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U.S. v. Carson and ‘Foreign Officials’

In their appeal filed last week, Joel Esquenazi and Carlos Rodriguez argued that state-owned Haiti Telco wasn’t an ‘instrumentality’ so its personnel weren’t ‘foreign officials.’

It’s the first ‘foreign official’ appeal under the FCPA. The law prohibits payments to ‘foreign officials’ to obtain or retain business.

One appellate brief said:

Because no evidence was presented at trial that Haiti Teleco performed governmental functions, Esquenazi’s conviction for violation of, and conspiracy to violate, the FCPA should be reversed.

Esquenazi is now serving a fifteen-year prison sentence and Rodriguez is behind bars for seven years.

*     *     *

They’re citing ‘positions taken by Michael Koehler,’ according to the Wall Street Journal.

Esquenazi and Rodriguez said in the appeal,

Nothing in the FCPA’s legislative history supports the government’s position that Congress intended the term ‘instrumentalities’ to ensnare a broad and diverse range of companies by including the term ‘instrumentalities’ in its definition of ‘foreign official. The FCPA’s legislative history demonstrates the opposite—Congress intended the definition of ‘foreign official’ to apply to traditional government officials, not employees of state-owned enterprises such as [Haiti] Teleco.

When Esquenazi and Rodriguez raised the ‘foreign offical’ argument during their trial in federal court in Miami, the judge ruled against them.

That ruling was cited by another federal judge in California who considered the issue and also ruled that state-owned enterprises can be ‘instrumentatlities’ under the FCPA, and their employees can be ‘foreign officials.’

In U.S. v. Carson, the defendants submitted a sixty-one page argument on the issue of who’s a ‘foreign official,’ along with a declaration by Mike Koehler about the FCPA’s legislative history that stretched to one hundred fifty pages.

Judge James V. Selna declined to review the legislative history. He said:

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 that neither the DOJ nor the defendants could point to any quotes in the legislative history that supported their arguments.

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.

He also said,

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.

*     *     *

In that May 2011 ruling in the Carson case, Judge Selna mentioned the ‘foreign official’ challenges at the trial court level in Haiti Telco and Lindsey, which both also failed. He wasn’t bound by those rulings, but he agreed with them.

‘The Court reaches the same conclusion,’ he said, ‘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.’

Stuart Carson and his wife, Hong ‘Rose’ Carson, didn’t go trial after all. They pleaded guilty in April this year to one count of making a corrupt payment to a foreign official. Sentencing is set for October. Two other defendants in the case, Paul Cosgrove and David Edmonds, are scheduled to go on trial in late June.

To be continued . . . . . . . . . . with a look at the ‘foreign official’ challenge in the Lindsey trial.


Download a copy of Judge Selna’s May 18, 2011 Order Denying Defendants’ Motion to Dismiss Counts 1 though 10 of the Indictment here.

Here’s Mike Koehler’s declaration filed on behalf of the Carson defendants:

U.S. v. Stuart Carson el al. (Declaration of Professor Michael Koehler)

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