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Friday
Nov212014

PetroTiger defendant brings latest ‘foreign official’ challenge

Joseph Sigelman, who served as a former co-CEO of PetroTiger Ltd., is the latest FCPA defendant to argue that employees of state-owned enterprises aren't "foreign officials" under the FCPA.

He was charged in May with bribing an official at Ecopetrol SA, Colombia’s state-controlled oil company, and defrauding PetroTiger by taking kickbacks.

The indictment included one count of conspiring to violate the FCPA and three counts of violating the FCPA. He also faces charges in federal court in New Jersey for conspiracy to commit wire fraud and money laundering.

Sigelman said the FCPA's definition of "foreign official" is so vague that the statue is unconstitutional. He asked the trial judge to dismiss the FCPA charges and not let the jury decide them.

The FCPA defines “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof.” 15 U.S.C. § 78dd-2(h)(2)(A).

The DOJ said in a reply brief that the FCPA's definition of "foreign official" is clear, and it will present evidence to the jury that Ecopetrol is an "instrumentality" of the government of Colombia.

The Justice Department brief cited a string of prior cases that have upheld the definition of "foreign official" and the constitutionality of the FCPA.

A number of courts have addressed the question of whether the government entity involved in a particular case is an “instrumentality” under the FCPA (which the FCPA includes in the definition of “foreign official” . . .). Each and every court that has addressed the issue has concluded that (1) this is a fact issue for the jury to decide at trial; and (2) the determination is based on a non-exclusive list of factors. See, e.g., United States v. Carson, 2011 WL 5101701, *3-*4 (C.D. Cal. May 18, 2011); United States v. Aguilar, 783 F. Supp. 2d 1108, 1110 & n.4 (C.D. Cal. 2011); United States v. Esquenazi, No. 1:09-cr-21010-JEM, Dkt. No. 309 (S.D. Fla. Nov. 19, 2010); United States v. Nguyen, No. 2:08-cr-00522-TJS, Dkt. No. 144 (E.D. Pa. Dec. 30, 2009) . . . .

As an initial matter, no court has held that the definition of “foreign official” in the FCPA is unconstitutionally vague. Indeed, in a number of recent decisions on similar motions, the district courts denied the motions to dismiss and rejected the defendants’ void for vagueness arguments. See, e.g., Carson, 2011 WL 5101701, at *11; Esquenazi, No. 1:09-cr-21010-JEM, Dkt. No. 309 at 3 (“[T]he Court finds that persons of common intelligence would have fair notice of this statute’s prohibitions”); Nguyen, No. 2:08-cr-00522-TJS, Dkt. No. 144.

Additionally, no court has adopted Defendant’s position since the FCPA was enacted -- over three decades ago -- despite dozens of guilty pleas from individuals who admitted to bribing “foreign officials” employed by nations or instrumentalities (including two in the present case). It is thus “plain as a pikestaff,” Skilling, 130 S. Ct. at 2933, that the FCPA prohibits paying bribes to officials who work for foreign governments or their instrumentalities. See, e.g., United States v. Kay, 513 F.3d 432, 441 (5th Cir. 2007) (rejecting defendants’ claim that FCPA was void for vagueness because “[t]he FCPA delineates seven standards that may lead to a conviction. All are phrased in terms that are reasonably clear so as to allow the common interpreter to understand their meaning.”); Carson, 2011 WL 5101701, at *11 (rejecting defendants’ claim that FCPA was void for vagueness because “the meaning of ‘instrumentality’ in the FCPA is sufficiently definite that an ordinary person can understand what conduct is prohibited”).

Two other PetroTiger defendants have pleaded guilty to one count of conspiracy to violate the FCPA and to commit wire fraud. Knut Hammarskjold was the other co-CEO of the company and Gregory Weisman was the general counsel.

PetroTiger is a privately held British Virgin Islands company with operations in Colombia and offices in New Jersey. It provides production testing services to oil and gas companies.

The defendants allegedly made at least four payments in 2010 from PetroTiger’s bank account in the United States to an account in Colombia held by David Duran, an employee of Ecopetrol, worth a total of about $333,500.

The trial judge, Joseph E. Irenas, hasn't yet set a date for a hearing on Sigelman's motion to dismiss.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.