Carson “Foreign Official” Challenge Fully Briefed
Yesterday various defendants in the U.S. v. Carson case pending in the Central District of California filed a reply brief (see here).
The brief begins as follows.
“In 1977, Congress could have enacted a general anti-bribery statute that made it a crime to pay a commercial bribe to any foreign national, but it did not. Rather, the FCPA criminalizes improper payments only to a “foreign official.” Thus, making an improper payment to a “foreign official” violates the FCPA; making that same payment to someone who is not a “foreign official” does not. This is undisputed.”
“The Government argues that “[s]tate-owned business enterprises [‘SOEs’] may, in appropriate circumstances, be considered instrumentalities of a foreign government and their officers and employees to be foreign officials.” But Congress (i) knew about SOEs when it enacted the FCPA, (ii) knew that some of the questionable payments in the pre-FCPA era may have been made to employees of SOEs, and (iii) knew how to include SOEs in the definition of “foreign official” if it had wanted to do so. Clearly, Congress did not do so, and contrary to the Government’s arguments, there is no evidence that Congress intended SOEs to be covered by this criminal statute, or intended the word “instrumentality” to encompass broadly anything through which a foreign government achieves an “end or purpose.” In fact, the plain language of the statute and its history illustrate that the FCPA was aimed at preventing improper payments to traditional government officials. If Congress had wanted SOEs to be included in the definition of “instrumentality,” it would have expressly said so – just as it did in 1976 when it enacted the Foreign Sovereign Immunities Act (“FSIA”).”
“Having no statutory authority for its sweeping position, the Government is thus unable to define the “appropriate circumstances” when an SOE allegedly falls within the FCPA. The Government states only that it is a “fact-based determination.” But facts in isolation are irrelevant unless analyzed in the context of a legal framework. And for over two hundred years it has been “emphatically the province and duty of the judicial department” – not the jury – “to say what the law is.” Marbury v Madison, 5 U.S. (1 Cranch) 137 (1803). Thus, while a jury may decide disputed issues of fact, this Court must first decide the law.”
“Defendants’ Motion squarely challenges the Government’s unsupported legal
interpretation of the FCPA by arguing that the term “instrumentality” simply does not include SOEs, and thus employees of SOEs are not, as a matter of law, “foreign officials.” The Government labels Defendants’ position as extreme, insisting that it “is not asking for a legal conclusion that all SOEs are instrumentalities,” only for a ruling that “the term instrumentality . . . can include SOEs.” But it is the Government’s position that is unreasonable, because the Government cannot articulate any principled test – and there is no test, other than one invented from whole cloth – for what would make one SOE, but not another, a government “instrumentality” under the FCPA. Accordingly, the Government’s concession, that some SOEs fall within and some outside the statute, coupled with the complete lack of any meaningful or discernable standards for deciding which is which, undermines the Government’s position and requires that it be rejected because it would render the FCPA unconstitutionally vague as applied.”
“Accordingly, the Court should hold that employees of SOEs are not “foreign
officials” under the FCPA and should dismiss Counts One through Ten of the
Indictment. Contrary to the Government’s overblown rhetoric, the sky will not fall upon such a ruling; rather, the issue will be returned to its proper forum: Congress. See Skilling v. United States, 561 U.S. ___, 130 S. Ct. 2896, 2933 (2010) (“If Congress desires to go further . . . it must speak more clearly than it has.”).”
This previous post links to the Defendants’ motion and my declaration filed in support. This previous post links to the DOJ’s opposition brief as well as supporting declarations from the State Department and the FBI.
The Carson defendants also moved (see here) to strike the State Department declaration or in the alternative for a court order requiring the State Department employee to appear for questioning at next week’s hearing). As noted in this prior post, the same State Department declaration was ordered stricken in the Lindsey “foreign official” challenge and is also being challenged in the O’Shea “foreign official” challenge – see here.
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In a related development, last week the DOJ announced (here) that “Flavio Ricotti, a former executive of [Control Components, Inc. – the same employer as the above referenced defendants challenging the DOJ’s “foreign official” interpretation] has pleaded guilty for his participation in a conspiracy to secure contracts by paying bribes to officials of foreign state-owned companies as well as officers and employees of foreign and domestic private companies.” See here for the plea agreement.
As noted in the DOJ release, “Ricotti pleaded guilty […] to a one-count superseding information [see here] charging him with conspiring to make corrupt payments to foreign government officials, and officers and employees of private companies in several countries, including Saudi Arabia and Qatar, in violation of the Foreign Corrupt Practices Act (FCPA) and the Travel Act.”
The DOJ release further states as follows. “In connection with his guilty plea, Ricotti admitted that he conspired with other CCI employees to offer a payment to an official of Saudi Aramco, a Saudi Arabian state-owned oil company, in connection with attempting to obtain a valve contract for CCI in 2003. Ricotti also admitted to conspiring with other CCI employees to make a payment to an employee of a private company so that the employee would assist in awarding to CCI a valve contract in Qatar.”
As further noted in the DOJ release:
“In related cases, two defendants previously pleaded guilty to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI. On Jan. 8, 2009, Mario Covino, the former director of worldwide factory sales for the valve company, pleaded guilty [see here] to one count of conspiracy to violate the FCPA and admitted to causing the payment of approximately $1 million in bribes to officers and employees of several foreign state-owned companies. On Feb. 3, 2009, Richard Morlok, the former finance director for the valve company, pleaded guilty [see here] to one count of conspiracy to violate the FCPA and admitted to causing the payment of approximately $628,000 in bribes to officers and employees of several foreign state-owned companies. Covino and Morlok are scheduled to be sentenced in February 2012.”
See here for July 2009 enforcement action against Control Components, Inc.
DOJ Files Opposition Brief in Carson “Foreign Official” Challenge
On February 21st, various defendants in the U.S. v. Carson case pending in the Central District of California filed a historic challenge to the DOJ’s interpretation that employees of alleged state-owned or state-controlled enterprises are “foreign officials” under the FCPA. (See here for the prior post).
Yesterday, the DOJ filed its opposition brief (see here).
The DOJ brief is supported by the same declaration from Clifton Johnson (Assistant Legal Adviser for Law Enforcement and Intelligence in the Legal Adviser’s Office of the United States Department of State) ordered stricken in the Lindsey “foreign official” challenge (see here and here) and also filed in the O’Shea “foreign official” challenge (see here).
The DOJ brief is also supported by a declaration from FBI Special Agent Brian Smith (here) as to “some facts related to certain of the entities involved” in the case and “information pertaining to state-owned enterprises in China” and “certain portions of legislative history related” to the FCPA.
Also yesterday, Nathaniel Edmonds (Assistant Chief, DOJ Fraud Section) filed a notice of appearance in the case.
DOJ Files “Foreign Official” Response Brief In O’Shea Matter
With attention focused on the “foreign official” challenge in the Lindsey matter pending in the C.D. of California (a ruling may soon occur), the DOJ yesterday filed (here) its “foreign official” response brief in the O’Shea matter pending in the S.D. of Texas. See here for the prior post.
The DOJ’s response is substantively similar to its response in the Lindsey matter. See here for the prior post.
In its O’Shea response, the DOJ attaches the same declaration of Clifton Johnson (Assistant Legal Adviser for Law Enforcement and Intelligence in the Legal Adviser’s Office of the United States Department of State) as it filed in the Lindsey matter. See here for the prior post. As noted in this prior post, the judge in the Lindsey ordered the declaration be stricken.
Lindsey Defendants Move to Strike State Department “Foreign Official” Declaration *UPDATE* Judge Strikes State Department Declaration
Monday’s post (here) detailed the recent declaration by Clifton Johnson, Assistant Legal Adviser for Law Enforcement and Intelligence in the Legal Adviser’s Office of the United States Department of State in the Lindsey “foreign official” challenge pending in the Central District of California.
The Lindsey defendants have moved (here) to strike the State Department declaration. Among other arguments made, the Lindsey defendants state as follows.
“The opinion of one employee of the Department of State, or even of the Department of State as a whole, on the terms of the Convention and what the treaty required of the United States, as well as the meaning of the FCPA, a United States criminal statute, has no bearing on the matter before the Court. In any event, it is the job of the federal courts, not the executive branch, to be the final arbiter of what the FCPA actually provides. See generally Marbury v. Madison, 1 Cranch 137, 177 (1803) (“It is emphatically the province and duty of the judicial department to say what the law is.”).”
“On the other hand, the foreign policy implications of a particular interpretation, and how to deal with them, are the business of Congress and the President to address. Mr. Johnson’s suggestion to this Court to decide foreign policy is inappropriate. Courts concern themselves with the interpretation of the law as written. Congress is perfectly capable of amending the statute if it decides it is necessary to do so in light of a court’s decision. See generally McNally v. United States, 483 U.S. 350, 360 (1987) superseded by statute, Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690, 102 Stat. 4181 (“If Congress desires to go further, it must speak more clearly.”).”
Alternatively, the Lindsey defendants argue that if the Court is inclinded to consider the State Department declaration, that it should order Mr. Johnson to appear at the March 24th motion hearing. As noted in an exhibit to the motion to strike, the DOJ has stated that it “will not voluntarily produce Mr. Johnson as a witness at that hearing.”
*UPDATED*
In an order yesterday, presiding judge Howard Matz ordered (here) the State Department declaration be stricken.
For additional coverage see here.
State Department Declaration in Lindsey “Foreign Official” Challenge
In its opposition brief (here) in the Lindsey “foreign official” challenge, the DOJ states at footnote 5:
“If this Court were to interpret the FCPA in such a way that officials of state-owned and state-controlled enterprises could not be foreign officials, the United States would be out of compliance with its treaty obligations under the OECD Convention. The government has requested a declaration from the State Department confirming this assessment and explaining its implications for U.S. foreign policy. Given the short response period, the declaration could not be finalized, but the government will endeavor to secure the declaration before argument on this motion and will file it if and when it is received.”
Last Friday, the DOJ filed a declaration by Clifton Johnson, Assistant Legal Adviser for Law Enforcement and Intelligence in the Legal Adviser’s Office of the United States Department of State – see here.
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Readers may also be interested in reviewing the OECD Convention (here) including commentary 15; a previous post (here) on the OECD Convention and U.S. positions; and a previous post (here) on how another OECD signatory country views the term “foreign public official.”