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FCPA Blog Daily News

Entries in Haiti (52)

Sunday
May172009

Guilty Pleas In Haiti Bribery Case

Two Florida men have admitted bribing employees of Haiti's state-owned telephone company in return for better rates for Miami-based communications firms.

Juan Diaz, 51, of Miami, pleaded guilty Friday to a one-count criminal information. He was charged with violating the Foreign Corrupt Practices Act by conspiring to make corrupt payments to officials from Telecommunications D'Haiti. He paid and concealed $1,028,851 in bribes while acting as an intermediary for three private telecommunications companies.

Antonio Perez, 51, of Miami, the former controller of one of the U.S. telecos, pleaded guilty on April 27, 2009, to a one-count information charging him with conspiring to bribe officials at Telecommunications D'Haiti. Perez arranged bribes of $674,193 to the Haitian officials while he worked at the company from March 1998 to January 2002.

The government said Diaz and Perez admitted they conspired to make "side payments" through a shell company belonging to Diaz. The bribes went to Telecommunications D'Haiti's ex-director general and ex-director of international relations.

Diaz and Perez each face up to five years in prison and a fine of the greater of $250,000 or twice the gross gain produced by their bribes. The government said its investigation is ongoing.

The Justice Department hasn't released the names of the U.S. companies involved in the case. In late April, Latin Node Inc., another privately held Florida corporation in the telecommunications business, pleaded guilty to violating the Foreign Corrupt Practices Act in connection with improper payments in Honduras and Yemen. Latinode agreed to pay a $2 million fine and to cooperate with investigators in the U.S. and other countries.

Download a copy of the DOJ's May 15, 2009 release here.

Download a copy of the April 22, 2009 criminal information against Juan Diaz here.

Download a copy of the April 22, 2009 criminal information against Antonio Perez here.
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Tuesday
Nov062007

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.

Sunday
Nov042007

FCPA Convictions Upheld Against Kay And Murphy

They Paid Bribes to Reduce Taxes in Haiti; The FCPA Gave Them Fair Warning, the Court says

The United States Court of Appeals for the Fifth Circuit affirmed on October 24, 2007 the criminal convictions of David Kay and Douglas Murphy for violating the antibribery provisions of the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§ 78dd-1, 78-dd-2). Kay was formerly vice president and Murphy president of American Rice, Inc. (ARI), a Houston-based rice exporter. In 1999, ARI's board learned through an internal investigation that Kay and Murphy had paid bribes to reduce duties and taxes in Haiti -- which was “business as usual” there during the 1990’s. ARI’s directors self-reported the bribery to U.S. government regulators. ARI was not charged but Kay and Murphy were eventually indicted on twelve counts of violating the FCPA.

In their 2002 trial, the district court dismissed the indictments, concluding that “payments to foreign government officials made for the purpose of reducing customs duties and taxes [do not] fall under the scope of ‘obtaining or retaining business’ pursuant to the text of the FCPA.” The government appealed and the Fifth Circuit reversed. It said that “in diametric opposition to the district court . . . [,] bribes paid to foreign officials in consideration for unlawful evasion of customs duties and sales taxes could fall within the purview of the FCPA’s proscription,” but “[i]t still must be shown that the bribery was intended to produce an effect - here, through tax savings - that would ‘assist in obtaining or retaining business.’” The case was then sent back to the district court to determine, among other things, whether further prosecution would deny Kay and Murphy due process for want of fair warning.

Back in the district court in Houston, Kay and Murphy failed in their motion to dismiss for lack of fair warning. A jury then found them guilty on all counts. Kay was sentenced to 37 months in prison and Murphy to 63 months. They appealed on several grounds, including lack of fair warning. They argued that the ambiguity in the FCPA -- which does not expressly say that payments to lower taxes are related to "obtaining or retaining buisness" -- renders the statute void for vagueness.

The Fifth Circuit disagreed. It said in its 56-page opinion: "All [elements of the FCPA] are phrased in terms that are reasonably clear so as to allow the common interpreter to understand their meaning. Defendants have, rather than showing vagueness, raised a technical interpretive question as to the exact meaning of 'obtaining or retaining' business. Whether 'obtaining or retaining' business covers the general activities that an entity undertakes to ensure continued success of a business or Defendants’ more limited definition of contractual business is an ambiguity but not one that rises to the level of vagueness and unfair notice. . . .

"Although ARI did not make corrupt payments to guarantee one particular contract’s success," the Fifth Circuit said, "ARI ensured, through bribery, that it could continue to sell its rice without having to pay the full tax and customs duties demanded of it. Trial testimony indicates that ARI believed these payments were necessary to compete with other companies that paid lower or no taxes on similar imports – in other words, in order to retain business in Haiti, the company took measures to keep up with competitors. The fact that other companies were guilty of similar bribery during the 1990’s does not excuse ARI’s actions; multiple violations of a law do not make those violations legal or create vagueness in the law."

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

View the Fifth Circuit's February 4, 2004 Opinion Here.

Thursday
Aug092007

Question: Why Do Bribes to Reduce Foreign Taxes Violate the FCPA?

The answer, from the United States Court of Appeals for the Fifth Circuit, is this:

[T]he concern of Congress with the immorality, inefficiency, and unethical character of bribery presumably does not vanish simply because the tainted payments are intended to secure a favorable decision less significant than winning a contract bid. Obviously, a commercial concern that bribes a foreign government official to award a construction, supply, or services contract violates the statute. Yet, there is little difference between this example and that of a corporation’s lawfully obtaining a contract from an honest official or agency by submitting the lowest bid, and —— either before or after doing so —— bribing a different government official to reduce taxes and thereby ensure that the under-bid venture is nevertheless profitable. Avoiding or lowering taxes reduces operating costs and thus increases profit margins, thereby freeing up funds that the business is otherwise legally obligated to expend. And this, in turn, enables it to take any number of actions to the disadvantage of competitors. Bribing foreign officials to lower taxes and customs duties certainly can provide an unfair advantage over competitors and thereby be of assistance to the payor in obtaining or retaining business.

From U.S. v. David Kay and Douglas Murphy (February 4, 2004) at page 21.


View the Fifth Circuit's Opinion here.

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