On October 6, 2014, the U.S. Supreme Court denied an August 14, 2014, petition for writ of certiorari by Joel Esquenazi and Carlos Rodriquez, former owners of Terra Communications (Terra). The petition asked the court to define who counts as a foreign official under the Foreign Corrupt Practices Act (FCPA).

In 2011, Esquenazi and Rodriquez were convicted under the FCPA for making payments to foreign officials. On May 16, 2014, their convictions were upheld by the 11th U.S. Circuit Court of Appeals.

The Supreme Court did not explain why it denied the petition. The Supreme Court’s denial leaves intact the definition in the 11th Circuit ruling, which provided the following list of factors to determine if an entity is an instrument of a foreign government.

  • Does the government control the entity? Consider:
    • the nature of the foreign government’s formal designation of the entity;
    • whether the government has a majority interest in the entity;
    • the government’s ability to hire and fire entity principals;
    • the extent to which the entity’s profits, if any, go directly to the government;
    • the extent to which the government funds the entity if it fails to break even; and
    • the length of time these indicia have existed.
  • Is the entity an instrumentality of a foreign government? Consider:
    • whether the entity has a monopoly over the function it exists to perform;
    • whether the government subsidizes the costs associated with the entity providing services;
    • whether the entity provides services to the public at large; and
    • whether the public and the government of the foreign country generally perceive the entity to be performing a governmental function.

Until another circuit rules on the issue, domestic companies must be aware that, if a foreign company is state-owned, that can be enough to trigger anti-bribery statutes.