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Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

FCPA Blog Daily News

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Monday
May192014

Esquenazi loses appeal in 'foreign official' case

A federal appeals court Friday affirmed the DOJ's expansive view of a "foreign official" under the FCPA, upholding Joel Esquenazi and Carlos Rodriguez's convictions, and keeping intact the longest prison sentence ever imposed in an FCPA case.

The unanimous three-judge panel from the U.S. Court of Appeals for the 11th Circuit interpreted the FCPA's definition of "foreign official," which the statute says includes "any officer or employee of a foreign government or any department, agency, or instrumentality thereof."

In 2011, a jury in Miami found Esquenazi and Rodriguez guilty of bribing officials at state-owned Telecommunications D’Haiti. The jury convicted them of one count of conspiracy to violate the FCPA and wire fraud, seven substantive FCPA counts, one count of money laundering conspiracy, and 12 counts of money laundering.

Esquenazi was sentenced to 15 years in prison and Rodriguez got seven years.

Esquenazi and Rodriguez argued on appeal that the DOJ's view of "foreign official" was overly expansive and beyond Congress's intent for the statute's coverage.

They said Haiti Teleco wasn't an "instrumentality" under the FCPA and that its directors, officers, and employees therefore weren't "foreign officials." If that was true, they argued, bribes paid to anyone at Haiti Teleco couldn’t violate the FCPA. 

In Friday's opinion, the panel defined "instrumentality" as "an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own."

In key language, the appellate court said:

To decide if the [foreign] government "controls" an entity, courts and juries should look to the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; and the length of time these indicia have existed.

The court said the "control factors" aren't arbitrary but are "informed by the commentary to the OECD Convention the United States ratified."

T. Markus Funk, a partner at Perkins Coie who represented Esquenazi in the appeal, spoke to the Wall Street Journal after the ruling.

He said the appeals court rejected what he saw as the prosecutors' interpretation of instrumentality as covering any entity with even "nominal" government ownership, noting the opinion identified a government's "majority interest" in an entity as a factor for determining "instrumentality" under the FCPA.

A copy of the opinion by the United States Court of Appeals for the Eleventh Circuit in US v. Joel Esquenazi and Carlos Rodriguez is here (in pdf).

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Richard L. Cassin is the Publisher and Editor of the FCPA Blog. He can be contacted here.

Julie DiMauro is the executive editor of FCPA Blog and can be reached here.