Archive for the ‘Facilitating Payments’ Category

Donald Trump: The FCPA Is a “Horrible Law and It Should Be Changed”

Thursday, August 6th, 2015

TrumpTonight is the first Republican presidential debate. If history is any guide, the candidates will deliver scripted responses and speak in vague generalities about many issues.

Many polls suggest that Donald Trump is leading the field, but whether Trump will ultimately emerge as the Republican candidate remains to be seen.

Nevertheless, one thing about Trump compared to traditional political candidates is that he is unscripted and blunt.

As highlighted in this 2012 post, Trump was unscripted and blunt when speaking of the Foreign Corrupt Practices Act in relation to Wal-Mart’s FCPA scrutiny focused on alleged payments in Mexico to obtain various licenses and permits.

In this CNBC SquawkBox interview (beginning at the 14-minute mark) Trump said that “this country is absolutely crazy” to prosecute alleged FCPA violations in places like Mexico and China.  Moreover, Trump said that the FCPA is a “horrible law and it should be changed” and that it puts U.S. business at a “huge disadvantage.”

In this criticisms, Trump confuses two issues:  (1) the FCPA as passed by Congress and (2) the FCPA as enforced by the DOJ and SEC.  Many of the concerns Trump raises were addressed by Congress when it elected not to capture payments to “foreign officials” in connection with ministerial or clerical acts or licensing and permitting issues.

The FCPA’s legislative history makes clear that in passing the FCPA Congress intended to capture only a narrow category of payments and chose not to capture so-called facilitating payments given the difficult and complex business conditions encountered in many foreign countries.  Consider the following language from the relevant Senate and House Reports.

The Senate Report stated:

“In drafting the bill . . . the Committee deliberately cast the language narrowly, in order to differentiate between such payments [to a foreign official corruptly intended to induce the recipient to use his influence to secure business, influence legislation or regulations] and low-level facilitating payments sometimes called ‘grease payments.’ Thus, [the bill] would not reach a small gratuity paid to expedite shipment through Customs or the placement of a trans-Atlantic telephone call, to secure required permits, or to ensure that a corporation’s warehouses were not put to the torch. In other words, payments made to expedite the proper performance of duties may be reprehensible, but it does not appear feasible for the United States to attempt unilaterally to eradicate all such payments.  […] The Committee fully recognizes that the proposed law will not reach all corrupt payments overseas.”

The House Report likewise stated:

“The bill’s coverage does not extend to so-called grease or facilitating payments. . . . The language of the bill is deliberately cast in terms which differentiate between such payments and facilitating payments, sometimes called ‘grease payments’. In using the word ‘corruptly’, the committee intends to distinguish between payments which cause an official to exercise other than his free will in acting or deciding or influencing an act or decision and those payments which merely move a particular matter toward an eventual act or decision or which do not involve any discretionary action. […] For example, a gratuity paid to a customs official to speed the processing of a customs document would not be reached by the bill. Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity by performed in any event.  While payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments. As a result, the committee has not attempted to reach such payments. […] The committee fully recognizes that the proposed law will not reach all corrupt payments overseas.”

The FCPA originally contained an indirect facilitating payment exception embedded in the “foreign official” element by excluding from the definition of “foreign official” “any employee of a foreign government or any department, agency, or instrumentality thereof whose duties are essentially ministerial or clerical.”

In 1988, this indirect exception was removed from the definition of “foreign official” in favor of an express stand-alone exception.  The House Report indicates that Congress did not seek to disturb Congress’s original intent and stated:

“The policy adopted by Congress in 1977 remains valid, in terms of both U.S. law enforcement and foreign relations considerations. Any prohibition under U.S. law against this type of petty corruption would be exceedingly difficult to enforce, not only by U.S. prosecutors but by company officials themselves. Thus while such payments should not be condoned, they may appropriately be excluded from the reach of the FCPA. U.S. enforcement resources should be devoted to activities have much greater impact on foreign policy.”

At present, the FCPA’s anti-bribery provisions “shall not apply to any facilitating or expediting payment to a foreign official … the purpose of which is to expedite or to secure the performance of a routine government action by a foreign official …”.

The FCPA defines “routine government action” as follows:

“The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in

(i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature.

The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”

Notwithstanding the above legal authority, many corporate FCPA enforcement actions in this new era concern payments made in connection with securing foreign permits, licenses or other official documents needed to do business in a foreign country. This raises the question of whether the facilitating payments exception has any real meaning or whether the enforcement agencies have essentially repealed this exception through its enforcement theories.

Indeed, the SEC’s former Assistant Director of Enforcement has called the FCPA’s facilitating payment exception “illusory” and stated:

“The drafters of the FCPA recognized that such demands for ‘grease payments’ are a reality in many countries, and accordingly made clear that certain payments made to expedite the approval of permits or licenses, or to prompt the expeditious performance of similar low-level ministerial duties, fell outside the ambit of the statute’s anti-bribery provisions. Yet that exception for ‘facilitating payments’ […] is becoming harder and harder to rely on. […]  The DOJ and SEC have pressed a narrow view of the exception in recent years … […] Of course, the fact that the FCPA’s twin enforcement agencies have treated certain payments as prohibited despite their possible categorization as facilitating payments does not mean a federal court would agree. But because the vast majority of enforcement actions are resolved through DPAs and NPAs, and other settlement devices, these cases never make it to trial. As a result, the DOJ and the SEC’s narrow interpretation of the facilitating payments exception is making that exception ever more illusory, regardless of whether the federal courts – or Congress – would agree.”

(See Richard Grime and Sara Zdeb, “The Illusory Facilitating Payments Exception: Risks Posed By Ongoing FCPA Enforcement Actions And The U.K. Bribery Act,” (2011).

As relevant to the de facto repealing of this statutory exception, a current Senior Investigations Counsel with the SEC’s FCPA Unit stated, in his personal capacity:

“While the FCPA contains several core provisions that will always withstand the test of time, the facilitation payments exception is out of date in this modern-day era of commerce and sensibility.”

(See Jon Jordan, “The OECD’S Call for an End to ‘Corrosive’ Facilitation Payments and the International Focus on the Facilitation Payments Exception Under the Foreign Corrupt Practices Act,” 13 Univ. of Pennsylvania Journal of Business Law 881 (2011).

In short, Trump likely confused the issues.  If he meant to say that certain aspects of the current FCPA enforcement landscape are absolutely crazy there are many people who would likely agree.

Is The Current “Foreign Official” Enforcement Theory Unconstitutional?

Wednesday, February 18th, 2015

UnconstitutionalAs readers no doubt know, in May 2014 the 11th Circuit issued a decision of first impression for an appellate court on the issue of whether employees of alleged state-owned or state-controlled entities are “foreign officials” under the FCPA.

This prior post contains numerous links to other posts regarding the decision.

In short, in U.S. v. Esquenazi, the 11th Circuit concluded as follows.

“An ‘instrumentality’ [under the FCPA] is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own. Certainly, what constitutes control and what constitutes a function the government treats as its own are fact-bound questions. It would be unwise and likely impossible to exhaustively answer them in the abstract. [...] [W]e do not purport to list all of the factors that might prove relevant to deciding whether an entity is an instrumentality of a foreign government. For today, we provide a list of some factors that may be relevant to deciding the issue.

To decide if the government ‘controls’ an entity, courts and juries should look to the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; and the length of time these indicia have existed.


We then turn to the second element relevant to deciding if an entity is an instrumentality of a foreign government under the FCPA — deciding if the entity performs a function the government treats as its own. Courts and juries should examine whether the entity has a monopoly over the function it exists to carry out; whether the government subsidizes the costs associated with the entity providing services; whether the entity provides services to the public at large in the foreign country; and whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.”

As evident from the 11th Circuit’s ruling, a key element of a U.S. federal law will often be dependent on foreign law or foreign government circumstances or characterization of an alleged SOE.

Indeed, as noted in this prior post, the meaning of foreign official thus can have 193 meanings (by most measures, the number of countries in the world).  As noted in the prior post, a significant irony of the 11th Circuit’s resort to foreign characterization and treatment of a seemingly commercial enterprise is that the DOJ itself has rejected this approach in issuing opinions under the FCPA Opinion Procedure program. (See Release 94-01).

The 11th Circuit itself recognized that its control and function test could raise constitutional vagueness concerns.  As stated by the court, it can be a “difficult task – involving divining subjective intentions of a foreign sovereign, parsing history, and interpreting significant amounts of foreign law – to decide what functions a foreign government considers core and traditional.”  Moreover, the 11th Circuit recognized ”there may be entities near the definitional line for ‘instrumentality’ that may raise a vagueness concern.”

The above is relevant background in discussing a recent article – outside the FCPA context – but with clear FCPA implications given the above background.

In “The Dynamic Incorporation of Foreign Law and the Constitutional Regulation of Federal Lawmaking,” Paul Larkin argues that “the prospect that the United States would grant a foreign government the legal authority to govern the people of this nation is absurd.”  Stated differently, Larkin notes:

“Congress’s decision to authorize foreign government and foreign officials to define the content of a domestic law raises legal issues residing at the core of any analysis of how the federal government may govern [...]“

According to Larkin, such circumstances are unconstitutional “because it vests domestic federal lawmaking in foreign governments and their officials.”

Larkin then discusses several “problems posed by vesting absolute lawmaking power to define federal criminal law in the hands of foreign officials who may be used to governing in a foreign system for people who may live in a culture with vastly different legal and social expectations.”

Among the problems are the following:

“It is wholly unrealistic to assume that Americans know foreign law.  Foreign codes may not always reflect American law or morals, so there is no justification for presuming that domestic residents will know foreign laws by heart.”

“Finding foreign law may also be difficult.  Foreign nations may not make all of their laws public, whether in printed code accessible in a domestic library or via the Internet.”

“Other nations may grant their departments similar rulemaking power [to U.S. agencies] but their agencies may not publish regulations in their version of the Federal Register or Code of Federal Regulations (assuming that they have one at all).”

“A foreign law must be identifiable as a ‘law.’  Yet, foreign nations may define their ‘law’ to embrace edicts with no parallel or counterpart in our legal system.”

Larkin’s article raises interesting parallel issues concerning the current “foreign official” enforcement theory.

Moreover, the issues raised in Larkin’s article are not merely hypothetical in the FCPA context.  As noted in this prior post, several of the issues Larkin identified were disputed in the SEC’s failed case against Mark Jackson and James Ruehlen regarding Nigerian law relevant to temporary importation permits.

Friday Roundup

Friday, February 13th, 2015

Roundup2Scrutiny alert and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alert

In August 2012, the Israel-based Teva Pharmaceuticals first disclosed its FCPA scrutiny and in its most recent annual report the company disclosed as follows.

“For several years, we have been conducting a voluntary worldwide investigation into business practices that may have implications under the FCPA. We have engaged outside counsel to assist in the investigation, which was prompted by the receipt, beginning in 2012, of subpoenas and informal document requests from the SEC and the Department of Justice (“DOJ”) to produce documents with respect to compliance with the FCPA in certain countries. We have provided, and will continue to provide, documents and other information to the SEC and the DOJ, and are cooperating with these agencies in their investigations of these matters. In the course of our investigation, which is continuing, we have identified certain business practices and transactions in Russia, certain Eastern European countries, certain Latin American countries and other countries in which we conduct business, which likely constitute violations of the FCPA and/or local law. In connection with our investigation, we have also become aware that affiliates in certain countries under investigation provided to local authorities inaccurate or altered information relating to marketing or promotional practices. We have brought and continue to bring these issues to the attention of the SEC and the DOJ. Our internal investigation is not complete and additional issues or facts could become known to management as the investigation continues, which may expand the scope or severity of the potential violations and/or extend to additional jurisdictions. Our investigation is expected to continue through the end of 2015, and may continue beyond that date.”

Reading Stack

From Shearman & Sterling attorneys in the New York Law Journal “A Bribe Is a Bribe: FCPA’s Influence on International Arbitration.”

“Although bribery investigations conducted under the auspices of the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) may appear, at first glance, detached from the world of international arbitration, BSG Resources v. Guinea highlights an issue that practitioners should understand when advising their clients on the potential repercussions of FCPA liability. While practitioners are generally aware of the litigation risks associated with FCPA investigations in the U.S. courts, they would also be well advised in considering the implications that FCPA liability may have on their clients’ recourse to foreign investment protections and bilateral investment treaties, and related international arbitration.”

For additional information on this topic, see this prior guest post.


The attorneys who represented Mark Jackson in SEC. v. Jackson (the SEC’s failed case against Noble executives in connection with Nigerian permits – see herehere, and here for prior posts) ask whether the SEC has written the facilitating payments exception out of the FCPA?  The article states:

“Last summer, a lawsuit brought by the Securities and Exchange Commission (SEC) alleging Foreign Corrupt Practices Act (FCPA) violations against two individuals related to Noble Corporation, a global oil and gas drilling services company, nearly went to trial in federal court in Texas. SEC v. Jackson and Ruehlen, No. 12-cv-563 (S.D. Tex.). [...] As one of the only civil FCPA cases to proceed to that stage of litigation, the case provided unique insights into the SEC’s interpretation of key provisions of the FCPA. The case ultimately settled on very favorable terms for the individuals, but the SEC’s position on the facilitating payments exception to the FCPA was a notable departure from its own stated guidance and may herald a renewed attempt by the SEC to further narrow the exception to the point of irrelevance.”


“Due to the settlement [in the case], the court never had the opportunity to rule on the fate of the FCPA’s facilitating-payments exception under the SEC’s newfound interpretation. But the SEC’s position on this issue signals a shift in policy toward the practical elimination of the exception. If the SEC continues down the road established in this case, it will be interesting to examine whether courts accept the SEC’s position eliminating the exception. However, since most FCPA cases are not litigated, the SEC may seek to push its novel interpretation into law, without approval by the courts, by including it in settlement agreements going forward. Counsel should be aware of this effort and, where possible and appropriate, resist the SEC’s efforts to rewrite the law.”

My own two cents on the issue is consistent with other observations, and that is yes, the enforcement agencies have largely read facilitating payments out of the FCPA, along with the corrupt intent element in many cases.


Much has been written about the recently leaked records from HSBC, including this piece regarding Jeffrey Tesler’s role in the Bonny Island, Nigeria bribery cases (4 out of 10 cases in the top ten in terms of FCPA settlements).  According to the article:

“Leaked records from HSBC, a huge global bank based in London, reveal new details about the bank’s role as a conduit for the bribes — and new details about how Tesler operated. The files, obtained by the French newspaper Le Monde and the International Consortium of Investigative Journalists, show ties between Tesler and high-ranking Nigerians not previously named publicly in connection with the scandal, raising the possibility of renewed questions about Nigeria’s handling of the affair.”


The files obtained by Le Monde and ICIJ show that nine people, including members of the Tesler family and Nigerian nationals, held a variety of roles with accounts  at HSBC Private Bank (Suisse) between 1990 and 2003 — months before the completion of the gas plant. Nine of the 12 accounts instructed HSBC to keep all correspondence under lock and key in a bank safe.

Despite Tesler being under investigation since 2003, HSBC continued to offer advice, services and cash withdrawals to Tesler and his family, whose accounts with the bank totaled tens of millions of dollars at one point in 2006/2007. HSBC advised the family even though its individual files for Tesler and those close to him include references to “criminal cases” and “the Tesler affair.”


A good weekend to all.

11th Circuit Discusses “Routine Governmental Action” Prong Of The FCPA’s Facilitation Payments Exception

Wednesday, February 11th, 2015

11th Cir.This February 2013 post highlighted the criminal appeal of Jean Rene Duperval, the alleged “foreign official” at the center of the various Haiti Teleco enforcement actions, including U.S. v. Esquenazi, the recent 11th Circuit decision concerning the “foreign official” element.

In connection with the Haiti Teleco cases, Duperval was found guilty by a jury on various money laundering charges. As highlighted in the prior post, Duperval appealed his conviction to the 11th Circuit and among the issues appealed were:

  • whether the evidence was “insufficient to prove beyond a reasonable doubt that Haiti Teleco was a government instrumentality and that Duperval was a foreign official as required to prove that a violation of the Foreign Corrupt Practices Act generated proceeds of a specified unlawful activity – a necessary predicate for the convictions on the money laundering conspiracy and substantive money laundering charges.”
  • various due process challenges concerning the declaration of the Haitian Prime Minister; and
  • whether the “trial court erred in not charging the jury in accordance with Duperval’s proffered theory of defense instruction” as to whether the FCPA’s facilitation payments exception applied.

Earlier this week, the 11th Circuit issues this opinion.  The opinion begins as follows.

“This appeal of criminal convictions involving money laundering and foreign bribery presents issues of exposure of jurors to publicity; the sufficiency of the evidence that a telephone company was an “instrumentality” of a foreign government, 15 U.S.C. § 78dd-2(h)(2)(A); whether the administration of a multimillion dollar contract is “routine governmental action,” id. § 78dd-2(h)(4)(A); whether the government interfered with a witness when it obtained a clarifying declaration from that witness; and four issues about the application of the United States Sentencing Guidelines. Jean Rene Duperval appeals both his convictions of two counts of conspiring to commit money laundering, 18 U.S.C. § 1956(h), and 19 counts of concealment of money laundering, id. § 1956(a)(1)(B)(i), and his sentence of imprisonment of 108 months followed by three years of supervised release. Duperval worked as the Director of International Affairs at Telecommunications D’Haiti, a company owned by the government of Haiti. Duperval participated in two schemes in which international companies gave him bribes in exchange for favors from Teleco. Duperval’s arguments fail. We affirm.”

As relevant to “foreign official,” the 11th Circuit’s discussion of this issue in Duperval mirrors the 11th Circuit’s conclusion in U.S. v. Esquenazi.  In short, in Duperval the court stated: “[i]n Esquenazi and this appeal, the government introduced almost identical evidence about Teleco. [...] As in Esquenazi, the jury could have reasonably found that Teleco was an instrumentality of Haiti.”

As relevant to the “routine government action” portion of the facilitation payments exception, the 11th Circuit stated:

“Duperval admitted that he received money from Cinergy and Terra, but he asserted that the money was for doing a good job in the administration of the contracts. Duperval’s counsel requested a jury instruction based on an exception to the Act for routine governmental action, id. § 78dd-2(b), but the district court denied this request.”


“Duperval argues that the district court erred when it refused his proffered jury instruction. Duperval requested that the district court instruct the jury on the exception to the Foreign Corrupt Practices Act for routine governmental action, 15 U.S.C. § 78dd-2(b). Duperval argues that he was entitled to an instruction on this defense because he introduced evidence that he was paid only for administering the contracts within their terms. But we conclude that the district court did not err when it refused Duperval’s instruction.

A defendant has the right to have the jury instructed on a theory of defense only if “the proposed instruction presents a valid defense and [if] there has been some evidence adduced at trial relevant to that defense.” United States v. Ruiz, 59 F.3d 1151, 1154 (11th Cir. 1995). When we review the refusal to give an instruction for abuse of discretion, we ask whether “the requested instruction is correct, not adequately covered by the charge given, and involves a point so important that failure to give the instruction seriously impaired the party’s ability to present an effective case.” Svete, 556 F.3d at 1161 (internal quotation marks omitted). But we need not engage in this inquiry if the defendant failed to introduce evidence relevant to the jury instruction.

The Act allows “any facilitating or expediting payment to a foreign official . . . the purpose of which is to expedite or to secure the performance of a routine governmental action.” 15 U.S.C. § 78dd-2(b). Routine governmental action includes actions such as “obtaining permits . . . to do business[;] . . . processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery, or scheduling inspections[; and] . . . providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products.” Id. § 78dd-2(h)(4)(A). Other actions are routine governmental action only if they are “actions of a similar nature” to those listed in the statute. Id. § 78dd-2(h)(4)(A)(v). But routine governmental action “does not include . . . any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.” Id. § 78dd-2(h)(4)(B).

Duperval argues that he performed a routine governmental action when he administered the contracts, but he misunderstands this exception to the Act. As the Fifth Circuit explained, “[a] brief review of the types of routine governmental actions enumerated by Congress shows how limited Congress wanted to make the . . . exception[].” United States v. Kay, 359 F.3d 738, 750 (5th Cir. 2004). These actions are “largely non-discretionary, ministerial activities performed by mid- or low-level foreign functionaries,” id. at 751, and the payments allowed under this exception are “grease payments” to expedite the receipt of routine services, id. at 747. The administration of a multi-million dollar telecommunication contract is not an “action[] of a similar nature” to the actions enumerated in the Act. 15 U.S.C. § 78dd-2(h)(4)(A)(v). Duperval was not a low-level employee who provided a routine service; he was a high ranking official who administered international contracts. And, when Terra and Cinergy paid Duperval, their “grease payment” was not to expedite the receipt of a routine service. Duperval was not “providing phone service” as the Act uses that term, id. § 78dd-2(h)(4)(A)(iv). “[P]hone service” appears along with “providing . . . power and water supply, loading and unloading cargo, or protecting perishable products.” Id. The text of the statute refers to the government providing a service to a person or business, not to the government administering contracts with companies that provide telephone service.

Duperval’s interpretation also is in tension with the section of the Act that describes what is not routine governmental action, id. § 78dd-2(h)(4)(B). A party cannot pay a decision-maker to continue a contract with the government, id., but under Duperval’s interpretation, a party could circumvent this limitation by “rewarding” the decision-maker for doing a good job in administering the current contract. This interpretation, which would provide an end-run around the provisions of the Act, finds no support in the text of the Act. Duperval presented evidence that he administered multi-million dollar contracts. He failed to prove that he performed a routine governmental action. Without any evidence to support his defense, Duperval was not entitled to his requested jury instruction.”

The 11th Circuit’s conclusion as to “routine governmental action,” was hardly surprising given the facts at issue in Duperval and Duperval’s argument.

Nevertheless, the 11th Circuit’s discussion of facilitation payments in Duperval is believed to be the first time an appellate court has squarely  addressed this prong of the FCPA (as the Fifth Circuit’s discussion of facilitation payments in Kay was dicta).

“I Have Such Trouble Understanding The Facilitating Payment Exception”

Tuesday, December 9th, 2014

Southern District of Texas Judge Keith P. Ellison.  HANDOUT.

In the minds of some, the Foreign Corrupt Practices Act is a clear statute with no ambiguity whatsoever (see here for a prior post on the same subject).  To such commentators, it’s easy –  just don’t bribe.  (The irony of course is that if it was so easy, then why do many of these same commentators devote their practice to FCPA compliance?).

To suggest that the FCPA is an ambiguous statute has been met by claims that such statements are nothing more than pandering to a particular audience.

Well, federal court judges are apparently pandering to a particular audience because if there is one common thread in many FCPA judicial decisions, it is judges finding various FCPA provisions vague or ambiguous.  (See the above prior post for numerous examples).

The latest example occurred in SEC v. Jackson & Ruehlen (the individual enforcement action the SEC settled on the eve of trial this past summer in what could only credibly be called an SEC defeat – see here and here for prior posts).

As to relevant background, in a pre-trial ruling (see here for the prior post), Judge Keith Ellisson (S.D.Tex.) ruled that the SEC had the burden of negating application of the FCPA’s facilitating payment exception.  As noted in this prior post, the enforcement action focused on alleged payments in connection with temporary importation permits in Nigeria for oil rigs.

Deep within the pre-trial transcript (see here), one will find Judge Ellison engage in the following exchange with SEC counsel.

JUDGE:  I have such trouble understanding the facilitating payment exception.  [...] I mean, it almost swallows the rest of the statute.  And I know it’s in the legislative history that these, I think reference is made to grease payments, somehow to grease the skids.  How do I separate those payments, which do seem to be contemplated, from the payments that [the SEC] alleges were made in this case, which you think are squarely within the FCPA’s prohibition?  [...] And I don’t understand it.  Whether we make the distinction based on size of payments, regularity of payments, purpose of payments, nature of the — of the favorable conduct elicited.  I just really struggle with it.”

SEC:  [...] For the — for the exception to apply, the SEC’s position is that two elements must be met.  There must be a purpose to expedite an act and the act must be a routine government action within the meaning of the statute.

JUDGE:  Both those could apply to the temporary — to the temporary import, though, couldn’t it?

SEC:  Well, in what way, Your Honor?

JUDGE: Well, because it purpose was to expedite an act and it was a routine government action.  These import permits were granted all the time.

Elsewhere in the transcript, one will find Judge Ellison expressing concern about the SEC’s position that the defendants violated the FCPA’s books and records provisions because Noble Corp. booked the alleged bribe payments in a special facilitating payments account based on the good faith belief that they were indeed facilitating payments.  The following exchange occurred.

JUDGE:  You also argue that recording the payments as facilitating payments in the company’s book is essentially duplicative or duplicitous.  Would payments to government officials, just say to that, like so, would that be accessible?

SEC:  Your honor, these payments were recorded as a particular kind of payment, a lawful payment.  A payment that meets a legal exception to liability under the FCPA.  As this Court recognized in the motion to dismiss opinion, calling a payment something that it is not is false.

JUDGE: What would they have needed to call it?  That’s what I am asking?

SEC:  Payments to government official — I can’t speculate all the things that it possibly could have been called, but payments to government officials may have been – may have been adequate.  However, they weren’t designated payments to government officials in this case …

Elsewhere in the transcript, the SEC acknowledged that the facilitating payments exception is “a difficult area to understand, largely because of the wording of the exception and the statute overall.”  The following exchange occurred.

SEC: This is how we conceptualize it.  And I think it’s — and it’s clearly evidenced and its manifest in the words of the statute and the exception.  Now, the facilitating payment exception is exactly that. It’s an exception for government actions that are routinely or ordinarily carried out. And you’ll see in the — in the exception itself, a number of examples that Congress set out as — as possible facilitating payment – facilitating payments and government — routine government actions. [...]

JUDGE: In your mind, does “routine” mean frequent or does “routine” mean automatic or does “routine” mean both?

SEC: I think that’s a fact issue, Your Honor. I think there could be situations where a routine governmental action can be something automatic. I think there can be situations where a — a routine governmental action is something that is issued or granted by a government entity or official routinely, so frequently, or without exception.

JUDGE: Well, I’m trying to identify which of the those things.  I mean, what if it were routine but not consistent; or automatic but not routine, it only happened once every five years?

SEC:  [...] Now, what’s important here is that the SEC posits whether a particular action is a routine governmental action is an objective inquiry.  You just take a look at the Nigerian law that governs this particular action.  If the Nigerian law says that it’s nondiscretionary, that’s the end of the inquiry.

JUDGE: Well, that’s what I trying to identify.  The fact that it’s nondiscretionary.  Do you think — do you agree with that?

SEC: No, Your Honor.

JUDGE:  Tell me what the lynchpin is?

SEC: The lynchpin is, again, it’s a fact-intensive inquiry.  What did the defendants – all right – what did the defendants believe was the action here?  And the action here was in — again, tying to the specific — specific facts of this case, the action was applying for temporary import authorizations that had, prior to the relevant period in this case, had been routinely granted.

JUDGE: Meaning — meaning consistently?

SEC: Consistently, to our — to our knowledge, without exception.

JUDGE:  Consistently and frequently?

SEC:  Yes

JUDGE:  Okay.

SEC:  Every — every time an application was put in, they received the authorization.

JUDGE: And those — to the best of your knowledge were those applications put in without — without any further monetary inducement or were they accompanied by monetary inducement?

SEC:  Accompanied by monetary inducement; hence, the payment itself, the facilitating payment, for a government action that was routinely rendered.

JUDGE: So the government would grant these routinely if it was paid?

SEC:  Well, Your Honor, we don’t know whether — we don’t necessarily know whether they were — whether they would have been granted if — if a payment had — payment had not been made, but what — what matters here is the payments were made –

JUDGE:  Isn’t that a big difference, though?  If it would have been granted anyway, without a payment being made, isn’t that signficant?

SEC:  I don’t think so, Your Honor.

In short, while many FCPA commentators continue to believe that the FCPA is a simple, straight-forward statute (and that claims of vagueness and ambiguity are the stuff of sugar plums and tinkerbells), the above example is just the latest of many (and please do visit this prior post for the numerous other examples) where federal court judges remain confused about various aspects of the FCPA.