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FCPA Books And Records Jury Instructions In A Criminal Action

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This recent post highlighted the criminal convictions of former ComEd executives and associates on all counts charged, including conspiring to influence and reward the former Speaker of the Illinois House of Representatives in order to assist with the passage of legislation favorable to the electric utility company, in addition to multiple bribery and record falsification charges. (See here for the DOJ release).

It was noted that bribery of a state politician is not ordinarily the type of conduct that results in Foreign Corrupt Practices Act issues; however ComEd (a majority-owned indirect subsidiary of Exelon Corp) was an issuer (as was Exelon) and the most serious (from a sentencing and fine perspective) criminal charges the individuals were found guilty of were record falsification in violation of the FCPA.

Although outside the foreign bribery context, the individual convictions of FCPA books and records offenses is likely one of more high profile instances of criminal convictions of those provisions in the FCPA’s approximate 45 year history.

Set forth below are the relevant jury instructions issued by Judge Harry Leinenweber (N.D. Ill).

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Judge Finds The Term Instrumentality “Unclear” And Narrowly Construes “Foreign Official” Element Contrary To The DOJ’s Position

Judicial Decision

There is little substantive Foreign Corrupt Practices Act case law, even fewer judicial decisions of precedent. Nevertheless, in the aftermath of FCPA enforcement actions or merely FCPA scrutiny, plaintiffs counsel (no doubt representing shareholders on a contingent fee basis) frequently file securities fraud class actions hoping some get past the motion to dismiss stage.

In deciding motions to dismiss, federal trial court judges occasionally directly comment upon FCPA issues and this post highlights a recent example in a matter involving Rio Tinto. As discussed below, a federal court judge found the term “instrumentality” in the FCPA’s “foreign official” definition “unclear” and otherwise narrowly construed the term in a way contrary to the DOJ’s current position.

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Motions To Dismiss Fully Briefed In SEC v. Cohen & Baros

Judicial Decision

As highlighted in this prior post, in January 2017 the SEC filed a civil complaint against former Och-Ziff executives Michael Cohen and Vanja Baros alleging the same core conduct as the DOJ and SEC’s September 2016 enforcement action against Och-Ziff.

The prior post noted that the defendants would be mounting a defense and further noted that the SEC is rarely put to its burden of proof in FCPA enforcement actions (corporate or individual). Indeed, the SEC has never prevailed in FCPA history when put to its ultimate burden of proof.

Late last week, the briefing on the motions to dismiss appeared (all at once) on the court’s docket and this post summarizes the disputed issues which largely center on statute of limitations issues and (as relevant to Baros, a foreign national defendant) general jurisdiction issues as well as FCPA specific jurisdiction issues).

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About That New Yorker Trump Organization Azerbaijan Story

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On February 23rd, I received an e-mail from Adam Davidson with a re: line “New Yorker Magazine on the FCPA” which stated in pertinent part “I’m writing an article about a fascinating case of potential FCPA violation and would welcome the chance to discuss.”

Since launching FCPA Professor in 2009, I’ve had hundreds of conversations with journalists writing about the Foreign Corrupt Practices Act, but my 45 minute conversation with Davidson on February 23rd was the strangest, most concerning conversation I’ve ever had with a journalist about the FCPA.

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Case Law Of Note

Judicial Decision

Judicial opinions construing the Foreign Corrupt Practices Act are rare. Thus, when they occur (even if only a trial court opinion on a pre-trial motion to dismiss) FCPA judicial opinions are worthy of note.

As highlighted in this prior post, in January 2015 the DOJ criminally charged Dmitrij Harder, the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co., for allegedly bribing an official with the European Bank for Reconstruction and Development (“EBRD”).

The enforcement action was notable in that it invoked the rarely used “public international organization” prong of the FCPA’s “foreign official” element.

As highlighted here, in October 2015, Harder filed this motion to dismiss:  In summary fashion it stated:

“The Indictment fails to accurately allege the elements of a violation under the Foreign Corrupt Practices Act (“FCPA”) – it is devoid of any allegations that Mr. Harder paid an allegedly corrupt payment to a “foreign official,” fails to state required allegations when an allegedly corrupt payment is made to a third party, and impermissibly substitutes “public international organization” in the charging language against Mr. Harder. The FCPA counts should also be dismissed because the provision permitting the President to expand the term “foreign official” by identifying “public international organizations” as authorized by 15 U.S.C. § 78dd-2(h)(2)(B) is unconstitutional.”

In an unsurprising development given the procedural posture of the motion, last week Judge Paul Diamond (E.D. Pa.) denied the motion. It is believed to be the first judicial decision in FCPA history construing the rarely implicated “public international organization” prong of the FCPA’s “foreign official” definition.

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