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Checking In On The Carson Case

After Judge James Selna (C.D. Cal.) denied the “foreign official” motion to dismiss challenge in the Carson case in May 2011 (see here for the prior post) , the “foreign official” issue moved to the jury instructions – see here and here for prior posts.  Last month, Judge Selna issued an order (here) regarding certain jury instructions.  Not surprisingly, Judge Selna carried forward his previous “instrumentality” analysis into the “instrumentality” jury instruction.

As to the “knowledge of status of foreign official,” Judge Selna’s instruction states as follows.


“(4) The defendant offered, paid, promised to pay, or authorized the payment of money, or offered, gave, promised to give, or authorized the giving of anything of value to a foreign official;

(5) The payment or gift at issue in element 4 was to (a) a person the defendant knew or believed was a foreign official or (b) any person and the defendant knew that all or a portion of such money or thing of value would be offered, given, or promised (directly or indirectly) to a person the defendant knew or believed to be a foreign official. Belief that an individual was a foreign official does not satisfy this element if the individual was not in fact a foreign official.

(6) The payment or gift at issue was intended for at least one of four purposes: a. To influence any act or decision of a foreign official in his or her official capacity; b. To induce a foreign official to do or omit to do any act in violation of that official’s lawful duty; c. To secure any improper advantage; or d. To induce a foreign official to use his or her influence with a foreign government or department, agency, or instrumentality thereof to affect or influence any act or decision of such government, department, agency, or instrumentality;


In his order, Judge Selna stated as follows.

“The Government proposes to add the following paragraph to element 5:”

The government need not prove that the defendant knew the legal definition of “foreign official” under the FCPA or knew that the intended recipient of the payment or gift fell within the legal definition. The defendant need not know in what specific official capacity the intended recipient was acting, but the defendant must have known or believed that the intended recipient had authority to act in a certain manner as specified in element 6.”

The Court does not believe that this language is necessary, and it is potentially confusing.”


As previously noted by the Federal Securities Law Blog (see here), earlier this week, the Carson defendants filed a motion to dismiss (here) and a motion to suppress (here).

In summary, the motion to dismiss states as follows.

“The basis for Defendants’ Motion is that the impact of the cumulative impediments – unique investigation tactics preventing Defendants access to millions of pages of evidence they would normally receive under Rule 16, the lack of a meaningful Brady review, CCI’s loss of crucial documents underlying many of the counts and transactions, the inability of Defendants to obtain foreign documents and subpoena foreign witnesses, CCI instructing its employees not to speak with the defense, many of which are pertinent to the counts and transactions, as well as opaque statutes applied in a novel fashion and failure to provide mandated public awareness – in combination, deprived Defendants’ of their Due Process and Sixth Amendment rights, including the right to present a complete defense, and have prejudiced Defendants to such a severe extent that dismissal is the only appropriate remedy.”

Of note, the motion argues that “from the outset of [Control Component Inc’s] CCI’s internal investigation in August 2007, CCI, through its counsel Steptoe & Johnson LLP (“Steptoe”), worked hand-in-hand with DOJ to investigate the matters at issue in this case.”  The motion further argues as follows.  “The DOJ and CCI essentially agreed to a private information-sharing arrangement between them. With this agreement in place, CCI selectively disclosed only information CCI believed inculpated Defendants and DOJ did not seek additional information.”  According to the motion, “the collaborative nature of DOJ’s and CCI’s relationship provided both parties benefits, to the detriment of Defendants …”.

Under the heading “The FCPA and Congressional Efforts for Clarity” the motion states as follows.

“Portions of the FCPA are obscurely written and a key term at issue in this case is the meaning of “instrumentality,” which is not defined in the statute. This Court’s ruling, which involves a non-exclusive, multiple factor test to determine whether a state-owned-enterprise is an “instrumentality,” shows just how complex and unclear the FCPA is. The FCPA’s history reflects Congress’ recognition of the inherent lack of clarity.  Eleven years after Congress enacted the FCPA, Congress adopted amendments via the 1988 Omnibus Trade and Competitiveness Act (“Trade Act”), reflecting an important policy decision: the federal government must make substantial efforts to inform the public about the FCPA. Congress, therefore, required the Attorney General (“AG”) to consult with various federal agencies and departments; obtain the views of interested persons through a public notice and comment procedure; determine based on this combined input “to what extent” FCPA compliance would be enhanced and the business community assisted by further clarification of the FCPA; and then, based on this determination, issue guidelines illustrating allowable and prohibited conduct, clarify Department of Justice’s (“DOJ’s”) enforcement policies and generate precautionary procedures to aide in compliance. The AG’s compliance with Congress’ directive has been minimal.”  [For more on this issue, see this prior guest post].

The motion also asserts that CCI “directed employees not to talk with defense counsel.”  The motion states, in pertinent part, as follows.  “Had the government directly instructed witnesses not to speak with the defense, or even to do so only in the prosecution’s presence, such conduct would violate Defendants’ constitutional right to present a defense.” […] The same constitutional principle should apply here, given CCI cooperated in the government’s investigation, including by sharing witness specific information. […]  Steptoe’s actions against [a former Regional Sales Manager in Asia]  and possibly others would constitute government intimidation of a witness if this Court finds CCI was an agent of the government, which clearly would violate Defendants’ Fifth and Sixth Amendment rights.”

Elsewhere, the motion states as follows.  “Defendants were responsible for oversight of significant international business, yet IMI/CCI provided no FCPA training.”

In summary, the motion to suppress states as follows.

“The basis for this Motion is that CCI and its counsel were de facto public actors when they implicitly threatened to terminate Defendants’ employment if they did not cooperate and participate in interviews with CCI’s investigators. At the time of the interviews, CCI and IMI were not only in contact with law enforcement authorities regarding the investigation, but were collaborating with the Department of Justice (“DOJ”) in how to conduct the investigation and obtain relevant admissions from the Defendants. CCI compelled the Defendants’ statements with the government’s knowledge, certainly at a minimum with the government’s general encouragement, and with the intent to cooperate with the DOJ. As a matter of fact and law CCI was an agent of the government during the interviews. Thereafter and further to published DOJ memoranda, CCI spared no expense in cooperating with the government by identifying purported culprits and disclosing the fruits of its investigation, including interviews of the Defendants, to the DOJ. Thus, CCI’s actions are “fairly attributable to the government.” CCI compelled the Defendants’ statements under a classic “penalty situation” – CCI required them to answer all questions regardless of their Fifth Amendment right against self-incrimination or be fired. Because CCI was a state actor when it compelled the Defendants’ statements, it violated their Fifth Amendment rights and the statements must be suppressed.”

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