On Monday this week, the U.S. Supreme Court unanimously overturned the 2014 corruption conviction of former Virginia Governor Bob McDonnell.
As a refresher, Gov. McDonnell, directly and through his spouse, accepted over $175,000 in gifts and loans from Jonnie Williams, the CEO of a Virginia-based business known as Star Scientific. In return, the Governor repeatedly provided information about Star Scientific’s products to various subordinate state officials, and recommended that they meet with Williams.
Gov. McDonnell had been convicted under the federal bribery statute, 18 USC 201, which contains similar language to the FCPA. Indeed, in some respects, the two laws are virtual twins. So what does the SCOTUS decision mean for the FCPA? Not terribly much.
Williams provided lavish gifts to Gov. McDonnell. The kind of stuff that would make an FCPA lawyer wince. They included a $20,000 shopping trip in New York, personal loans worth tens of thousands of dollars, a Rolex watch, a gift of $15,000 to defray the wedding costs for McDonnell’s daughter, free vacations, and even the use of Williams’ swanky Ferrari.
According to the Supreme Court, Williams’ goal was to secure the Governor’s assistance in convincing Virginia public universities to study the benefits of the company’s major product.
In return, Gov. McDonnell arranged meetings between Williams and Virginia officials, instructed members of his staff to forward information about Star Scientific’s products to Virginia officials, requested state officials to meet with Williams, and hosted events at the Governor’s Mansion to which Williams and other Virginia officials were invited.
At trial, several Virginia officials testified that they had been contacted by Gov. McDonnell about Star Scientific’s products, but that they took no official action to benefit the company.
In September 2014, Gov. McDonnell was convicted of violating 18 USC 201. In relevant part, the statute specifies that it is a crime for an official to receive “anything of value” in return for “being influenced in the performance of any official act.” The statute also prohibits giving anything of value to a public official “to influence any official act.”
Williams’ conduct wasn’t at issue in the case — he was granted immunity in exchange for his testimony. However, given that 18 USC 201 uses the same language to prohibit the receiving and giving of bribes, the Supreme Court’s ruling impacts how the statute governs both demand-side and supply-side bribery.
As noted above, the language of 18 USC 201 should sound very familiar for FCPA practitioners. Among other things, the FCPA also prohibits offering, giving or promising “anything of value” to a foreign official for the purpose of “influencing any act or decision of such foreign official in his official capacity.”
So, circling back to the basic question I raised at the start of this post, does the SCOTUS decision shake the foundations of the FCPA? Given the similarity between the statutes, can companies now open the flood gates and start bestowing lavish gifts on foreign officials?
The short answer to these questions is no, and the explanation is a simple one. While both statutes prohibit offering, giving or promising anything of value to an official to influence official acts, the FCPA contains an additional restriction that is absent from 18 USC 201. In particular, the FCPA makes it a crime to offer, give or promise anything of value to a foreign official to induce the official “to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality.”
The Supreme Court’s decision focused on whether Gov. McDonnell accepted benefits from Star Scientific’s CEO in return for taking some official act. The High Court decided that setting up meetings between Williams and Virginia officials, passing along information about Star Scientific to Virginia officials and arranging for events at the Governor’s Mansion where Williams could interact with state officials did not constitute “official acts.”
Consistent with prior cases, the Supreme Court construed the term “official acts” in 18 USC 201 to consist of making decisions or taking actions on an “identified question, matter, cause, suit, proceeding or controversy” (internal quotations omitted). The Court held that “merely arranging a meeting or hosting an event to discuss a matter does not count as a decision or action on that matter.”
While Gov. McDonnell’s actions in response to Williams’ gifts did not satisfy the Supreme Court’s definition of “official act” under 18 USC 201 — and likely under the FCPA — I do believe Williams’ gifts were given for purposes of inducing Gov. McDonnell to use his influence with other Virginia officials.
In response to Williams’ substantial gifts, Gov. McDonnell repeatedly recommended that state officials meet with Williams or consider information furnished by Williams about Star Scientific’s products. He invited Mr. Williams to exclusive events in the Governor’s Mansion, and allowed Williams to add specific Virginia officials to the guest list. That feels a lot like paying an official to get them to use their influence with others.
The High Court’s ruling in favor of Gov. McDonnell draws some boundaries around 18 USC 201. It likely does the same for the similarly-worded provisions of the FCPA. But companies must bear in mind that the FCPA, on its face, is broader than its domestic sibling. It specifically reaches conduct –paying officials for the purpose of inducing them to use their influence with other officials — that is not addressed in 18 USC 201.
So, the Supreme Court’s ruling doesn’t significantly change the FCPA landscape. Companies should not loosen their controls over providing gifts and hospitality to foreign officials. They shouldn’t start planning shopping trips, extending five-figure personal loans, paying for weddings, or asking foreign officials to line up for Ferrari rides.
Bill Steinman is the senior partner at Steinman & Rodgers LLP, a boutique law firm in Washington, D.C. specializing in international anti-corruption compliance and investigations. He’ll be a speaker at the FCPA Blog NYC Conference 2016.
Not sure I agree that the demand and supply sides of the 18 USC 201 equation are the same. In this particular case, the defendant escapes conviction because it was found as a fact that all the defendant did was arrange meetings, conduct which did not arise to the level of an official act. However, it is highly unlikely that Williams handed over $175,000 with the intent that the defendant act merely as an appointments secretary. As Williams, the giver of the bribe, almost certainly intended for the defendant to do something by means of an official act, it is easy to envisage a situation in which the giver of a bribe would be found guilty in circumstances where the receiver of the bribe would be acquitted. The FCPA, of course, focuses exclusively on the giving of bribes. Even without the FCPA's broader language, the McDonnell case would have no practical effect on the FCPA because it will have most impact on the receiving side of the equation, an area the FCPA does not touch.
All the same, I strongly feel that SCOTUS's decision stinks and could pave way to other state officials in other states. Not being a lawyer, but a lay man with Fraud Examiner credentials, I would ask what motivated Gov. McDonnell to accept gifts from Williams and what were the intentions of Williams to provide gifts to Gov. McDonnell. Business is usual. WIIFM. As Tom Jones sang "It's not unusual", where fraudsters do get elected to top offices of Cities and States.
Adam, Thanks so much for your comment. Just to clarify — my point wasn't that the standard for supply side and demand side is the same, but that the term "official action" as used in the supply side and the demand side provisions would be interpreted in the same way. The Court has long held that "a term appearing in several places in a statutory text is generally read the same way each time it appears.” I also posit, for argument's sake, whether Williams indeed sought some form of official action. In my experience in the FCPA context, I have indeed seen companies and individuals pay significant amounts of money to a foreign official not for any official action falling within the official's portfolio, but for the purpose of inducing that official to use their influence with others. We may never know, but it's not beyond the pail that Williams was seeking McDonnell to use the impirmatur of his office to influence others. An interesting topic, and thanks again!
IN many situations that I have seen regarding bribe demands in Canada and the US by government officials, the official asks for bribes, promising that he can deliver whatever the payor is asking for. The money comes in, and the official takes steps such as arranging meetings, talking to people etc and the payor thinks that his bribe is going to provide the desired result. Hence, the money keeps flowing in, be it cash, Rolex watches, loans etc.
Finally, the official tells the payor that he cannot help any further. At that point, the payor is stuck because he cannot go to the authorities and say that he bribed the official and now the official won't comply with his promises, lest he go to jail for corruption. Hence the official knows he is safe from being reported to authorities by the payor.
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