Last week (here) I noted, in connection with Wal-Mart’s potential FCPA exposure, that the enforcement theory that payments outside the context of foreign government procurement fall under the FCPA’s anti-bribery provisions has been subjected to judicial scrutiny three times.  After summarizing those three instances, I noted that the scorecard was as follows:  US – 1; Defendants – 2; or if you prefer US – .5; Defendants – 2.5 (recognizing that the 5th Circuit decision in Kay is equivocal).

Last week in doing some research, I stumbled upon a fourth instance where this enforcement theory was subjected to judicial scrutiny.

The result?  DOJ lost.

Thus, the scorecard is as follows when an enforcement agency is put to its burden of proof on the enforcement theory that payments outside the context of foreign government procurement fall under the FCPA’s anti-bribery provisions:  US – 1; Defendants – 3; or if you prefer US – .5; Defendants – 3.5 (again recognizing that the 5th Circuit decision in Kay is equivocal).

This 1990 FCPA enforcement action is so obscure it was not even cited in any of the decisions of the other challenges which occurred between 2002-2004.   For instance, in the Kay trial court decision in 2002, the court stated that it was confronting an issue of first impression in the federal courts.

Below is a summary of U.S. v. Alfredo Duran.

AEA Aircraft Recovery (“AEA”) was a division of Summerland Engineering Corp. (a Florida corporation) and engaged in the business of recovery of seized aircraft.  The sole shareholder of Summerland was Robert Gurin.

In 1989, the DOJ charged Joaquin Pou (a Dominican Republic citizen and an agent of AEA, Summerland and Gurin), Alfredo Duran (a U.S. citizen and agent of AEA, Summerland, and Gurin)  and Jose Guasch (a U.S. citizen and agent of AEA, Summerland, and Gurin) with conspiracy to violate the FCPA’s anti-bribery provisions.  See here for the criminal indictment.  In a criminal information (see here) the DOJ also charged Robert Gurin.

According to the charging documents, the defendants conspired to make payments to officials of the Dominican Republic in order to obtain the release of two aircraft seized by the government of the Dominican Republic.  The charging documents then proceed to set forth various acts in furtherance of the conspiracy.

Gurin and Guasch pleaded guilty and Pou (a citizen of the Dominican Republic) became a fugitive.  Gurin was sentenced to 5 years probation and 100 hours of community services and Guasch was sentenced to 4 years probation, 1 month of house arrest and 75 hours of community service.

Duran, a former Florida state Democratic Party chairman, pleaded not guilty and put the DOJ to its burden of proof at trial.  At the close of the DOJ’s case, he filed a motion for judgment of acquittal (see here).  Duran argued that “no reasonable jury could find that the purpose of any of the alleged intended payments was to assist [...] in obtaining or retaining business” and that the government “has failed to adduce sufficient evidence to prove any intended payments were not facilitating or expediting payments for the purpose of expediting or securing routine governmental action (i.e. grease payments).”

The motion stated that “the legislative history to the 1977 Act makes clear that the evil redressed by the Act was the use of bribery by U.S. corporations to obtain contracts for the sale of good or services to foreign countries.”  The motion then referenced that in 1988 Congress “created an exception for expediting or facilitating payments for the purpose of securing routine governmental action.”  The motion stated, “by clear implication, payments in respect of the awarding of procurement contracts of the foreign government are the type of payments targeted” by the FCPA.

The motion then stated as follows.  “The evidence, taken in the light most favorable to the government, shows at best that payments were to be made to Joaquin Pou and, through him, to unidentified Dominican government officials for the purpose of obtaining the release of a single aircraft to its owner.  Clearly, this is not what Congress intended by the phrase obtaining or retaining business …  The fact that this intended payment may have indirectly benefited Gurin’s business by facilitating the release of an aircraft does not establish the type of direct business purpose contemplated by the statute.”  Duran argued that “the government has failed to establish that the intended payments in this case were for the specific purpose of obtaining or retaining business … and, accordingly, a judgment of acquittal should be entered.

Turning next to facilitating payments, the motion argued that “the government bears the burden of disapproving that the payment was not a ‘facilitating or expediting payment” and that had “Congress intended the ‘facilitating or expediting payment exception’ to be an affirmative defense, it would have placed it” in the portion of the FCPA containing affirmative defenses.  The motion stated as follows.  “By its nature, therefore, the exception creates an additional element which the government must disprove beyond a reasonable doubt to establish the crime.”  The motion then goes through the legislative history of facilitating payments and how in the original FCPA the concept was imbedded in the definition of “foreign official” and how in 1988 Congress created the stand-alone facilitating payment exception.

As to the evidence at trial, the motion stated as follows.  “Here the evidence introduced by the prosecution is only consistent with a finding that the purpose of the alleged intended payments was to facilitate or expedite the release of an aircraft.  The Defendant had been told by an undercover government informant that there was no legal holds upon the aircraft.  He was led to believe that neither the Dominican Republic nor any other government held any legal claim to or right in the aircraft.  He understood that it was simply a straightforward matter of expediting the release of an aircraft on behalf of the owner.  Any intended payment was simply for the purpose of hurrying along a bureaucratic process.  The purpose of the alleged intended payment was to expedite a routine governmental action.  Consequently, no reasonable jury could conclude that the Defendant agreed upon an illegal objective.”

Elsewhere, the motion stated as follows.  “The facts simply show that the army of the Dominican Republic had no discretion in the matter of the release of the aircraft, and that some government officials were simply trying to line their pockets outside of their official capacities.”  Further the motion stated as follows.  “There was no decision-making process in this case, the facts merely demonstrate a ministerial or clerical matter involving the processing of government papers and the automatic release of the aircraft.”

On April 17, 1990, U.S. District Court Judge Jame Kehoe granted a judgment of acquittal (see here).

Original source media accounts note that  Judge Kehoe said “the government failed to prove the charges against [Duran] were a crime under the Foreign Corrupt Practices Act.”  According to media reports, Judge Kehoe refused a government request to stay acquittal while prosecutors appealed.  Duran is reported as stating, “I feel that I have been throughly vindicated.  I was ready to take the stand in my own defense.  I am very happy.”

An additional dynamic in the case was that Pou fled the U.S. and Judge Kehoe agreed with the defense that all evidence concerning Pou should be excluded from the case.

According to media reports, the case began when the Government used an informant to pose as an agent for the owner of a drug plane seized by the Dominican military.    Media reports suggest that the government was investigating Gurin in light of allegations he had bribed high-ranking military officials in the Dominican Republic and other Caribbean countries to recover drug planes.