Second Circuit Rejects Fourth Amendment Challenge To Foreign Evidence Obtained Through MLAT
Today’s post is from Stanley Twardy and Elizabeth Latif of Day Pitney LLP concerning a recent Second Circuit decision concerning foreign obtained evidence.
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In 2002, the DOJ stated that the lack of cooperation in obtaining evidence located overseas was “the chief difficulty in investigating and prosecuting foreign bribery cases.” Since then, there has been increased cooperation between Foreign Corrupt Practices Act prosecutors and foreign authorities through Mutual Legal Assistance Treaties (“MLATs”), which allow U.S. prosecutors to request a foreign state to take testimony, obtain documents, issue search warrants, or otherwise assist with an investigation. For example, in United States v. Green, 08-CR-059 (C.D. Cal. 2008), prosecutors obtained bank records from Swiss authorities pursuant to an MLAT request and used them to connect bribe payments to overseas accounts in the name of the foreign official’s daughter.
The Second Circuit recently rejected a defendant’s Fourth Amendment challenge to evidence obtained from foreign authorities pursuant to an MLAT request, holding that the exclusionary rule only applies to foreign evidence where there is U.S. control or direction of the foreign investigation, an intent to evade the Constitution, or where the foreign agency’s actions shock the judicial conscience. Although this was not an FCPA case, its conclusions can be applied in the FCPA context.
The prosecutors in United States v. Matthew Getto made an MLAT request to the Israeli National Police (“INP”) to assist with the investigation of a U.S. lottery scam that had been operating out of three “boiler rooms” located in Israel. The relevant MLAT, the Treaty with Israel on Mutual Legal Assistance in Criminal Matters, provides that the United States and Israel “shall provide mutual assistance . . . in connection with the investigation, prosecution, and prevention of offenses, and in proceedings related to criminal matters.” See Treaty with Israel on Mutual Legal Assistance in Criminal Matters, U.S.-Israel, Jan. 26, 1998, S. Treaty Doc. No. 105-40, 1998 WL 1784226.
Pursuant to the MLAT request, the FBI provided the INP with details of its investigation, including Israeli phone numbers of suspects in the case. Using this information, the INP was able to identify a “SIM” card associated with a suspect’s phone number, which led them to interview employees at Tel Aviv restaurants. Through the interviews, the INP learned the address of one of the scheme’s “boiler rooms” and then interviewed the superintendent of the building in which it was located. The INP then searched the boiler room and installed a hidden surveillance device within it. Evidence obtained from that search and surveillance linked the scheme to Getto, who was arrested in the United States.
Getto moved to suppress the evidence gathered by the INP on the basis that it was obtained in violation of the Fourth Amendment and was subject to suppression based on the close cooperation between the INP and the FBI and the egregiousness of the INP’s actions. The district court denied the motion. Getto was convicted after a bench trial on stipulated facts and was sentenced principally to 150 months’ imprisonment. He subsequently appealed the suppression issue to the Second Circuit.
The Second Circuit affirmed the district court’s denial of Getto’s suppression motion. The Court began by noting that, in its recent decision in United States v. Lee, it reaffirmed the long-standing rule that “‘suppression is generally not required when the evidence at issue is obtained by foreign law enforcement officials.’” This rule has sometimes been called the “international silver platter doctrine.” The Court in Getto reiterated that the only exceptions to this general rule are: (1) where the cooperation with the foreign law enforcement officials implicates constitutional concerns, and (2) where the conduct of the foreign officials is so egregious it shocks the judicial conscience.
The Court easily held that the INP’s actions did not shock the judicial conscience, even assuming arguendo the credibility of Getto’s allegations that the INP had searched the boiler room before it had obtained a warrant and had lied about material facts in its warrant application. These allegations did not, the Court held, rise to the level of “‘torture’” or “‘terror’” or a “‘violat[ion of] fundamental international norms of decency.’”
As to the close cooperation between the INP and FBI, the Court declined to adopt the “joint venture” doctrine adopted by the First, Ninth, and Eleventh Circuits, which provides for application of the Fourth Amendment exclusionary rule where the participation of U.S. law enforcement in the investigation is so substantial that the investigation can be characterized as a joint venture between the U.S. and foreign law enforcement. Instead, the Second Circuit reiterated its prior holdings that the Fourth Amendment exclusionary rule applies only where the foreign law enforcement officials are “virtual agents” of the U.S. or where the cooperation between the countries is designed to evade constitutional requirements. The Court held that virtual agency was not established by the facts that the INP undertook its investigation pursuant to an MLAT request or that the U.S. shared the results of its investigation or that the foreign government provided a live feed of the search to U.S. law enforcement. The Court also found no intent to evade constitutional requirements.
As for what would constitute virtual agency, the Court in Getto stated that the U.S. would have to “play some role in controlling or directing the conduct of the foreign parallel investigation.” The Court noted that the U.S. prosecutors were not “involved in the preparation, submission and execution of search warrants” or “in interviews of witnesses or defendants,” thereby suggesting that such actions may rise to the level of control or direction.
The rationale for the Court’s decision, which echoed that in Lee and the cases cited in Lee, was that exclusion of the fruits of a foreign investigation serves no deterrence purpose where U.S. law enforcement agents do not have the authority to control or direct the investigation. It is arguable, however, that the situation in Getto is different from that of Lee and the other cases because the evidence came from an MLAT request, as opposed to being handed over on a silver platter from an ongoing foreign investigation. Indeed, it could be argued that a foreign investigation initiated pursuant to an MLAT is not, as the Second Circuit in Getto characterized it, a parallel investigation. It could also be argued that there will naturally be a deterrent effect on foreign police if weeks or months of work done in response to an MLAT request is thrown out by a U.S. court. These issues, as well as the circuit split on “virtual agency” versus “joint venture,” will likely be raised again. As FCPA enforcement continues at a vigorous pace, the collection of evidence from abroad will continue as well, and therefore these issues should stay top of mind for FCPA practitioners.
Corruption And Anti-Corruption: Challenges And Future Perspectives
Today’s post is from Professor Bruce Bean (Michigan State University College of Law). Prior to academia, Bean had a diverse practice career including at various law firms and in-house counsel positions.
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Last week in London, the University of Sussex Centre for the Study of Corruption presented its annual conference, this year entitled “Corruption and Anti-Corruption: Challenges and Future Perspectives.” This one day affair, organized by Professor Dan Hough, Director of the Centre, was held at the Canary Wharf offices of Clifford Chance with about 150 attendees.
Professor Michael Johnston from Colgate, author of Syndromes of Corruption, gave the keynote address, Are we there yet?
He emphasized these themes:
- All countries have corruption. It is not simply a problem of the “warmer parts of the world.”
- Corruption will never be “eliminated.”
- Anti-corruption efforts should not mean “Be like us.”
- Corruption is one aspect of political integrity, and the liberal democracies have a major corruption problem with the funding of political campaigns where we have merely legalized corruption.
My presentation emphasized the practical problems of complying with Section 7 of the Bribery Act, the strict liability corporate crime of Failing to Prevent a Bribe. Lost on my co-panelists was my principal point, that the penalties and disgorgement amounts extracted in settlements with the Department of Justice and the Securities and Exchange Commission deplete shareholder funds while not incentivizing corrective action by senior management.
Robert Barrington, Executive Director of Transparency International U.K., had no sympathy for the dilemma faced by companies doing only a “part of a business” in the UK, the sole jurisdictional nexus required under Section 7 of the Bribery Act. Ignoring the moral hazard of permitting senior executives to continue business as usual since it is only shareholders who might have to pay, Barrington suggested, naively in my view, that if shareholders do not approve of such settlements, “they can always change the CEO.”
Barrington’s major focus was on Transparency’s new global initiative, a world-wide survey of lobbying. He pointed out, as an example, that there is currently no information available to the public about lobbyists in London, and that Parliament is currently considering this issue. Barrington flatly stated that the bill before Parliament was “appallingly bad.” Referring to the U.S. requirement that lobbyists register and report, he observed that the U.S. procedure is a good example of where “transparency is not enough.”
Dmitri Vlassis, Chief of the Economic Crime Branch of the United Nations Office on Drugs and Crime in Vienna, noted that 2013 was the 20th anniversary of the creation of Transparency International and the 10th anniversary of the United Nations Convention Against Corruption. Vlassis announced that 167 nations have become party to the UNCAC, but, curiously, New Zealand has not. New Zealand declines to ratify the UNCAC on the theory that they are already #1 on the Transparency International Corruption Perceptions Index!
The final speaker of the day was Sir Ian Blair, Head of the Metropolitan Police (Scotland Yard) from 2005-2008. He made the surprising disclosure that Scotland Yard has itself had serious corruption problems. In the 1970’s, the then head of the Yard announced that he was trying to insure that there were more criminals apprehended by the Metropolitan Police than were working there. According to Blair, this problem has been substantially improved upon, but even at Scotland Yard, corruption will always be an issue.
Transparency International’s new emphasis on lobbying may indicate the beginning of a long overdue focus on political integrity in the economically advanced nations. Meanwhile, we await an indication of the approach prosecutors will take toward strict corporate criminal liability under the Bribery Act.
First Case Under Korea’s Version Of The FCPA Tests The Limits Of Defining “Foreign Official”
This previous guest post discussed “Korea’s FCPA” and a recent case in which a trial court held that the prosecution failed to meet its burden of proof that China Eastern Airlines was a state owned enterprise, and, therefore, that the president of China Eastern’s Korean subsidiary was a foreign public official sufficient to state a claim under the law.
The prosecution appealed the ruling and in this guest post Alston & Bird attorneys Edward Kang and Christopher Lucas discuss the appellate court ruling.
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An appeals court in Korea affirmed a lower court decision to reject a prosecution’s theory of what it means to be a “foreign official” under Korea’s version of the Foreign Corrupt Practices Act, called the Act on Preventing Bribery of Foreign Public Officials (“FBPA”). This was the first case brought by prosecutors under the FBPA with allegations that an executive of a state-controlled company was a “foreign official.” Prosecutors have appealed to the Korean Supreme Court, and the high court’s decision could be an important signal as to how aggressively prosecutors can pursue future cases under the FBPA.
In 2011, Korean prosecutors brought FBPA charges against two individuals – executives at a shipping company and a travel agency – for allegedly bribing the president of the Korean subsidiary of China Eastern Airlines to secure improper business advantages. Prosecutors argued that the Korean president of China Eastern Airlines was a “foreign official” and pointed to documents that allegedly linked the company to the Chinese government.
The lower court acknowledged the evidence suggesting a connection with the Chinese government, but found that prosecutors had not met their burden in proving that the China Eastern executive was a “foreign official” under the FBPA. The Korean prosecutors appealed and directed the appellate court to additional pieces of evidence to support its theory, including the facts that the Chinese government: (1) through a wholly-owned subsidiary, owned more than 50% of China Eastern’s capital; (2) had appointment and dismissal power over China Eastern’s CEO; (3) was in charge of certain business decisions of China Eastern, including mergers and spin-off decisions; and (4) provides China Eastern with large amounts of government subsidies.
Despite that evidence, the appellate court affirmed the lower court’s decision without further elaboration. The case has been appealed to the Korean Supreme Court. We will continue to monitor developments and provide an update once this decision has been announced.
The Korean FBPA defines “foreign official” to include employees of certain state-owned or state-controlled companies. Under Article 2(2)(c) of the FBPA, the term “foreign official” includes:
“[A]n executive or employee of a company in which a foreign government contributed more than 50% of the paid-in-capital or with respect to which a foreign government exercises de facto control over its overall management including major business decisions and the appointment or dismissal of its executives.”
Interestingly, at the same time the Korean Supreme Court wrestles with the limits of defining “foreign official” when it comes to state-owned or controlled companies, the U.S. Court of Appeals for the Eleventh Circuit is currently considering a similar issue in U.S. v. Esquenazi, a case that is slated for oral arguments in October.
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Similar to the issue raised in this recent post concerning Canada’s FCPA-like law, Korea’s FBPA defines the targeted recipient category to include state-owned enterprise (“SOE”) definitions and concepts. As noted in my “foreign official” declaration (which has been cited by the defense in the pending 11th Circuit “foreign official” appeal), despite being aware of state-owned enterprises (SOEs) during the FCPA’s legislative process, despite exhibiting a capability for drafting a foreign official definition that expressly included SOEs in other bills, and despite being provided a more precise way to describe SOEs during the legislative process, Congress chose not to include such definitions or concepts in FCPA.
As noted in this prior post regarding the DOJ’s response brief in the 11th Circuit challenge, among other arguments the DOJ is making is the alarmist argument that “Defendants’ construction of the statute to exclude employees of SOEs … means that the United States is out of compliance with its treaty obligations under the [OECD] Convention.”
Like the U.S., Korea is also a member of the OECD Convention.
[Disclosure – I am providing pro bono expert services to defendants’ counsel relevant to the “foreign official” issue].
What’s On Your Mind?
The dog days of summer. A time for reflection, a time to think.
I posed the question “what’s on your mind” to the following FCPA practitioners and below are their responses.
Philip Rohlik (Debevoise & Plimpton – Hong Kong)
“While I have been working on Asian related FCPA matters for more than seven years, I moved to the region two years ago. Living here and interacting with local employees in situations other than investigations has given me a different perspective of the cost and difficulties associated with compliance.
Facilitating payments and transnational legal regimes that seek to bar them are on my mind. While it is correct and easy to say that ethical multinational corporations should not give in to the petty extortion that characterizes facilitation payments, the issue is not so simple when looked at from the reality of an employee in a high-risk jurisdiction — the kind of employee who recently asked me for advice on “how do I make the police go away?” when they visit the second or third week of every month (about the time their last month’s paycheck runs out). It is easy for a compliance officer or lawyer who encounters random government officials on his or her way to or from the airport to make full use of the ICC’s Resist handbook. Local (and, let’s face it, not that well paid) employees who must deal with specific officials on a regular basis are in a different situation especially if they have no desire to test the limits of “imminent physical harm.”
When laws impose vicarious or respondeat superior liability, situations to which the law applies should not be determined from the abstract perspective of a corporation but from the realities faced by the company’s employees. Is the fight against corruption really furthered by having zero tolerance policies for facilitation payments at the corporate level, but local employees very rationally believing that such grand pronouncements leave them in a situation that will either (i) make their life very difficult or (ii) force them to circumvent internal controls in order to make the payment (thereby creating a potential mechanism for more nefarious payments)? In this respect, the U.S. law that exempts facilitating payments from the anti-bribery provisions of the FCPA may be less anachronistic than it is often made out to be.
Also often on my mind is third party due diligence. Right now, one of our concerns is attending to our clients’ needs for right-sizing third party due diligence. Businesses are concerned that the continued lack of clarity from regulators as to the required steps results in excessive cost and a misallocation of compliance resources. While some third parties deserve thorough diligence, how much diligence is due other third-parties? Is a basic questionnaire and (the often-not-inexpensive) outsourcing of a public records check sufficient? What if such checks are almost always inconclusive in countries with limited public records? Do they just become inefficient box ticking? We are actively working with both clients as well as due diligence firms providing cloud-based and world-wide investigative services to help get these costs under control. Among the solutions we are working on are greater use of in-house information. If there are adequate internal controls on the evaluation of in-house experience with a third party, we believe that the greater use of on-hand information to evaluate third parties can be a real cost-saver. Doing so would free up resources for other compliance tasks as well as improve the client’s bottom line.”
John Rupp (Covington & Burling – London)
“As we continue to struggle on behalf of clients with demands for bribes, large and small, by government officials in a depressing number of countries, I have become ever more convinced that a new approach to the campaign against bribery – in particular, by western countries – is needed. The approach that western countries have taken thus far to the bribery of foreign government officials is to punish the bribe giver. The premise appears to be that international companies, including those subject to the US Foreign Corrupt Practices Act and the UK Bribery Act 2010, rather like bribing foreign government officials, seeing it as a convenient way to win business without having to compete fairly with other companies operating in the same space.
A completely different picture emerges, of course, when one spends a good part of each working day developing strategies to enable clients to operate in countries where official corruption is endemic. The international company employee who wakes up in the morning, steadies himself or herself in the mirror and then looks forward to winning business through bribery is an exceedingly rare bird in my experience. Overwhelming, the reflected image of the vast majority of employees of international companies grappling with bribery demands is of consternation – how does one continue to operate in Country X when everyone on the government payroll in the country is demanding a bribe for everything?
A fully developed, and maximally effective, anti-bribery program by a western country would involve, I believe, much more attention than has been paid in the past to assisting international companies when they are confronting demands for bribes by foreign government officials. The US State and Commerce Departments, UK and German Foreign Ministries, World Bank – and many others – should put much more emphasis in the future than they have in the past on assisting companies fend off official demands for bribes. In many, many cases, they have the resources – and the leverage – to do so.
I’m not suggesting that western countries consider repealing statutes punishing the bribery of foreign government officials. What I am suggesting is that they balance that approach with an equally concerted effort to deal with the demand side of the bribery equation.“
Thomas Fox (Solo Practitioner, Founder and Editor of the FCPA Compliance and Ethics Blog)
“The Securities and Exchange Commission (SEC) is investigating JPMorgan Chase regarding its hiring practices in China. It appears that JP Morgan Chase hired children of Chinese government officials or heads of state owned enterprises. While such hirings do not violate the FCPA per se, they do raise red flags. The FCPA Professor was quoted in the New York Times, “While the hire of a son or daughter itself is not illegal, red flags would be raised if the person hired was not qualified for the position, or, for example, if a firm never received business before and then lo and behold, the hire brought in business.” Such a hire may be a FCPA noteworthy event if the timing of the alleged hiring is closely connected to important business victories and awards of government business.
While the questions of corrupt intent will be paramount I think that this episode emphasizes the continuing key concept of the three most important things in any FCPA compliance program; that being: Document, Document, Document. If your compliance program does not document its successes there is simply no evidence that it has succeeded. In addition to providing to your company support to put forward to the DOJ, it is the only manner in which to gauge the overall effectiveness of your compliance program. To negate corrupt intent, JP Morgan Chase will have to dis-link any hiring with the obtaining of business. It will be the documentary efforts of the company in answering this query that may well decide the question of whether the SEC will consider the matter a FCPA violation or not.”
From Siriwan To Gonzalez: Why The DOJ Altered The Way It Charges Alleged Corrupt Foreign Officials
Today’s post is from Mike Dearington, a 2013 Vanderbilt law grad who will soon start his practice career. Dearington has previously authored several FCPA Professor guest posts on the Siriwan matter.
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As the Wall Street Journal reported in March, the court in United States v. Siriwan has issued a stay of the case in order to await resolution of the Thai government’s prosecution of defendant Juthamas Siriwan. A recently released transcript of the March hearing, which details the court’s reasons for the stay, suggests a strategic shortcoming in the DOJ’s charging tactics in the case. The shortcoming may explain why the DOJ, after Siriwan, altered the way it charged an allegedly corrupt foreign official in a similar case, Gonzalez.
Siriwan Background
In 2009, prosecutors charged Juthamas Siriwan, former governor of Tourism Authority of Thailand, as well as her daughter Jittisopa, with awarding lucrative contracts to two Hollywood movie executives in exchange for kickbacks. (See here for the prior post). Because foreign officials are outside the scope of the FCPA, prosecutors charged Juthamas Siriwan under the MLCA (Money Laundering Control Act). The indictment cited two theories of specified unlawful activity: promotion of (i) violations of the US Foreign Corrupt Practices Act and (ii) violations of Thai law. Under the MLCA, FCPA violations expressly constitute specified unlawful activity, 18 U.S.C. § 1956(c)(7)(D), and violations of Thai law may constitute specified unlawful activity by virtue of being an “offense against a foreign nation involving . . . bribery of a public official, or the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official,” 18 U.S.C. § 1956(c)(7)(B)(iv). But when the defendant is the foreign official, as in Siriwan, neither theory is well settled under federal law.
Questions about the FCPA theory of money laundering predominated a January 2012 hearing in Siriwan. At that hearing, the court suggested preliminary disapproval of the theory, noting the FCPA’s affirmative legislative policy of exempting foreign officials from its reach. See, e.g., Castle; Gebardi. The government countered that it had not charged the defendant under the FCPA statute and instead was charging money laundering in promotion of FCPA violations, a distinct crime (citing Bodmer).
During the March 2013 hearing, however, discussion shifted to the prosecution’s second theory of money laundering, where an “offense against a foreign nation” is the purported specified unlawful activity.
March 2013 Siriwan Hearing: Court Continues Stay Until Resolution of Thai Prosecution
During the March 2013 hearing on defendants’ motion to dismiss, the court was conspicuously reluctant to decide questions of Thai law, when it could instead wait until Thailand decides those questions itself: “I don’t understand how I could attempt to discover what Thai law is, the ins and outs of Thai law to make that type of determination.” The court opined:
“[E]specially when there are very serious issues, it behooves the court to be somewhat cautious in this regard. And, again, it seems to me that what will happen in Thailand will inform this court as to what this court’s proper response should be to the motion to dismiss. And I do not feel that it is my obligation to do that which can be done through a prosecution in Thailand as to Thai law. [I]t behooves me to wait and see even for no other reason that I can say, at least, they are experts in Thailand as to what Thai law is.”
Additionally, the court averred that an acquittal in Thailand would weaken the government’s money-laundering charge based on promotion of crimes against Thailand. The court speculated that, in the event Thailand acquits the defendant of the very conduct that constitutes specified unlawful activity under the MLCA charge, the government is “going to be precluded from making that argument because the Thai government will have said they haven’t violated Thai law . . . .”
The government did not concede this point, instead cautioning that, in the event of an acquittal in Thailand, the government “would want to reevaluate” its position. The government added that the MLCA charges would still stand under the FCPA theory of money laundering.
Gonzalez: The DOJ Alters Its Charging Tactics After Siriwan
The Siriwan court’s reluctance to decide questions of Thai law before resolution of Thailand’s domestic enforcement means a concomitant delay of the government’s case in the United States. And if prosecutors continue to charge money laundering in promotion of an offense against a foreign nation, thereby implicating foreign law, district courts may repeatedly decide to stay the cases until the foreign nation has resolved its charges against the official. In practice, charging a foreign official with money laundering where the specified unlawful activity is a violation of another country’s law can pose a “trial within a trial” problem; that is, the district court may decide to cautiously await that country’s direct prosecution of the offense before adjudicating a money-laundering charge in the United States predicated on that offense. The latter complication seems to have occurred in Siriwan.
In addition to the delay, when a court awaits the foreign nation’s prosecution, it renders ineffective the government’s prosecution for money laundering predicated on the foreign offense. For instance, if Thailand acquits Siriwan, it will be difficult for prosecutors in the United States to then prove that Siriwan intended to promote an offense against Thailand. On the other hand, if Thailand convicts Siriwan, imprisonment in Thailand may further delay extradition to the United States.
But the government seems to have learned all this from Siriwan. In March 2013, prosecutors in United States v. Gonzalez charged Venezuelan “foreign official” Maria Gonzalez with money laundering in a kickback scheme similar to the one in Siriwan. Specified unlawful activity charged in the criminal complaint consisted of violations of the FCPA, like in Siriwan, but did not include an offense against Venezuela. Thus, the court will not need to defer to resolution of a foreign prosecution of Gonzalez to decide the merits of the government’s case on a motion to dismiss.
Furthermore, prosecutors departed from Siriwan by adding a new charge: violations of the Travel Act. The Travel Act prohibits travelling or using the mail in interstate or foreign commerce with intent to promote unlawful activity. See 18 U.S.C. § 1952(a)(3)(A). Such unlawful activity, defined in § 1952(b), includes bribery under the laws of the United States or any state thereof in which it is committed. The Gonzalez criminal complaint cites New York State Penal Law sections 180.00 and 180.05, which criminalize commercial bribery. Based on the facts alleged in Siriwan, prosecutors could probably have charged Juthamas Siriwan with violating the Travel Act, based on California Penal Code section 641.3, which criminalizes commercial bribery. Naturally, these predicate unlawful activities raise no difficulties of interpreting foreign law, and federal courts are competent at deciding questions of state law.
Attorney General Holder’s Personal Stake in Siriwan and Gonzalez
Attorney General Holder has a personal stake in seeing money-laundering cases predicated on “an offense against a foreign nation involving . . . bribery of a public official” succeed. This is because Holder, as Deputy Attorney General in the Clinton administration, was instrumental in amending the MLCA so that it included this provision in its list of specified unlawful activity.
During the Clinton administration, Holder co-chaired the Money Laundering Steering Committee. As co-chair, Holder oversaw implementation of the National Money Laundering Strategy of 2000, one of five annual strategies mandated by the “Money Laundering and Financial Crimes Strategy Act of 1998.” The 2000 Strategy Report urged passage of the Money Laundering Act of 2000, a bill that would have added bribery of a public official to the MLCA’s list of specified unlawful activity. (The addition would have satisfied Article 7 of the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.) Although the bill failed to pass, Congress resurrected the provision in 2001 under section 315 of Title III of the USA PATRIOT Act (codified at 18 U.S.C. § 1956(c)(7)(B)(iv)).
Presciently, the provision was intended to fill the very “loophole” at issue in Siriwan and Gonzalez. The 2000 report observed that:
“At present, . . . a foreign public official who accepts bribes or embezzles money and then launders the proceeds through a U.S. bank is not subject to a U.S. money laundering prosecution. The new provision will close that loophole, which severely limits the ability of the United States to investigate and prosecute the laundering of foreign criminal proceeds through financial institutions in the United States.”
Fast forward to 2009, and it is unsurprising that the DOJ, under Holder’s leadership, pursued Siriwan under the “offense against a foreign nation involving . . . bribery of a public official” provision that he helped develop.
But after the provision has caused substantial delays in Siriwan, it is equally unsurprising that the DOJ sidelined the provision in Gonzalez. That decision underscores the inefficacy of charging a specified unlawful activity that turns on a foreign offense, which can be better analyzed in a foreign court. Moreover, Gonzalez undoubtedly put the DOJ in the uncomfortable position of abandoning a strategy Holder helped develop earlier in his career at the DOJ.