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Practice Alert: Is every email another FCPA violation?

Last month, while all eyes in the FCPA world were on the acquittal of former Alstom executive Lawrence Hoskins in the U.S. District Court for the District of Connecticut, a far more significant FCPA decision was delivered a bit further down the coast by Judge Kevin McNulty of New Jersey’s federal trial court.

In U.S. v. Coburn and Schwartz, Judge McNulty held that when it comes to charging defendants with violating the FCPA, the relevant question isn’t the number of bribes paid, but the number of calls made or emails sent.

To reach this decision – one of first impression under the FCPA – Judge McNulty simply relied on the statute’s plain language. Chatty defendants beware: you can face a separate criminal count for each individual missive you send about the same overall bribery scheme.

Prior to Judge McNulty’s ruling, the prosecution of Messrs. Coburn and Schwartz garnered a great deal of attention. Both are former executives of Cognizant Technology Solutions, which itself entered into an FCPA settlement with the SEC in 2019. According to the SEC, back in 2015 Cognizant decided to build several new facilities across India to house its substantial in-country workforce, including a major new campus in Chennai.

Cognizant allegedly entered into a scheme with a leading Indian construction company to funnel bribes to municipal officials in several cities to secure construction permits for the projects. What has drawn attention to the case against Coburn and Schwartz is that in 2015 the former was Cognizant’s president and CFO, and the latter was its chief legal officer. Direct participation by such senior executives in an alleged bribery scheme is always noteworthy – it is doubly so when one of those executives is the company’s head lawyer.

According to federal prosecutors, both Coburn and Schwartz authorized the bribes and participated in a scheme to illicitly provide funds to the contractor by approving payments under fraudulent change orders. As previously noted on the FCPA Blog, Cognizant self-reported the alleged transgressions, and incurred a civil penalty of $25 million for violating the FCPA’s accounting provisions.

In February 2019, a federal grand jury returned a twelve-count indictment against Messrs. Coburn and Schwartz for their alleged roles in the scheme, as follows: a single count of conspiracy to violate the FCPA, seven counts of falsifying Cognizant’s books and records, a single count of circumventing or failing to maintain adequate internal accounting controls, and three counts of violating the FCPA’s substantive anti-bribery provisions. It is the last three counts that form the heart of Judge McNulty’s ruling. Each involves a separate email that Coburn allegedly sent about the bribery scheme in India. In other words, while all of the emails pertained to the same bribery scheme, the criminal indictment asserts that each of Coburn’s three emails constitutes a separate violation of the FCPA.

Coburn challenged the three bribery counts, arguing that they were multiplicitious – the term used to describe a single alleged violation of law that is improperly spread over multiple charges. Perhaps the most common example cited for the concept of multiplicity is the hypothetical defendant alleged to have stolen $100 from a wallet being indicted on ten counts of theft of $10 each, instead of being charged with one count of theft for $100. When faced with claims of multiplicity, judges must examine the underlying crime’s appropriate “unit of prosecution.” In other words, judges ask what is the fundamental wrongful conduct that Congress sought to prohibit?

To discern the FCPA’s “unit of prosecution,” Judge McNulty turned first to the plain language of the statute. In what will no doubt remind many of middle school grammar classes, Judge McNulty essentially constructed a sentence diagram of 15 U.S.C. 78dd-1(a) which, in relevant part, makes it unlawful for “an issuer … or for any officer, director, employee or agent of such issuer … to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to a foreign official.”

The subject of that sentence, Judge McNulty wrote, is clearly an issuer and its officers, directors, employees, and agents. They’re the parties whose conduct is regulated by the FCPA. The next question is what does the FCPA tell them they cannot do? Put another way, what is the operative verb of the FCPA’s anti-bribery provision? To the delight of grammarians everywhere, Judge McNulty concludes that the relevant verb phrase is “make use of the mails or any means or instrumentality of interstate commerce.”

The overall purpose of the FCPA may be to prohibit the bribery of foreign officials, but the act it criminalizes – its unit of prosecution – is making use of interstate commerce in connection with a bribery scheme. Since sending an email is making use of interstate commerce, a defendant who sends three emails about the same bribery scheme seems to have engaged in three separate violations of the FCPA.

Though guided by the laws of language, Judge McNulty did not rely on grammar alone to reach his conclusion. Rather, he augmented his ruling by examining long-standing interpretations of other anti-corruption statutes that are no doubt familiar to readers – the federal wire fraud statute and the Travel Act. Like the FCPA, the gist of both statutes is prohibiting corruption, and federal circuits have repeatedly held that both prohibit using the means of interstate commerce in connection with misconduct.

For example, under the Travel Act, a defendant who crosses state lines twice in connection with perpetrating the same commercial bribery scheme has allegedly violated the Travel Act twice. It is the act of using interstate commerce in connection with corruption – and not the underlying corrupt conduct itself – that the Travel Act prohibits. And so it goes with the FCPA.

It’s important to bear in mind that the ability of federal prosecutors to pursue multiple charges arising from the same bribery scheme does not necessarily mean harsher punishments for those found guilty at trial. While it is true that a defendant can receive a separate sentence for each individual FCPA violation, federal judges have discretion when it comes to dolling out jail time. Indeed, in the Coburn matter, Judge McNulty stated in a footnote that he will “ensure that multiple punishments are not inflicted for the same scheme.”

While that is certainly a relief to Messrs. Coburn and Schwartz, this does not reduce the import of the court’s opinion. Even if an FCPA defendant is not separately punished for each individual violation of the statute, the ability of prosecutors to pursue multiple charges arising from the same overall bribery enterprise will have a direct and tangible impact on corruption trials.

First, the more counts with which an individual is charged, the greater likelihood that the government will be able to prove at least some of its case. Indeed, this is one of the reasons prosecutors like multiple count indictments. It simply allows more chances to prove that the defendant guilty of something. Second, more charges result in greater out of pocket costs to the defendant. Defending a one-count indictment generally takes fewer billable hours than defending a multiple count indictment. This, in turn, puts more pressure on a defendant, whose individual resources are unlikely to be limitless. That greater strain on resources creates a significant incentive to plead guilty in order to staunch defense costs.

It is safe to assume that Coburn will pursue an interlocutory appeal, and it remains to be seen if Judge McNulty’s ruling will stand. As a defense lawyer, I am understandably dismayed by his conclusion, but at the same time, I am convinced by his logic. While the Hoskins case may be of interest because it defines the hazy outer limits of FCPA jurisdiction, this order in Mr. Coburn’s case has far more significance and practical downside for the vast majority of FCPA defendants.

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  1. Will the following acts be considered as a single charge using the reasoning provided in the Coburn and Schwartz judgment.

    1) An email is marked to 3 different people asking all 3 people to collectively bribe somebody through a single payment.
    2) An email marked to 3 different people asking all 3 people to individually bribe somebody through 3 different payments?
    3) An email marked to 3 different people (in BCC) asking all 3 people to individually bribe a single individual. Would this be considered as 3 distinct emails as the people on the email are not aware that the others had been marked?
    4) An email marked to 3 different people to individually bribe 3 different people for 3 different purposes.

    It would seem if the unit of prosecution is the email, then this would be a single charge in all the above scenarios.

  2. Interesting question. When you email multiple people using email, all of the indented recipients may receive the email or none of the intended recipients may receive the email. My receipt of the email is not dependent on if the others receive the email. It is essentially a group conversation. In that conversation, I can request each person to take on a task or I can ask them to collaborate on a task. Following Judge McNulty’s reasoning, there are at least three separate counts.

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