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Second Circuit Affirms Ho’s FCPA And Related Convictions

As described in this prior post [1], in late 2018 Chi Ping Patrick Ho was found guilty at trial of Foreign Corrupt Practices Ac and money laundering violations in connection with alleged bribery schemes in Chad and Uganda on behalf of China Energy Fund Committee, an entity funded by CEFC China Energy Company Ltd.

This prior post [2] outlined Ho’s arguments on appeal and the FCPA specific issues were presented as follows:  (1) “Whether the government, which repeatedly argued that Ho paid bribes on behalf of a Chinese company, presented legally sufficient evidence that he acted on behalf of a “domestic concern,” as required for a conviction under 15 U.S.C. § 78dd-2;” and (2) “Whether a defendant may be prosecuted for violating § 78dd-3 where (a) the grand jury determined that he was a “domestic concern,” but § 78dd-3 expressly does not apply to domestic concerns, and (b) the defendant was also indicted for violating § 78dd-2, but §§ 78dd-2 and 78dd-3 are mutually exclusive.”

In this recent decision [3], the Second Circuit rejected each of Ho’s challenges and affirmed his convictions.

In summarizing all of Ho’s arguments on appeal, the Second Circuit stated:

“First, Ho contends that there was insufficient evidence to establish that he acted on behalf of a “domestic concern,” as required to convict under § 78dd-2 of the FCPA. Second, he asserts that the jury was improperly instructed that a violation of § 78dd-3 could serve as specified unlawful activity supporting his money laundering convictions. Third, Ho maintains that the money laundering statute, which covers wire transfers that go “to” or “from” the United States, does not reach a transaction that merely involves the use of correspondent banks in the United States, where the transfer originated in Hong Kong and concluded in Uganda. Fourth, Ho argues that the district court abused its discretion by admitting certain out-of-court statements and summary charts into evidence. Fifth, Ho contends that the district court should have struck Counts One, Four, and Five because the indictment contained material contradictions that rendered those counts legally defective and because the indictment charged Ho under two mutually exclusive sections of the FCPA, §§ 78dd-2 and 78dd-3.”

As to the first FCPA specific issue, the decision states in pertinent part (certain internal citations omitted):

“As relevant here, 15 U.S.C. § 78dd-2 prohibits an officer or director of a “domestic concern” from offering or paying bribes to a foreign official to gain “any improper advantage,” “in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.” 15 U.S.C. § 78dd-2(a).2 A domestic concern includes an entity that has a “principal place of business in the United States” or that “is organized under the laws of a State of the United States.”

Ho challenges the sufficiency of the evidence underlying his § 78dd-2 convictions on Counts Two and Three, arguing that “no rational trier of fact could have found the essential elements of [a § 78dd-2 violation] beyond a reasonable doubt, because there was no evidence that Ho was acting to assist any domestic concern.” Drawing on the government’s argument at trial that “Ho’s actions were undertaken to benefit . . . two foreign entities,” Ho maintains that the government’s theory of the case precluded the jury from finding that Ho assisted a domestic concern. According to Ho, “at most” the jury could find that Ho “worked for” the Hong Kong-based CEFC NGO to arrange meetings between CEFC and Ugandan officials that benefited CEFC Energy, and that he “worked on behalf of” CEFC Energy to facilitate the Chad sale; but he contends that the government provided “no proof” that the U.S. NGO “did anything relevant to the allegations in the case.”

[…]

In challenging the sufficiency of the evidence supporting his § 78dd-2 convictions, Ho makes much of the fact that the U.S. NGO was not the ultimate object of Ho’s assistance. The statutory language, however, does not require that the domestic concern itself be the ultimate object of the assistance. Rather, the statute precludes officers and directors of domestic concerns from paying bribes to foreign officials “in order to assist such domestic concern in obtaining . . . business for . . . any person.” 15 U.S.C. § 78dd-2(a) (emphasis added); accord United States v. Ng Lap Seng, 934 F.3d 110, 145 (2d Cir. 2019) (explaining that the FCPA “prohibits bribery designed to obtain, retain, or direct business not only for or to the briber, but for or to ‘any person’”). Notably, the statute addresses the goal of corruptly assisting a domestic entity in obtaining business either “for or with” another company, suggesting that the domestic concern need not itself be seeking to obtain business “with” that company. 15 U.S.C. § 78dd-2(a) (emphasis added); see also United States v. Kay, 359 F.3d 738, 755–56 (5th Cir. 2004) (explaining that “Congress was concerned about both the kind of bribery that leads to discrete contractual arrangements and the kind that more generally helps a domestic payor obtain or retain business for some person in a foreign country.” (emphasis added)). Similarly, the phrase “directing business to” is followed by the phrase “any person,” which again shows that the statute is not solely concerned with entities or persons steering business toward themselves. See 15 U.S.C. § 78dd-2(a). After all, as we have recognized, “the FCPA prohibits commercial bribery without regard to whether the briber himself profits directly from the business obtained.” Ng Lap Seng, 934 F.3d at 145. Thus, Ho plainly could be convicted if the jury found that he acted on behalf of the domestic concern to assist that concern in obtaining business for CEFC Energy.

We conclude that the evidence introduced at trial was more than sufficient to prove that Ho acted on behalf of the U.S. NGO to assist it in obtaining business for CEFC Energy. Contrary to Ho’s assertion that “at most a reasonable juror could find that . . . [he] worked for” the Hong Kong-based CEFC NGO, the government presented ample evidence demonstrating that the U.S. NGO operated as an arm of CEFC NGO and that Ho’s actions in furtherance of the scheme were conducted in his capacity as officer or director of the U.S. arm to steer business to CEFC Energy.”

[4]

As to the second FCPA specific issue (whether the dd-2 and dd-3 prongs of the FCPA are mutually exclusive) the decision states in pertinent part (certain internal citations omitted):

“Ho argues that the indictment was “‘repugnant’ because it contain[ed] [a] ‘contradiction between material allegations’” when it alleged that Ho was “a domestic concern” in one count while bringing charges that did not apply to domestic concerns in another. He also argues that the indictment was invalid because it charged Ho under two mutually exclusive sections of the FCPA, §§ 78dd-2 and 78dd-3. According to Ho, these purported errors “required that Counts [Four] and [Five] be stricken, which would also have fatally undermined Count [One].” We disagree.

Ho argues that the indictment was facially inconsistent as to material allegations, thus rendering Counts Four and Five defective, because the grand jury determined that he was a “domestic concern,” to which § 78dd-3 does not apply. To show that the grand jury “determined” Ho was a domestic concern, he relies on the indictment’s language in Counts Two and Three, which allege violations of § 78dd-2. Tracking the statute and using the conjunctive, the indictment alleged that “the defendant, . . . being a domestic concern and an officer, director, employee, and agent of a domestic concern,” paid bribes in violation of § 78dd-2.  Based on the indictment’s use of “and” rather than “or,” Ho argues that the grand jury must have found that he was a domestic concern, and that he could therefore not also be charged in Counts Four and Five, which allege violations of § 78dd-3 – a provision that does not cover domestic concerns.

We are not persuaded by Ho’s argument that the grand jury found that Ho was himself a domestic concern. Our case law, which upholds the practice of pleading in the conjunctive without requiring that the government prove all possibilities at trial, undermines the view that the grand jury “finds” each fact alleged conjunctively in a charge on which the grand jury indicts.

[…]

Nor is there any reason to believe that Ho was confused as to the government’s theory of liability in Counts Four and Five. Ho clearly knew that the government was not alleging that he was a domestic concern, and the parties in fact stipulated that he “was not a citizen, national, or resident of the United States.”  Moreover, the district court expressly instructed the jury that “Counts Two and Three charge the defendant based on his status as an alleged officer, director, employee, or agent of a domestic concern.”

But even if it could be argued that the conjunctive language inserted error in the grand jury process, such error clearly would have been harmless.

[…]

Here, as noted, Ho was informed well before trial of the particular way in which he was alleged to have violated the FCPA, and he had ample opportunity to prepare his defense in response to that theory. We therefore cannot say that any purported inconsistency in the indictment caused him prejudice at trial, and Ho does not do much to suggest otherwise.

[…]

Section 78dd-2 of the FCPA renders it unlawful for “any domestic concern, . . . or for any officer, director, employee, or agent of such domestic concern . . . acting on behalf of such domestic concern” to engage in certain prohibited practices involving foreign trade. Section 78dd-3, by contrast, renders unlawful the same conduct by “any person other than . . . a domestic concern (as defined in section 78dd-2 of this title), or for any officer, director, employee, or agent of such person . . . acting on behalf of such person, while in the territory of the United States.”

Arguing from the legislative history and purported intent of Congress, Ho contends that §§ 78dd-2 and 78dd-3 are mutually exclusive. Broadly, he argues that the statute addresses “three separate categories” of violators – “issuers, [under] § 78dd-1; domestic concerns and their agents, [under] § 78dd-2; and anyone else and their agents, [under] § 78dd-3.” As support, Ho points to a Senate Committee Report, which explains that § 78dd-3 provides “criminal and civil penalties over persons not covered under the existing FCPA provisions regarding issuers and domestic concerns.” He also argues that United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018), supports his position that §§ 78dd-2 and 78dd-3 are mutually exclusive because the Court “[r]eferr[ed] to § 78dd-3” to indicate it applied to foreign persons “not within any of the aforementioned categories who violate the FCPA while present in the United States.” Finally, Ho argues that ambiguous criminal statutes must be interpreted narrowly according to the rule of lenity.

But the FCPA’s statutory language contains no indication that the provisions are mutually exclusive, or that both sections would not cover a director, like Ho, who acts on behalf of both a domestic concern – here, the U.S. NGO – and on behalf of a person other than a domestic concern – here, CEFC NGO. As we noted in Hoskins, Congress sought to subject foreign persons to FCPA liability if they “fit within three categories: (1) those who acted on American soil, (2) those who were officers, directors, employees, or shareholders of U.S. companies, and (3) those who were agents of U.S. companies.” Nothing in the language of the statute, or Hoskins, prevents an individual from fitting within more than one of those three categories, particularly where, as here, that individual acts on U.S. soil on behalf of both domestic and foreign entities. The FCPA’s clear text therefore makes it unnecessary for us to examine its legislative history or invoke the rule of lenity, and we accordingly reject Ho’s claim that his §§ 78dd-2 and 78dd-3 convictions are mutually exclusive.”

As to money laundering issues, the Second Circuit held that a violation of 78dd-3 can constitute specified unlawful activity under the money laundering statute even though when Congress amended the statute to add FCPA violations as a specified unlawful activity only the 78dd-1 and 78dd-2 portions of the FCPA existed. According to the court, the money laundering statute’s general reference to “any felony violation” of the FCPA “extends to the identified criminal statutes as they develop …”.

The court also rejected Ho’s argument that his money laundering convictions must be vacated because the wire transfers at issue “went from Hong Kong to Uganda through the United States, and thus, did not go ‘to’ or “from’ the United States.” In rejecting Ho’s claim that a wire transfer, which takes advantage of U.S.-based correspondent accounts to conduct a dollar-denominated transaction, is barred from coverage under the money laundering statute, the court stated:

“We do not reach, for example, whether the transportation of cash from Hong Kong in an airplane over the United States to a final destination in Uganda would be properly said to have gone “through,” “from,” or “to” the United States – let alone whether more than one of those prepositions could apply. We simply acknowledge that some schemes that colloquially go “through” the United States – in the sense that their origins and destinations are elsewhere – might also be said to involve transfers that go “to” or “from” the United States. They did so here.

The wire sent by Ho involved (1) HSBC Hong Kong debiting CEFC NGO’s account in Hong Kong; (2) HSBC Hong Kong sending a payment message to HSBC Bank US, asking it to debit $500,000 from HSBC Hong Kong’s correspondent account in New York; (3) HSBC Bank US debiting HSBC Hong Kong’s same correspondent account; (4) HSBC Bank US and Deutsche Bank, New York settling a $500,000 transfer through a payment system; (5) Deutsche Bank crediting Stanbic Bank’s correspondent account in New York; and (6) Stanbic Bank crediting Food Security and Sustainable Energy Foundation’s account in Uganda.”

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