The FCPA And Evidence Abroad

"Obtaining evidence outside the United States," the U.S. Attorneys Manual says, "involves considerations unfamiliar to many American prosecutors."

What tops the list of unfamiliar considerations? Sovereignty -- the idea that if you want something that's mine, you have to ask me for it. 

Countries aren't happy when their sovereignty is violated.

And, let's face it, representatives of the United States government aren't always known for their thoughtful and sensitive treatment of other countries.

But most FCPA violations involve money changing hands outside the United States. So evidence of the offense is often outside the jurisdiction of any U.S. court and within the sovereignty of another country.

How does the DOJ gather that evidence?

The U.S. Attorneys Manual (USAM) -- a handbook for federal prosecutors -- has a chapter about it.

"Virtually every nation," the USAM says, "vests responsibility for enforcing criminal laws in the sovereign. The other nation may regard an effort by an American investigator or prosecutor to investigate a crime or gather evidence within its borders as a violation of sovereignty."

When prosecutors need criminal evidence that's tucked away in a police station in Abuja, for instance, Uncle Sam needs to walk softly and put away the big stick. Otherwise the evidence may never leave Nigeria, and an FCPA violator might walk.

Stepping on toes overseas produces predictable results. "A violation of sovereignty," the USAM says, "can generate diplomatic protests and result in denial of access to the evidence or even the arrest of the agent or Assistant United States Attorney who acts overseas."

The manual warns that "even such seemingly innocuous acts as a telephone call, a letter, or an unauthorized visit to a witness overseas may fall within this stricture."

The best way forward?  The USAM counsels federal prosecutors to forget about going it alone or trying to force the issue. Better, the handbook says, "to invoke the aid of the foreign sovereign in obtaining the evidence."

View Title 9, Criminal Resource Manual 267, United States Attorneys Manual, here.

What's The Deal With Declinations?

After a company self discloses possible FCPA violations, or hears from the DOJ or SEC first, there are only two possible outcomes -- an enforcement action or a declination (no action by the DOJ or SEC).

How often do declinations happen?

No one knows. The DOJ and SEC don't reveal anything about them. Companies can disclose declinations and some do. But an unknown number do not.

No one talks much about declinations. There's not much to say when it all happens in the dark.

We know. It's frustrating.

But a couple of DC lawyers have just let in a little light.

Writing in this month's edition of Bloomberg's Corporate Counsel Law Report, James Tillen and Marc Alain Bohn (an important visitor to the FCPA Blog from time to time) looked at declinations.

Here's part of their firm's summary of the article:

[Although declinations] might reflect an insufficiency of evidence, the absence of jurisdiction, or a lack of actionable misconduct, they can also represent the clearest evidence of benefit from a voluntary self-disclosure or from extraordinary cooperation. Therefore, any determination of whether to voluntarily self-disclose a potential violation or cooperate fully with enforcement authorities in an investigation is incomplete without including the recent spike in declinations in the analysis of what, strategically, is in the company’s best interest. . . .

From the article is this graph (reprinted here with the authors' permission), showing the number of known declinations since 2008.

The full article, high on our recommended reading list, can be downloaded here.

Call For Scholarship: The Travel Act

We've talked about the Carson case and the defendants' challenge to the Travel Act counts.

Extraterritoriality, jurisdiction, and due process (in other words, the threshold questions) are at issue.

Before the Carson briefs were in, a reader asked us about Travel Act jurisdiction over foreign issuers. We did some research and came up with very little. And we weren't alone.

The only non-judicial source the government cited was the Travel Act's legislative history. The Carson defendants' used the legislative history, and also the Ninth Circuit Model Criminal Jury Instructions, a book about jury instructions, and a chapter from the Corporate Counsel’s Guide to Doing Business in China.

In the Corporate Counsel's Guide, Patrick Norton wrote:

Because of the Travel Act’s domestic focus, one commentator observed: The validity of [Travel Act] charges [for foreign commercial bribery] may be questioned. The legislative histories of the FCPA and the Travel Act show no evidence that Congress intended to make foreign commercial bribes a federal crime; indeed, quite the opposite. The legislative histories of many state bribery statutes similarly fail to disclose any intention to reach bribery in other countries that has, at best, a limited nexus to the state. Travel Act charges predicated on bribery laws of those states thus require overlooking the intentions of both Congress and the state legislature. In the half century that the Travel Act has been in effect, moreover, only one federal court has upheld criminal charges for foreign commercial bribery under that Travel Act, and that court’s decision is a doubtful precedent.

In our search, we went back to 1983 for a law review article that included a discussion about the Travel Act (58 Notre Dame L. Rev. 1027).

But between Norton's work and the 1983 piece, there was a big gap.

A good time for some fresh thinking about the Travel Act will be after the trial court's ruling on the Carson defendants' motion to dismiss.

Download the defendants' motion and memorandum here.

We linked the government's reply in our post here.

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Here are excerpts from the 1983 article in the Notre Dame Law Review:

 . . . . . The Interstate and Foreign Travel in Aid of Racketeering Enterprises Act, more commonly known as the Travel Act, was enacted in 1961. It was part of Attorney General Robert Kennedy's fight against organized crime and racketeering but its use has expanded.

"Broadly stated, the Travel Act makes it a federal offense to travel interstate, or to use any interstate facilities, with intent to: (1) distribute the proceeds of any unlawful activity; (2) commit a violent crime in furtherance of any unlawful activity; or (3) promote or facilitate any unlawful activity. The Act defines 'unlawful activity' to include any business enterprise involving gambling, illegal liquor, narcotics, or prostitution offenses, as well as conduct involving extortion, bribery or arson.

"The Travel Act reaches anyone who: (1) travels in or uses a facility of interstate commerce with intent to promote or facilitate unlawful activity; and (2) who thereafter actually performs or attempts to perform an act in furtherance of those activities.

"The use of an interstate facility or means of interstate travel to promote an unlawful activity provides federal courts with jurisdiction over crimes which would otherwise require local prosecution. Travel Act liability can attach even though a defendant does not reasonably foresee that he will be engaged in interstate activity. Likewise, a defendant may be convicted under the Travel Act without proof that he knowingly caused interstate travel or use of an interstate facility.

"The Travel Act, however, does require that the defendant use an interstate means, intending to promote or carry on an unlawful activity."

The Travel Act has withstood constitutional challenges under the tenth amendment (state powers) and fifth amendment (due process, based on arguments that the law is vague and ambiguous).

"Some defendants have also asserted that the Act infringes upon first amendment freedoms. They have argued that, by regulating the use of interstate communication facilities, the Travel Act abridges freedom of speech. Courts have consistently upheld the Travel Act in face of these assertions, since the first amendment does not protect unlawful speech."

Carson Case Tests The Travel Act

A hearing on Friday this week might influence whether the DOJ will keep using Travel Act counts in FCPA-related prosecutions.

The Carson defendants are charged under both the FCPA and the Travel Act.

The Travel Act (18 U.S. C. §1952) prohibits traveling between states or using an interstate facility in aid of any crime, and carries a 5-year prison sentence for most offenses. The underlying crime doesn't have to be a federal offense, such as an FCPA violation. Traveling around or using the mails to violate a state law can also trigger a Travel Act violation.

For their Travel Act counts, the Carson defendants are accused of violating California's anti-bribery law (California Penal Code section 641.3). It bans corrupt payments anywhere of more than $1,000 between any two persons, including private commercial parties.

The government alleged the Carson defendants paid bribes overseas to foreign officials and private parties -- both prohibited, the government said, under California law. (The FCPA only reaches bribes to foreign officials.)

In a motion to dismiss the Travel Act counts, the Carson defendants argued:

First, that the Travel Act doesn't apply extraterritoriality -- that is, to conduct outside the United States.

Second, their alleged conduct doesn't violate California's commercial bribery statute.

Third, the Travel Act and the California commercial bribery statute are unconstitutionally vague and violate due process because the defendants had no fair notice that the laws would reach the alleged conduct.

And fourth, the Travel Act counts fail to allege an essential element – namely, an act following the travel or use of interstate facilities in furtherance of the promotion of California commercial bribery.

The government's reply addressed each point the defendants raised.

The DOJ has been using Travel Act counts more often in FCPA prosecutions. This is apparently the first test of the statute in an FCPA-related case.

Download the government's brief in opposition to the defendants' motion to dismiss here.

On News Corp, Some Recommended Reading

Ellen Podgor on her White Collar Crime Prof Blog posted commentary called Murdoch and the Foreign Corrupt Practices Act: A Minefield.

As usual from Podgor, a professor at Stetson Law, it's a thoughtful post, full of the practical wisdom and technical knowledge that sets her apart.

Her take? Building an FCPA case against Murdock "would be like entering a minefield."

Issues abound, such as the intent behind the statute, extraterritoriality ('would this really be a case of policing U.S. actors'?), and the good-faith defense or lack thereof (one of her favorite topics), among others.

On due process, she quotes her contributing blogger, Lawrence S. Goldman: "As much as I would enjoy seeing Murdoch in the dock, so to speak, I think it would be a terrible stretch to punish conduct committed in Britain by British citizens bribing British citizens to invade the privacy of British citizens in Britain. Even Murdoch and News Corp. deserve due process."

The post is no defense of News Corp's alleged practices.

But it's Ellen Podgor once again defending the rule of law.