Judge James V. Selna yesterday denied the Carson defendants motion to dismiss ten FCPA-related counts in the indictment against them based on the definition of “foreign official” in the FCPA.
Stuart Carson, his wife Hong “Rose” Carson, Paul Cosgrove, and David Edmonds — all former executives of California-based Control Components Inc. — had argued that employees of state-owned enterprises aren’t “foreign officials,” as the DOJ contends.
The defendants said the state-owned companies where officials were allegedly bribed — Korea Hydro and Nuclear Power, PetroChina, China Petroleum Material and Equipment Corporation, China National Offshore Oil Corporation, National Petroleum Construction Company, Dongfang Electric Corporation, Guohua Electric Power, Petronas — aren’t covered by the FCPA.
Judge Selna disagreed. He said it’s a question of fact.
In making his decision, he declined to review the legislative history of the FCPA, saying:
The Court finds that the statutory language of the FCPA is clear, that the statutory scheme is coherent and consistent, and that resort to the legislative history of the FCPA is unnecessary.
He then said in a footnote,
Defendants include a comprehensive review of the legislative history of the FCPA with their motion. (See Decl. of Prof. Michael J. Koehler, Feb. 2, 2011, ECF No. 305.) The Government argues that “nowhere in the vast review of legislative history can the defendants point to a single quote that supports the position that the FCPA should not apply to employees of [state-owned enterprises].” (Opp’n at 35.) Defendants reply that “the inverse is equally true, that is, the Government ‘cannot point to a single quote’ from a member of Congress that supports the position that the FCPA should apply to employees of [state-owned enterprises].”
The judge also disagreed with the defendants’ argument that the FCPA’s definition of “foreign official” is void for vagueness. The meaning of “instrumentality” in the FCPA, he said, is sufficiently definite that an ordinary person can understand what conduct is prohibited.
Given the Government’s substantial evidentiary burden to establish that a business entity constitutes a government instrumentality, and the scienter requirement mentioned above, the definition of a “foreign official” does not encourage arbitrary or discriminatory enforcement.
Judge Selna mentioned the same challenges to the meaning of “foreign official” in the Haiti Telco and Lindsey cases, which both also failed. He said: “The Court reaches the same conclusion as these district courts: state-owned companies may be considered ‘instrumentalities’ under the FCPA, but whether such companies qualify as ‘instrumentalities’ is a question of fact.”
A jury trial of the Carson defendants including Han Yong Kim is now set for June 5, 2012.
The case is U.S. v. Carson, (U.S.District Court, Central District of California, Southern Division – Santa Ana) Case #: 8:09-cr-00077-JVS-1.
Download a copy of Judge Selna’s May 18, 2011 Order Denying Defendants’ Motion to Dismiss Counts 1 though 10 of the Indictment here.
Download a copy of the indictment in U.S. v. Carson here.
View Mike Koehler’s declaration in support of the defendants’ motion to dismiss in U.S. v. Carson et al here.