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The Lindsey Trial and ‘Foreign Officials’

Joel Esquenazi and Carlos Rodriguez — both sentenced to federal prison for FCPA and related offenses — are asking the U.S. Court of Appeals for the 11th Circuit to rule that state-owned Telecommunications D’Haiti S.A.M. isn’t an ‘instrumentality’ under the FCPA, and that its directors, officers, and employees aren’t ‘foreign officials.’ If that’s true, bribes paid to them wouldn’t violate the FCPA.

This is the first time an appellate court has been asked to review the question.

But several trial courts have ruled on ‘foreign official’ challenges. We already looked at the Carson case and Judge Selna’s written decision. He wasn’t bound to follow what other trial judges had decided, but he did. The two cases he cited were Esquenazi et al and the Lindsey prosecution.

*     *     *

Let’s look back at Lindsey.

In that case, Judge A. Howard Matz ruled that state-owned utility CFE was an “instrumentality” of the Mexican government, as the word is used in the FCPA, and its officers who allegedly received bribes were therefore ‘foreign officials’ under the law.

On the FCPA’s legislative history, Judge Matz concluded, as we once did, that any argument about Congress’s intent to include or exclude employees of state-owned enterprises is a draw. The judge said,

The Court finds that the legislative history of the FCPA is inconclusive. Although it does not demonstrate that Congress intended to include all state-owned corporations within the ambit of the FCPA, neither does it provide support for Defendants’ insistence that Congress intended to exclude all such corporations from the ambit of the FCPA.

(In the Carson case, which came later, Judge Selna also found that neither side could find support for its position about ‘foreign officials’ from the FCPA’s legislative history.)

Back in Judge Matz’s Lindsey ruling, after he took the focus off the inconclusive legislative history, he reasoned from the words of the FCPA iteself. 

Finding that employees at state-owned enterprises can be ‘foreign officials,’ he said:

The Government agrees with Defendants’ proposition that “instrumentality” should be interpreted in light of the two words preceding it, “department” and “agency.” According to the Government, however, Defendants are wrong to assert that instrumentality “‘must be understood to capture only entities that share qualities both agencies and departments share.’” Indeed, the Government argues, state-owned corporations do share various qualities with both agencies and departments, such as existing at the pleasure of the government and being oriented to public policy. Moreover, as the Government sensibly points out, if an instrumentality must share all of its characteristics with both a department and an agency, then the term “instrumentality” would be robbed of independent meaning. Canons of statutory construction counsel against this outcome, which would turn “instrumentality” into surplusage.

Our italics, and we’ve omitted Judge Matz’s footnotes.

*     *     *

A jury convicted the Lindsey defendants of FCPA and related charges. Judge Matz later threw out the convictions because of prosecutorial misconduct unrelated to the ‘foreign official’ issue.

Download Judge Matz’s April 20, 2011 ruling on foreign officials here.

Tomorrow: What does the trial court record mean for the appeal by Joel Esquenazi and Carlos Rodriguez?

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