The Department of Justice would like for all to believe that its plea agreements represent acknowledgment of the legitimacy of its enforcement theories including as to “foreign official.”  A prior guest post (here) referred to this dynamic as prosecutorial common law.  As to “foreign official,” in the Carson briefing (see here at pg. 46) the DOJ stated the following - because DOJ has secured approximately 35 guilty pleas from individuals who admitted to bribing officials at SOEs ”it is thus ‘plain as a pikestaff’ that the FCPA prohibits paying bribes to officials who work at SOEs.”  You can subscribe to that position if you choose or realize that testing one’s innocence comes at a high cost in our system.  (See here for the prior post).

The conclusion is yours to draw, the facts are as follows.

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In April 2009, David Edmonds was criminally charged, along with other defendants who were also former employees of Control Components Inc. (CCI), in a criminal indictment (here) for engaging in “a conspiracy to secure contracts by paying bribes to officials of foreign state-owned companies as well as officers and employees of foreign and domestic private companies.”

As to Edmonds (the Vice-President of Worldwide Customer Service at CCI), the indictment alleged as follows.  “From in or around 2003 through in or around 2007, defendant Edmonds caused [CCI's] employees and agents to make corrupt payments totaling approximately $430,000 to officers and employees of state-owned companies, and corrupt payments totaling approximately $220,000 to officers and employees of private companies.”  “[CCI's] state-owned customers included, but were not limited to, Jiangsu Nuclear Power Corporation (“JNPC”)  (China), Guohua Electric Power (China), China Petroleum Materials and Equipment Corporation (“CPMEC”), PetroChina, Dongfang  Electric Corporation (China), China National Offshore Oil Corporation (“CNOOC”), Korea Hydro and Nuclear Power (“KHNP”),  Petronas (Malaysia), and National Petroleum Construction Company (“NPCC”) (United Arab Emirates).  Each of these state-owned entities was a department, agency, and instrumentality of a  foreign government, within the meaning of the FCPA. The officers  and employees of these entities, including the Vice-Presidents, Engineering Managers, General Managers, Procurement Managers, and Purchasing Officers, were “foreign officials” within the meaning of the FCPA.”

As noted in the DOJ release (here), Edmonds was charged with one count of conspiracy to violate the FCPA and the Travel Act, three counts of violating the FCPA and two counts of violating the Travel Act.

Shortly thereafter, CCI resolved an FCPA enforcement action based on the same core set of conduct alleged in the above indictment.  (See here for the prior post).  I noted then, as I had since launching this website in July 2009, that the DOJ’s position that employees of state-owned companies, regardless of position, are “foreign officials” under the FCPA is an unchallenged and untested legal theory – and one I believe is ripe for challenge.

In February 2011 (as noted in this prior post), for the first time in FCPA history, a federal court judge, with the benefit of a detailed and complete overview of the FCPA’s extensive legislative history on the “foreign official” element, was asked to rule on the DOJ’s interpretation that employees of alleged state-owned or state-controlled enterprises are “foreign officials” under the FCPA.  My declaration on the FCPA’s legislative history relevant to “foreign official” (here) was used in the “foreign official” motion to dismiss.

In May 2011 (as noted in this prior post), Judge James Selna denied the “foreign official” motion to dismiss and concluded that “the question of whether state-owned companies qualify as instrumentalities under the FCPA is a question of fact.”  The “foreign official” issue thus moved to the jury instructions (as noted in this prior post).

In February 2012 (as noted in this prior post), Judge Selna issued certain jury instructions.  Not surprisingly, Judge Selna carried forward his previous “instrumentality” analysis into the “instrumentality” jury instruction.  Yet, in a significant development in terms of the future of the case, Judge Selna issued an instruction titled “knowledge of status of foreign official.”  In pertinent part, the instruction stated as follows.

[.....]

“(4) The defendant offered, paid, promised to pay, or authorized the payment of money, or offered, gave, promised to give, or authorized the giving of anything of value to a foreign official;

(5) The payment or gift at issue in element 4 was to (a) a person the defendant knew or believed was a foreign official or (b) any person and the defendant knew that all or a portion of such money or thing of value would be offered, given, or promised (directly or indirectly) to a person the defendant knew or believed to be a foreign official. Belief that an individual was a foreign official does not satisfy this element if the individual was not in fact a foreign official.”

In his order, Judge Selna stated as follows.

“The Government proposes to add the following paragraph to element 5:”

The government need not prove that the defendant knew the legal definition of “foreign official” under the FCPA or knew that the intended recipient of the payment or gift fell within the legal definition. The defendant need not know in what specific official capacity the intended recipient was acting, but the defendant must have known or believed that the intended recipient had authority to act in a certain manner as specified in element 6.”

The Court does not believe that this language is necessary, and it is potentially confusing.”

As noted in this prior post, in April 2012 – a few months prior to trial, Stuart and Hong Carson pleaded guilty to conduct not found in the original indictment.  Pursuant to a plea agreement, Stuart Carson, 73, faces up to 10 months in prison and Rose Carson, 48, faces a sentence of three years probation, which may include up to six months of home confinement.

As noted in this prior post, in late May 2012 – a few weeks prior to trial, Paul Cosgrove (a 65 year old individual who recently underwent emergency heart quadruple bypass surgery) pleaded guilty to conduct not found in the original indictment.  Pursuant to a plea agreement, Cosgrove faces up to 15 months in prison.

Last week - a few weeks prior to his trial, the DOJ announced (here) that Edmonds pleaded guilty to a one-count superseding information charging him with making a corrupt payment to a foreign government official in violation of the FCPA.

Unlike the original indictment, the four page superseding information as to Edmonds (here) focuses solely on Public Power Corporation of Greece (“Public Power”) and states as follows.  “Public Power was a department, agency, and instrumentality of a foreign government with the meaning of the FCPA” and “officers and employees of Public Power were ‘foreign officials’ within the meaning of the FCPA.”  The superseding information then states that “on or about May 15, 2000″ Edmonds “corruptly caused an e-mail to be sent authorizing the payment of approximately $45,000 to officials of Public Power for the purpose of securing Public Power’s business.

For more on Public Power during the general time period alleged in the superceding information, see this Annual Report.

As noted in the DOJ’s release (here), “Edmonds, 59, faces up to 15 months in prison.  Sentencing is scheduled for Nov. 19, 2012.”

The Edmonds plea agreement (here) incorporates the substance of Judge Selna’s jury instruction set forth above.  In addition, the plea agreement states as follows.  “Defendant Edmonds understands that at any trial, the government would prove sufficient facts to demonstrate that Public Power was a government instrumentality within the meaning of the FCPA [...] and its employees ‘foreign officials’ within the meaning of the FCPA.”

The plea agreement further states as follows.  “Although defendant Edmonds did not actually know that the approximately $45,000 was to be offered, given, or promised to an employee of Public Power for the purpose of securing Public Power’s business, he was aware of a high probability of this circumstances and failed to make additional inquiries concerning the nature of the commission and the suspected recipient in order to determine whether the proposed commission payment might be made to an employee at Public Power for the purpose of securing Public Power’s business.”  The plea agreement further states as follows.  “Although defendant Edmonds did not know about the prohibitions of the FCPA, defendant Edmonds was aware that the law would forbid making an undisclosed payment to an employee of a customer for the purpose of securing the customer’s business.”

In the plea agreement, Edmonds waived any statute of limitations defenses.