In their motion to dismiss all counts of the complaint against them, the defendants in U.S. v. Carson argue that state-owned companies aren't "instrumentalities" of a foreign government. So, they reason, the officers and employees of state-owned companies -- the people they allegedly bribed -- can't be "foreign officials," even if the entity in question is owned 100% by the foreign government. And if there are no "foreign officials," there are no FCPA violations.
There's lots to say on the subject. The defendants' supporting memo is 61 pages, and Mike Koehler's declaration about the FCPA's legislative history is 151 pages (he's not the FCPA Professor for nothing). The first hearing on the motion to dismiss is set for March 21.
How do the horses line up? Neck-and-neck.
First, the FCPA says a “foreign official” is an “officer or employee of a foreign government or any department, agency, or instrumentality thereof.” There's no definition in the statute of "instrumentality" or, for that matter, of "department" or "agency." So from reading the words of the statute, neither side can claim victory.
Second, the legislative history of the FCPA doesn't discuss what "instrumentality" means when used in the law. Congress's pre-enactment debate fills several thousand pages but doesn't mention state-owned enterprises. Again, both sides are equally advantaged or disadvantaged from the legislative history's blank slate.
Third, the defendants say, rightly, that the FCPA as first conceived had a mainly foreign-policy purpose. The State Department and Congress didn't want overseas bribery scandals to keep wrecking the foreign governments our diplomats were trying to work with. So, the defendants argue, "instrumentality" must mean something similar to "department" or "agency" -- in other words, an integral part of the government itself. But wait. Can't a bribery scandal at a state-owned telephone company wreck a foreign government just as easily as a bribery scandal at the ministry of communications? Well, yes. Again, then, both sides can claim to take the point.
But there's this. Since the FCPA became law 33 years ago, governments have radically changed the way they govern. Sovereigns have corporatized and globalized and become the biggest financial players on the planet. It's the governments themselves that have redefined their "instrumentalities" -- the DOJ didn't need to lift a finger.
We don't know what the judge in the Carson case will decide. The defendants' lawyers have hit all the right notes and the DOJ will do the same.
Meanwhile, there's no villain in this legal drama. If the word "instrumentality" has taken on new complications lately, the cause isn't linguistic failures by stupid people or manipulations by devious ones. The cause is the new world order unfolding before our eyes.
Download the defendants' February 21, 2011 motion to dismiss here.
View Mike Koehler's declaration in support of the defendants' motion here.