James Giffen recently passed away.
As highlighted in this New York Time obituary:
“James H. Giffen, an American businessman with close ties to the president of Kazakhstan who became embroiled in one of the largest international bribery cases in U.S. history, only for a judge to effectively throw out the charges after it emerged that Mr. Giffen had been working with the C.I.A.’s approval, died on Oct. 29 in Manhattan. He was 81. His son, David, said the cause was cancer.”
The obituary continues:
“At the time of his arrest, in March 2003, Mr. Giffen was one of the best-connected Americans working in the former Soviet Union.
His merchant bank, Mercator, was a critical go-between for Western energy companies eager to exploit Kazakhstan’s vast, largely untapped oil fields. He was a close friend and counselor to Kazakhstan’s president, Nursultan Nazarbayev, and kept a luxury apartment in Almaty, the country’s largest city and its former capital.
And all along, he was a back channel operative for the Central Intelligence Agency and the State Department.
Washington was eager to bring Kazakhstan and its resources into the Western fold, especially in the 1990s, and Mr. Giffen was a valuable asset in that campaign.
He briefed government officials on the latest developments in Central Asia, carried sensitive messages between Mr. Nazarbayev and the White House, and was often the first American called on by the Kazakhs when they wanted to engage with the U.S. government.
“He was Washington’s de facto ambassador to Kazakhstan,” wrote Robert Baer, a former C.I.A. case officer, in his book “See No Evil: The True Story of a Ground Soldier in the CIA’s War on Terrorism” (2002).”
As discussed in this previous post:
“The original 2003 indictment (here) charged James Giffen with “making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan.”
Partly that his actions were taken with the knowledge and support of the Central Intelligence Agency, the National Security Council, the Department of State and the White House. The DOJ did not dispute the fact that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court’s approval, Giffen sought discovery from the government to support such a public authority defense and much of the delay in the case was due to the government’s resistance to such discovery and who was entitled to see such discovery.
In August , the case took a mysterious turn when Giffen agreed to plead guilty (here) to a one-paragraph superseding indictment charging a misdemeanor tax violation.
The case ended [in November 2010] in a Manhattan court room.
U.S. District Court Judge William Pauley called Giffen a Cold War hero, imposed no jail time, and stated that the case should never had been brought in the first place.
It’s the Giffen Gaffe, the biggest blunder in the history of the FCPA.”
Incidentally, Judge Pauley passed away in July 2021 and this prior post highlighted Judge Pauley’s comments at sentencing including his remark: “This ordeal must end. How does Mr. Giffen reclaim his reputation? This Court begins by acknowledging his service.”
This prior post highlighted how the Giffen enforcement action contributed to FCPA related caselaw. This prior post stated in pertinent part:
“Notwithstanding its mysterious conclusion, the Giffen enforcement action was instructive because it represented a rare instance in which an FCPA defendant mounted an aggressive legal defense. As a result, the long enforcement action yielded FCPA case law, even though the issues subjected to judicial scrutiny did not involve core FCPA elements.
So what did we learn from the Giffen case law?
For starters, we learned that just because the DOJ charges it, does not mean that the charge is legally viable.
As explored in this prior post, in addition to the FCPA charges, the original indictment also alleged that Giffen’s actions violated 18 USC 1346 by depriving the citizens of Kazakhstan of the honest services of their government officials – one of the more curious “tag-a-long” charges ever in an FCPA enforcement action.
In 2004, Giffen moved to dismiss portions of the charges that alleged a scheme to deprive the citizens of Kazakhstan of the honest services of their government officials. He asserted that application of the honest services fraud theory of Section 1346 to Kazakhstan impermissibly extended the mail and wire fraud statutes to cover activities beyond the original intent of Congress.
Judge William Pauley of the Southern District of New York agreed and granted Giffen’s motion to dismiss portions of the charges that alleged a scheme to deprive the citizens of Kazakhstan of the honest services of their government officials. See U.S. v. Giffen, 326 F.Supp.2d 497 (S.D.N.Y. 2004).
In so holding, Judge Pauley stated that the DOJ offered “the slenderest of reeds to support its expansive interpretation.” Among other things, Judge Pauley noted that the DOJ could not point to “any decision where a court upheld application of the honest services theory in an international setting involving a foreign government and its citizens.”
When the DOJ pointed to “two 25-year old indictments” charging a similar theory, Judge Pauley noted that the DOJ “has not unearthed any published decision on the issue” and that the DOJ “conceded that there were no court decisions addressing the validity of the two 25-year old indictments.” Judge Pauley further stated that just because certain U.S. Attorneys were able to obtain indictments “under an intangible rights theory, grounded between a foreign government and its citizenry, is not the kind or quality of precedent this Court need consider.”
Judge Pauley concluded that “Congress did not intend that the intangible right to honest services encompasses bribery of foreign officials in foreign countries” and that “application of Section 1346 to Giffen [was] unconstitutional.”
We also learned during the Giffen enforcement action that the act of state doctrine is [difficult] to properly assert in an FCPA enforcement action. In addition to claiming that his actions were taken with the knowledge and support of the Central Intelligence Agency, the National Security Council, the Department of State and the White House, Giffen also asserted that he was acting as an official of the Kazakh government and thus, under the act of state doctrine, the court was precluded from considering the validity of Kazakh law and the officials acts of its leaders.
However, Judge Pauley stated that the act of state doctrine has a territorial dimension in that it is limited to acts done within the applicable foreign state in the exercise of government authority. Because the Giffen allegations, like most FCPA allegations, did not relate solely to conduct within Kazakhstan, Judge Pauley concluded that the act of state doctrine did not bar Giffen’s prosecution. For instance, and among other things, the indictment alleged that Giffen transferred funds from Swiss bank accounts.”
Back to the New York times obituary of Giffen’s death.
The article asserts
“Yet Mr. Giffen was also a victim of shifting government priorities. The Foreign Corrupt Practices Act had been in effect for decades but rarely enforced. He was hardly alone in thinking that it was OK to grease the wheels of global commerce, especially with the C.I.A.’s endorsement. When the Department of Justice decided to start taking the law seriously, Mr. Giffen became its first big catch.
“Is it fair for an enforcement agency to not enforce a law on the books for 25 years, and then one day announce to the world that it will begin enforcing the statute in connection with conduct that occurred during that 25 year period?” Andy Spalding, senior editor of The FCPA Blog, said in an email. “In many ways, that is the Giffen question.”
The above assertions and quotes are just plain whacky.
As highlighted in this prior post, at the time of the original 2003 indictment approximately 40 business organizations and 80 individuals had been charged with FCPA offenses.
Save Money With FCPA Connect
Keep it simple. Not all FCPA issues warrant a team of lawyers or other professional advisers. Achieve client and business objectives in a more efficient manner through FCPA Connect. Candid, Comprehensive, and Cost-Effective.Connect