Rodriguez Seeks Release Pending Historic Appeal
In October 2011, Carlos Rodriguez, one of the defendants in the Haiti Teleco case, was sentenced to 7 years in prison (see here for the prior post). Rodriguez was convicted in August 2011, along with his co-defendant Joel Esquenazi, of FCPA and related counts. In this prior post discussing the verdict, I noted that given the “foreign official” jury instructions at trial the defendants have a good chance to challenge the instruction on appeal should they so choose. This was before the strange developments concerning the existence of Haiti Teleco – see here, here and here for prior posts.
This past Friday, Rodriguez filed a motion for release pending appeal – see here. His appellate counsel is lead by David Simon (Foley & Lardner – here) and also includes Foley attorneys Michael Halfenger – here, Pamela Johnson – here and Lauren Valiente – here. This will be the first time in the FCPA’s history that “foreign official” will be squarely before a Circuit Court.
In the motion, Rodriguez moves the Court to order his release pending appeal of his conviction and sentence. The motion states as follows. “This appeal will address issues of first impression in any circuit involving the [FCPA]; additionally, the record contains a number of serious errors that deprived Rodriguez of a fair trial and affected his substantial rights. This is the quintessential case where release (with bail ordered) pending appeal should be granted. Rodriguez should not be incarcerated, as he is now, while these significant legal issues are briefed and addressed by this Court. He was on bail during the entire pretrial period and trial. He is not a flight risk, which the government has already conceded. This motion should be granted because all the counts fail and should be reversed …”.
According to the motion, the appeal will present substantial questions relating to: “(1) whether the district court erred in its jury instructions regarding the meaning of a key statutory term in the FCPA – what is an ‘instrumentality’ of a foreign government; (2) whether there was sufficient evidence to sustain the jury’s verdict on the ‘foreign official’ element; (3) whether the district court erred in its wire fraud jury instructions; (4) whether there was sufficient evidence presented to establish a violation of Haitian bribery law as a predicate for the conspiracy and money laundering charges; and (5) whether the money laundering charges violated the merger rule.”
A “Foreign Official” Head-Scratcher
I read the news with FCPA goggles on. It’s an occupational hazard. An article last week in the Wall Street Journal – “China Bids in Fracking” by Dinny McMahon and Chester Yung caused me to scratch my head.
Earlier this week, I entered my final grades after days of grading. But I offer one more final exam. This final exam is for people who believe (see here for the prior post) that the FCPA “sufficiently defines the term foreign official” and that “given the various forms of government found around the world, it would be impractical to articulate each of the myriad of ways that one could use to identify a foreign official in particular countries or cultures. ”
The WSJ article discusses how Cnooc Ltd. and China Petroleum Corp. (Sinopec), two Chinese state-owned or state-controlled enterprises (SOEs), are competing to buy a 30% stake in Texas-based Frac Tech Holding LLC.
Are SOE’s “instrumentalities” under the FCPA such that SOE employee are “foreign officials.” You know my conclusion – see here for my “foreign official” declaration. Yet, in Lindsey and Carson the trial court judges concluded (see here and here) that certain SOEs may be “instrumentalities” under the FCPA such that SOE employees are “foreign officials.”
Can minority ownership qualify an enterprise as an SOE? In its charging decisions, both the DOJ and SEC have answered yes. See here for the current “foreign official limbo low.”
Competing against Cnocc and China Petroleum for the stake in Frac Tech is Saudi Arabian Oil Co. (Saudi Aramco), the state-controlled oil company. So Frac Tech employees could become Chinese “foreign officials” or Saudi “foreign officials” depending on the successful bid?
But wait, perhaps Frac Tech employees are already “foreign officials.” Why? Because, as the WSJ article notes, a consortium led by Singaporean state-owned investment firm Temasek Holdings Pty. Ltd. and including sovereign wealth funds Korea Investment Corp., China Investment Corp. and Abu Dhabi Investment Council currently owns 70% of Frac Tech. Are sovereign wealth funds foreign government owned “instrumentalities.”? The DOJ and SEC sure seem to think so. Would that make Frac Tech employees current Singaporean “foreign officials,” Korean “foreign officials,” Chinese “foreign officials” or Abu Dhabi “foreign officials”?
This is quite the “foreign official” head-scratcher. But quit scratching your head, the FCPA “sufficiently defines the term foreign official” in the minds of some and it is “impractical to articulate each of the myriad of ways that one could use to identify a foreign official in particular countries or cultures.”
When It Wants To, Congress Knows How To Speak
The FCPA defines “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof …”. One of the arguments in the “foreign official” challenges is that “where Congress wants to define ‘instrumentality’ to include state-owned enterprises, it knows how to do so.” (See pg. 30 of the Carson brief summarized in this previous post).
My “foreign official” declaration (see here) notes as follows. “There is no express statement or information in the FCPA’s legislative history describing the ‘any department, agency, or instrumentality’ portion of the “foreign official” definition. Further, there is no express statement or information in the FCPA’s legislative history to support the DOJ’s expansive legal interpretation that alleged SOEs are ‘instrumentalities’ (or ‘departments’ or ‘agencies’) of a foreign government and that employees of SOEs are therefore ‘foreign officials’ under the FCPA’s anti-bribery provisions. However, there are several statements, events, and information in the FCPA’s legislative history that demonstrate that Congress did not intend the ‘foreign official’ definition to include employees of SOEs. […] During its multi-year investigation of foreign corporate payments that preceded enactment of the FCPA, Congress was aware of the existence of SOEs and that some of the questionable payments uncovered or disclosed may have involved such entities. Indeed, in certain of the competing bills introduced in Congress to address foreign corporate payments, the definition of ‘foreign government”’ expressly included SOEs. These bills were introduced in both the Senate and the House during both the 94th (1975-76) and 95th (1977-78) Congresses. […] However, despite being aware of SOEs, despite exhibiting a capability for drafting a definition that expressly included SOEs in other bills, and despite being provided a more precise way to describe SOEs, Congress chose not to include such definitions or concepts in S. 305, the bill that ultimately became the FCPA in December 1977.”
As noted in the Carson brief, in the Foreign Sovereign Immunities Act (passed a year before the FCPA), the term “agency or instrumentality of a foreign state means any entity which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision.” In short, Congress knew how to embed SOE concepts in the FSIA when it wanted to.
Similarly, as noted in the Carson brief, Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (which became law in 201o) and imposes requirements on certain resource extraction issues to, among other things, disclose information regarding payments made to “foreign governments” for the purpose of the commercial development of oil, natural gas or minerals, defines “foreign government” to “include [] a department, agency, or instrumentality of a foreign government or a company owned by a foreign government.” In short, Congress knew how to embed SOE concepts in Dodd-Frank when it wanted to.
A bill introduced by Rep. Chris Smith last week further demonstrates that when Congress wants to, it knows how to embed SOE concepts into legislation. The bill, “The Global Online Freedom Act” seeks to “prevent U.S. businesses from cooperating with repressive governments in transforming the Internet into a tool of censorship and surveillance …”. The bill defines “foreign official” to mean (i) any officer or employee of a foreign government or of any department; and (ii) any person acting in an official capacity for or on behalf of, or acting under color of law with the knowledge of, any such government or such department, agency, state-owned enterprise, or instrumentality.” Further, the bill defines “state-owned enterprise” as follows – “a commercial entity in which a foreign government owns or controls, directly or indirectly, more than 50 percent of the outstanding capital stock or other beneficial interest in such commercial entity.”
For the Carson and Lindsey “foreign official” decisions see here and here. Recently the Lindsey convictions were vacated based on prosecutorial misconduct (see here), the Carson case remains pending.
Development Down Under
If you have any interest in the issue of facilitating payments or Australia’s “FCPA-like” law you will want to read this document recently released by the Australia Attorney-General’s Department, Criminal Justice Division.
The document states as follows. “In September 2011, the Australian Government announced the commitment of $700,000 to develop and implement Australia’s first National Anti-Corruption Plan. A key objective of the Plan is to strengthen Australia’s existing governance arrangements by developing a whole-of-government policy on anti-corruption. The Plan will bring the relevant agencies together under a cohesive framework and strengthen the Government’s capacity to identify and address corruption risks.”
Australia’s “FCPA-like” law (Division 70 of the Criminal Code Act 1995) currently states that a person is guilty of an offense of bribing a foreign public official if: “the person provides a benefit to another person, offers or promises to provide a benefit to another person, or causes a benefit to be provided, offered or promised to another person AND the benefit is not legitimately due to the other person AND step 1 was carried out with the intention of influencing a foreign public official (who may or may not be the recipient of the benefit) in the exercise of the official’s duties, in order to obtain or retain business or obtain or retain a business advantage which is not legitimately due.” Under the law, “two defenses are provided for the foreign bribery offense: (i) that the benefit was permitted or required by written law and (ii) that it was a ‘facilitating payment.'”
As relevant to the foreign bribery offense, the Australian government is reviewing “the treatment of facilitation payments under Australian law;” “the factors that influence whether a benefit is ‘legitimately due’ to the recipient;” and “the current requirement to identify a particular foreign public official in order to establish an offence.”
As to facilitating payments, the document states as follows under the heading “international approaches.” “The United States’ Foreign Corrupt Practices Act, on which the Australian law was modelled, includes a similar exemption to the offense of foreign bribery for facilitation payments. The United States Government has stated that it does not condone facilitation payments. The OECD has recommended that the United States review its policy. The United Kingdom’s Bribery Act, which came into force on 1 July 2011, prohibits facilitation payments.” The document also states as follows. “The international movement towards criminalizing facilitating payments is demonstrated by the recent amendments to both UK and US bribery legislation.” This statement is clearly wrong, there have been no recent amendments to the FCPA, although I agree with what seems to be the implication that the current FCPA enforcement agencies do not recognize the facilitating payments exception Congress put into the law.
The document states that the “government is considering whether to remove the defense of facilitating payments by repealing” that relevant section of the law.
Another issue the Australian government is reviewing is whether a particular foreign official must be identified in order to establish a bribery offense. This same issue was disputed in both the Nexus Technologies and Africa Sting enforcement actions.
As to this issue, the document states as follows. “Under subsection 70.2 of the Criminal Code it is an offense to offer or provide an undue benefit to a person with the intention of influencing a public official in the course of their duties, in order to obtain business or an undue business advantage. In some circumstances, it will be possible to establish that a bribe has been offered or provided to a person to induce a Government agency to grant business or an undue business advantage but it may be difficult to identify the specific official who will be influenced. For example, it may be possible to prove a person offered or provided a bribe to an agency in charge of granting public infrastructure contracts, but not possible to identify whether the payment is destined for the official directly responsible for granting contracts or another official who will direct their staff to grant a certain contract. The Government therefore is considering whether to amend legislation so that, when proving that a benefit was offered or provided with an intention to influence a foreign public official, it is not necessary to prove an intention to influence a particular foreign public official.”
The Australian government is inviting submissions as to the above (and other issues) by December 15th.
“Foreign Official” Evidence
Last week, U.S. District Court Judge Jose Martinez (S.D. of Florida) denied (here) Carlos Rodriguez’s and Joel Esquenazi’s motions for judgment of acquittal or a new trial in the Haiti Teleco case. See here for a prior post regarding the jury verdict.
With sparse caselaw on the FCPA’s “foreign official” element, anything a court says as to “foreign official” or “instrumentality” is worthy of a read. This post summarizes relevant excerpts from Judge Martinez’s order including the evidence the court found sufficient to demonstrate that Teleco was an “instrumentality” of the Haitian government and that certain employees of Teleco were thus “foreign officials” under the FCPA. As detailed below, that evidence mostly (but not exclusively) consisted of “extensive research” a former Haitian Minister of Justice did in connection with a book.
Under the heading “Evidence at Trial Regarding Teleco As A Public Entity,” the order notes that the Government called Gary Lissade to testify regarding Haitian law and public institutions and states (at pages 5-7) as follows.
“In support of the allegations regarding the FCPA and Haitian bribery law, the Government called Gary Lissade, Haiti’s former Minister of Justice and the author of a book on Haiti’s public administration, as an expert in Haitian law and Haitian public institution. [A footnote explains that Lissade conducted extensive researching, including legal research and interviews, in reaching his conclusions] Mr. Lissade explained that Teleco was widely considered to be a Haitian public entity during the relevant time period and that he had classified Teleco as part of the public administration in his 2000 book.”
“Mr. Lissade explained that Teleco was established as a private institution in 1968 but become a public entity when, around 1971-1972, the state-owned National Bank of the Republic of Haiti (“BNRH”) acquired 97% of its shares. Mr. Lissade conceded that the exact time and circumstances of this acquisition were unclear but explained that the Government’s actions and official documents from the time period reflected that the acquisition and assumption of control had occurred. Mr. Lissade also conceded that, although Teleco began to use the term “S.A.M.,” rather than “S.A.” [a footnote says that Mr. Lissade noted that S.A. designates a private corporation in Haiti and that the addition of the initial “M” indicates that the corporation is a mixed public/private enterprise] to reflect its partial state-ownership after the acquisition, Teleco never underwent any legal process to change its name.”
“Mr. Lissade testified that Teleco was 97% owned and 100% controlled by BNRH’s successor, the state-owned Bank of the Republic of Haiti (“BRH”), for many years, including during the time period charged in the indictment. Teleco was run by a board of directors and a general director, all of whom were appointed by executive order signed by Haiti’s President, Prime Minister, and relevant Ministries. The people who worked under these political appointees were considered to be ‘public agents’ working for the ‘public administration,’ which Mr. Lissade defined as ‘the entities the state uses to perform and to give services to the people living in Haiti’ and ‘as an instrument … for the state to reach it missions and objectives and goals.’ Teleco was entitled to special treatment under Haitian tax laws, and its revenues were controlled by the BRH.”
“Mr. Lissade further testified that Haiti’s bribery laws applied to Teleco officials during the relevant time period. In 2008, Haiti passed an asset disclosure law, intended to combat public corruption, that required certain employees of Teleco and other public institutions to declare their assets, further confirming Mr. Lissade’s opinion that Teleco had been considered a public entity during the relevant time period.”
“Mr. Lissade also explained that, in 1996, Haiti passed a modernization law intended to privatize certain state-owned companies, including Teleco, but Teleco did not actually become partially privatized until 2009-2010.”
“Mr. Lissade’s testimony that Teleco was owned and controlled by the Haitian government was corroborated by numerous witnesses and voluminous documentary evidence. For example: Robert Antoine testified that Teleco was a state-owned company and that, when he worked there, he was a government employee whose supervisor, Patrick Joseph, had been appointed by the President of Haiti; Jean Fourcand testified that the President of Haiti appointed his cousin, Patrick Joseph, as General Director of Teleco, the ‘state owned’ ‘national phone company’ of Haiti; Juan Diaz testified that he learned while living in Haiti that Teleco was a ‘nationalized’ company owned by the Haitian government; Antonio Perez testified that Esquenazi, Dickey, and Terra’s business partners at HAWAI told him that Haiti Teleco was owned and operated by the Haitian government and that he saw an Aon insurance application submitted by Terra to that effect; and John Marsha, who worked at Aon, testified that Esquenazi, Rodriguez, and Dickey told him that the contract they wanted to insure was with a foreign government and that the type of insurance they requested only applied to government contracts.”
Judge Martinez stated, as to the “foreign official” / “instrumentality” issue, and otherwise, that based on the above “the evidence at trial was sufficient to support the jury’s verdict of guilty beyond a reasonable doubt and also weighed heavily in favor of the jury’s verdict. This is not a case in which the interests of justice require that the jury’s verdict be set aside.”
Judge Martinez next addressed the defendants’ argument that the “court’s instruction regarding a state-owned enterprise pursuant to the FCPA was incorrect.” See this prior post for the full instruction. Judge Martinez merely stated as follows. “This court properly instructed the jury through a non-exclusive multi-factor definition that permitted the jury to determine whether Teleco was an instrumentality of a foreign government.”
Judge Martinez concluded his order by discussing the declaration of Jean Max Bellerive, the current Prime Minister of Haiti. As detailed in this prior post, Bellerive stated that “Teleco has never been and until now is not a state enterprise.” Yet, as detailed in this prior post, the DOJ assisted Bellerive in revising certain statements in his declaration even though the facts in his original declaration were “truthful.”
Judge Martinez stated that the “declaration provides no newly discovered evidence and would not have affected the jury verdict. He stated that “Mr. Bellerive’s second declaration simply clarified the contents of the first declaration” and that the “contents of the first declaration were established throughout trial and were known to Defendants during trial preparation.”
Sentencing of Rodriguez and Esquenazi is scheduled for October 25th.