There is little Foreign Corrupt Practices Act case law (particularly appellate court decisions) including as to the FCPA’s books and records provisions.
Thus, when an appellate court opines on an FCPA issue – even if the issue is a relatively minor part of the overall appeal – it is worth noting.
As stated by the 7th Circuit in this recent opinion.
“In 2022, a grand jury indicted [Michael] Madigan [the Speaker of the Illinois House of Representatives] on twenty-three counts. Almost half of the charges in the operative (superseding) indictment concerned two broad schemes relevant on appeal.”
The opinion sets forth the following background:
“The first scheme involved Madigan’s dealings with the Chicago-based utility company named Commonwealth Edison. The company faced financial trouble from 1998 until 2011. During those years, ComEd confronted a statutory rate freeze and regulatory unpredictability, which limited its revenue and put pressure on profitability. By 2011, the state agency in charge of energy rates had been disallowing or undercounting ComEd’s costs to the tune of $100 million per year. ComEd enlisted Madigan’s help to resolve the downward financial spiral.
From 2011 to 2019, ComEd lined the pockets of Madigan’s close political allies. The company did so in part by using intermediaries to funnel over $1.3 million to five of Madigan’s friends for little or no work. ComEd would increase the dollar amount of contracts with certain businesses with the understanding that those businesses would then pay Madigan’s political associates as so-called “subcontractors.” In much the same vein, ComEd awarded contracts worth over $1.8 million to a law firm founded by a Madigan fundraiser.
These payments were in exchange for Madigan’s support advancing ComEd’s legislative agenda. In 2011, he voted to override the governor’s veto on a law to stabilize energy rates. This was a boon to ComEd, and Madigan supported similar legislation in the years that followed. These actions restored rate predictability and relieved ComEd’s financial distress.
Madigan took steps to avoid being caught red handed. He orchestrated the scheme indirectly through his longtime friend, Michael F. McClain, a former Illinois legislator who had been a contract lobbyist for ComEd since the 1980s. What Madigan did not know was that the government had wire tapped McClain’s phone. And the government featured the recorded calls at trial.
The second scheme concerned Madigan’s interactions with Chicago City Council Alderman Daniel Solis. The government had investigated Solis for years, and when confronted, he agreed to cooperate and to record his conversations with Madigan. The government directed Solis to tell Madigan that he was thinking of retiring as an alderman and wanted Illinois’s incoming governor to appoint him to a state board. Madigan agreed to recommend Solis to Governor-elect JB Pritzker in exchange for business referrals.
The government tried Madigan and McClain together. The trial lasted four months, with the government introducing over 1,000 exhibits into evidence and calling more than 50 witnesses to testify, including some of Madigan’s alleged coconspirators in the ComEd scheme and Solis himself. The trial transcript spans more than 11,000 pages.
The jury returned a partial and mixed verdict. The counts related to ComEd and the state board seat charged Madigan alone (Counts 2–7 and 8–14, respectively). The jury convicted him on most of them (Counts 2, 4–6, 8–10, 12–14) but acquitted him on two alleging that he tried to get a political ally appointed to ComEd’s board of directors (Counts 3 and 7) and one framing his state board dealings as federal-program bribery (Count 11). Other counts charged both Madigan and McClain, including one alleging a vast conspiracy in violation of the Racketeer Influenced and Corrupt Organizations Act. The jury could not reach a verdict on this second set of counts.
At the close of trial, Madigan renewed an earlier motion for a judgment of acquittal under Federal Rule of Criminal Procedure 29 and also moved for a new trial under Federal Rule of Criminal Procedure 33. The district court denied both motions in a thorough opinion canvassing broad swaths of the record. It later sentenced Madigan to 90 months’ imprisonment and fined him $2.5 million.”
Among the many issues on appeal was Madigan’s challenges to the sufficiency of the evidence for the ComEd convictions.
In affirming the Count 2 conspiracy conviction the opinion states:
“The government alleged that Madigan conspired to violate not only 18 U.S.C. § 666(a)(1)(B), but also the recordkeeping provisions of the Foreign Corrupt Practices Act. Sufficient evidence supported this second ground. And that is all that is required for us to affirm on Count 2. […]
The FCPA provides that “[n]o person shall … knowingly falsify any book, record, or account,” 15 U.S.C. § 78m(b)(5), which would otherwise “accurately and fairly reflect the transactions and dispositions of the assets of” a securities issuer, § 78m(b)(2)(A), and that knowing and willful violators shall be punished, § 78ff(a).
The government presented evidence that ComEd’s financial records contained a falsehood. Recall that in 2018 ComEd began funneling $5,000 per month to Madigan’s political ally Michael Zalewski through an intermediary, Jay D. Doherty & Associates. ComEd’s Fidel Marquez testified that Zalewski did no work in return for these payments.
Zalewski’s money did not start flowing automatically. Jay Doherty first submitted an amended contract to ComEd, requesting an additional $5,000 per month. He represented that the increase was for his “expanded role with [the] Cook County Board President’s office and [the] Cook County Commissioners and Department Heads.” At trial, the government asked Marquez if this explanation was “truthful,” and he responded, “No.” He elaborated that “it [didn’t] reflect the actual situation of adding Mike Zalewski.”
Doherty then submitted an invoice to ComEd similarly representing that the increased bill was “due to additional scope of services.” A ComEd employee testified that ComEd recorded that invoice as an expense, with the transaction then feeding into the company’s general ledger—a foundational corporate financial record. That meant ComEd’s general ledger contained a falsehood: that ComEd paid Doherty’s firm an extra $5,000 for increased lobbying services. As Marquez testified, the money instead went to Zalewski for no work at all.
The jury could have found that Madigan agreed to this object of the conspiracy. In February 2019, McClain said on a phone call with the ComEd contract lobbyist John Hooker that he and a small group had come up with the Zalewski plan and that their “friend” had “thought it was great.” It would have been reasonable for the jury to infer that any discussion of the plan would have recognized that Doherty would submit a false invoice leading to falsified ComEd financial records. We see no reason to disturb the conviction.”
