Archive for the ‘Foreign Nationals’ Category

Other DOJ Defeats When Asserting Aggressive Enforcement Theories Against Foreign Nationals

Monday, August 31st, 2015

You be the JudgeIn the minds of some, the many recent DOJ defeats when put to its burden of proof in individual Foreign Corrupt Practices Act enforcement actions are of little consequence.

Some have written off the DOJ’s struggle in the recent Sigelman action because it was the result of a key witness admitting he gave false testimony during the trial.

Others have written off the DOJ’s ultimate defeat in the enforcement action against Lindsey Manufacturing and two of its executives because it was, most directly, the result of numerous instances of prosecutorial misconduct.

To some, the DOJ’s defeat in the O’Shea enforcement action  was no big deal because it was, most directly, the result of a key witness knowing “almost nothing” in the words of the judge even though the judge admonished the DOJ that it “shouldn’t indict people on stuff you can’t prove.”

The DOJ’s defeat in the Africa Sting cases, well, where do you even begin with that one.

However, you add up these defeats of little consequence in the minds of some, and the end result is a big consequence:  the DOJ often loses when put to its burden of proof.

The most recent example occurred in a pre-trial ruling in the DOJ’s FCPA prosecution of Lawrence Hoskins. The DOJ’s defeat was not because the quality of its evidence, not because of the DOJ’s conduct in the investigation, but rather a flawed legal theory.

The same people who are likely to view the above DOJ defeats as having little consequence are also likely to view the DOJ’s pre-trial defeat in Hoskins as an anomaly.

Except that it is not.

As summarized in this post, in three prior instances federal court judges have rebuked DOJ enforcement theories in FCPA enforcement actions involving foreign national defendants.

As highlighted in this prior post, in U.S. v. Castle, both the N.D. of Texas and the 5th Circuit ruled against the DOJ as a matter of law regarding the issue of whether “foreign officials” (in the case Canadian nationals) who are excluded from prosecution under the FCPA itself, could nevertheless be prosecuted under the general conspiracy statute (18 USC 371) for conspiring to violate the FCPA.  The courts held that “foreign officials”  could not be prosecuted for conspiring to violate the FCPA.  The rationale was that Congress, in passing the FCPA, only chose to punish one party to the bribe agreement and the DOJ could not therefore  ”override the Congressional intent not to prosecute foreign officials for their participation in the prohibited acts” through use of the conspiracy statute.  The court decisions were based in part on Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 L.Ed. 206 (1932), a case that also featured prominently in the recent Hoskins pre-trial ruling.

In U.S. v. Bodmer, 342 F.Supp.2d 176 (S.D.N.Y. 2004), Judge Shira Scheindlin addressed the question “whether prior to the 1998 amendments, foreign nationals who acted as agents of domestic concerns, and who were not residents of the United States, could be criminally prosecuted under the FCPA.”  Judge Scheindlin concluded that the FCPA’s language, as it existed prior to the 1998 amendments, was ambiguous and she thus resorted to legislative history.  Judge Scheindlin further commented in dismissing the FCPA charges against Bodmer (as Swiss national) as follows.  “After consideration of the statutory language, legislative history, and judicial interpretations of the FCPA, the jurisdictional scope of the statute’s criminal penalties is still unclear.” Thus, the rule of lenity required dismissal according to Judge Scheindlin.

As highlighted in this prior post, in the Africa Sting enforcement action Judge Leon dismissed a substantive FCPA charge against Pankesh Patel (a U.K. national) based on the DOJ’s enforcement theory that Patel was subject to the FCPA’s jurisdiction because he allegedly sent a DHL packing in furtherance of the bribery scheme from the U.K. to the U.S.  Although Judge Leon did not issue a formal written decision, the trial court transcript is clear that he disagreed with the DOJ’s legal theory.

Granted the DOJ’s enforcement action against Hoskins remains active, but at present the DOJ is believed to be 0-4 when asserting aggressive FCPA enforcement theories against foreign nationals.

To some, this is of little consequence.

The rule of law would disagree.

It is interesting to note that the DOJ of course asserts aggressive FCPA enforcement theories against foreign companies as well.However, no foreign company has challenged the DOJ in these enforcement actions – it is simply easier, more certain and more efficient to roll over, play dead, and agree to resolve the enforcement action.

Yet, if certain foreign companies would have challenged the DOJ, the likely result in several enforcement actions may have been DOJ defeats.

Judge Trims DOJ’s FCPA Enforcement Action Against Lawrence Hoskins

Monday, August 17th, 2015

Judicial DecisionLast week, U.S. District Court Judge Janet Bond Arterton (D. Conn.) trimmed the DOJ’s FCPA enforcement action against Lawrence Hoskins (a former Alstom executive criminally charged in August 2013 – see here) by granting in part his motion to dismiss and denying a DOJ motion in limine.

In pertinent part, Hoskins (a U.K. citizen) moved to dismiss count one of the DOJ’s Third Superseding Indictment “on the basis that it charges a legally invalid theory that he could be criminally liable for conspiracy to violate the FCPA even if the evidence does not establish that he was subject to criminal liability as a principal, by being an “agent” of a “domestic concern.”

As stated by Judge Arterton:

“Relatedly, the Government moves in limine to preclude Defendant from arguing to the jury that it must prove that he was the agent of a domestic concern because the Government contends that Defendant can also be convicted under theories of accomplice liability. For the reasons that follow, Defendant’s Motion to Dismiss Count One of the Third Superseding Indictment will be granted in part to preclude Defendant’s FCPA conspiracy prosecution from being de-linked from proof that he was an agent of a domestic concern and the Government’s Motion in Limine is denied.”

In the words of Judge Arterton:

“[T]hese two motions put before the Court the question of whether a nonresident foreign national could be subject to criminal liability under the FCPA, even where he is not an agent of a domestic concern and does not commit acts while physically present in the territory of the United States, under a theory of conspiracy or aiding and abetting a violation of the FCPA by a person who is within the statute’s reach.2 The Court concludes that the answer is “no” and that accomplice liability cannot extend to this Defendant under such circumstances and thus Defendant’s Motion to Dismiss Count One is granted in part and the Government’s Motion in Limine is denied.”

Judge Arterton began by discussing the Gebardi Principle that has been used previously by judges in dismissing DOJ FCPA enforcement actions against foreign nationals (Castle and Bodmer referenced below)  Specifically, the Judge noted as follows.

“[T]he Gebardi principle is that where Congress chooses to exclude a class of individuals from liability under a statute, “the Executive [may not] . . . override the Congressional intent not to prosecute” that party by charging it with conspiring to violate a statute that it could not directly violate. United States v. Castle, 925 F.2d 831, 833 (5th Cir. 1991); see also United States v. Bodmer, 342 F. Supp. 2d 176, 181 n.6 (S.D.N.Y. 2004) (“In Gebardi, the Supreme Court held that where Congress passes a substantive criminal statute that excludes a certain class of individuals from liability, the Government cannot evade Congressional intent by charging those individuals with conspiring to violate the same statute.”). The Gebardi principle also applies to aiding and abetting liability.

In determining whether the Gebardi principle applies, the question is “not whether Congress could have” reached a certain class of individuals under the conspiracy or aiding and abetting statutes, “but rather whether Congress intended to do so, or more specifically, whether Congress intended the general conspiracy statute” to apply to these individuals.5 Castle, 925 F.2d at 835 (emphasis in original).

The Government maintains that Gebardi recognized only a “narrow exception to [the] long-established legal principle” that “the conspiracy and accomplice liability statutes apply to classes of persons who lack the capacity to commit a violation of the underlying substantive crime.”  It maintains that this exception only “applies in two limited circumstances: (1) where a class of person is a necessary party to the crime and was specifically excluded from prosecution for the substantive violation by Congress (e.g., the foreign official who receives the bribe payment under the FCPA, or the woman who is transported across state lines under the Mann Act); or (2) where the substantive statute was enacted to protect the class of person to which the individual belongs (e.g., victims).”  Defendant maintains that Gebardi applies whenever “Congress affirmatively chooses to exclude a certain class of individuals from liability under a criminal statute.”

The Court agrees with Defendant that the Government’s interpretation of Gebardi is too narrow and that while the two “[f]actual scenarios . . . posited by the government bring Congress’s intent into view and, thereby, make it easier to glean the existence of an affirmative legislative policy,” Congressional intent can be evident in other circumstances. For example, in Amen, the Second Circuit applied Gebardi and held that a person who was not the head of a criminal enterprise could not be subject to the drug “kingpin” statute’s sentencing enhancement under a theory that he aided and abetted a violation, because “[w]hen Congress assigns guilt to only one type of participant in a transaction, it intends to leave the others unpunished for the offense.” 831 F.2d at 381.

The Second Circuit’s reasoning was not, as the Government maintains, that a violation of the kingpin statute requires “the participation of two classes of persons— those who lead a criminal enterprise, on the one hand, and those who are led, on the other” and that “Congress chose only to provide for an enhanced punishment of one of those necessary parties.”  Rather, the Second Circuit reasoned that while the statute’s “legislative history makes no mention of aiders and abettors, it makes it clear that the purpose . . . was not to catch in the [kingpin] net those who aided and abetted the supervisors’ activities.”

Judge Arterton relied extensively on the FCPA’s legislative history to support her decisions. The application section of the ruling states in its entirety as follows.

“The clearest indication of legislative intent is the text and structure of the FCPA, which carefully delineates the classes of people subject to liability and excludes nonresident foreign nationals where they are not agents of a domestic concern or did not take actions in furtherance of a corrupt payment within the territory of the United States. See Community for Creative Non–Violence v. Reid, 490 U.S. 730, 739 (1989) (“The starting point for [the] interpretation of a statute is always its language.”).

In United States v. Castle, 925 F.2d 831, 832 (5th Cir. 1991), the Fifth Circuit applied Gebardi to conclude that another class of individuals not subject to liability as principals under the FCPA—the foreign officials who accept bribes—could not be prosecuted for conspiracy to violate the FCPA. The Fifth Circuit found an intent in the FCPA to exclude the foreign bribe recipients because, in enacting the FCPA in 1977 in the aftermath of the Watergate scandal, Congress was principally “concerned about the domestic effects of such payments,” such as “the distortion of, and resulting lack of confidence in, the free market system within the United States.” Id. at 834–35.

Congress was aware that it “could, consistently with international law, reach foreign officials in certain circumstances,” but it was also concerned about “the ‘inherent jurisdictional, enforcement, and diplomatic difficulties’ raised by the application of the bill to non-citizens of the United States” and decided not to do so. Id. at 835 (quoting H.R.Conf.Rep. No. 831, 95th Cong., 1st Sess. 14, reprinted in 1977 U.S.Code Cong. & Admin.News 4121, 4126).7 From the text of the statute and the legislative history expressing concern about reaching non-citizens, the Fifth Circuit found “in the FCPA what the Supreme Court in Gebardi found in the Mann Act: an affirmative legislative policy to leave unpunished a well-defined group of persons who were necessary parties to the acts constituting a violation of the substantive law.” Id. at 836.

Legislative History of 1977

Although the text and structure of the FCPA provide strong indication that Congress did not intend for non-resident foreign nationals to be subject to the FCPA unless they were agents of a domestic concern or acted in the territory of the United States, the Court also considers the legislative history of the Act.

While the extensive legislative history of the enactment of the FCPA in 1977 and its amendments in 1998 identified by the parties contain little discussion of accomplice liability, that which does exist is consistent with what the plain text and structure of the final enactment implies regarding the limits of liability for non-resident foreign nationals. The initial version of the Senate bill introduced by the Committee on Banking, Housing and Urban Affairs on June 2, 1976 made it unlawful for any U.S. “issuer” or “domestic concern” to use any means or instrumentality of interstate commerce to authorize or pay a bribe. S. 3664, 94th Cong. (1976). “Domestic concern” was defined to include (1) U.S. citizens and nationals and (2) entities owned or controlled by U.S. citizens and nationals that were either incorporated in or had a principal place of business in the United States. Id. at 7.

An amendment to the Senate bill responded to a request by the administration of President Carter “to clearly cover under the bill individuals making payments” that was not “crystal clear” in the original version. Markup Session on S. 305, Senate Comm. on Banking, Housing and Urban Affairs, 95th Cong., 8 (Apr. 6, 1977). The definition of domestic concern was left unchanged, but the proposal added that officers, directors, employees and stockholders acting on behalf of U.S. issuers or domestic concerns, irrespective of nationality, would be liable for making bribes on behalf of the company. S. Rep. No. 95-114, at 11; 123 Cong. Rec. 13817 (1977). Although the Carter Administration requested that liability be extended to foreign subsidiaries of U.S. companies, Markup Session on S. 305 at 9, the Senate declined to do so, S. Rep. No. 95-114.

A competing House bill introduced on February 22, 1977 provided for broader liability for non-resident foreign nationals than the Senate bill, proposing liability not just for non-U.S. officers, directors, and employees of domestic concerns, but also (1) any “agent” of a U.S. issuer or domestic concern who “carried out” a bribe and (2) officers, directors, and employees of foreign affiliates irrespective of nationality. H.R. 3815 §§ 30A(c)(2), 3(c)(2), 3(f)(2)(A), 95th Cong. (1977).

The FCPA as enacted included elements from both the Senate and House bills, extending liability to agents of domestic concerns as the House proposed, but limiting criminal liability of agents and employees of domestic concerns to a person who was a “United States citizen, national, or resident or is otherwise subject to the jurisdiction of the United States,” and predicated such person’s criminal liability on a finding that the domestic concern itself had violated the statute. 15 U.S.C. § 78dd-2(b)(1)(B)(3) (1977).

The final bill excluded foreign affiliates of U.S. companies, as the Senate proposed, which the House Conference Report described as a “recogni[tion] [of] the inherent jurisdictional, enforcement and diplomatic difficulties raised by the inclusion of foreign subsidiaries of U.S. companies in the direct prohibitions of the bill.” H.R. Conf. Rep. No. 95-831, at *14. The Report explained, however, that because U.S. citizens, nationals, and residents were defined as domestic concerns, they could be liable for engaging in bribery “indirectly” through another person and that the “jurisdictional, enforcement and diplomatic difficulties” that applied to extending liability to foreign subsidiaries did not apply to “citizens, nations, or residents of the United States.” Id.

The Government notes that early versions of the Senate and House committee reports discussed accomplice liability: The committee fully recognizes that the proposed law will not reach all corrupt payments overseas. For example, Sections 2 and 3 would not permit prosecution of a foreign national who paid a bribe overseas acting entirely on his own initiative. The committee notes, however, that in the majority of bribery cases investigated by the SEC some responsible official or employee of the U.S. parent company had knowledge of the bribery and either explicitly or implicitly approved the practice. Under the bill as reported, such persons could be prosecuted. The concepts of aiding and abetting and joint participation would apply to a violation under this bill in the same manner in which those concepts have always applied in both SEC civil actions and in implied private actions brought under the securities laws generally. H.R. Rep. No. 95-640, at 8 (1977); S. Rep. No. 94-1031, at 7 (1976).

As discussed above, this legislative history discussing an early version of the bill was later clarified in response to concerns by the Carter Administration that the extent of individual liability (including for U.S. nationals) was not “crystal clear.” Rather than resorting to concepts of accomplice liability, the enacted version specifically delineated the extent of individual liability by “mak[ing] it clear that” the delineated individuals were “covered directly.” Markup Session on S. 305, Senate Comm. on Banking, Housing and Urban Affairs, 95th Cong., 8, 12 (Apr. 6, 1977). Therefore, the discussion of accomplice liability cited by the Government does not suggest that Congress intended for those who were excluded from direct liability under the Act to be subject to accomplice liability but only shows that Congress considered imposing individual liability based on concepts of accomplice liability but instead chose to do so directly and carefully delineated the class of persons covered to address concerns of overreaching.

Thus, as in Amen and Gebardi, even absent explicit discussion in the legislative history of accomplice liability, the carefully-crafted final enactment evinces a legislative intent to cabin such liability. See Amen, 831 F.2d at 382; Gebardi, 287 U.S. at 123. As the Fifth Circuit explained, when Congress “listed all the persons or entities who could be prosecuted” under the FCPA, it “intended that these persons would be covered by the Act itself, without resort to the conspiracy statute” and, as in Gebardi, that intent cannot be circumvented by resort to conspiracy and aiding and abetting liability. Castle, 925 F.2d at 836.

1998 Amendments

While the Government argues that the original version of the FCPA in 1977 provided for accomplice liability, it maintains that after the 1998 amendments to the FCPA “Congress unequivocally provided that it intended the accomplice liability and conspiracy statutes to apply to foreign nationals not otherwise subject to the FCPA as principals.” The 1998 amendments to the FCPA were “enacted to ensure the United States was in compliance with its treaty obligations,” United States v. Esquenazi, 752 F.3d 912, 923 (11th Cir. 2014), after the United States ratified the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention”). Dec. 17, 1997, S. Treaty Doc. No. 105–43, 37 I.L.M.; International Anti– Bribery and Fair Competition Act of 1998, Pub.L. No. 105–366, 112 Stat. 3302.

The OECD Convention required each signatory country to “take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally” to bribe foreign officials. OECD Convention art. 1.1. In response, the 1998 amendments expanded the scope of liability in three ways. First, Congress added 15 U.S.C. § 78dd-3(a), which prohibited those individuals or entities that did not already fall under other provisions of the statute from taking action “while in the territory” of the United States in furtherance of corrupt payments. 15 U.S.C. § 78dd-3(a). Second, the 1998 amendments eliminated a disparity in penalties between U.S. and foreign nationals acting as agents of domestic concerns whereby previously foreign nationals were subject only to civil penalties. The amendment made clear that foreign nationals acting as agents of domestic concerns could be criminally prosecuted for violating the FCPA if they used some manner or means of interstate commerce. 15 U.S.C. § 78dd-2. Third, Congress provided for nationality jurisdiction12, providing that it “shall also be unlawful for any United States person to corruptly do any act outside the United States in furtherance of” a foreign bribe. 15 U.S.C. § 78dd-2(i)(1); see also S. REP. 105-277, at *2–3 (1998) (describing these three changes to the FCPA as being intended “to conform it to the requirements of and to implement the OECD Convention”).

The Government maintains that because the OECD Convention required each signatory country to make it a “criminal offense under its law for any person” to pay a foreign bribe, OECD Convention, art. 1.1 (emphasis added), the “1998 amendments expanded the jurisdictional reach of the FCPA to cover any person over whom U.S. courts have jurisdiction” and a contrary interpretation “would place the United States in violation of its treaty obligations.” While the Supreme Court has admonished that “courts should be most cautious before interpreting . . . domestic legislation in such manner as to violate international agreements,” Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 539 (1995), this Court does not agree with the Government’s contention that the OECD Convention required or even contemplated the extent of liability sought by the Government here by using the term “any person.”

Rather, the OECD’s reference to “any person” is cabined by Article 4 of the Convention, addressing jurisdiction, which provides that each signatory “shall take such measures as may be necessary to establish its jurisdiction over the bribery of a foreign public official when the offense is [1] committed in whole or in part in its territory” (OECD Convention, art. 4.1) or [2] by its own nationals while abroad (id., art. 4.2). Therefore, there is no indication that the OECD Convention requires the United States to prosecute foreign bribery committed abroad by non-resident foreign nationals who conspire with United States citizens.

Based on the text and structure of the FCPA and the legislative history accompanying its enactment and its amendment, the Court concludes that Congress did not intend to impose accomplice liability on non-resident foreign nationals who were not subject to direct liability. Count One will not be dismissed in its entirety, however, because if the Government proceeds under the theory that Mr. Hoskins is an agent of a domestic concern and thus subject to direct liability under the FCPA, the Gebardi principle would not preclude his criminal liability for conspiring to violate the FCPA. The Government may not argue, however, that Defendant could be liable for conspiracy even if he is not proved to an agent of a domestic concern.”


Hoskins is represented by Christopher Morvillo and David Raskin of Clifford Chance.

Into The FCPA’s Jurisdiction Thicket

Tuesday, April 28th, 2015

ThicketThe jurisdiction elements of the Foreign Corrupt Practices Act are like a thicket.

It is easy to get snarled and snagged (and thus confused) as to the law’s jurisdiction elements.

Hopefully this post can clear things up a bit.

Jurisdiction under the FCPA’s anti-bribery provisions depends on the type of business organization or person subject to the FCPA.


  • As to U.S. “issuers” and “domestic concerns,” the FCPA contains both territorial jurisdiction and nationality jurisdiction.  Territorial jurisdiction refers to “use of the mails or any means or instrumentality of interstate commerce” in furtherance of an improper payment.  Nationality jurisdiction, added to the FCPA in the 1998 amendments, means that an improper payment scheme is prohibited by the FCPA’s anti-bribery provisions “irrespective of whether [the U.S. person] makes use of the mails or any means or instrumentality of interstate commerce in furtherance” of an improper payment.  Thus, as to U.S. “issuers” and “domestic concerns,” the FCPA’s anti-bribery provisions have extraterritorial jurisdiction meaning that the FCPA can be violated even if an improper payment scheme is devised and executed entirely outside of the U.S.
  • As to foreign “issuers,” the FCPA’s anti-bribery provisions apply only to the extent there is territorial jurisdiction, in other words, “use of the mails or any means of instrumentality of interstate commerce” in furtherance of an improper payment scheme. (The alternative nationality jurisdiction prong added to 78dd-1 in 1998 only applies to U.S. issuers).
  • As to “persons” other than an “issuer” or “domestic concerns,” the FCPA’s anti-bribery provisions apply to the extent that, “while in the territory of the U.S.,” the person “makes use of the mails or any means or instrumentality of interstate commerce” or engages in “any other act in furtherance” of an improper payment scheme.

This recent post highlighted the judicial benchslapping the DOJ received in a foreign bribery case involving foreign nationals (U.S. v.  Vassilieve et al.). The prior post noted that the alleged conduct was in the same general sphere of the FCPA, but that DOJ’s indictment did not contain any U.S. jurisdictional allegations, and likely because of this, the bribery scheme was not charged as an FCPA offense.

An informed and astute reader correctly notes however that the FBI Agent Affidavit in Support of the Criminal Complaint specifically refers to “at least thirty … e-mail exchanges relevant to the bribery scheme … [that] passed through the Google server “” which is located in the Northern District of California.”  As stated in the affidavit, “accordingly, a significant number of e-mail communications that facilitated the commission of the crimes described herein traveled to and through the Northern District of California.”

Would such e-mail communications have provided the necessary jurisdictional hook for the DOJ to charge the foreign national defendants with FCPA anti-bribery violations?

Informed readers no doubt recall SEC v. Straub (see here for the prior post), a case of first impression concerning the jurisdictional parameters of 78dd-1 as it relates to foreign national defendants.  In Straub, a decision by the S.D. of N.Y. on a motion to dismiss (the case is still pending), the SEC alleged that the foreign national defendants were subject to the FCPA’s anti-bribery provisions because e-mails in furtherance of the bribery scheme – while sent from locations outside of the U.S. – were  routed through and/or stored on network services located within the U.S.

Judge Sullivan found the jurisdictional element of 78dd-1 (use of the “mails or any means or instrumentality of interstate commerce”) to be ambiguous and he thus consulted legislative history.  In reviewing the legislative history, Judge Sullivan concluded that the corrupt intent element of the FCPA did not apply to the jurisdictional component of the FCPA.  Accordingly, Judge Sullivan concluded that e-mails routed through and/or stored on network servers located within the U.S. are sufficient to plead the jurisdictional element of an FCPA anti-bribery violation even if the defendant did not personally know where his e-mails would be routed and/or stored.

The foreign national defendants in U.S. v. Vassilieve were not associated with an issuer (as in Straub).  Thus, to the extent the foreign national defendants could have been charged with FCPA anti-bribery violations, it would have been under the 78dd-3 prong of the FCPA.

As noted above however, the 78dd-3 prong of the FCPA has a more stringent jurisdictional element compared to the 78dd-1 prong relevant to foreign nationals.  The jurisdictional prong of 78dd-3 is as follows:  “while in the territory of the U.S.,” the person “makes use of the mails or any means or instrumentality of interstate commerce” or engages in “any other act in furtherance” of an improper payment scheme.

The only judicial scrutiny of this prong of the FCPA occurred in the Africa Sting case during which Judge Richard Leon (D.D.C.) dismissed substantive FCPA charges against Pankesh Patel (a U.K. national) that were premised on him sending a DHL package in furtherance of the alleged (and manufactured) bribery scheme from the U.K. to the U.S.

As highlighted in this June 2011 post, Judge Leon benchslapped the DOJ on this jurisdictional theory.

In short, the jurisdiction elements of the FCPA’s anti-bribery provisions are a thicket and subtle differences exist in 78dd-1 and 78dd-3 in regards to FCPA exposure of foreign national defendants.

The DOJ Gets Benchslapped In Foreign Bribery Case

Thursday, April 23rd, 2015

Charles B.In recent FCPA year in reviews (see here for 2014 and here for 2013) topics have included judicial scrutiny of non-FCPA cases because the decisions (mostly concerning jurisdictional issues relevant to foreign actors) should cause pause as to certain Foreign Corrupt Practices Act enforcement theories against foreign actors.

The 2015 year in review is sure to include mention of U.S. v. Vassilieve et al. (a recent case highlighted here) in which U.S. District Court Judge Charles Breyer (N.D. Cal.)(pictured) delivered a major benchslap to the DOJ.

The case involved conduct in the same general sphere of the Foreign Corrupt Practices Act.

Namely, the DOJ alleged in this indictment that:

Yuri Sidorenko (a citizen of Ukraine and St. Kitts & Nevis who resided in Dubai and the Chairman of the EDAPS Consortium Advisory Counsel – a Ukrainian conglomerate of various companies that manufactured and supplied a variety of identification and security products, including passports, drivers licenses and other such products) and

Alexander Vassiliev (also a citizen of Ukraine and St. Kitts & Nevis who resided in Dubai and the Chairman of the Board of EDAPS)

provided money and other things of value to Mauricio Siciliano (an executive of the International Civil Aviation Organization (“ICAO”),  a United Nations specialized agency, responsible for, among other things, standardizing machined-readable passports, including biometric passports) so that Siciliano would use his official position as an Executive of ICAO to benefit EDAPS’s business as well as Sidorenko and Vassiliev personally.  According to the indictment Siciliano (a Venezuelan national who primarily resided in Canada where ICAO is headquartered and had a Canadian passport) was an executive at ICAO who was specifically assigned to work in ICAO’s Machine Readable Travel Documents Programme.

Siciliano would likely be a “foreign official” under the FCPA given the “public international organization” prong of the “foreign official” element. However, as it relates to foreign nationals like Sidorenko and Vassiliev the FCPA’s anti-bribery provisions contain the following jurisdictional element:  ”while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance” of a bribery scheme.

The DOJ’s indictment did not contain any U.S. jurisdictional allegations, and likely because of this, the bribery scheme was not charged as an FCPA offense.

Rather, the indictment alleged that the U.S. was a member of ICAO and provided support to ICAO by, among other things, annual monetary contributions.  According to the indictment, during the relevant time period, U.S. contributions to ICAO constituted approximately 25% of its annual budget.

Presumably on the basis of this allegation, the DOJ charged the defendants with: (i) conspiracy to commit honest services fraud; (ii) honest services fraud; (iii) conspiracy to solicit and to give bribes involving a federal program; (iv) soliciting bribes involving a federal program; (v) giving bribes involving a federal program; and (vi) aiding and abetting offenses.

Vassiliev and Siciliano filed similar motions to dismiss (here and here) with Vassiliev’s motion to dismiss stating in pertinent part:

“This is a most unusual indictment. It levels charges against foreign nationals and is based solely on foreign conduct. The indictment candidly states that the alleged offenses were committed in their entirety outside the United States—they were “begun and committed outside the jurisdiction” of any State or district.

All three defendants are foreign citizens and foreign residents. [...] The indictment contains no allegation that any of them committed any criminal act in the United States. In fact, the indictment contains no allegation that any of them ever entered the United States for any reason whatsoever, let alone in connection with the crime charged in the indictment. The gist of the indictment is that Vassiliev and Sidorenko sought to pay bribes and/or gratuities to Siciliano, who worked for an agency of the United Nations based in Canada, in order to influence contracts awarded by other foreign agencies. [...]

These criminal counts are fundamentally flawed. Neither statute has extraterritorial application, so the indictment fails to state an offense under United States law. Even if the statutes were found to apply extraterritorially, the alleged facts in this case fail to allege minimum contacts or sufficient nexus between the defendants and the United States, so the Due Process Clause forbids this prosecution.”

Judge Breyer granted the motion to dismiss and his comments in this transcript make for an interesting read.

“What I’m going to do is read the facts as I have gleaned them from the indictment and I’d like the Government to — if  the Government believes that I’ve misstated it, I would like you to make note.

The International Civil Aviation Organization has been a United Nations specialized agency since 1944. The United States has been a member of this agency since its formation. One of the agency’s responsibilities is standardizing machine readable passports. The standards that this agency established were used to determine which features would be utilized in passports in a variety of countries, including the United States.

The time period relevant to the indictment is 2005, 2010. And during this time, the United States made annual monetary contributions to the agencies exceeding $10,000 per year. Throughout this time period contributions from the United States constituted 25 percent of the agency’s annual budget.

Mr. Siciliano was an employee of this agency and was specifically assigned to work in the Machine Readable Travel Documents Program. Mr. Siciliano worked and resided in Canada, where the agency that we’ve just discussed is headquartered. He held a Canadian passport, but is actually a Venezuelan national.

Mr. Sidorenko and Mr. Vassiliev were chairmen of a Ukrainian conglomerate of companies that manufactured and supplied security and identity products and their consortium, how they acted, was called EDAPS. It’s called the EDAPS Consortium.

Mr. Sidorenko is a citizen of Ukraine, Switzerland and St. Kitts and Nevis. Not of the United States. But he primarily resided in Dubai during the relevant time period.

Mr. Vassiliev also resided in Dubai, but he is a citizen of Ukraine and St. Kitts and Nevis. He’s not an American citizen either.

And, of course, the company is not — I mean, the agency is not an American agency.

The indictment alleges that Mr. Sidorenko and Mr. Vassiliev provided money and other things of value to Mr. Siciliano in exchange for Mr. Siciliano using his position at this agency to benefit EDAPS, as well as Sidorenko and Vassiliev personally. That is to say, the allegation is that the — that Mr. Sidorenko and Vassiliev, Ukrainians, provided things of value to Mr. Siciliano in Canada in exchange for Mr. Siciliano using his position at a place in Canada to benefit an Ukrainian company, as well as these — Mr. Sidorenko and Mr. Vassiliev personally, these Ukrainians personally.

Mr. Siciliano sought to benefit the Ukrainian consortium by introducing and publicizing EDAPS to Government officials and entities, by arranging EDAPS to appear at the agency’s conferences, and by endorsing the Ukrainian consortium to other organizations and contacts.

The indictment also alleges that Mr. Siciliano assisted Mr. Vassiliev’s girlfriend in obtaining a visa to travel to Canada in 2007.

Around the same time Mr. Siciliano also considered arranging to obtain a visa for Mr. Sidorenko by hiring Mr. Sidorenko as a consultant for this agency.

Additionally, the three defendants arranged to have Mr. Siciliano’s son sent to Ukraine to work for Mr. Sidorenko.

During there time period, Mr. Siciliano wrote an email message to Mr. Vassiliev seeking payment of dues via wire transfer to a Swiss bank account.

A few years later, Mr. Siciliano sent an email advising Mr. Vassiliev and Mr. Sidorenko that they owed him three months payment. A few weeks after this email, Mr. Siciliano sent another email to Mr. Vassiliev referencing future projects, receiving the fruits of their marketing agreement, and inquiring about picking up his dues.

All of those activities, everything that I have said, occurred outside the United States of America between these three defendants, who, by the way, aren’t United States citizens, who never worked in the United States and whose use of the wires did not reach or pass through the United States.


[M]y first reaction in reading this indictment is that your office is to be congratulated because, apparently, you have reduced crime in the Northern District of California, and indeed in the United States of America, to such a point that you are using resources of your office to go after criminal activity that occurs in foreign countries and for that — that’s a rather interesting concept that, apparently, you thought this is a good use of assets and resources of the United States Attorney’s Office for the Northern District of California.

So it occurred to me: Is this statute or statutes, the honest services statute and the bribery statute, extraterritorial? And, fortunately, the Supreme Court has addressed this issue. As recently as 2010, they have said — Justice Scalia writing the opinion for a unanimous court, I might add, said that you just look at the statute. See what Congress said. Did Congress say it should be applied extraterritorial?

And you would concede, wouldn’t you, [DOJ attorney], there is nothing in the statute that talks about extraterritorial application, is there?

DOJ: There is nothing in the text of [the charged statutes]. I would submit that the legislative history of [a relevant statute] suggests that it was meant to be applied extraterritorially.

THE COURT: But you know there are those people, like judges, who look first to the statute. There is nothing in the statute.

DOJ: That is correct, your Honor.

THE COURT: Okay. So then if there is nothing in the statute, that doesn’t preclude necessarily the application of the statute extraterritorial, but we have to see whether or not that’s consistent with the general purpose of the statute.

DOJ: Correct, your Honor.

THE COURT: And it’s your view that since the Government contributes some funds to this agency, which is involved in national security — I guess we can talk about it in open court, can’t we?

DOJ: Yes, your Honor.

THE COURT: Okay. I didn’t want to clear the Court because of this strong national security interests that apparently are at issue here. But because they give money to this agency which is engaged in activities, some of which may impact national and international security arrangements, that’s the nexus for the United States Government to apply the statute in an extraterritorial way, is that correct?

DOJ: That’s certainly one of the key –

THE COURT: That’s your first point. We’ll get to the other points, but let’s deal with this first point first.

And so it occurred to me by that logic, the United States being a very generous country, gives a lot of money to a lot of foreign countries. They give over a billion dollars to Egypt. They give vast sums of money to Mexico. They give sums of money to many, many countries all over the world.

And then I wonder by their giving some money to a foreign country, does that then give them jurisdiction to apply statutes, such as the honest services statute, to individuals who are operating in that country or outside the United States?

For example, can you prosecute — you give some money, let’s say, to Mexico and — for programs involving security in Mexico, the border. Let’s make it right down your alley. And it turns out that somebody who is running one aspect of that program in Mexico, a Mexican national, favors his brother-in-law and takes a bribe from his brother-in-law to get his brother-in-law’s children a job somewhere.

Are you suggesting that the United States of America under an honest services theory could prosecute the individual in Mexico?

DOJ: Under honest services, there would have to be the use of a mailing or wire. Under [a relevant statute] I believe those facts would support a prosecution, if the funding were made pursuant to a federal program.

THE COURT: So, in other words, if I — it’s your view, your view, that the United States of America can police foreign companies in the exercise of their operation involving foreign citizens on matters unrelated to the program which the United States gave money for — that is, for the specific purpose of the program — and that they then have jurisdiction to act in that regard.

DOJ: It is, your Honor, if it is pursuant to a federal program.

THE COURT: And do you have one case that says that?

DOJ: We have Campbell, your Honor, which was a District of Columbia case in which an Australian national was charged with bribery under 666 for conduct in Afghanistan relating to his work with a private contractor that received aid from the US AID.

THE COURT: And the program involved was a program for the benefit of the United States, is that correct, in that case?

DOJ: It was a program through which the United States policy interests were advanced, your Honor.

THE COURT: So if there is ever, ever a policy interest of the United States of America in anything a foreign country — that occurs in a foreign country, the United States Attorney’s Office for the Northern District of California will vindicate the way the laws apply — the honest services law applies. You’re going to wipe out bribery and honest services throughout the world. I want to congratulate you for that.

And I never in my life, in 50 years of criminal practice, seen a more misguided prosecution as the one that you’ve brought. I just don’t even get it. I don’t get it, how you can — how you can use resources of the United States Attorney’s Office to prosecute some foreign nationals involved in a foreign company, engaged in conduct which was foreign, on doing things that weren’t directly related to the contribution of the United States to that entity.

DOJ: Your Honor –

THE COURT: Who did you get permission from to bring this prosecution? Anybody in Washington?

DOJ: We — this was a Northern District of California prosecution, your Honor.

THE COURT: Did you get permission from anyone in the Department of Justice in Washington DC to bring this prosecution?

DOJ: It was not required. We coordinated –

THE COURT: It implicates foreign countries, doesn’t it?

DOJ: It does, your Honor.

THE COURT: And you didn’t choose fit to ask the Department of Justice whether in their smarter sentencing, smarter criminal law enforcement program this is a good use of your resources?

DOJ: We received office approval. We also coordinated with the State Department, your Honor.

THE COURT: Pardon?

DOJ: We also coordinated with the State Department.

THE COURT: In other words, it was the State Department, and that was whether or not this person had diplomatic immunity. I’m not even going to address that. That’s another issue entirely.

But you’re telling me this was a decision of the United States Attorney to bring this prosecution without the knowledge of the Department of Justice.

DOJ: It was a duly authorized decision by this office to do so.

THE COURT: My suggestion, since I’m dismissing this indictment, is that you bring an appeal, right away. I would be very interested in what the Ninth Circuit has to say about this, whether they think that there is enough of a nexus to apply statutes, such as the bribery statute and the honest services statute, to the conduct that’s alleged in this particular case.”

Elsewhere in the transcript, Judge Breyer stated:

“They actually have law enforcement in Canada. If you’re so concerned about the way some Canadians are operating with a Canadian-based company in dealing with Ukrainians, you can always phone the Mounties and they will investigate it if they think it’s appropriate.”


This program, this program — there is no allegation here that somehow the program failed or was in jeopardy by virtue of — by virtue of this purportedly allegedly corrupt person giving a contract or favoring somebody in Ukraine. That’s not — that’s not what’s alleged here.”

Judge Breyer followed up his oral decision granting the motions to dismiss with this written opinion.  In it, Judge Breyer states, among others things, as follows:

“Of course, the United States has some interest in eradicating bribery, mismanagement, and petty thuggery the world over. But under the government’s theory, there is no limit to the United States’s ability to police foreign individuals, in foreign governments or in foreign organizations, on matters completely unrelated to the United States’s investment, so long as the foreign governments or organizations receive at least $10,000 of federal funding. This is not sound foreign policy, it is not a wise use of scarce federal resources, and it is not, in the Court’s view, the law.”


“There is no allegation that even one dollar of the millions of dollars the United States presumably sent to ICAO was squandered.”

Although outside the FCPA context, Judge Breyer’s decision and reasoning is nevertheless relevant to FCPA enforcement actions against foreign actors that are frequently brought on sparse jurisdictional allegations.

Moreover, Judge Breyer’s comment that there was no allegation that the alleged bribery compromised the integrity of the program at issue is relevant to causation issues discussed in prior posts (see here).

Friday Roundup

Friday, April 3rd, 2015

Roundup2Looking for talent – got talent, FBI announcement, Bourke related, to FCPA Inc., and for the reading stack.  It’s all here in the Friday Roundup.

Looking for FCPA Talent?  Got Talent

If your firm or organization is looking for either a summer associate or full-time lawyer with a solid foundation in the FCPA, FCPA enforcement, and FCPA compliance, please e-mail me at I teach one of the only FCPA specific law school classes in the country (see here) and my Southern Illinois University law students who excelled in the class have, I am confident in saying, more practical skills and knowledge on FCPA topics than other law students.

I can recommend several students and I encourage you to give them an opportunity.

FBI Announcement

The FBI recently announced the establishment of international corruption squads.  In pertinent part, the release states:

“The FCPA … makes it illegal for U.S. companies, U.S. persons, and foreign corporations with certain U.S. ties to bribe foreign officials to obtain or retain business overseas. And we take these crimes very seriously—foreign bribery has the ability to impact U.S. financial markets, economic growth, and national security. It also breaks down the international free market system by promoting anti-competitive behavior and, ultimately, makes consumers pay more.

We’re seeing that foreign bribery incidents are increasingly tied to a type of government corruption known as kleptocracy, which is when foreign officials steal from their own government treasuries at the expense of their citizens. And that’s basically what these foreign officials are doing when they accept bribes in their official capability for personal gain, sometimes using the U.S. banking system to hide and/or launder their criminal proceeds.

The FBI—in conjunction with the Department of Justice’s (DOJ) Fraud Section—recently announced another weapon in the battle against foreign bribery and kleptocracy-related criminal activity: the establishment of three dedicated international corruption squads, based in New York City, Los Angeles, and Washington, D.C.

Special Agent George McEachern, who heads up our International Corruption Unit at FBI Headquarters, explains that the squads were created to address the national and international implications of corruption. “The FCPA allows us to target the supply side of corruption—the entities giving the bribes,” he said. “Kleptocracy cases allow us to address the demand side—the corrupt officials and their illicit financial assets. By placing both threats under one squad, we anticipate that an investigation into one of these criminal activities could potentially generate an investigation into the other.”

Corruption cases in general are tough to investigate because much of the actual criminal activity is hidden from view. But international corruption cases are even tougher because the criminal activity usually takes place outside of the U.S. However, members of these three squads—agents, analysts, and other professional staff—have a great deal of experience investigating white-collar crimes and, in particular, following the money trail in these crimes. And they’ll have at their disposal a number of investigative tools the Bureau uses so successfully in other areas—like financial analysis, court-authorized wiretaps, undercover operations, informants, and sources.

Partnerships with our overseas law enforcement counterparts—facilitated by our network of legal attaché offices situated strategically around the world—are an important part of our investigative arsenal. The FBI also takes part in a number of international working groups, including the Foreign Bribery Task Force, to share information with our partners and help strengthen investigative efforts everywhere. And we coordinate with DOJ’s Fraud Section—which criminally prosecutes FCPA violators—and the Securities and Exchange Commission—which uses civil actions to go after U.S. companies engaging in foreign bribery.

Our new squads will help keep the Bureau at the forefront of U.S. and global law enforcement efforts to battle international corruption and kleptocracy.”

Bourke Related

This October 2013 post highlighted a Democracy Now program that attempted to re-script the Frederic Bourke FCPA enforcement action.

Democracy Now returns to the story in this recent interview with former U.S. Senator George Mitchell.  Mitchell, like Bourke, invested in the Azeri project at issue, but unlike Bourke was not prosecuted.

Set forth below is the Q&A:

Democracy Now: Do you believe [Bourke] is a whistleblower, and do you believe that he should be exonerated.

Mitchell: Well, I believe that he should not have been convicted in the trial, in which conviction did occur. I think it was a very unfortunate circumstance, and as you describe it, regrettable from Rick Bourke’s standpoint.

Democracy Now: Do you believe he should now be exonerated, to be able to clear his name fully?

Mitchell: Well, yes, but I’m not sure what process would occur. He was tried, convicted. The conviction was upheld on appeal. But, as I said, I repeat, I do not believe he should have been convicted in the first place.

As noted in the prior post, while each is entitled to his/her own opinion about the Bourke case, the fact is – the case received more judicial scrutiny than arguably any other FCPA enforcement action.

To FCPA Inc.

It happens so often it is difficult to keep track of, but I try my best.

In the latest example of a DOJ FCPA enforcement attorney departing for FCPA Inc., Sidley Austin recently announced that James Cole (former DOJ Deputy Attorney General) “ has joined the firm in Washington, D.C. as a partner in its White Collar: Government Litigation & Investigations practice.”  As stated in the release, ““[Cole's] experience at the highest levels of law enforcement will enable him to counsel our clients facing the most difficult and complex challenges.”  Cole’s law firm bio states that he will focus “his practice on the full range of federal enforcement and internal investigation matters, with a particular emphasis on cross-border and multi-jurisdictional matters.”

While at the DOJ, Cole frequently articulated DOJ FCPA positions and enforcement policies.  (See here for example).

For the Reading Stack

From Professor Peter Henning in his New York Times Dealbook column – “Lawmakers Focus on How the SEC Does Its Job.”

From Miller & Chevalier attorneys – “DOJ is Losing the Battle to Prosecute Foreign Executives.”  An informative article regarding the DOJ’s struggles to prosecute foreign nationals for a variety of offenses (antitrust, FCPA, etc.).

An informative article here in the New York Law Journal by Marcus Asner and Daniel Ostrow  titled “A New Focus On Victims’ Rights in FCPA Restitution Cases.”

An interesting read here from the Wall Street Journal regarding China National Cereals, Oils and Foodstuffs Corp (Cotfco), a state-owned enterprise.

“In a few short years, Cofco has spent a couple billion dollars quietly buying up Australian cane fields, French vineyards and soybean pastures in Brazil, helping it become one of the world’s largest food companies. Now, Cofco is exploring deals in the world’s biggest exporter of agricultural commodities: the U.S.”

Weekend assignment:  are Cofco employees Chinese “foreign officials” under the 11th Circuit’s Esquenazi decision?


A good weekend to all and “On Wisconsin.”