Category: Guest Posts

Former Attorney General John Ashcroft On Corporate Governance And The FCPA

Earlier this week, former U.S. Attorney General John Ashcroft (2001-2005) delivered a keynote address at a corporate governance symposium hosted by the Notre Dame Journal of Law, Ethics & Public Policy.  See here for the event brochure.  The title of Ashcroft’s address was “The Recent and Unusual Evolution of the FCPA.”

In this guest post, Brendan Geary (a 3L at Notre Dame, Managing Editor of the Notre Dame Journal of International & Comparative Law and Research Assistant to Professor Roger Alford) provides a summary of Ashcroft’s remarks.

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DOJ FCPA Unit Chief Charles Duross At Ohio State’s FCPA Symposium

Today’s post is from James McGrath (McGrath & Grace Ltd. – here) and author of the Internal Investigations Blog (here).

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Last Friday, the Ohio State Law Journal presented a symposium entitled “The FCPA at Thirty-Five and Its Impact on Global Business” at the Moritz College of Law. Though Spring Break was already on for most of the student body and the Ohio State campus was relatively empty, experts, practitioners, and a sizable number of the law school’s students packed the William B. Saxbe Law Auditorium to focus on the FCPA.

While the conference consisted primarily of academic panelists presenting executive summaries of their forthcoming
papers on widely-ranging aspects of the Foreign Corrupt Practices Act, the Law Journal staff did score a coup in securing the DOJ’s Charles Duross, who is the Deputy Chief of its Fraud Section and the head of the DOJ’s FCPA unit.  Duross said he elected to attend the OSU event instead of an OECD conference considering the submission of Russia’s most recent anti-corruption legislation in terms of treaty compliance and the audience’s reception indicated its gratitude.

Affable and self-deprecating, Duross sat on two of four presentation panels and gave what he represented to be his personal opinions on the FCPA and its enforcement.  He asked, therefore, that they not be considered binding upon the Department of Justice.  The concern that a double Wolverine – Duross attended both undergraduate and law school at Michigan – finding himself in Columbus might result in Duross in distress was quickly dismissed. In making his own presentation and addressing ad hoc issues raised throughout the day, he pressed the rightness of the DOJ’s enforcement posture much as one expected.

The substantive Duross presentation on the subject of “The FCPA and Government” consisted of his impressions of five things that have not changed about the DOJ’s approach to FCPA enforcement over the years, five things that have changed in the recent past, and five things to look for in the future.

Five Things That Have Not Changed

From the FCPA’s inception in 1977 to the present, the following are the five constants Duross identified:

FCPA as a constant source of complaints.  These complaints primarily come from the U.S. Chamber of Commerce and are in direct contrast with his experience in talking to compliance officers who see the law as giving them a competitive advantage.  As evidence of this, Duross indicated that a Chief Compliance Office recently told him that his people in the field have used the statute as a shield to explain non-payment of bribes to those demanding them.

Methods of corruption stay the same.  Duross noted that in the 1970s, Lockheed used the Tokyo-based Marubeni Corporation as a middleman in securing sales in Japan and that Marubeni was back in the Bonny Island bribery case.  Duross also indicated that the use of intermediaries to do the dirty work has not changed during the FCPA’s 35 years.

Centralization of enforcement.  Duross noted that although some cases were initiated and prosecuted by individual U.S. Attorney’s at the FCPA’s inception, by and large, the Fraud Section has handled enforcement in the last 20 years.  According to Duross, this has lent a consistency and certainty to the effort and this is an overwhelming positive.

Definitions of “instrumentality” and “anything of value”.  While Duross acknowledged that the meanings of these terms are the subject of debate, they have been consistently construed over the years.  To that point, the definition of “anything of value” has been the same as in the domestic bribery and other criminal statutes, where it is not often complained of or litigated.

Use of agency theory.  Duross stated that this theory of criminal liability has always been used in FCPA enforcement, interpreted in the same way and that agency principles will continue in FCPA enforcement.

Five Things That Have Changed

The five changes seen by Duross are as follows.

Passage of international anti-bribery treaties.  While the U.S was the first nation to pass a foreign bribery statute, the formation of the OECD by treaty has been a prime mover in getting other countries to pass similar laws.  Passage of FCPA-style anti-bribery and anti-corruption laws is a major goal of the accord.  Duross noted that while China and India are not signatories to the convention, Russia is one and its attempt at treaty compliance is now being considered in Paris.

Jurisdictional Changes.  In 1998, Congress amended the FCPA statute to include alternative nationality jurisdiction – as to U.S. companies and citizens the law applies regardless of a U.S. territorial nexus – and jurisdiction over “persons other than issuers or domestic concerns” – including foreign nationals – while they are within the United States.    According to Duross, these changes significantly expanded the scope of the law and the reach of the U.S. government enforcement agencies.

International enforcement cooperation.  Thanks in large part to technological advances such as video conferencing, it is easier for multiple governments around the globe to coordinate investigations and prosecutions.  In addition, data collection and transmission across vast distances and national boundaries has benefitted from the ever-expanding capabilities of successive generations of computers.

Advent of NPAs and DPAs.  While not previously seen, their advent came in 1994 [in a non-FCPA case] when the DOJ and target corporations entered into two of them.  In recent years, the average number of agreements has risen.  According to Duross, increased popularity of NPAs and DPAs mirror the jump in enforcement and attest to the corporate ability to avoid the excessive adverse publicity of trials.

Increase in number of trials.  According to Duross, from 1997 to 2010 there were 18 FCPA defendants who went to trial.  In 2011 alone, there were 17 defendants who went to trial.

Five Things For The Future

In the future, Duross said to look for the following:  more case law; more scholarly analysis of the FCPA; increasingly complex multi-jurisdictional issues (with overlapping efforts by various nations and their agencies, Duross said these issues will most likely be resolved by treaties between the U.S. and those countries);  more international attention (as additional countries join the OECD, the drive to fight foreign bribery and corruption will continue to move forward); more discussion on amending the FCPA (Duross noted that while the U.S. Chamber of Commerce leads the call to amend the law – primarily to posit an affirmative “compliance defense” – the OECD has also suggested changes to the FCPA, such as extending its statute of limitations).

In response to a post-presentation query as to why FCPA enforcement is so hot now, Duross opined that while corruption has always been a problem, things such as the Sarbanes-Oxley reporting requirements and more whistleblower tips have shined additional light on illicit payoffs and other nefarious activities.  According to Duross, technology and interconnectivity make for a smaller, less-isolated world and this translates into more reporting.  In addition, the DOJ follows the trail of evidence wherever it leads, sometimes making for larger, more-publicized results.

Answering a second question as to how the Fraud Unit decides whether to defer enforcement to other nations, Duross indicated that there is no formal protocol and that it is primarily talked through and decided on an individual basis.

As part of an afternoon discussion of “The FCPA’s Impact on Global Business”, Duross seized the opportunity to respond to many issues presented by other panelists.  Noting that he himself had left a large law firm as soon as he had paid off his student loans in order to enter public service and do something bigger, Duross stressed that he is proudly the face of a group that works hard to do the right thing.  Occasionally it makes mistakes, but “not all mistakes are misconduct” – no doubt a reference to the Lindseydismissal.  As to the size of the DOJ’s FCPA unit, Duross stressed the fact that even today there are only 20 lawyers in the entire section.  This makes the job difficult, he said, particularly in light of the resources possessed by enforcement targets and the white collar defense bar.  Nevertheless, he asserted that while he and his people might be outspent, they are “never out-classed and never out-hustled.”   Duross acknowledged that assessment of their work is appropriate and the pride he showed in his people is not only admirable, but indicative of solid leadership.

Nevertheless, to paint the DOJ as the underdog in this fight – as it wields the full investigative and prosecutorial power of the United States government – reminds me of Lou Holtz’s fretful assessments of his team’s chances each week while hunting down a national title at Notre Dame in 1998.  Subpoena and search warrant returns still trump big money and slick lawyers when the facts are bad for investigation targets and defendants.

Why does the FCPA Unit fight so hard?  According to Duross, because  foreign bribery is bad for business.  As Duross analogized, paying bribes to corrupt officials is like dealing with the mob. Companies think that if they can get that first contract by greasing the skids, their superior product or services will get them the next one on merit.  But the first shakedown, Duross asserted, is just that:  the first shakedown.  The sequence repeats itself and grows like a cancer, infecting an entire project, business, or industry.  And as the bribes paid often equal the profit on the underlying job, these payoffs are for naught, according to Duross.

Further and on a larger scale, Duross believes that FCPA violations can be indicative of more widespread corporate problems.  Where overseas corruption is present, there is a good chance that a company has other questionable business practices both at home and abroad.   Therefore, he firmly believes that “compliance is good for business”.

With respect to a “compliance defense” tailored to the FCPA, Duross is against it. Duross believes that while it may properly be part of a larger discussion of vicarious liability and respondeat superior in criminal cases generally, enacting an affirmative defense to any single statute – and the FCPA in particular – would be unwise.  He said that the anecdotal evidence supported his position, stating that no compliance officers at a recent meeting raised their hands in favor of a compliance defense.  How many were attorneys and if any were white collar litigators was not disclosed.  He also stated that no individuals in another forum he recently participated were willing to accept a more extensive U.K. Bribery Act-type statute as a trade off for a compliance defense.

The current trade-off for no compliance defense seems to be accessibility to DOJ decision-makers.  Duross closed his remarks for the day by indicating that if there be a need for FCPA certainty – definitions, defenses, or prosecutorial philosophy – it can certainly be found at his door.  Harkening back to the smallness of the FCPA Unit, Duross noted that it was unusual to be able to come to the same people who have been with the Department for long stints for guidance and answers.

Though well-intentioned, this does not provide real comfort in my opinion.  Though Duross proved very likeable and earnest in his symposium presentations and in a one-on-one conversation afterwards, the notion that bankable advice will always be available from the FCPA Unit because of the quality and professionalism of its current personnel is troubling.  After all, this has always been a nation of laws and not of men.  That being said, one would have to wonder what or whom to rely upon for FCPA guidance – and to what degree of certainty – when Charles Duross no longer heads the FCPA Unit.

[I would like to thank Professor Koehler for the opportunity to write this guest post.  Additionally, I would like to thank the Moritz College of Law at The Ohio State University, the Ohio State Law Journal, Editor-in-Chief Jaci Wilkening, Symposium Editor Katie Linehan, Symposium Faculty Advisor Professor Daniel Chow, and Professor Koehler for putting together an excellent event and for their collective hospitality.]

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Attending an event where a DOJ or SEC FCPA enforcement attorney is speaking?  Consider this an open invite to do a guest post for FCPA Professor.

A Focus On Facilitation Payments

This post is all about facilitation payments.

Congress was clear when it passed the FCPA that the statute was not intended to address such payments.  For instance, the relevant House Report (H.R. Rep. No. 95-640 (1977)) stated as follows.  “The language of the bill is deliberately cast in terms which differentiate between [corrupt] payments and facilitating payments, sometimes called ‘grease payments,’ … For example, a gratuity paid to a customs official to speed the processing of a customs document would not be reached by the bill.  Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity be performed in any event.  While such payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are no necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments.  As a result, the committee has not attempted to reach such payments.”

Originally, the FCPA contained an indirect facilitation payments exception through the definition of “foreign official” which excluded from that definition any employee of a foreign government “whose duties are essentially ministerial or clerical.”  Among the FCPA’s 1988 amendments was taking this indirect facilitation payments exception from the definition of “foreign official” and establishing a direct, stand-alone facilitation payment exception currently found in the statute.

With that backdrop, two items to highlight.  First, recent scholarship from an SEC enforcement attorney on facilitation payments.  Second, a Q&A with a member of the Global Steering Team for the recently formed facilitation payment focused anti-corruption industry initiative, Committee to Address Facilitation Payments (C.A.F.P.)

Facilitation Payments Scholarship

Jon Jordan (Senior Investigations Counsel with the FCPA Unit of the SEC) recently published “The OECD’s Call For An End To “Corrosive’ Facilitation Payments And The International Focus On The Facilitation Payments Exception Under The Foreign Corrupt Practices Act” in the University of Pennsylvania Journal of Business Law (see here).

The article gives a basic outline of the FCPA and the facilitation payments exception and explores the history behind the exception.  The article then discusses the U.S. pursuit of an international agreement prohibiting foreign bribery and the resulting OECD Anti-Bribery Convention.  Next, the article focuses on international and domestic disdain over the issue of facilitation payments during the first decade of the Convention.  Then, the article considers the recent OECD Recommendation calling on the prohibition of facilitation payments and the OECD’s recent criticisms of the U.S. with respect to its policies on facilitation payments.  Jordan then gives his prediction that the facilitation payments exception will be eliminated and provides his recommendation that domestic companies prohibit the use of facilitation payments in the current global anti-bribery environment.

Jordan’s article is an informative read and this sentence from the article stood out to me.  “[W]hile the FCPA contains several core provisions that will always withstand the test of time, the facilitation payments exception is out of date in this modern-day era of commerce and sensibility.”

Q&A With Mike Munro

The Committee to Address Facilitation Payments (C.A.F.P.) is a collection of global companies working together to address the potential future demand/risk of facilitation type payments in a thoughtful, proactive and appropriate manner.  It recently released this document and below Mike Munro (Vice President, Associate General Counsel and Chief Compliance Officer, Transocean, and a member of the Global Steering Team for C.A.F.P.) responds to some questions.

Q:  Congress chose to exempt facilitating payments from the reach of the FCPA’s anti-bribery provisions.  Why then is there a need for CAFP to address facilitating payments? 

A:  Regardless of whether facilitation payments are allowed by anyone, I am not aware of any company that believes facilitation type payments are positive to business or economic development.  All companies want to reduce the risk of potential facilitation payments and clearly the best way to do that is through collective action.

Q:  Does CAFP support amending the FCPA to remove the facilitating payments exception? 

A:  C.A.F.P. is not an organization that would take that type of position.  The types of legal changes we are interested in relate to how government processes can be clarified or improved (such as computer automation) to reduce risk or situations that potentially could involve facilitation payments.

Q:  To best eliminate facilitating payments in many countries, cultural changes are necessary.  Can a committee of multinational companies effectuate cultural change? 

A:  Cultural change could be helpful in some countries and situations to reduce the potential risk of facilitation type payments and therefore a significant focus of C.A.F.P. is to engage local people and companies in this effort.

Q:  It would seem that the best forward-looking solution to reducing the demand for facilitating payments is to increase civil servant salaries in many foreign countries.  Do you agree? 

A:  Increasing civil servants pay could potentially have a positive impact but how positive of an impact would be difficult to determine.  Clearly if an individual’s pay is not sufficient to meet daily living requirements, most would agree that there is likely a higher probability of requests or demands, but as indicated above,  other factors such as culture, individual integrity norms, etc. do have an impact.

Q:  If increasing foreign civil service salaries is a good idea, how can it be accomplished?

A:  If a decision was made that increasing civil servant salaries would be helpful, one of the ways to approach that would be to have key companies and industry groups in a particular country approach high level government officials to determine how best to effectuate such a change.  The companies and industry groups could then help coordinate that effort with others in that country who have similar interests and views.

What Percentange of DOJ FCPA Losses Is Acceptable?

To be sure, the DOJ – when put to its burden of proof in FCPA enforcement actions – has had success.  Although an appeal is pending, the jury convictions of Joel Esquenazi and Carlos Rodriguez in 2011 come to mind (see here for the prior post).

Yet recent events (July 2011 – Judge Richard Leon declared a mistrial in the first Africa Sting case as to four defendants (after earlier tossing several substantive counts against certain defendants; October 2011, a federal court in Seattle dismisses, at the urging of the DOJ, an FCPA enforcement action against Si Chan Wooh “in the interest of justice and the efficient use of government resources” (those are the DOJ’s words) after he previously pleaded guilty; November 2011, Judge Howard Matz vacated the FCPA convictions of Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee and dismissed the indictment after finding numerous instance of prosecutorial misconduct; December 2011, in the second Africa Sting case, Judge Richard Leon, at the close of the DOJ’s case, dismissed  a conspiracy charge against all defendants – because this was the only charge Stephen Giordanella faced, he was exonerated; January 2012, Judge Lynn Hughes, at the close of DOJ’s case, dismissed FCPA charges against John Joseph O’Shea;  January 30, 2012 in the Africa Sting case, Patrick Caldwll and John Godsey were found not guilty by the jury and on January 31, 2012  Judge Leon declared mistrial as to the remaining three defendants) raise the following question:  what percentage of DOJ FCPA losses is acceptable?

After all, criminal charges damage lives, ruin careers and ostracize individuals from their  community. While it is unrealistic (and probably not desirable from a policy perspective) to expect the DOJ to win 100% of its FCPA cases when put to its burden of proof, given the referenced dynamics, I think it is realistic (and desirable from a policy perspective) to expect the DOJ to win a very high percentage of its FCPA cases when put to its burden of proof.

I posed the question – what percentage of DOJ FCPA losses is acceptable – to two individuals whose opinion and analysis on white-collar crime issues I highly respect.  Set forth below are their answers.

Scott Fredericksen (here) is the managing partner of the Washington, D.C. office of Foley & Lardner LLP.  He is a member of the firm’s Government Enforcement, Compliance & White Collar Defense and Securities, Enforcement & Litigation Practices.  Previously, Fredericksen had several stints at the DOJ including special counsel to the U.S. Attorney and Associate Independent Counsel in the Office of Independent Counsel.  Below is Fredericksen’s response to the question:  what percentage of DOJ FCPA losses is acceptable?

“By any measure the recent record of the DOJ in trying FCPA cases, well below the approximate 90% plus overall conviction rate the DOJ usually attains, is not acceptable. The recent  performance  in FCPA trials of individuals and small companies seems to represent a wrong turn by the DOJ, and it may stem from some fundamental misconceptions by the DOJ about the best approach to charging individuals with FCPA  violations.

First, the undeniable success the DOJ has had with  companies self-reporting and settling their FCPA cases with the DOJ is the result of an entirely different analysis by company counsel compared to counsel for individuals who face the loss of liberty and the prospect of real prison time.  No public company in approximately twenty years has challenged the DOJ at a trial for a FCPA violation and that probably will not change.  Companies usually face a more difficult task in defending themselves at trial that is not the case with individuals.  Even private companies face the burden that it only takes one of their employees who violate the FCPA to convict the company.

But when the DOJ insists on significant prison sentences in its FCPA charging decisions for individual defendants then experienced white collar lawyers will try those cases if there is a realistic opportunity for acquittal-exactly what has happened recently.  The reason is that FCPA cases are vulnerable for a few reasons, including ambiguous definitions that invite challenge, and the fact that often times the FCPA is not perceived by juries or the average person as an “intuitive” crime.  It is regulatory in nature and, rightly or wrongly, juries and the ordinary person do not necessarily perceive it as as a crime “worthy” of conviction and prison unless the evidence of a violation is strong and clear.

And the enforcement strategy must be fair. Using aggressive enforcement tactics such as the “Africa Sting” carries significant risk for the DOJ and for good reason.  It often runs counter to our sense of justice and juries are the first to see that. Yet, the DOJ has had considerable success prosecuting other sting cases in international prosecutions where there was strong evidence of an intent by the defendant to violate the criminal statute at issue. The record of 0-10  in the Africa Sting case here is more likely the result of a poorly designed “sting.”

The recent acquittals and hung verdicts was also remarkable for the earlier Rule 29 dismissal of the conspiracy count against the defendants by Judge Leon.  That is an unusual occurrence and speaks volumes about the lack of good evidence in the case.  A conspiracy count is usually the one count that survives and represents the framework for the government’s case. The lesson to be learned is that  it takes experienced prosecutors to make the right decisions in charging FCPA cases, and the DOJ must always stand firm in its review of sting cases to insure that there is no uncertainty or unfairness in its design.

Finally, Judge Matz’ decision to vacate the FCPA convictions in the Lindsey Manufacturing case for prosecutorial misconduct is an unfortunate reflection on the DOJ standards and training more than it is a comment on the DOJ enforcement of the FCPA. Prosecutorial misconduct has to be dealt with at the DOJ level with real sanctions for prosecutors who intentionally violate fundamental rules, including losing the privilege of representing the Department of Justice.” [For a prior post on this issue, see here].

Peter Henning (here) is a Professor of Law at Wayne State University School of Law.  Previously he was an enforcement attorney in the DOJ’s Fraud Section (as well as at the SEC) and, among other things, Professor Henning writes the always informative White Collar Crime Watch (here) at the New York Times.  Below is Professor Henning’s response to the question: what percentage of DOJ FCPA losses is acceptable?

“The recent acquittals in the Gabon FCPA sting case, coupled with a hung jury for other defendants, and dismissal of charges for prosecutorial misconduct in another foreign bribery prosecution in Southern California, raise an interesting question about the Justice Department’s focus on individuals as defendants.  While it is usually easy to get a company to agree to a guilty plea, or to enter a deferred prosecution agreement, individuals are more likely to take a case to trial.  So how many losses are too many?

The recent post (here) on the FCPA Professor Blog by the jury foreman in the Gabon sting case highlights how difficult it is to pursue these cases with a very complex law that requires proof of different intents – like knowingly and corruptly – based on circumstantial evidence against people who often have an unblemished record.  Multi-defendant cases are not uncommon in the drug area, but those are not nearly as difficult because the underlying conduct is clearly illegal, while the FCPA involves business transactions that are often quite ordinary.

I do not think there is a number that can be summoned to say when there are too many acquittals, especially because the result cannot be known in advance.  Some defendants have entered guilty pleas in cases that have resulted in acquittals of others, and the evidence in the Gabon sting case shows that there was a basis to pursue the charges.  But perhaps the Justice Department will now recognize that FCPA cases present distinct challenges, especially when multiple defendants are involved who will often have different levels of culpability.  It is not like the drug gang in which everyone is involved in illegal conduct, so ignoring the shades of gray in an FCPA case has been shown to be quite problematic.  Treating everyone as if they are the same does not work because, as the foreman’s report makes clear, juries are careful in assessing the evidence, and will not take a “birds of a feather flock together” approach, as can happen in other types of prosecutions.”

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Speaking of the guest post (here) earlier this week from the Africa Sting jury foreman, readers may also be interested in published comments to the post.  Also, as has been reported elsewhere (see here for instance), since the post ran, the DOJ, during a status conference with Judge Leon, requested a two week continuance for the next trial so that it can evaluate the remaining cases in light of recent events.

A Guest Post From The Africa Sting Jury Foreman

After Judge Leon declared a mistrial in the second Africa Sting trial last week (see here for the prior post), I was contacted by an individual who identified himself/herself as the jury foreman in the case.  After taking certain steps to reasonably assure myself of the individual’s identity and role in the Africa Sting case, I am pleased to publish this guest post from the jury foreman.

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“As foreperson of the jury that acquitted Messers. Caldwell and Godsey of FCPA charges, and as a non-practicing attorney, I thought it might be useful to those who practice and study the FCPA to pull back the veil a bit on jury deliberations. Professor Koehler has kindly provided this forum. The following view and recollection of the trial and deliberations is mine alone. In the interest of full disclosure, I voted not guilty in the final vote for all defendants and on all charges, convinced that the government’s evidence did not establish guilt beyond a reasonable doubt on any of the charges.

Jury Composition and Working Relationship

The jury was composed of four African-American men, three African-American women, one Asian-American woman, and four Caucasian men. General conversation over the course of the trial established that at least half of the jurors had at least some college education. Jury interaction was collegial at all times, excepting only a few confrontational moments during the last three days of deliberations.

Approach to Deliberations

We began deliberations with a secret ballot straw vote on all defendants. At this vote we did not vote specifically on each of the charges, and jurors were encouraged to vote “Leaning Guilty,” “No Leaning,” or “Leaning Not Guilty.” The results of the vote clearly indicated that it would be easiest to reach unanimity on Mr. Caldwell as ten jurors indicated a leaning toward his innocence and two indicated no leaning whatsoever. The straw vote also indicated that Messers. Godsey and Morales would be next most likely to receive a verdict and that the charges against the Mushriquis would be the greatest challenge. The initial straw vote on the Mushriquis returned approximately six “Not Guilty” votes each with the balance evenly split between “Guilty” and undecided. Over the course of the deliberations, no defendant ever received more than five guilty votes, though I did once incorrectly report a straw vote of 7-5 as 6-6 to the jury.

My initial recommendation that we walk through the elements of the offense was quickly overwhelmed by an unstoppable flood of opinion on process and evidence. It was not disorderly, but indicated the challenge of focusing a jury on a single element as it relates to a single defendant after nearly three and half months of being unable to discuss the case. We settled into a pattern for the first week of reviewing chronologically the evidence against a particular defendant.

Partial Verdict

In our first two days of deliberations we were able to reach unanimity on Mr. Caldwell and were only one vote from a “Not Guilty” verdict for Mr. Godsey. Some jurors were persuaded, based on the character evidence offered in Mr. Caldwell’s defense, that he could not have committed the offense. Others had reasonable doubt that he was able to hear the terms of the deal or that, based on his relative inexperience in the industry, he understood the terms of the deal. Some jurors gave significant weight to what they perceived to be Mr. Caldwell’s deference to Mr. Giordanella during the meeting in which the deal was pitched.

The initial straw poll did include two or three “Guilty” votes against Mr. Godsey. However, in the review of the evidence against Mr. Godsey, it became clear to the jury that there was very little indication in the evidence of his state of mind. The evidence included video of him in a meeting in which the terms of the deal were described, but the terms of the deal were described less fully than in the meetings with other defendants. In addition, Mr. Godsey made very few statements or even passive affirmations (“yeah,” “ok,” “uh huh”) near those portions of the meeting that contained the statements about part of the agent’s commission going to the Gabonese Minister of Defense. The last “Guilty” vote against Mr. Godsey fell on the morning of our third day of deliberations. In our review of the evidence against Mr. Morales, the holdout developed reasonable doubt of Mr. Godsey’s guilt and switched his or her vote.

We continued to deliberate for a couple more days in the same manner – walking chronologically through the evidence against Mr. Morales and then the Mushriquis. We then sent in our first note indicating that we were deadlocked and Judge Leon instructed us to try again, as we knew he would. At this point it became clear that we were not near agreement on these defendants and that we needed to revert to the original suggestion of walking through the elements of the offense for each of the three remaining defendants.

Adjustment to Deliberations

Upon our switch to an element-based deliberation, we quickly obtained agreement that each of the defendants was a “domestic concern” (as Judge Leon had instructed us) and that each of the defendants had made a payment. These were the first and third of six elements of the offense in our instructions.

The remaining elements of the offense were that the defendant had: 2) acted corruptly and willfully; 4) known that at least part of the payment was going to a foreign official; 5) intended the payment for at least one of four disallowable purposes (most notably, to influence the foreign official to do something or to gain an unfair advantage); 6) made the payment to obtain or retain business.

Deliberation following this approach was an arduous task because of the difficulty of keeping a single defendant and a single element in focus at a time. In addition, the idiosyncratic views of a few of the jurors came to light during this period. For example, one juror would not have convicted any of the defendants because he or she was not persuaded it would have been illegal for the Gabonese Minister of Defense to accept such a payment. “What,” she or he asked, “if that is part of his compensation? I don’t know. And the prosecution didn’t offer any evidence.” In this juror’s view, the fifth element of the offense could not be met without such evidence.

Another juror had difficulty parsing the language of the instructions. For example, he or she repeatedly pointed to a gloss of one of the terms of art (“corruptly,” I believe) included after the elements of the offense. The gloss used a brief phrase (something like “for some illegal purpose”) to broadly describe the four sub-elements of the fifth element of the offense. This juror would have voted “Not Guilty” on any of several grounds and so the extended detour to address this misreading of the instructions only muddied the water for others.

After a week of deliberation along these lines, we realized that there was no more to be done. For Mr. Morales, one member of the jury simply had insufficient doubt about his guilt to vote “Not Guilty.” This juror leaned heavily on his or her perception that Mr. Morales’s was more engaged in the meeting where the terms of the deal were described than was Mr. Godsey. This juror also relied heavily on a recorded phone call that corroborated Mr. Bistrong’s testimony that Mr. Morales had been made aware of the concerns another subject of the sting had about the legality of the deal.

Counsel for the Mushriquis had suggested during the trial that they had suspicions that Gabon was not the end destination for the goods in the first phase of the transaction. The jury agreed that at some point they were aware that Gabon was the destination of the goods.   So we started from the end of the transaction and walked that thread back through the evidence until all jurors agreed that they probably understood Gabon to be the end user before the date of a specific meeting.  This helped us determine, so far as we were able, their states of mind on the dates they were alleged to have violated the FCPA.

Even with this agreement, a significant majority of the jurors continued to vote “Not Guilty” on the Mushriquis because of reasonable doubt as to whether they believed at least a portion of the commission payment was going to a foreign official. And, of course, without agreement on that point, we could not even get to the question of their intent in that payment. In the end, only three jurors concluded that the evidence demonstrated beyond a reasonable doubt that the Mushriquis believed the goods were going to Gabon and that a portion of the commission they remitted in the first phase of the deal was going to a foreign official. All jurors admitted there was language in an email from Ms. Mushriqui and on a phone call from Mr. Mushriqui that could be reasonably construed as skepticism, but we could not secure unanimous agreement that the skepticism related specifically to the allegedly illegal payment.

Credibility of Witnesses

It may be clear from the description above that very little of the jury’s deliberations took into account the testimony of prosecution witnesses. In part, that is because the jury with near unanimity found nearly all of the prosecution witnesses to be evasive and combative. The very low view of their credibility was also based on the concerns of many jurors related to the nature of the sting operation. Though, in the end, I am not sure the credibility concerns were an important aspect of this case because the jury had the most difficult time ascertaining the state of mind and intent of the defendants. And very little testimony would have been useful in reaching those determinations.

Nature of the Sting Operation

As noted above, a number of jurors were troubled by the nature of the FBI sting operation. Specifically, some seemed unwilling to convict on the basis of vague language (e.g., “commission” instead of “bribe”) and where the defendants had not sought out the deal. These jurors were largely not participatory in the deliberations and when specifically called upon for their views would typically voice agreement with views expressed by some other juror voting “Not Guilty.” But enough small comments through the course of deliberations lead me to believe that their underlying view was that the defendants had acted in good faith and the FBI/DOJ in bad faith. Along the same lines, more than one juror voiced concern that it would be unjust for the defendants in this case to be convicted when the government relied so heavily on Mr. Bistrong who freely admitted on the stand more illegal acts than the entire group of defendants was accused of, yet was able to plead to only one count of conspiracy to violate the FCPA.

A similar issue was raised specific to Messers. Morales and Godsey. In their case, the goods they were selling would not have received State Department clearance to be exported to Gabon. Evidence indicated that nine of the subjects of the sting would be lost if State failed to grant clearance and the FBI advocated such clearance on the grounds that the goods would not actually be exported to Gabon. Some jurors expressed concern that this was overreaching by the government and that it was impossible to determine what the intent of these defendants would have been at the point in time they were alleged to have violated the FCPA because they would never have been engaged in the deal at that point absent government interference. This “impossibility” defense was not raised in court – it originated in the deliberation room and may have carried special weight for some jurors due to concerns expressed by Mr. Morales (upon first being told of the potential deal) that treaties might not permit the sale and export.

Complications Related to the Size and Length of the Trial

In my opinion the larger and longer trial accomplished several things contrary to the goals of the prosecution. First, it gave the jury multiple iterations of the deal invitation language. When comparing the less clear language used in some pitches with the clearer language used in others, it provided a mechanism to conclude that there was relatively less likelihood of culpability for those who heard less clear language or who were less participatory in their pitch meetings.

Second, the decision of the government to prosecute at least one defendant who seemed to most of the jurors to be clearly innocent leant greater weight to concerns that the government was conducting the sting or prosecutions in bad faith.

Third, facing the defendants nearly every day for more than three months seemed to me to humanize the defendants in the eyes of many jurors. At least one juror expressed absolute confidence that none of the defendants would intentionally have participated in a crime and this seemed to me to be rooted in empathy. Additionally, jurors noticed that defendants were being burdened with a much longer trial than was necessary as very little of the testimony was applicable to more than two defendants at a time.

Fourth, it gave the jurors a very long time to develop their own theories of the case. Although the judge appropriately warned us at least once a day to not form conclusions, I suspect that it is largely, if unintentionally, violated in a trial of this length.

Conclusion

The government has the option to try Mr. Morales and Mr. and Ms. Mushriqui again. As a taxpayer, I sincerely hope they will instead dismiss the charges. The evidence simply does not exist, even if they get their witnesses to behave better under cross, to convict. This is a case that makes one wish that a supermajority was sufficient to acquit. Prolonging this prosecution is a waste of government resources.

At some point in the deliberations, I described this sting and prosecution as a quarterback sneak. Although I came to regret that analogy for the frequency with which it was recalled in the jury room, I think it apt. The FBI and DOJ designed a play to get the ball just across the goal line. Unfortunately, in the ensuing pileup, no camera angle shows the ball with clarity and it is anyone’s guess as to whether they scored.”