As highlighted here, last week Charles Hunter Hobson (who served in a variety of roles at Corsa Coal from 2013 to 2018) was found guilty by a jury for various Foreign Corrupt Practices Act and related offenses in connection with an Egyptian bribery scheme.
As stated by the DOJ, the bribery scheme involved “Al Nasr Company for Coke and Chemicals (Al Nasr), which was then a state-owned and state-controlled chemical manufacturing company in Egypt.”
The issue of whether Al Nasr was an “instrumentality” of the Egyptian government such that employees of Al Nasr could be “foreign officials” was the focus of a specific jury instruction.
The jury instruction stated:
“The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality.
An “instrumentality” of a foreign government is an entity controlled by the government of a foreign country which performs a function of that government. State-owned or state-controlled companies may meet this definition.
The defendant has been charged with paying, offering, promising, or authorizing the payment of bribes to an employee of Al Nasr Company for Coke and Chemicals (“Al Nasr”), or any person acting in an official capacity for or on behalf of Al Nasr. To determine whether Al Nasr was an entity controlled by the Egyptian government, you may consider the following factors if you find that they existed during the relevant time period:
(1) the Egyptian government’s formal designation of the entity as a government-owned entity;
(2) whether the Egyptian government had a majority interest in Al Nasr;
(3) whether the Egyptian government had the ability to hire and fire the entity’s principals;
(4) the circumstances under which Al Nasr was created;
(5) the extent to which Al Nasr’s profits went directly to the Egyptian government;
(6) the extent to which the government funds the entity if it fails to break even; and
(7) the length of time these indicia have existed.
To determine whether Al Nasr performed a function the government treats as its own, you may consider the following factors as they existed during the relevant time period:
(1) whether Al Nasr had a monopoly over the function it existed to carry out;
(2) whether the Egyptian government subsidizes the costs associated with the services provided by Al Nasr;
(3) whether Al Nasr provided a service to the public at large in Egypt; and
(4) whether the public and the Egyptian government generally perceived Al Nasr to be performing a government function.
These factors are not exclusive, and no single factor determines or controls whether Al Nasr was an instrumentality of the Egyptian government. To decide whether Al Nasr is an instrumentality, you may also consider all of the evidence that has been received in this case.”
This jury instruction is flawed as there is no support in the FCPA statute nor the FCPA’s extensive legislative history for this jury instruction.
Rather, as readers may know, the jury instruction is nearly a verbatim regurgitation of the holding in U.S. v. Esquenazi (a 2014 decision 11th Circuit decision – see here for the prior post).
The Esquenazi decision was, and remains, a flawed decision.
As I explained in my amicus brief urging the Supreme Court to consider the case:
“The FCPA’s legislative history indicates that Congress did not intend that statutory term to include employees of SOEs. In the legislative process that ultimately produced the FCPA, Congress specifically considered competing bills that would have included employees of SOEs as “foreign officials” yet rejected those definitions in the version of the FCPA it enacted.
[…]
The Eleventh Circuit’s interpretation of the statute was erroneous. The decision below failed to consider the enacting legislative history of the provisions it construed. It instead mistakenly relied on amendments enacted more than twenty years later and mistakenly concluded that those amendments were intended to bring the FCPA into strict conformity with the OECD.
The Eleventh Circuit’s express reliance on amendments to the FCPA in 1998 is flawed in at least two respects. First, the 1998 amendments to the FCPA are, on their face, irrelevant to the statutory-interpretation question at issue in this case because those amendments did not modify the portion of the “foreign official” definition in question here. Second, contrary to the Eleventh Circuit’s conclusion, the 1998 amendments did not fully conform the FCPA to the OECD Convention. Because they did not conform the FCPA to the OECD Convention, the amendments the Eleventh Circuit relied upon do not support the conclusion that the FCPA’s “foreign official” element includes employees of SOEs.
Amending a key element of a top-priority federal criminal statute of such significance to international commerce is not properly accomplished through a process of judicial inferences about the supposed purpose of subsequent, unrelated statutory amendments. Rather, actual legislative action is required to amend the FCPA. If Congress wished to include employees of SOEs in the statutory definition of “foreign official,” it easily could have done so — when enacting the FCPA in 1977, when amending the FCPA in 1998, or on any other occasion. Congress has expressly included employees of SOEs in similar statutory definitions contained in other legislation passed both before and after the enactment of the FCPA. Similarly, the legislative bodies of several signatory countries to the OECD Convention have taken specific legislative action to include SOEs and related concepts in their comparable anti-corruption legislation.”
As highlighted on these pages several times, over the past approximate decade, the Supreme Court has numerous times rejected expansive statutory interpretations by the DOJ.
If the Supreme Court would have accepted the Esquenazi case, it is likely that the court would have rejected the DOJ’s “foreign official” interpretation.
The reason the Supreme Court declined to hear case is likely due to the absence of a circuit split on the “foreign official” issue.
Should Hobson choose to appeal to the Third Circuit, the opportunity exists for the disputed “foreign official” issue to be interpreted again (for just the second time in the FCPA’s nearly 50 years by an appellate court).
Another interesting aspect of the Hobson verdict is that the jury instructions did not include a “knowledge of the status of foreign official” jury instruction.
For instance in 2012 in U.S. v. Carson (et al), Judge James Selna (C.D. Cal.) ordered a “knowledge of status of foreign official” jury instruction 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.”
In short, basing a “foreign official” jury instruction on a flawed appellate court decision does not make the jury instruction legally sound, it just carries forward the flaw and the legal issue remains ripe for proper judicial interpretation (including by the Supreme Court).
