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Looking Again At U.S. v. Kay

David Kay and Douglas Murphy bet their freedom on a high-risk and untested FCPA defense. Kay, the former vice president of American Rice, Inc. (ARI), and Murphy, the former president, never denied bribing officials in Haiti to reduce the company's tax burden. Their primary defense -- after being charged with 12 counts of violating the Foreign Corrupt Practices Act -- rested on the argument that the law's excessive ambiguity renders it void and unenforceable. Bribes to reduce foreign taxes, they said, cannot violate the FCPA because such payments aren't intended to "obtain or retain business." But even if the law is meant to ban tax-related bribes, the argument goes, it's so poorly drafted that a reasonable person wouldn't understand it. That's a failure to give fair notice, and thus a denial of due process, leaving the law unenforceable.

Their defense had some history. When the FCPA was still new -- and intensely unpopular -- it was commonly criticized for being ambiguous and unclear. Although most FCPA lawyers thought the statute would hold up in court, some lawyers and clients believed the void-for-vagueness defense might just work. So when in 2002 the U.S. Federal District Court in Houston agreed with Kay and Murphy and dismissed all their FCPA charges, it looked like the defense was vindicated after all. But that wasn't the end of the story.

In its second review of the case, the U.S. Court of Appeals for the Fifth Circuit last month debunked the idea that the law is vague. How? By letting the simple words of the statute speak for themselves. The FCPA makes it a crime, the court said, to (1) “willfully;” (2) “make use of the mails or any means or instrumentality of interstate commerce;” (3) “corruptly;” (4) “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;” (5) “any foreign official;” (6) “for purposes of [either] influencing any act or decision of such foreign official in his official capacity [or] inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official [or] securing any improper advantage;” (7) “in order to assist such [corporation] in obtaining or retaining business for or with, or directing business to, any person.”

Then the court delivered the coup de grace to the void-for-vagueness defense -- and fired a personal rebuke at Kay and Murphy: "A man of common intelligence would have understood that ARI, in bribing foreign officials, was treading close to a reasonably-defined line of illegality. As the Supreme Court in Boyce held, 'no more than a reasonable degree of certainty can be demanded [in a criminal statute]. Nor is it unfair to require that one who deliberately goes perilously close to an area of proscribed conduct shall take the risk that he may cross the line.' Defendants took this risk, and splitting hairs as to the illegality of one type of action under the business nexus test does not allow them to argue successfully that the FCPA’s standards were vague."

The lesson: hairsplitters beware -- the FCPA means what is says. David Kay was sentenced to 37 months in prison and Douglas Murphy to 63 months. There's nothing ambiguous or vague in that tragic outcome.

View the Fifth Circuit's October 24, 2007 Opinion Here.

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