Why FCPA history matters: ‘Congress was distraught’ 
Friday, December 5, 2014 at 7:28AM
Richard L. Cassin in David Kay, Foreign Official, Joel Esquenazi, Joseph Sigelman, Legislative History, PetroTiger Ltd, instrumentaility

President Jimmy Carter addresses Congress in 1977Joseph Sigelman, the former co-CEO of PetroTiger Ltd., is the latest 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.

He asked a federal district court in New Jersey to dismiss FCPA charges against him.

Sigelman, like a string of defendants before him, said the definition of “foreign official” in the FCPA is so vague that it fails to give proper notice of who is or might be covered by the definition.

The DOJ said in response that the FCPA is clear and its original intent has been consistently understood and acknowledged by Congress and the courts.

Here's how the DOJ started its argument:

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Defendant is charged with conspiring to violate, and violating, the FCPA, 15 U.S.C. § 78dd-2, which prescribes corrupt payments to “foreign officials.”

The statute 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). See also United States v. Esquenazi, 752 F.3d 912, 920 (11th Cir. 2014).

“Congress enacted the FCPA in 1977, in response to recently discovered but widespread bribery of foreign officials by United States business interests. Congress resolved to interdict such bribery, not just because it is morally and economically suspect, but also because it was causing foreign policy problems for the United States.” United States v. Kay, 359 F.3d 738, 746 (5th Cir. 2004).

Congress was concerned with the problem of corporate bribery because, among other reasons, it was “bad business.” S. Rep. No. 95-114, at 4 (1977). See also, e.g., id. at 3 (bribery “hamper[s]” the “efficient functioning of our capital markets”); H.R. Rep. No. 95-640, at 4 (1977) (corporate bribery “erodes public confidence in the integrity of the free market system” and “short-circuits the marketplace by directing business to those companies too inefficient to compete . . . or too lazy to engage in honest salesmanship, or too intent upon unloading marginal products.”).

Contrary to Defendant’s assertion that Congress was primarily concerned with bribes to high-ranking government officials, “Congress was obviously distraught not only about high profile bribes to high ranking foreign officials, but also by the pervasiveness of foreign bribery by United States businesses and businessmen.” Kay, 359 F.3d at 749. See also id. (noting that the FCPA cast “a[] wide net over foreign bribery”); H. Rep. No. 95-640 (1977) at 4 (stating Congress’ intent to address bribery throughout the international economy, including in the “oil and gas production and services” industry).

Notably, Congress amended the FCPA in 1998 “to ensure the United States was in compliance with its treaty obligations. That year, the United States ratified the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention). In joining the OECD Convention, the United States agreed to ‘take such measures as may be necessary to establish that it is a criminal offen[s]e under [United States] law for any person intentionally to’” bribe a foreign official to obtain or retain business. Esquenazi, 752 F.3d at 923 (citations omitted).

The OECD Convention requires the signatories, including the United States, to criminalize bribes to a “foreign public official,” Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Art. 1.1., Dec. 17, 1997, S. Treaty Doc. No. 105-43, 37 I.L.M. (entered into force Feb. 15, 1999), which it defined as, among other things, “any person exercising a public function for a foreign country, including for a public agency or public enterprise,” id. art. 1.4(a). The Commentaries to the Convention, in turn, explain that: “a public enterprise” is any enterprise, regardless of its legal form, over which a government, or governments, may, directly or indirectly, exercise a dominant influence. This is deemed to be the case, inter alia, when the government or governments hold the majority of the enterprise’s subscribed capital, control the majority of votes attaching to shares issued by the enterprise or can appoint a majority of the members of the enterprise’s administrative or managerial body or supervisory board. Id. art 1.4, cmt. 14.

When Congress amended the FCPA in 1998 to comport with its treaty obligations, it left intact the definition of “foreign official.” 15 U.S.C. § 78dd-2(h)(2)(A). See also Esquenazi, 752 F.3d at 920.


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

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