The government of the United States in recent years has increased its enforcement of the Foreign Corrupt Practices Act (FCPA), which prohibits bribery of non-U.S. public officials for commercial advantage. The 10 May 2011 conviction of Lindsey Manufacturing Company marks the first conviction of a corporation under the FCPA. Notably, the conviction supports the U.S. government's expansive interpretation of the term "foreign official" to include officers and employees of state-owned enterprises.
On 10 May 2011 a federal jury in California convicted Lindsey Manufacturing Company, along with its president Keith E. Lindsey, its CFO Steve K. Lee, and a Mexican intermediary, Angela Aguilar, on all counts for their roles in a bribery scheme related to a Mexican state-owned utility company, Comisión Federal de Electricidad (CFE).
The U.S. government submitted evidence that Lindsey Manufacturing funds were used to purchase a US$300,000 Ferrari, a US$1.8 million yacht, and payment of over US$170,000 of credit card bills for a CFE official. Furthermore, US$500,000 was paid to relatives of another CFE official. Ms. Aguilar served as a director of the intermediary between Lindsey Manufacturing and CFE that provided fraudulent invoices to facilitate bribery of CFE officials. Between 2002 and 2009 Lindsey Manufacturing received more than US$19 million in business from CFE.
Following a one-month trial, the jury rendered the verdict after only one day of deliberation. Lindsey Manufacturing, Mr. Lindsey, and Mr. Lee were each convicted of one count of conspiracy to violate the FCPA and five substantive FCPA violations. Ms. Aguilar was convicted of one count of conspiracy to launder money.
In the U.S. Department of Justice's (DOJ) press release following the conviction, Assistant Attorney General Lanny Breuer noted that "Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last." U.S. Attorney Andre Birotte Jr. stated "[t]he Department of Justice remains committed to prosecuting violations of the FCPA to ensure that the payment of bribes can no longer be viewed simply as the cost of doing business in a foreign nation." A record number of FCPA trials are scheduled for this year (including trials of 22 defendants for alleged conspiracy to bribe the defense minister of an African nation, which recently commenced in the U.S. District Court for the District of Columbia).
Judge's ruling validates expansive definition of "foreign official"
The Lindsey Manufacturing conviction is the first to directly address and support the DOJ's expansive interpretation of "foreign official" to include employees of state-owned enterprises. The FCPA defines "foreign official" to include, among others, "any officer or employee of a foreign government or any government, agency, or instrumentality thereof." The FCPA does not define the term "instrumentality." While U.S. enforcement authorities in recent years have consistently interpreted the term to include state-owned enterprises, this is the first court ruling and conviction directly addressing the issue. In a 20 April 2011 ruling on the defendants' pre-trial motion to dismiss, the court held that a state owned corporation may be an "instrumentality" of a foreign government within the meaning of the FCPA. Additionally, the court held that the FCPA definition of "foreign official" may include officers of a state-owned corporation. CFE is described as a governmental agency on its website, and CFE is owned by the Mexican government.
Although the court's factual analysis of CFE's public function leaves open the possibility that some state-owned enterprises and some lower-level employees of state-owned enterprises could fall outside of the FCPA's scope, the judge's ruling generally supports the U.S. government's broad interpretation of "foreign official."
Related judicial proceedings
Courts in two other FCPA cases in California and Texas are expected to shed additional light on similar challenges to the government's expansive view of "foreign official." In United States v. Carson, et al., 09-CR-00077 (C.D. Cal.), the court found that determining whether state-owned enterprise officers and employees are "foreign officials" is a question of fact for the jury, relying on the Lindsey Manufacturers ruling. Trial is set for June 2012. In United States v. O'Shea, 09-CR-00629 (S.D. Tex.), the court's ruling is pending on a similar challenge to the meaning of "foreign official" as applied to state-owned enterprises. As the issue is fully briefed, a ruling is expected soon.