Limiting The Local Law Defense

The Opinion and Order in U.S. v. Kozeny issued October 21, 2008 mentioned in our post yesterday deals directly with the Foreign Corrupt Practices Act’s local law affirmative defense. That defense says a bribe paid to a foreign official is permitted if it was “lawful under the written laws and regulations of the foreign official’s” country. 15 U.S.C. §§ 78dd-1(c)(1), 78dd-2(c)(1) and 78dd-3(c)(1).

Defendant Frederic Bourke, heading to trial in New York for FCPA violations, asked for a jury instruction on the local law defense. He argued that under the laws of Azerbaijan, the payments in question were not punishable once they were reported to the country’s president. Prosecutors didn’t agree and, after a hearing in September, Judge Scheindlin issued her Opinion and Order.

She analyzed it this way. The Azerbaijan law relieving a bribe payer from criminal liability if the bribe is properly reported doesn’t make the payment lawful when it was paid. Instead, reporting the bribe retroactively erases the stain of criminality.

It is true, she said, that a person cannot be guilty of violating the FCPA if the payment was lawful under the foreign law. But, there’s no immunity under the FCPA merely because a person couldn’t be prosecuted in the foreign country due to a technicality (e.g., time-barred) or because a provision in the foreign law relieves the person of criminal responsibility. “[I]t is inaccurate to suggest,” Judge Scheindlin said, “that the payment itself suddenly became ‘lawful’ — on the contrary, the payment was unlawful, though the payer is relieved of responsibility for it.” (emphasis in original) On that basis, she denied Bourke’s request for a jury instruction on the local law affirmative defense.

She was deciding the issue, by the way, under Rule 26.1 of the Federal Rules of Criminal Procedure. The Rule makes it clear that questions of foreign law are not facts for the the jury to decide but are questions of law for the judge to decide.

Bourke also asked for a specific instruction on true extortion. Judge Scheindlin left that door open, depending on Bourke’s evidence at trial. She also said evidence of extortion would go to the issue of whether Bourke possessed a corrupt intent in making the payments. The government has to prove beyond a reasonable doubt, she said, that Bourke had an improper motive or purpose for the payment that was intended to induce the recipient to misuse his official position in discharging an official act. But the government, she said, is not required to show that the official accepted the bribe, that the official had the power or authority to perform the act sought, or that the defendant intended to influence an official act which was lawful.

Judge Scheindlin’s decision doesn’t reach beyond her courtroom in the SDNY, at least for now. But it does reinforce the idea — stretching back to the Meade and Kay cases — that courts generally agree with the government’s narrow view of the FCPA’s exception and defenses.

Please contact us here for a copy of Judge Scheindlin’s Opinion and Order.

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