPCO employee provided Liebo with a memorandum showing [a superior’s] approval to the charge of the airline tickets.” Liebo argued that the discovery of this evidence warranted a new trial. In support, Liebo argued that “he was acquitted on all other bribery counts for which there was evidence that the payment in question was approved [by a superior]. Liebo argued that evidence of a superior’s approval of the wedding trip was a determinative factor in the jury’s verdict by “pointing to a question sent out by the jury during their deliberations asking whether there was ‘any information regarding authorization for payment of wedding trip.'”
After noting that motions for a new trial based on newly discovered evidence are looked upon with disfavor, the court also noted that “courts have granted a new trial based on newly discovered evidence especially when the evidence supporting the defendant’s conviction is weak.”
The court closed its opinion as follows.
“[T]he evidence against Liebo, while sufficient to sustain the conviction, was not overwhelming. Indeed, we believe that the company president’s approval of the purchase of the tickets is strong evidence from which the jury could have found that Liebo acted at his supervisor’s direction and therefore, did not act “corruptly” by giving the tickets to Barke. Furthermore, we are highly persuaded that the jury considered such approval pivotal, especially in light of the question it submitted to the court during its deliberations and its acquittal of Liebo on the other bribery counts in which evidence of approval existed. Accordingly, we hold that the district court clearly abused its discretion in denying Liebo’s motion for a new trial.”
In the re-trial, Liebo was convicted of aiding and abetting FCPA anti-bribery violations and making a false statement to the DSAA. He was then sentenced to three years probation, two months home detention, and 400 hours of community service.
Based on all of the above, the question is raised – did Richard Liedo win or lose when he put the DOJ to its burden of proof?
In this the exam grading season, I know where I come out when the one with the burden is 90% unsuccessful.
Oral Arguments Heard In Historic “Foreign Official” Challenge
Last Friday in Miami, the 11th Circuit Court of Appeals heard oral argument in U.S. v. Joel Esquenazi & Carlos Rodriguez. (See here for the audio recording of the arguments). The issues on appeal did not just relate to the FCPA’s “foreign official” element, but as to this important element, the appeal is a historic occasion – the first time in FCPA history when 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 previously used in other cases and as previously disclosed in prior posts I have served as a pro-bono expert to the defense in this case. For additional background reading on the case (in chronological order), as well as links to the underlying briefs, see here, here, here, here, here, here, and here.
The below guest post is from Paul Calli (Carlton Fields) who was present in the courtroom for the oral arguments. The 11th Circuit does not post audio recordings of oral arguments. When such a recording or transcript becomes available, it will be posted.
*****
The panel consisted of Eleventh Circuit Judges Beverly B. Martin and Adalberto Jordan and Sixth Circuit Senior Judge Richard F. Suhrheinrich. The argument was a homecoming of sorts for Judge Jordan, a favorite son and Judge adored by all who appear before him and who served as an Assistant United States Attorney and United States District Court Judge in the Southern District of Florida. I understand that this was his first oral argument back in Miami since he ascended to the Court of Appeals.
What I endeavor to do in this post is not engage in an analysis of where things might come out in an ultimate decision by the 11th Circuit, but to provide a recap of the arguments for those who could not attend the hearing but are following this case closely.
T. Markus Funk (Perkins Coie) argued on behalf of Joel Esquenazi and David Simon (Foley & Lardner) argued the FCPA foreign official / instrumentality issue on behalf of Carlos Rodriguez. (Pamela Johnston (Foley & Larder) argued the money laundering and wire fraud issues which were more generalized issues of criminal law (including a plain error analysis) that did not really implicate FCPA issues, are not issues of first impression, and with which the panel seemed less interested).
The courtroom was filled to capacity and unfortunately I was relegated to the attorney overflow room, which was also packed, to listen to the oral argument.
All members of the panel peppered the lawyers to varying degrees with questions primarily focused on defining “instrumentality” generally and in jury instructions. As reflected below, Judge Jordan and Senior Judge Suhrheinreich were relentless on this issue and despite the best efforts of the three lawyers arguing the FCPA issues, remained seemingly unsettled with either side’s position or definition.
I missed the beginning of Funk’s argument due to delay entering the courthouse, but when I picked up he was hammering the jury instructions in this regard, referring to the jury instructions in the case as “exceptional” and observing that “they went beyond what the government wanted.” He deemed the jury instructions the “…greatest flaw and most unfair thing in the case….” Funk stayed true to his brief, in arguing that the “instrumentality” must perform a “governmental function” and thus the rubber meets the road in his view, on what constitutes a “governmental function.”
Funk was effective in trying to focus the panel on the flaws in the government’s definition of instrumentality as overly broad, while at the same time promoting his position that the definition should hinge on whether the entity performs “traditional government functions.” He pounded his view of the government’s definition as so overly broad as to render any entity merely owned or controlled to some degree by the government, an instrumentality regardless of what function it discharged.
Funk drew a compelling analogy to demonstrate the flaw in the government’s definition of “instrumentality” as applied to Haiti Teleco by suggesting that since his law firm collects federal income tax from his salary and pays it to the Department of the Treasury, under the government’s definition of instrumentality, his law firm qualifies a state entity. Others in the room apparently felt different than me. The panel began to warm up with Judge Jordan asking several questions regarding Funk’s framing of the definitional issue.
David Simon stepped into a hot panel and he was ready to go. He picked up nicely where Funk left off, attacking “the jury instructions as error which requires reversal.” Simon proposed that to qualify as an entity of the government, it needs to be part of/a “unit of government.” Senior Judge Suhrheinrich stopped him early with this question – “unit of government: what does that mean? Ownership?” Simon unequivocally answered in the negative and when Judge Suhrheinrich shot back, “why?”, Simon responded that ownership merely makes it an “asset” of the government. At which point Judge Suhrheinrich drew some laughter by stating that if it looks or quacks “like a duck, it’s a duck.” But he got serious and asked if national parks are just an asset. Simon was teed up on the hot seat and impressed me. He seemed quick and well prepared. He responded in the negative again, and indicated that parks are created by statute and are “not merely a commercial entity that happens to be owned by a government.”
Judge Jordan stated generally that in other countries a state owned enterprise may be or have a commercial function … “so how do you make the distinction? You can just tell it or you just know it?” ( I wondered if anyone else in attendance was reminded of Justice Stewart’s famous statement “I know it when I see it” in Jacobellis…). But then Judge Jordan really defined the issues: “We can’t give that in a jury instruction.” Simon shot back – “nor can we give the one given in this case,” and he certainly stimulated questions from the bench.
At this point Judge Martin asked: “isn’t that what juries do?,” meaning apply the facts to the law. Simon responded that the defendants’ approach to the definitional issues was a “much cleaner and easier” undertaking, generally taking the position that it would present a workable paradigm for the jury to in fact apply the facts to the law, and not be forced – or allowed – to speculate.
Judge Suhrheinrich took the baton from Judge Martin and pressed, stating “I’ve been practicing law for 50 years and I’m not sure a jury would understand because I don’t.” Simon suggested it was an easy call – is it a municipality, is it created by statute, is it in the constitution…
Judge Suhreinrich wasn’t letting him off the hook: “Well in the case of a foreign government, do we go to their constitution ? Or do we look to how the entity functions? Do we have to go to the constitutions and statutes of that country? Because those constitutions may be difficult, different or murky?”
My thought was doesn’t that question expose the flaw in the FCPA on “instrumentality?” Apparently I wasn’t alone. Simon responded “these questions invite a constitutional problem in criminal cases.”
Judge Jordan jumped in – “ what about a state created entity providing commercial services – like the U.S. Olympic Committee?” Simon, not missing a beat, stated – “that does not qualify. It needs to be a “unit of government.” I thought I heard Judge Suhrheinrich grumble…
Simon drew the analogy between government employees – when the government shuts down, the employees are furloughed. “That is one indicator of an instrumentality of government.”
Judge Martin jumped in by observing the language “…department, agency or instrumentality…” and stating “you focus on the first two. What’s an example of instrumentality, that’s not a department or agency?” Simon responded – “the FDIC” and cited to the Edison case. Whether she expected it or was satisfied is unclear, but Judge Martin asked no follow-up and Simon’s argument ended.
Kirby A. Heller from the Appellate Section of DOJ in Washington argued for the government. Heller countered that the defendants’ definition of instrumentality was too narrow in that isolating the crux of the definition to performance of a “government function” disregards other factors the government deems sufficiently indicative of being an instrumentality of government.
Ms. Heller was probably less than two minutes into her presentation when Judge Martin tossed a softball: “Give me a one sentence definition of instrumentality. What is it?” Long pause, some stumbling, followed by “dominion and control over the entity.” Judge Suhrheinrich asked, “what’s the government function though?” As to Haiti Teleco, Heller responded that Haiti Teleco had a “monopoly on phone service and just because that’s a commercial service, does not mean it can’t be an instrumentality. In Haiti, they obviously define it by the fact that the government took over, profits flowed to the government, and the government would have to cover if costs needed to be advanced and Teleco could not do so. The government of Haiti seized this as a foreign instrumentality.”
Judge Jordan pursued one logical extension/problem with Heller’s point: “Isn’t notice a problem? If you are letting juries analyze and decide these issues, don’t you run into vagueness problems?” Heller replied “Maybe. But not on the facts of this case. We’re talking bribes! Everyone knew it was illegal and was on notice!”
Judge Jordan pressed. “But there is a fair amount of criminal conduct not covered by the U.S. Code. To give a bribe does not mean you are on notice that you are committing a federal criminal offense in violation of the FCPA because it is not clear if it’s a state-owned entity.” Heller didn’t deviate from her position and in the process, failed to respond to the point Judge Jordan was making. Heller: “This was not a marginal, fringe case in which vagueness would be implicated. Not even close. Everyone knew bribes and grease payments were flowing…”
Judge Jordan asked if a plurality ownership would satisfy the government’s definition. “Possibly,” replied Heller. “That’s not a good answer,” Jordan responded. “What about 25% ownership? 15% ? 10% ?” Heller stood her ground – “yes, that would satisfy our definition.” Judge Jordan asked “How far does the control principle go? We don’t have the luxury of not worrying about writing a definition ….”
Heller admitted having a problem answering that question, and that it is not simply and ownership issue. She went on to call the General Motors example in the defense brief “absurd,” saying the government would not consider that an instrumentality.
Judge Jordan then went all temporal: “ so you’ve got to look at how long the government has been in the market/entity?” Heller started to say “ permanent or temporary is …,” but Judge Jordan cut her off: “ so if they acted [the defendants] a week after the entity was seized, would that be difficult for the government to prove?” Heller unfortunately could only say “I believe we could defend it on a rule 29.” Judge Jordan would have none of it: “No, no: would you charge it?”
Judge Jordan asked “What if the government barely gets in and then there is a bribe?” Heller responded that she would look at other factors, like control, profits, board of director appointments and if those all reflected government control then yes, the government definition fits. She spent a few minutes discussing the 1998 amendment as “clear evidence” that the FCPA statute was meant to apply to foreign officials like those at Teleco.
Funk’s rebuttal was strong. He challenged the panel to try to think of an entity that would not qualify under the government’s definition if it was owned or controlled by the government, regardless of its function. He looped back to the jury instructions and stated that the government’s definition at oral argument was not what was given in the jury instruction.
Funk spent a minute or so on the Brady issue and the dueling declarations of Haitian Prime Minister Jean Max Bellerive. Judge Martin asked how he could meet a Brady analysis since the initial declaration was obtained by a co-defendant and thus was not suppressed by the government. Funk did real well here. He said it is not the declaration but the content memorialized in it and “the answer to your question lies in the second Bellarive declaration the U.S. government obtained” which indicates “at least circumstantially that the U.S. government knew or should have known” that the by-laws were recently changed and the resultant problems with its expert’s testimony at trial.”
Simon again played off of Funk well, hitting on his rebuttal the irrefutable private ownership of Teleco and the subsequent murky ownership issues, noting the government’s own expert witness testified generally that “we don’t really know how the government came to own…maybe it was from debt…” “There is a level of confusion on the issue that should give us all pause.”
Judge Suhrheinrich ended by asking if the argument is not that the statute is vague? Simon responded “No, we choose our definition – a unit of government.”
How is the court going to formulate “the” definition of instrumentality, when the statute contains no definition, and there is as much ambiguity as reflected by the court’s questions?
[Paul Calli represented Patrick Joseph, a co-defendant in the Haiti Teleco case, after the government unsealed the indictment against him. Calli presented the Department of Justice with the first declaration from Haitian Prime Minister Jean Max Bellerive, in which Bellerive represented that Haiti Teleco “…had never been and until now is not a state enterprise. Since its formation to date, it has and remains a Company under common law.” After Calli provided the declaration, Joseph hired another lawyer. A review of the docket reflects that upon this lawyer entering the case, Calli withdrew virtually immediately from representing Joseph and that the other lawyer’s motion for admission pro hac vice into the United States District Court for the Southern District of Florida was denied. According to media reports, Joseph was then represented by a local Miami attorney and struck a cooperation deal. Media reports reflect that days after a local Miami paper leaked Joseph’s cooperation with U.S. authorities, his father, a former president of Haiti’s central bank under former Haitian President Jean-Bertrand Aristide, was shot and killed in the Haitian capital, Port-au-Prince. Joseph was subsequently sentenced to a year and a day in federal prison.]
Checking In
This post checks in on recent developments in two enforcement actions: (i) the FCPA enforcement action against various individuals associated with Alstom; and (ii) the FCPA-related enforcement action against alleged Haitian “foreign official” Jean Duperval currently on appeal to the 11th Circuit.
Alstom-Related Action
Earlier this week, the DOJ announced that Lawrence Hoskins, “a former senior vice president for the Asia region for [Alstom], was charged in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive FCPA and money laundering violations.”
The conduct at issue in the Second Superceding Indictment is the same core conduct alleged in original criminal charges filed against Frederic Pierucci and David Rothschild, as well as the conduct alleged in the Superceding Indictment which added William Pomponi to the action. (See here and here for previous posts). That is – alleged payments in connection with the Tarahan coal-fired steam power plant project in Indonesia. In the prior charging documents, Hoskins was generically referred to as Executive A.
As noted in previous posts, Rothschild pleaded guilty to conspiracy to violate the FCPA.
The DOJ further announced in its release earlier this week that Pierucci pleaded guilty to one count of conspiring to violate the FCPA and one count of violating the FCPA. (See here for the plea agreement).
Duperval Action
This previous post detailed the 11th Circuit appeal of Jean Duperval. Duperval was one of the alleged “foreign officials” charged in connection with the Haiti Teleco enforcement actions (see here for a summary and roundup of the entire Haiti Teleco enforcement actions) with non-FCPA offenses and he was found guilty by a jury of various money laundering charges.
As noted in the previous post, in his appeal Duperval argues, among other things, as follows. “The evidence was insufficient to prove beyond a reasonable doubt that Haiti Teleco was a government instrumentality and that Jean Rene Duperval was a foreign official as required to prove that a violation of the Foreign Corrupt Practices Act generated proceeds of a specified unlawful activity – a necessary predicate for the convictions on the money laundering conspiracy and substantive money laundering charges.”
As noted in the previous post, Duperval’s substantive arguments as to “foreign official” largerly mirror the arguments of Joel Esquenazi and Carlos Rodriguez (also criminally charged and convicted in the Haiti Teleco matter) in their historical “foreign official” appeal to the 11th Circuit (see here for links to the briefing).
Among other things, Duperval’s argument includes discussion and several citations to my “foreign official” declaration (see here).
Briefing is now complete in the Duperval appeal.
Not surprisingly, the DOJ’s arguments in connection with “foreign official” largely mirror the arguments it makes in the Esquenazi and Rodriguez appeal. The DOJ is again seeking to exclude my foreign official declaration from the record and its brief states:
“Duperval relies on a 144-page declaration by a proposed defense expert that was filed on behalf of the defendants in Carson. Although Duperval suggests that this Court may take judicial notice of the declaration because it relates to legislative history, the declaration selectively reviews the legislative history and draws inferences in support of a defense motion to dismiss the indictment. As such, it is not necessarily the statement of a disinterested expert, it was not reviewed as a scholarly article, and it was never subject to impeachment in the case below.”
Last week Duperval filed a reply brief, and not surprisingly, the arguments in connection with “foreign official” largely mirror the arguments made by Esquenazi and Rodriguez in their reply brief. As to my “foreign official” declaration, the brief states:
“The government also condemns Duperval’s reference to Professor Michael J. Koehler’s declaration addressing the legislative history of the FCPA, which was filed in United States v. Carson. Aside from the analysis contained in the Koehler declaration, the substance of the declaration is the legislative history of the FCPA. The Court can surely take notice of legislative history, and evaluate the utility and accuracy of Professor Koehler’s declaration for itself. But the Government’s claim that the declaration of a professor filed in another criminal proceeding and under penalty of perjury is somehow of lower status than a law-review article reviewed by law students strains credulity.”
It will be an interesting “foreign official” Fall in the 11th Circuit.
Friday Roundup
Enforcement agency speeches, “foreign official” delay, and for reading stack. It’s all here in the Friday roundup.
Enforcement Agency Speeches
This prior post detailed comments by Mary Jo White prior to becoming SEC Chairman.
Last week, White spoke before the Investment Company Institute on the general topic of the SEC’s role in an increasingly global financial and regulatory system. She stated as follows (see here) concerning the SEC’s enforcement of the FCPA.
“Of course, misrepresentations and other unlawful actions travel in both directions across borders, which is another reason why our partnership with our regulatory counterparts abroad is so important. Among the most prominent concerns in this regard is bribery by U.S. companies overseas, which not only undermines international markets and governments but also simultaneously undermines the reporting and disclosure integrity of our own markets. Thus, strong and fair enforcement of the Foreign Corrupt Practices Act, which forbids U.S. companies from bribing foreign officials, has been and will continue to be a priority for us. Our first objective is to help companies avoid FCPA violations by educating them. And so our staff along with our colleagues at the Department of Justice recently published a comprehensive Guide to the FCPA to give clear guidance and clear up some myths. Of course, the other side of education is deterrence. Deterrence can mean strong enforcement actions with tough disgorgement and penalties. But it can also mean the tangible benefits that come with cooperation – as demonstrated by the Non-Prosecution Agreement with Ralph Lauren Corporation we announced in April. In this particular case, the corporation’s Argentine subsidiary paid bribes to government and customs officials to improperly secure the importation of their products into the country. The bribes occurred during a period when the U.S. parent company lacked meaningful anti-corruption compliance and control mechanisms over its foreign subsidiary. The misconduct came to light as a result of the company’s efforts to improve internal controls and compliance. And the company immediately reported the problem to the SEC and provided exceptional assistance to our investigation. Successful FCPA cases also increasingly require assistance from foreign law enforcement authorities. That is why we recently partnered with the DOJ and FBI in conducting a foreign bribery training program that provided intensive training to 130 foreign investigators and prosecutors from 30 countries, many on which the SEC staff relies for mutual legal assistance in FCPA cases.”
Yesterday, Daniel Suleiman (DOJ Deputy Chief of Staff for the Criminal Division) spoke at the Minnesota Bar Association’s Annual International Business Law Institute. (See here). Suleiman offered “some views from the U.S. Department of Justice on the topic of anti-corruption enforcement” and “what the Justice Department is doing in the area of criminal enforcement to fight corruption at home and abroad.” He stated, in pertinent part, as follows.
“I think of our anti-corruption efforts as falling into three principal buckets: number one is criminal prosecution; number two is assisting foreign countries to build up their judicial, prosecutorial, and investigative institutions; and number three is the pursuit, through civil actions, of the proceeds of foreign official corruption. I will discuss each of these buckets in turn.
First and foremost, the Criminal Division is a litigating operation. We investigate and prosecute cases. Our corruption prosecutions are of two kinds: we prosecute corruption by domestic officials, and we prosecute foreign bribery offenses under the Foreign Corrupt Practices Act, or FCPA.”
[…]
“[W]e have an incredibly strong team of prosecutors who focus exclusively on enforcing the FCPA. Depending upon how familiar you are with FCPA enforcement, you may know that the Criminal Division is the entity in the United States with primary responsibility for criminal enforcement of the Act. It is Justice Department policy that no FCPA prosecution can be brought without authorization from the Criminal Division, which distinguishes FCPA prosecutions from most other kinds of federal criminal cases. The Securities and Exchange Commission, which is a few blocks up the street from us, has primary responsibility for the Act’s civil enforcement.”
“Foreign bribery enforcement has for a long time been an important aspect of U.S. policy. The FCPA was enacted roughly 35 years ago, around the same time that our Public Integrity Section was created to focus on public corruption prosecutions, and it was the first effort of any nation to specifically criminalize the act of bribing foreign officials. The statute was enacted in the wake of the Watergate scandal, but it took more than 20 years for the Act to become a strong enforcement tool. And, over the past several years, the Justice Department has substantially increased its enforcement of the Act.”
“One important aspect of our FCPA enforcement involves, of course, our corporate resolutions. We have collected billions of dollars in criminal fines and penalties to resolve FCPA investigations against companies doing business abroad, including BizJet International Sales and Support Inc., a Lufthansa subsidiary; Alcatel-Lucent; Johnson & Johnson; and many others.”
“But another, critically important aspect of our enforcement regime involves holding individuals responsible for FCPA offenses. There is no greater deterrent to corporate crime than the prospect of prison time. As many have recognized, if people don’t go to prison, then enforcement can come to be seen as merely the cost of doing business. In the past four years, the Criminal Division’s FCPA Unit has obtained over three dozen criminal convictions of individuals, including of people who have been sentenced to as many as 15 years in prison.”
“We are as active today in this area as we have ever been. In the past month alone, we have announced charges against several key defendants in ongoing, active FCPA investigations. In mid-April, in a case that we are prosecuting with the U.S. Attorney’s Office in Manhattan, we secured the arrest of a defendant in connection with an alleged bribery scheme to secure mining rights in the Republic of Guinea. In a separate case, which we are prosecuting with the U.S. Attorney’s Office in Connecticut, we also secured the arrest last month of a defendant in connection with an alleged bribery scheme to secure power contracts in Indonesia. And just two days ago, together with the U.S. Attorney’s Office in Manhattan, we announced charges against two broker-dealer employees and a senior Venezuelan banking official for engaging in a multi-million dollar bribery scheme.”
[…]
“Finally, I want to tell you about a relatively new Justice Department initiative. About three-and-a-half years ago, Attorney General Holder gave a speech in Qatar, at which he pledged to increase the United States’ commitment to recovering foreign corruption proceeds. Since that time, the Criminal Division has led the charge in developing what we refer to as the Kleptocracy Asset Recovery Initiative.”
“The initiative’s purpose is to identify the proceeds of foreign official corruption – in other words, the spoils – forfeit them through civil actions, and, to the extent possible, repatriate the forfeited funds for the benefit of the people harmed. In most criminal prosecutions, a court can order forfeiture, upon conviction, as part of the defendant’s sentence. Often, however, it may be impractical or impossible to bring a criminal prosecution against a particular person – because that person is immune from prosecution, for example, beyond our jurisdiction, or otherwise unavailable. In these circumstances, we have begun bringing civil forfeiture actions to recover the stolen property.”
“We have brought several Kleptocracy cases in the past couple of years, and forfeited millions of dollars in corrupt proceeds. The most high-profile of our Kleptocracy cases to date involves two civil actions we have brought against approximately $70 million in assets allegedly belonging to a government minister in Equatorial Guinea who is also the son of that country’s president. According to court papers, despite an official government salary of less than $100,000 per year, this minister amassed wealth of over $100 million. Among the items we are seeking to forfeit are nearly $2 million worth of Michael Jackson memorabilia (including the white glove), a Gulfstream G-V jet worth $38.5 million, and a $30 million house in Malibu. These are hard, and hard-fought, cases, but we believe strongly that foreign officials who amass wealth through corruption should not be permitted to use the United States as a haven for their ill-gotten gains.”
“Foreign Official” Delay
Oral argument in the “foreign official” challenge pending in the 11th Circuit – originally scheduled for later this month, has been postponed until the week of October 7th.
This is a historic appeal in that it will be the first instance in which a circuit court directly confronts the enforcement theory that employees of alleged state-owned or state-controlled entities are “foreign officials” under the FCPA (see here for a prior post, including embedded links).
Scrutiny Alerts
For more on Barclay’s scrutiny, on both sides of the Atlantic, see this recent article in Middle East Monitor concerning the bank’s relationship with the Abu Dhabi government, including Sheikh Mansour, the deputy prime minister of the United Arab Emirates.
Samuel Rubenfeld (Wall Street Journal Risk & Compliance Journal) has the latest (here) regarding BSG Resources Ltd. a Guernsey-based company in the news after Frederic Cilins, a French citizen associated with the company, was recently arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea. (See here for the prior post). As noted in the WSJ article, BSG recently released this detailed statement concerning its conduct in Guinea.
Reading Stack
Several articles of interest to pass along from last week’s Corporate Crime Reporter conference. This article details comments made by Denis McInerney (DOJ Criminal Division Deputy Assistant Attorney General) regarding non-prosecution and deferred prosecution agreements. This article details comments made by McInerney concerning my suggested two-step reform plan (see here for the prior post) and also details McInerney’s response to my question concerning the definition of a declination. Articles here and here concern corporate monitors.
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Over the years, Bloomberg’s David Glovin has written some excellent articles concerning Viktor Kozney, Frederic Bourke, et al. With Bourke soon to report to prison, Glovin pens another great article here.
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This prior post discussed the NY Times recent “With Bags of Cash, CIA Seeks Influence in Afghanistan” story and how the story put our stark double standards in the headlines once again. More recently, the NY Times reports (here) as follows. “[Afghan President] Karzai said he had called a meeting […] with the CIA’s Kabul station chief. “I told him because of all these rumors in the media, please do not cut all this money, because we really need it,” he said. “We want to continue this sort of assistance, and he promised that they are not going to cut this money.” For more on the situation, including the views of others, see here from Alison Frankel’s On the Case column.
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See here from Josh Goodman (an attorney at the Federal Trade Commission) titled “The Anti-Corruption and Antitrust Connection.”
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A good weekend to all.
Haiti Teleco “Foreign Official” Says He Was Not A “Foreign Official” – Files Appeal On This And Other Issues
Some background is necessary to place in context an interesting development that is likewise relevant to the pending Eleventh Circuit “foreign official” appeal by Joel Esquenazi and Carlos Rodriguez (see here for the prior post linking to the full briefing in the case).
In terms of the number of individual criminal defendants (9), the Haiti Teleco enforcement actions are the largest in FCPA history (minus the manufactured Africa Sting case). The FCPA charges in the enforcement actions were based on the theory that Haiti Teleco was a “instrumentality ” of the Haitian government, such that Haiti Teleco employees were “foreign officials” under the FCPA. Seven of the defendants pleaded guilty and two of the defendants, Esquenazi and Rodriguez, exercised their constitutional right to a jury trial and were found guilty of FCPA and related charges. As noted above, both defendants have appealed their convictions to the Eleventh Circuit. [Disclosure – I am providing pro bono expert services to defendants’ counsel, including my former law firm Foley & Lardner, relevant to the “foreign official” issue].
In addition to the FCPA (and related) charges brought against the above category of defendants, the DOJ also criminally charged three “foreign officials” in connection with the matter (see this prior post titled “Haiti Teleco Roundup” for additional details). Two of the individuals pleaded guilty to non-FCPA offenses, and one “foreign official,” Jean Rene Duperval, was found guilty by a jury on various money laundering charges.
In short, 12 individuals were criminally charged, pleaded guilty, and/or were found guilty based, in whole or in part, on the theory that Haiti Teleco was an “instrumentality” of the Haitian government.
This prosecution theory of course is a main focus of the Esquenazi and Rodriguez appeal in the Eleventh Circuit. As noted in this prior post, shortly after their convictions and before their current appeal, a stunning development occurred in the case as the Haitian Prime Minister (Jean Max Bellerive) authored a declaration, on behalf of the Haitian Ministry of Justice, concerning the “Legal Status of Teleco.” (See here for the declaration). The declaration asserted, among other things, that “Teleco has never been and until now is not a state enterprise.” The declaration was dated ten days before the jury reached its verdict in the Esquenazi and Rodriguez trial and subsequent filings in the cases suggest that the origins of the declaration was in response to a letter sent by Paul Calli (Carlton Fields – then an attorney for Patrick Joseph (one of the “foreign officials” who pleaded guilty in the case)) inquiring about the status of Haiti Teleco and whether it was a private company or a government owned company.
In a further stunning development, and as noted in this prior post, after the Bellerive declaration surfaced, the DOJ contacted the Prime Minister and he filed a revised declaration (here), in which he backtracked from many of his prior declaration statements, and stated that he did not know his original declaration “was going to be used in criminal legal proceedings in the United States or that it was going to be used in support of the argument that […] Teleco was not part of the Public Administration of Haiti.”
The trial court judge in the Esquenazi and Rodriguez case denied defendants’ request for a new trial and this denial is among the issues on appeal in the Eleventh Circuit.
And now for the interesting and notable recent development alluded to in this Main Justice story.
Duperval, the key “foreign official” at the center of the Haiti Teleco prosecutions, filed an appeal (here) in the Eleventh Circuit earlier this week challenging his convictions. One issue on appeal is stated as follows. “The evidence was insufficient to prove beyond a reasonable doubt that Haiti Teleco was a government instrumentality and that Jean Rene Duperval was a foreign official as required to prove that a violation of the Foreign Corrupt Practices Act generated proceeds of a specified unlawful activity – a necessary predicate for the convictions on the money laundering conspiracy and substantive money laundering charges.”
Separately, Duperval’s brief discusses the Bellerive declarations in connection with his due process challenges. Among other things, the brief notes that the DOJ’s “explanation and Bellerive’s statements in his second declaration, are nothing short of disingenuous, border on the nonsensical, and are expressly contradicted by the previous correspondence, which established that Bellerive signed the first declaration in response to an inquiry from an attorney representing Patrick Joseph …”. The brief then asserts that “but for the government’s unjustified interference with Prime Minister Bellerive, Mr. Duperval could have availed himself of a favorable witness to demonstrate quite simply that Teleco was not a government instrumentality and he was not a foreign official.”
Duperval’s brief also challenges the sufficiency of the trial court evidence regarding “foreign official” and whether Duperval was a “foreign official as required to prove a charge of money laundering related to the proceeds of a violation of the FCPA.” The substantive arguments on this issue largely mirror previous defense arguments in the Lindsey Manufacturing and Carson “foreign official” challenges as well as Esquenazi’s and Rodriguez’s arguments on appeal. Duperval’s argument includes discussion and several citations to my “foreign official” declaration (see here).
Another interesting aspect of Duperval’s appeal is his challenge that the “trial court erred in not charging the jury in accordance with Duperval’s proffered theory of defense instruction.” Specifically, Duperval argues that the trial court denied Duperval’s FCPA facilitation payments exception instruction. The brief asserts that the “language in the instruction was extracted verbatim” from the FCPA and that there was “ample evidence in the record to support the giving of the instruction.”
In this regard, it is interesting to note that in Judge Keith Ellison’s (S.D. Tex.) December 2012 Jackson / Ruehlen decision (see here for the prior post regarding the SEC enforcement action) he concluded, in what is believed to be an issue of first impression, that the SEC must bear the burden of negating the facilitation payments exception.