Archive for the ‘Foreign Official’ Category

Sigelman Challenges DOJ’s “Foreign Official” Interpretation And Application

Friday, November 21st, 2014

EcopetrolIn January 2014, the DOJ announced FCPA and related charges against former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.” The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold, and former general counsel Gregory Weisman.

As detailed in this prior post, the alleged foreign official was “an official at Ecopetrol [who] had influence over the approval and award of contracts by Ecopetrol.”  Ecopetrol was alleged to be “the state-owned and state-controlled petroleum company in Colombia.”

Unlike his co-defendants Hammarskjold and Weisman who previously pleaded guilty, Sigelman is challenging various aspects of the DOJ’s case, including its interpretation and application of the “foreign official” element.

The introduction of this October 29th motion to dismiss states (internal citations omitted) as follows:

“The indictment alleges that Joseph Sigelman violated the FCPA by authorizing a set of payments in 2010 to David Duran, who the Government claims was an employee of a Colombian corporation called Ecopetrol S.A. (Ecopetrol). Sigelman can be liable only if Duran was a “foreign official,” a term defined to include “any officer or employee of a foreign government or any . . . agency, or instrumentality thereof.” To be an “agency” or “instrumentality,” an entity must perform a governmental function.

The indictment is correct that Ecopetrol used to fit this description. Colombia created Ecopetrol in 1951 to be the official state body in charge of regulating the nation’s hydrocarbon resources. At the same time, Ecopetrol held a mandate to explore and extract oil and gas to sell in the open market. For decades, it carried out these dual functions, albeit lethargically. Being a government regulator stifled Ecopetrol’s ability to compete with private oil-and-gas companies. Its access to credit markets was limited. The Colombian government’s budget, rather than business judgment, guided decisionmaking.

Colombia grew fed up with the lack of commercial success. So in 2003, it split Ecopetrol in two. All of Ecopetrol’s regulatory and other governmental functions as well as its public interest mandate were assigned to a new state entity, the National Hydrocarbon Agency. Once divested of its government authority and functions, Ecopetrol became solely a commercial enterprise, its exclusive mission being to thrive in the highly competitive energy market. To further this mission and encourage Ecopetrol to be more competitive, Colombia amended its laws to treat Ecopetrol like Chevron, ExxonMobil, Royal Dutch Shell, or any other private oil-and-gas company. Ecopetrol became a corporation with shares of stock that could trade on public markets. It lost its privileged access to Colombian oil fields and stopped receiving any special benefits from the Colombian government, such as subsidies, dispensations, and tax exemptions. It became subject to private commercial law. Thus, Colombia’s Commercial Code (which applies to private companies) rather than Colombia’s General Contract Law for the Public Administration (which applies to public establishments) would govern Ecopetrol’s contracts. The labor code applicable to private companies would regulate Ecopetrol’s relations with its employees.

In short, as of 2010, when the events in this case took place, Ecopetrol was, as a matter of Colombian law, an ordinary market participant bereft of any governmental function. As the Government conceded in United States v. Esquenazi, an entity devoid of a governmental function is not an “agency” or “instrumentality” of a foreign government under the FCPA, regardless of whether a foreign government owns a majority of the stock of that entity.2 So even if the factual allegations in the indictment were true, the payments to David Duran would, as a matter of law, not violate the FCPA because they were not made to a “foreign official.” Thus, the FCPA charges must be dismissed.

Any contrary interpretation that stretches the definition of “foreign official” to cover employees of entities that exercise no public function, like Duran, would render the FCPA void for vagueness as applied to Sigelman. Nowhere in the statute’s provisions is there fair notice that it is unlawful to authorize payments to an employee of a corporation that does not perform any governmental functions. Permitting the Government to use the FCPA—a statute whose purpose is to penalize and discourage corruption of government officials—to prosecute payments made to employees of corporations with no governmental functions would leave charging decisions to the whims and personal views of prosecutors, with no reasonable foundation in the words of the statute or the intent of Congress. Thus, if the Government’s reading of the statute is correct, the charges against Sigelman under the FCPAmust also be dismissed on vagueness grounds.

Accordingly, Sigelman respectfully requests dismissal of all charges against him under the FCPA: namely, Counts Two, Three, and Four in their entirety, plus the portions of Counts One and Five alleging that Sigelman conspired to violate, and conspired to transfer money with the intent to violate, the FCPA. Sigelman further requests that this Court hold a hearing on issues of Colombian law pursuant to Federal Rule of Criminal Procedure 26.1.”

Sigeman’s motion is supported by an expert declaration from Carlos Gustavo Arrieta Padilla who, among other previous positions, was the Attorney Inspector General of Colombia and a Justice of the State Council  (the Colombian Supreme Court for administrative and certain constitutional matters).

Sigelman is represented by Patrick Egan (Fox Rothschild) and William Burck (Quinn Emanuel).

In this November 12th opposition memorandum, the DOJ states under the heading “Introduction” as follows.

“Defendant’s latest motion seeks the dismissal of counts corresponding to the FCPA charges in this case. Defendant claims that although the Government included well-pled allegations in the Indictment that the bribe recipient was a “foreign official,” as that term is defined in the FCPA, and was employed by an “instrumentality,” as that term is defined in the FCPA, the Court should look to facts outside the Indictment – including, among other things, a 22-page declaration by an individual who Defendant deems an “expert” – to remove this issue from the purview of the jury and dismiss the counts pretrial. Defendant is incorrect. As every single other court which has addressed this very issue has concluded, this is an issue of fact for the jury to decide after the presentation of all of the evidence. Indeed, the Government intends to submit substantial evidence at trial to establish beyond a reasonable doubt that the bribe recipient was a foreign official under the FCPA.

Moreover, and also as every other court to confront this very issue has found, the FCPA is not unconstitutionally vague as applied to Defendant. Importantly, the FCPA requires the Government to prove that Defendant acted corruptly and willfully, which is wholly inconsistent with the notion that Defendant did not have fair notice.

Defendant’s most recent motion to dismiss should be denied.”

In its brief, the DOJ states, in pertinent part, that “some of the facts about Ecopetrol that the Government may rely on at trial, and that clearly demonstrate that Ecopetrol is an “instrumentality” under the FCPA, include:

Ecopetrol was created by the government of Colombia;

The Colombian government is required to maintain at least an 80% interest in Ecopetrol, and during the relevant time period Ecopetrol was 89.9% owned by the Colombian government;

The Colombian government has the ability to select a majority of Ecopetrol’s board of directors, and during the relevant time period the board of directors included the Minister of Mines and Energy, the Minister of Finance, and the Director of the National Planning Agency;

The Colombian government has the right and ability to “undertake projects which may not be in [Ecopetrol’s] best interest” but are instead in the government’s interest;

Ecopetrol “reserve[s] the right to plead sovereign immunity under the United States Foreign Sovereign Immunities Act of 1976 with respect to actions brought against [it] under United States federal securities laws or any state securities laws” by any of Ecopetrol’s minority shareholders;

Ecopetrol prepares its “financial statements in accordance with Colombian Government Entity GAAP”;

Before Ecopetrol “can issue any debt in the international and local capital markets or incur any other type of indebtedness, the Government [of Colombia], through the Ministry of Finance and Public Credit, must authorize the issuance of such debt and [Ecopetrol] must register external debt with the Colombian Central Bank”;

The Colombian government “may require [Ecopetrol’s] Board of Directors to declare dividends in an amount that result in [Ecopetrol] having to reduce [its] capital expenditures thereby negatively affecting [its] prospects, results of operations and financial condition”;

Prior to 2004, any oil company wishing to engage in oil-related services in Colombia had to enter into an agreement with Ecopetrol. Ecopetrol remains, to this day, “as counterparty to the contracts which [it] signed prior to January 1, 2004” which include the Mansarovar contract. “The contracts on which [Ecopetrol is] the counterparty all have clauses which provide, at [Ecopetrol’s] sole option, for extensions. If [Ecopetrol] do[es] not extend the contracts, the right to exploit the hydrocarbon reserves which are the subject of the contract revert to [Ecopetrol], and [Ecopetrol] ha[s] the right to exploit them for an indefinite period at no additional cost to [Ecopetrol].” For example, as recently as June 2010 (in the middle of the charged FCPA conspiracy), “the ‘Santiago de las Atalayas Contract’, one of the most important exploration and production contracts due to its amount of crude oil and natural gas reserves, terminated and the right to exploit the hydrocarbon reserves subject to this Contract reverted back to [Ecopetrol].”; and

Employees of Ecopetrol, to this day, are treated as public officials for purposes of Colombia’s public corruption laws, and in fact have been prosecuted for such actions in recent years.”

As stated in the DOJ’s brief, “these are not attributes of a private commercial enterprise – they are the attributes of a foreign government instrumentality.”

In this November 14th reply letter to the court, Sigelman’s lawyers write.

“The validity of the government’s FCPA charges rests upon its assertion that Ecopetrol was an “instrumentality.”  It is undisputed that performing a governmental function is a sine qua non of being an “instrumentality” under the FCPA.  Yet nowhere in the indictment or its 28 pages of briefing responsive to Mr. Sigelman’s instant motion does the United States identify any Colombian governmental function performed by Ecopetrol in 2010.”

For more on “foreign official” issues, see my “foreign official” declaration and my amicus brief in the recent cert petition to the Supreme Court in U.S. v. Esquenazi (a petition the court denied).

Supreme Court Declines To Hear “Foreign Official” Challenge

Monday, October 6th, 2014

As highlighted in previous posts (here, here and here), the defendants in U.S. v. Esquenazi (see here for the May 2014 11th Circuit decision) petitioned the Supreme Court to hear the case – principally on the “foreign official” issue.  As previously noted, the cert petition was believed to be the first substantive FCPA cert petition in FCPA history and was supported by amicus briefs, including my own.

This morning, the Supreme Court, which decides its own docket, released this Orders List declining to hear the “foreign official” challenge in U.S. v. Esquenazi.

Cert denial in the case means that the 11th Circuit decision stands as a final decision.  Cert denial does not mean that the Supreme Court agreed or disagreed with the 11th Circuit decision.

As noted in previous posts, the Supreme Court has never heard an FCPA case.


The below statement may be attributed to Professor Koehler.

“The reasoning of the Supreme Court in declining to hear the petition is not known, but is likely due to the absence of a circuit split on the “foreign official” issue.  This absence is largely a result of alternative resolution vehicles used by the DOJ (and SEC) as well as other discretionary decisions by the enforcement agencies. So long as these dynamics continue, Supreme Court review of the key elements of a top-priority federal criminal statute of significant importance to all businesses and individuals engaged in international commerce is unlikely.”

Counsel for Esquenazi (Markus Funk and Michael Sink – both of Perkins Coie) offered the following statement.

“Statistically speaking, having the Supreme Court hear Mr. Esquenazi’s case was of course a long-shot.  But, as the amicus petitions highlighted, the confusion the appellate court’s ruling added to the ongoing muddle of what qualifies as an ‘instrumentality’ of a foreign government provided some hope that the Court might weigh in on this issue of great concern to the global business community.  That the Court decided to pass on the opportunity is disappointing.”

Professor Koehler Files Amicus Brief Urging Supreme Court To Hear “Foreign Official” Challenge

Thursday, September 18th, 2014

This previous post highlighted the petition for certiorari filed in the Supreme Court requesting the Court hear U.S. v. Esquenazi (the recent 11th Circuit decision of first impression in which the court concluded that certain state-owned or state-controlled enterprises  (SOEs) can be “instrumentalities” of a foreign government such that employees of SOEs can be “foreign officials” under the FCPA).

Yesterday, my counsel Russell Ryan and Brandt Leibe (both of King & Spalding) filed this amicus brief in support of Petitioners as to Question 1 of the Petition (the “foreign official” issue).

Under the heading “Introduction and Summary of Argument,” the brief states:

“The Petition presents this Court, for the first time in the FCPA’s thirty-seven year history, with the opportunity to construe a key element of a top-priority federal criminal statute of significant importance to all businesses and individuals engaged in international commerce.

The issue presented in Question 1 of the Petition is whether a state-owned or state-controlled enterprise (“SOE”) can constitute an “instrumentality” of a foreign government as that term is used in the FCPA. If so, as the Court of Appeals held, employees of SOEs could qualify as “foreign officials” under the FCPA’s anti-bribery provisions such that anything of value offered or provided to them to obtain or retain business could violate the FCPA’s criminal anti-bribery provisions.

The FCPA defines a “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization.” The FCPA’s legislative history indicates that Congress did not intend that statutory term to include employees of SOEs. In the legislative process that ultimately produced the FCPA, Congress specifically considered competing bills that would have included employees of SOEs as “foreign officials” yet rejected those definitions in the version of the FCPA it enacted.

The proper scope and meaning of the “foreign official” element of the FCPA’s anti-bribery provisions is an issue of extraordinary practical significance as it affects all businesses and individuals engaged in international commerce. The FCPA’s criminal anti-bribery provisions prohibit certain business conduct with “foreign officials,” but those prohibitions do not apply to conduct that does not involve a “foreign official.” Thus, it would not violate the FCPA to offer or provide something of value to a private customer, but offering or providing the same to a “foreign official” could be a crime. Consequently, drawing the line between individuals who could qualify as “foreign officials” and those who could not is critically important in a wide range of international business interactions.

An issue that has developed so little in the lower courts would not ordinarily satisfy the criteria for this Court’s review. However, the way FCPA enforcement actions are resolved makes it unlikely that lower courts will often consider this issue in the foreseeable future. The vast majority of FCPA investigations are resolved through out-of-court settlements including non-prosecution agreements (“NPAs”), deferred prosecution agreements (“DPAs”), and other administrative settlements not subject to judicial scrutiny. As a result, courts rarely construe the FCPA. The court below was the first Court of Appeals to address this statutory issue since Congress first enacted the FCPA thirty-seven years ago. Given these dynamics, there is little reason to believe that other federal appellate courts will examine this issue in the foreseeable future. Yet the Eleventh Circuit’s erroneous interpretation of the statute is likely to affect numerous future FCPA enforcement actions — negotiated and resolved in the absence of judicial scrutiny and in the shadow of scant precedent interpreting the FCPA — and thus the conduct of countless businesses and individuals subject to the FCPA.

The Eleventh Circuit’s interpretation of the statute was erroneous. The decision below failed to consider the enacting legislative history of the provisions it construed. It instead mistakenly relied on amendments enacted more than twenty years later and mistakenly concluded that those amendments were intended to bring the FCPA into strict conformity with the OECD.

The Eleventh Circuit’s express reliance on amendments to the FCPA in 1998 is flawed in at least two respects. First, the 1998 amendments to the FCPA are, on their face, irrelevant to the statutory-interpretation question at issue in this case because those amendments did not modify the portion of the “foreign official” definition in question here. Second, contrary to the Eleventh Circuit’s conclusion, the 1998 amendments did not fully conform the FCPA to the OECD Convention. Because they did not conform the FCPA to the OECD Convention, the amendments the Eleventh Circuit relied upon do not support the conclusion that the FCPA’s “foreign official” element includes employees of SOEs.

Amending a key element of a top-priority federal criminal statute of such significance to international commerce is not properly accomplished through a process of judicial inferences about the supposed purpose of subsequent, unrelated statutory amendments. Rather, actual legislative action is required to amend the FCPA. If Congress wished to include employees of SOEs in the statutory definition of “foreign official,” it easily could have done so — when enacting the FCPA in 1977, when amending the FCPA in 1998, or on any other occasion. Congress has expressly included employees of SOEs in similar statutory definitions contained in other legislation passed both before and after the enactment of the FCPA. Similarly, the legislative bodies of several signatory countries to the OECD Convention have taken specific legislative action to include SOEs and related concepts in their comparable anti-corruption legislation.”

Last week, as highlighted in this post, the Washington Legal Foundation and the Independence Institute joined to file an amicus brief in support of Petitioners as to Question 1 of the Petition (the “foreign official” issue).

Amicus Brief Filed Urging The Supreme Court To Hear “Foreign Official” Challenge

Tuesday, September 16th, 2014

This previous post highlighted the petition for certiorari filed in the Supreme Court requesting the Court hear U.S. v. Esquenazi (the recent 11th Circuit decision of first impression in which the court concluded that certain state-owned or state-controlled enterprises  (SOEs) can be “instrumentalities” of a foreign government such that employees of SOEs can be “foreign officials” under the FCPA).

Last week, the Washington Legal Foundation and the Independence Institute joined to file this amicus brief in support of Petitioners as to Question 1 of the Petition (the “foreign official” issue).

Under the heading “Summary of Argument,” the brief states as follows.

“This case presents an issue of exceptional importance to the business community. Although the FCPA was adopted nearly 40 years ago, the statute has  been the subject of remarkably few court decisions. The result is that there is very little definitive guidance regarding the statute’s meaning that can assist businesses in avoiding criminal violations, yet they are urgently in need of such guidance in light of the significant increase in FCPA enforcement activity during the past decade.

The issue raised by this case—who are the “foreign officials” to whom the FCPA restricts payments?—is the single greatest source of confusion regarding the scope of the FCPA. Until the Eleventh Circuit ruled in this case, no federal appeals court had addressed that issue. Moreover, amici are unaware of any other cases in the appellate pipeline that raise the issue. The reason for the dearth of cases is readily apparent. Although federal prosecutors have initiated numerous FCPA proceedings in recent years, every large business entity against which a proceeding was initiated has entered into a settlement agreement. In light of the huge negative consequences that would befall any company that contested and lost an FCPA case, businesses are categorically unwilling to challenge in court government assertions that payments it made violated the FCPA. Given the absence of any case law, review is urgently needed to provide the business community with concrete guidance regarding the FCPA’s definition of a “foreign official” (and the subsidiary term “instrumentality”). In the absence of such guidance from this Court, businesses will have to navigate these unsettled waters with only the negligible guidance provided by the decision below—with very little likelihood that other appeals courts will weigh in any time soon. The Eleventh Circuit’s guidance is thin indeed; by stating explicitly that its list of relevant factors is non-exclusive, the appeals court leaves American businesses to guess at when a corporation whose controlling shareholder is a foreign government will be deemed an “instrumentality” of that government for FCPA purposes.

Review is also warranted because the court below has adopted a definition of “instrumentality” that is far broader than anything set forth in the FCPA. The Eleventh Circuit’s definition is inconsistent with the language of § 78dd-2(h)(2)(A) as well as the overall structure of the FCPA. In particular, because the word “instrumentality” appears in conjunction with the  words “department” and “agency,” the maxim noscitur a sociis (a word is known by the company it keeps) calls into doubt the Eleventh Circuit’s decision to include entities within the definition of “instrumentality” that bear little resemblance to the common understanding of a government “department” or “agency.”

The appeals court’s definition is also inconsistent with Congress’s and this Court’s use of the term “instrumentality” in other contexts. In particular, the Court has never used that term in conjunction with a corporation that was not created by the government itself and where the government merely acted in a manner consistent with its (temporary) role as a majority shareholder.

The appeals court’s decision is particularly problematic because it arises in a criminal law context in which an individual’s good-faith disagreement with a prosecutor’s interpretation of a statutory term can (and did here) result in imposition of a lengthy prison term.  The Eleventh Circuit conceded that the word “instrumentality” is capable of multiple meanings. It adopted an extremely broad definition of the term, and at the same time it heightened potential uncertainty by insisting that whether a particular entity is an “instrumentality” of a foreign government is a question of fact to be determined by the jury. Indeed, the universal response among defense lawyers was that the decision left the issue even more muddled than it had been previously. The U.S. Department of Justice has declined to exercise the full extent of its authority to provide safe-harbor guidance that would reduce the level of uncertainty. As a result, the competitiveness of American businesses in overseas markets suffers when companies refrain from engaging in legal activities out of a fear that they might expose themselves to FCPA liability. Review is warranted to resolve that constitutionally intolerable level of uncertainty.

The United States has waived its right to respond to the Petition, perhaps in an effort to signal to the Court that the issues raised are unimportant and thus that review should be denied. The United States cannot in good faith assert that the issues raised herein are not of paramount importance. The principal question raised by the Petition (who qualifies as a “foreign official” for purposes of FCPA payment restrictions?) is at issue in a significant number of the numerous recent FCPA investigations, yet this is the first occasion the question has reached the appellate level, and there is little likelihood that the question will again reach this Court in the foreseeable future. At the very least, the United States ought to be directed to file a response and  explain why it believes that the case is unworthy of the Court’s attention.”


“Foreign Official” Cert Petition Filed In Supreme Court

Friday, August 15th, 2014

As highlighted in this previous post, in May the 11th Circuit affirmed the FCPA (and related) convictions of Joel Esquenazi and Carlos Rodriguez.  Numerous previous posts have analyzed the 11th Circuit’s “foreign official” decision (see here for the key language of the decision; here for “foreign official” – the current landscape; here for a “foreign official roundup; here for the 193 different meanings of foreign official; and here for why the meaning of “foreign official” matters).

Perhaps most importantly, this previous post highlighted the 11th Circuit’s flawed reasoning.

Yesterday, Esquenazi and Rodriguez (through their counsel Markus Funk of Perkins Coie and David Simon of Foley & Lardner and others) filed this petition for certiorari in the Supreme Court.

The cert petition is believed to be the first substantive FCPA cert petition in FCPA history.  (As noted in this prior post, the Frederic Bourke FCPA enforcement action did result in a cert petition to the Supreme Court.  However, the issues presented were not FCPA specific. The Supreme Court denied cert.  Prior to Bourke’s cert petition, David Kay and Douglas Murphy filed a cert petition in the Supreme Court.  Again, the issues presented were not FCPA specific.  The Supreme Court denied cert.)  

The Supreme Court, which decides its own docket, has never substantively addressed any FCPA issue.

The petition states, in pertinent part, as follows.

“Few, if any, laws match the FCPA when it comes to the chasm between its profitability for the Government and the near-universal confusion concerning how far the statute actually reaches. The Eleventh Circuit’s ruling below only amplified the problem by providing a  purported “definition” of key FCPA provisions that differs from all provided previously and deepens the confusion over the term “foreign official.”

Under the heading, “Reasons for Granting the Petition” the petition states, in full, as follows.

The FCPA leaves open the pivotal question of who qualifies as a “foreign official” by not defining what “instrumentality [of a foreign government]” means.  Without a clear definition of “instrumentality,” the scope of the term “foreign official” cannot be understood. So it comes as no surprise that, though the statute was enacted in 1977, persistent questions about the correct interpretations of these terms have plagued it in this case and others.

Based on long-standing and straight-forward principles of statutory interpretation, Petitioners argued that instrumentalities should either be an actual part of the foreign government, or, at a bare minimum, perform core traditional governmental functions. The Government has lobbied for, and received from the Eleventh Circuit, an unacceptably broad interpretation of the term “instrumentality” that expands the reach of the statute to include partially state-owned or state-controlled enterprises that are not a part of any foreign  government, but whose employees could be considered “foreign officials” under the FCPA if they somehow fall into one or more of the court’s open-ended definitional options. Demonstrating the illogic of the Eleventh Circuit’s approach, consider that under its statutory construction, a janitor working for U.S. Government subsidized General Motors could qualify as a “foreign official” if General Motors were located overseas.

Prosecutorial discretion is one thing, but permitting the Government to take a “we-know-it-when-we-see it” approach to FCPA enforcement violates basic constitutional protections. In fact, the scope of the Government’s enforcement efforts have broadened to the point that even former Assistant Attorney General Breuer conceded the uncertainty—and the breadth of the Government’s interpretation—of who is a “foreign official” under the FCPA:

[C]onsider the possible range of ‘foreign officials’ who are covered by the FCPA: Some are obvious, like health ministry and customs officials of other countries. But some others may not be, such as the doctors, pharmacists, lab technicians and other health professionals who are employed by state-owned facilities. Indeed, it is entirely possible, under certain circumstances and in certain countries, that nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product in a foreign country  will involve a ‘foreign official’ within the meaning of the FCPA.

The Government’s excessively broad (and now judicially sanctioned) interpretation of who is considered to be a “foreign official” stands in direct contrast to the stated purpose of the FCPA, namely, to prohibit payments to a “narrow recipient category of traditional government officials performing official or public functions.” Decl. of Professor Michael J. Koehler In Support of Defendants’ Motion to Dismiss Counts One Through Ten of the Indictment in United States v. Carson, No. 8:09-cr-00077, ¶ 16(b) (C.D. Cal. Feb. 21, 2011).

Recognizing this untenable state of affairs, there has been widespread commentary and concern about the Government’s pursuit of “an increasingly expansive view of what makes an enterprise an ‘instrumentality’ of a foreign government, and, therefore, what makes employees of such enterprises ‘foreign officials.’” [...]  Professor Koehler, for his part, has noted that no FCPA element “is more urgently in need of judicial scrutiny than the FCPA’s ‘foreign official’ element.” Michael J. Koehler, The Façade of FCPA Enforcement, 41 Geo. J. Int’l L. 907, 916 (2010).”

Elsewhere, the petition states, in pertinent part, as follows.

“In light of the Government’s recent increased enforcement action, and the span of time it has taken for just one federal appellate court to interpret this core statutory term, the time is now ripe for this Court to settle the meaning of instrumentality under the FCPA. This Court should not defer answering the question presented in this Petition until additional federal appellate courts reach conflicting decisions regarding whether state-owned enterprises are instrumentalities under the FCPA. By that time, the Government will have brought many more prosecutions or enforcement actions involving payments made, or benefits provided, to individuals who are not traditional government officials. Individuals and companies around the globe will be left to wonder whether the Government will unilaterally declare their conduct criminal. This Court should, therefore, settle the question of the meaning of “instrumentality” to clarify which of those enforcement actions Congress intended to sanction under the FCPA, and which it did not.

What is more, an acceptable answer to the definitional challenge lies near at hand. Congress is certainly capable of enacting language that applies to state-owned or state-controlled enterprises when it intends to do so. When Congress enacted the Foreign Sovereign Immunities Act (FSIA), for example, it specifically included within the definition of “agency or instrumentality of a foreign state” entities a “majority of whose shares or other ownership interest is owned by a foreign state or political subdivisions.” 28 U.S.C. § 1603(b). The presence of such an explicit definition in FSIA indicates that Congress knew how to include such language in the FCPA, but chose not to include it.


That absence is significant here and warrants construing “instrumentality” as excluding state-owned or state-controlled enterprises that are not political subdivisions and that do not perform core, traditional governmental functions. See Dole Food Co. v. Patrickson, 538 U.S. 468, 475-76 (2003) (contrasting the absence of language in FSIA with that used in other statutes and concluding that the absence of language was instructive). With regard to the FCPA, “[i]f Congress desires to go further . . . it must speak more clearly than it has.”


A previously disclosed, I have provided pro bono expert services to pro bono defense counsel in this case.