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Summarizing Ho’s Second Circuit Appeal

As highlighted in this article [1], the Second Circuit recently heard oral argument in U.S. v. Chi Ping Patrick Ho.

As described in this prior post [2], in late 2018 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 post summarizes the disputed FCPA issues on appeal (there are also money laundering and evidence issues on appeal).

As stated in Ho’s opening appellate brief:

“This appeal arises out of the prosecution of Dr. Patrick Ho, a citizen of Hong Kong, for alleged bribe payments made to leaders of Chad and Uganda on behalf of a conglomerate based in mainland China. Ho was convicted at trial of multiple violations of two provisions of the Foreign Corrupt Practices Act (the “FCPA”), 15 U.S.C. §§ 78dd-2 and 78dd-3; of one substantive count of promotional money laundering in violation of 18 U.S.C. § 1956(a)(2)(A); and of conspiracies to commit violations of the FCPA and the money laundering statute. But the government’s theory of the case was internally inconsistent and legally insufficient. Moreover, its case at trial relied heavily on inadmissible hearsay and government-crafted summary charts that were erroneously submitted to the jury. Evaluated under the proper legal framework, none of Ho’s convictions can stand.”

In Ho’s brief, the FCPA specific issues on appeal are stated as follows:

As to Issue 1, the brief states:

“Ho’s convictions under § 78dd-2 (Counts 2 and 3) are fatally flawed because the government failed to present any evidence of one of its essential elements: that Ho was acting on behalf of a domestic concern. On the contrary, as the government stated again and again at trial, at all relevant times Ho was acting on behalf of entities based in Shanghai and Hong Kong. The government’s repeated statements refuting its own case must be given conclusive weight. Because the government’s own theory was that Ho was not acting for a domestic concern, his convictions on Counts
2 and 3 cannot stand.”

As to Issue 2, the brief states:

“Ho’s convictions for violating § 78dd-3 (Counts 4 and 5) were also fatally flawed because the indictment was defective: It included a finding by the grand jury that Ho was a “domestic concern,” but § 78dd-3 does not apply to domestic concerns. Furthermore, the indictment charged Ho with violating both § 78dd-2 and § 78dd-3, but the two are mutually exclusive.”

In its response brief, the DOJ stated as follows regarding Issue 1.

“Ho challenges the sufficiency of the evidence that he violated the FCPA in only one respect: He contends that, as to Counts Two and Three, the Government failed to demonstrate that, in connection with his offering and payment of bribes, he acted to assist a “domestic concern,” namely, a U.S. entity. That contention is meritless. The evidence amply demonstrated that Ho acted to assist CEFC NGO, including its U.S. arm, CEFC NGO USA—which Ho headed and directed—in obtaining business for, and directing business to, CEFC China, the multi-billiondollar conglomerate that funded CEFC NGO.”

[3]

As to Issue 2, the DOJ stated:

“Ho contends that certain counts in the Indictment are facially defective. First, Ho asserts that to the extent Counts Two and Three appear to conflict with Counts Four and Five as to whether Ho was, personally, a “domestic concern,” Counts Four and Five cannot stand. Second, Ho asserts that because he was charged in Counts Two and Three with violations of one section of the FCPA, he could not be charged in Counts Four and Five with violations of another section, and the latter counts cannot stand. (Br. 52-55). These claims fail for multiple reasons.

[…]

[Ho] asserts that Sections 78dd-2 and Sections 78dd-3 are “mutually exclusive,” and that because the Government charged him in Counts Two and Three, Counts Four and Five should therefore be dismissed. This challenge should be swiftly rejected. Nothing in the language of the FCPA so much as suggests that Congress intended for the Government to have to choose to charge a given defendant under only one section, when he may have violated more than one section, removing an otherwise-applicable statute, with a different element, from the jury’s consideration.”

In his reply brief, Ho stated as follows regarding Issue 1:

“On counts 2 and 3, it was the government’s burden to prove that Ho was an “officer, director, employee or agent of [a] domestic concern” and that his allegedly wrongful acts were undertaken “in order to assist such domestic concern” in “obtaining or retaining business for or with, or directing business to, any person.” Ho was an officer of one domestic concern in the case, CEFC USA, but no reasonable finder of fact could conclude that CEFC USA directed business to CEFC Energy, or that Ho assisted CEFC USA to do so.

At trial, the government offered almost no evidence about CEFC USA. Instead, it deliberately conflated two NGOs—CEFC USA (a domestic concern) and CEFC Hong Kong (not a domestic concern)—and continues to do so on appeal. But the two NGOs were separately incorporated entities, registered in different jurisdictions, with their own offices and bank accounts.

[…]

In sum, there is not a single piece of evidence (1) that CEFC USA directed business to CEFC Energy, or (2) that Ho assisted CEFC USA to do so.”

In his reply brief, Ho stated as follows regarding Issue 2:

“The indictment charges three times that Ho was a “domestic concern,” exposing him to liability under § 78dd-2, and yet counts 4 and 5 charged him under § 78dd-3, which by its terms exempts domestic concerns from liability. The indictment is therefore repugnant. Ho should not have been required to stand trial on contradictory allegations, and counts 4 and 5 should have been dismissed.

[…]

The legislative history of § 78dd-3, which was enacted 21 years after § 78dd2, shows that Congress intended §§ 78dd-2 and 78dd-3 to be mutually exclusive, i.e., that one charged to have violated one statute could not be charged with violating the other. The government argues that (a) it is inappropriate to consider the legislative history because there is no ambiguity in the statutory language, (b) the legislative history does not establish the point that Ho asserts, and (c) §§ 78dd-2 and 78dd-3 cannot be mutually exclusive because that would lead to “absurd results.”

(a) Reference to the FCPA’s legislative history is appropriate. This Court has interpreted the FCPA on several occasions, and has used legislative history to help it. […] There is no reason not to do so here as well.

The government replies that the FCPA is unambiguous. But even though each word in a statute is itself plain, context can create ambiguity. That is precisely the case here: “the broader context of the statute as a whole,” reveals three separate categories of liability—issuers, § 78dd-1; domestic concerns and their agents, § 78dd-2; and anyone else and their agents, § 78dd-3. It is no answer to say that statutory provisions often overlap, because § 78dd-3 explicitly carves out persons who fall within §§ 78dd-1 and 78dd-2. That structural demarcation creates an ambiguity about the liability of a domestic concern’s agents—who are explicitly covered by § 78dd-2 and by the structure of the FCPA appear intended to be removed from § 78dd-3. It thus is entirely appropriate to refer to legislative history.

(b) The legislative history supports Ho. The Senate Committee Report for § 78dd-3 states that it was intended to provide for penalties “over persons not covered under” § 78dd-2. […] The government argues that this language “does not mean that Congress intended to preclude prosecution [of persons covered by § 78dd-3] under sections already in force,” that is § 78dd-2. The government notes that there is no prohibition on having two criminal statutes that effectively cover the same conduct, and that Congress should be presumed to know that such double-dipping is permissible.

The government’s interpretation blinks reality: § 78dd-3 begins by saying it does not apply to most (if not all) entities covered by §§ 78dd-1 and 78dd-2. Nor does the government cite a single piece of legislative history that challenges the proposition that the intent of the legislators in enacting § 78dd-3 was to cover those who were not covered by § 78dd-2—an intent obvious from the face of the statute as well. Given that intent, the government’s observation that Congress could have enacted two statutes to punish the same conduct is irrelevant.

[…]

(c) The proper reading of §§ 78dd-2 and 78dd-3 does not lead to “absurd results.” The government argues that reading §§ 78dd-2 and 78dd-3 as mutually exclusive would lead to “absurd results,” because it would prevent some defendants, whom the government evidently believes should be prosecuted, from being prosecuted under the FCPA.

That the interpretation of a criminal statute leads to the government being unable to prosecute someone that it wishes to prosecute hardly makes the interpretation “absurd.” It simply means that the particular statute does not cover everyone, or all of the behavior, that the government wants it to. Federal criminal statutes are required to be read narrowly, not to cover every conceivable wrong the prosecutor might wish punished.”

As noted in this article [1]:

“The three-judge panel, including U.S. Circuit Judge Denny Chin, homed in [Issue 2] when posing questions to Assistant U.S. Attorney Douglas Zolkind at oral argument in the case Wednesday.

“They do seem to be mutually exclusive,” Judge Chin said. “How can he be guilty of both?”

Zolkind argued that the U.S. conduct provision “explicitly did not exempt agents of domestic concerns.”

The judges also asked what the intent was in having those two separate provisions if they could both apply in Ho’s case.

“What are the two distinct wrongs here?” Judge Chin asked.

Zolkind replied that helping a domestic organization carry out the bribery and traveling to the U.S. to take action that would help the scheme were two distinct acts that Congress meant to criminalize.”

Strategies For Minimizing Risk Under The FCPA

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