With $4-a-gallon gas, disappearing honey bees and a world-wide hops shortage, there’s hardly time to worry about anything else. Like why bribe-taking foreign officials are never prosecuted under the Foreign Corrupt Practices Act. Fortunately, a reader with time to ponder such things asked us that question after we reported last month (here) the FCPA-related sentencing of former World Bank employee, Ramendra Basu.
Basu and his co-conspirator, Gautam Sengupta, another World Bank employee, pleaded guilty to helping a Swedish consultant make corrupt payments to government officials in Ethiopia and Kenya. At the time of their offense, Basu and Sengupta were working in the World Bank’s headquarters in the District of Columbia, and both were U.S. permanent residents. Our reader wanted to know if Basu and Sengupta, who also took money from the Swedish consultants, could have been prosecuted not only as “domestic concerns” but also based on their status as employees of the World Bank, because “the Bank is a public international organization and its employees are therefore foreign officials under the FCPA.” See 15 U.S.C. § 78dd-1(a)(f)(1) et seq.
Thanks to a definitive case from 1991, the answer is clear. Only bribe-payers can be prosecuted under the FCPA or under the general conspiracy statute of the United States. Bribe-takers are excluded. References in the FCPA to “foreign officials” are always talking about those who accept bribes, not those who pay them. That means foreign officials aren’t targeted for prosecution.
The case that settled the issue is U.S. v. Castle, 925 F.2d 831 (5th Cir. 1991) (per curiam). In it, the Fifth Circuit adopted the Memorandum Opinion and Order from the trial court written by Judge Barefoot Sanders. The four original defendants in the case were charged in a one-count indictment with conspiring to violate the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, 78dd-2. Two defendants, Donald Castle and Darrell W.T. Lowry, moved to dismiss the indictment against them on the grounds that as Canadian government officials, they couldn’t be convicted of accepting a $50,000 bribe to steer award of a bus-service contract by the Saskatchewan provincial government.
The two other defendants who paid the bribe didn’t dispute that they could be prosecuted for conspiring to violate the FCPA. Nor was there any dispute that defendants Castle and Lowry, as Canadian government officials, could not be charged with a substantive violation of the FCPA, since the statute doesn’t criminalize the receipt of a bribe by a foreign official. The issue, then, was whether the U.S. could prosecute Castle and Lowry under the general conspiracy statute, 18 U.S.C. § 371, for conspiring to violate the FCPA. “Put more simply,” the district court said, “the question is whether foreign officials, whom the Government concedes it cannot prosecute under the FCPA itself, may be prosecuted under the general conspiracy statute for conspiring to violate the Act.”
The trial court’s memorandum opinion of June 4, 1990 was adopted by the appellate court. It traces the FCPA’s legislative history relevant to whether foreign officials who take bribes can be prosecuted under the FCPA or the general conspiracy statute or both, and it sets out a comprehensive policy analysis behind Congress’ intent to exclude foreign officials from prosecution. As far as we know, the 1991 case persuaded the Justice Department to end all further attempts to make conspiracy to violate the FCPA a chargeable offense against bribe-taking foreign officials.
Happily, Judge Barefoot Sanders’ opinion lives up to its author’s great moniker. It’s a terrific read for FCPA lawyers, policy wonks, and policy-wonking lawyers. Here are just a few paragraphs from the 2,500-word decision:
“Yet the very individuals whose participation was required in every case–the foreign officials accepting the bribe–were excluded from prosecution for the substantive offense. Given that Congress included virtually every possible person connected to the payments except foreign officials, it is only logical to conclude that Congress affirmatively chose to exempt this small class of persons from prosecution.
“Most likely Congress made this choice because U.S. businesses were perceived to be the aggressors, and the efforts expended in resolving the diplomatic, jurisdictional, and enforcement difficulties that would arise upon the prosecution of foreign officials was not worth the minimal deterrent value of such prosecutions. Further minimizing the deterrent value of a U.S. prosecution was the fact that many foreign nations already prohibited the receipt of a bribe by an official. See S.Rep. No. 114 at 4, 1977 U.S.Code Cong. & Admin.News at 4101 (testimony of Treasury Secretary Blumenthal that in many nations such payments are illegal). In fact, whenever a nation permitted such payments, Congress allowed them as well. See 15 U.S.C. Sec. 78dd-2(c)(1).
“Based upon the language of the statute and the legislative history, this Court finds in the FCPA what the Supreme Court in [Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 L.Ed. 206 (1932)] 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. The Government has presented no reason why the prosecution of Defendants Castle and Lowry should go forward in the face of the congressional intent not to prosecute foreign officials. If anything, the facts of this case support Congress’ decision to forego such prosecutions since foreign nations could and should prosecute their own officials for accepting bribes. Under the revised statutes of Canada the receipt of bribes by officials is a crime, with a prison term not to exceed five years, see Criminal Code, R.S.C. c. C-46, s.121 (pp. 81-84) (1985), and the Royal Canadian Mounted Police have been actively investigating the case, apparently even before any arrests by U.S. officials. Defendant Castle’s and Lowry’s Supplemental Memorandum In Support of Motion to Dismiss, filed May 14, 1990, at 10. In fact, the Canadian police have informed Defendant Castle’s counsel that charges will likely be brought against Defendants Castle and Lowry in Canada. Id. at 10 & nn. 3-4. Thus, prosecution and punishment will be accomplished by the government which most directly suffered the abuses allegedly perpetrated by its own officials, and there is no need to contravene Congress’ desire to avoid such prosecutions by the United States.”
Download U.S. v. Castle, 925 F.2d 831 (5th Cir. 1991) (per curiam) here.