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FCPA Blog Daily News

« What's Wrong Down Under? | Main | Release 10-01 Is Here »
Thursday
Apr222010

Are GM Employees Government Officials?

The end came last month for a privately-held American company called Nexus Technologies. It pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act and the Travel Act. As part of its plea, Nexus admitted to operating "primarily through criminal means" -- and it agreed to cease operations.

After being indicted in 2008 with its owner and three other individuals, Nexus tried to mount a defense. In October 2009, the company and its owner and president Nam Nguyen sought more information about who the defendants allegedly bribed, and they filed a motion to dismiss the entire indictment.

An FCPA violation needs an offer, payment, or promise to pay anything of value to a “foreign official." The original indictment claimed that employees of six entities –- the Vung Tau Airport, the Southern Flight Management Center, an aviation industry business, a Vietsovpetro Joint Venture, the Petro Vietnam Gas Company, and the Tourism and Trading Company -– were "foreign officials" because the entities were controlled by Vietnamese government agencies.

The defendants said:

The instant indictment fails to state a criminal offense because it alleges that the recipients of the improper payments were “foreign officials” because they were employees of entities “controlled” by various Vietnamese ministries of the government. Such a definition of “foreign official” is unsupported by the text or the purpose of the FCPA. The FCPA is a public bribery statute which criminalizes improper payments to officials performing a public function. Mere control of an entity by a foreign government no more makes that entity’s employees “foreign officials” than control of General Motors by the U.S. Department of the Treasury makes all GM employees U.S. officials. [our emphasis]

They also said the FCPA’s definition of “foreign official” -- which includes employees of any foreign government “department, agency or instrumentality” -- is unconstitutionally vague. Especially in the context of socialist and communist states like Vietnam, they argued, defining a “foreign official” to include employees of entities solely based on government “control” of those entities would unfairly sweep nearly all economic activity within the scope of the statute.

The government responded two weeks later with a superseding indictment. It was directed to the "foreign official" issues and it escalated the charges from five to 28 counts -- one count of conspiracy, nine counts each of violating the FCPA, the Travel Act, and money-laundering.

The new indictment revised the descriptions of the six Vietnamese entities in question -- saying they were "agencies and instrumentalities" of the Vietnamese government instead of merely being “controlled” by departments, agencies or instrumentalities of the government.

In November 2009, the defendants filed a motion to dismiss the new indictment. They said it still didn't allege that the six entities performed government functions which would make their employees "foreign officials."

In December 2009, the judge denied the defendants’ motion to dismiss without addressing the substantive issue of who's a "foreign official" under the FCPA. After the motion failed, Nexus and the three remaining co-defendants reportedly started serious discussions with the DOJ about plea deals.

It was too late for Nexus; the company was forced out of existence.

What's the case mean?

First, that the government isn't going to budge on its view of who's a "foreign official."

Second, the cost of challenging an FCPA action in court can be enormous. Nexus and co-defendant Nguyen sought dismissal with a frontal assault on the government’s interpretation of a “foreign official.” The DOJ then reached into its arsenal, increasing the charges from five to 28 counts. The nine FCPA charges, nine Travel Act charges, and nine money laundering charges were all based on the same nine transactions. But they multiplied the risk of long-term jail sentences for the individual defendants if convicted.

Third, the trial judge, if he felt strongly about it, could have looked at the issue of who's a "foreign official." He side-stepped it instead, handing the government a victory and the defendants a defeat.

Download a copy of defendants' first motion to dismiss here.

Download a copy of the superseding indictment here.

Download a copy of defendants' second motion to dismiss here.

Download a copy of the government's memorandum in opposition to second motion to dismiss here.

Reader Comments (2)

What's the basis for saying the judge "side-stepped" the issue of whether or not they were foreign officials? The defendants challenged, the government responded, and the judge, after reviewing the filings and holding a hearing, ruled in the government's favor. How is that side-stepping?
April 24, 2010 | Unregistered CommenterAnonymous
Since the judge didn't comment, we don't know exactly why he ruled as he did on the motion to dismiss. In any case, we interpret it as a win for the government and confirmation of its position on "foreign officials." Others would argue the question is still as open as ever. We don't think so.
April 26, 2010 | Registered CommenterRichard L. Cassin

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