A recent decision by the United States Court of Appeals for the Second Circuit resolved several issues under the Foreign Corrupt Practices Act (“FCPA”) in a manner favorable to prosecutors. In United States v. Ng Lap Seng,1 the court affirmed the conviction of a Chinese citizen who bribed two United Nations (“U.N.”) officials to enlist their assistance in encouraging the U.N. to select his Macau convention center to host an annual U.N. conference.
In its opinion, the Second Circuit:
Applied a broader definition of a quid pro quo to the FCPA than the standard applicable to the general bribery statute, which requires that the bribe recipient undertake an “official act” in exchange for the bribe;
Declined to require the government to establish that the defendant intended to induce a breach of duty by the bribe recipient; and
Confirmed that a defendant can violate the FCPA even if the defendant did not profit directly from the bribe. (Ng provided his convention center to the U.N. free of charge.)
The Department of Justice has consistently taken aggressive positions interpreting the FCPA, but those positions are only infrequently subject to judicial review. U.S. Courts of Appeal interpret the FCPA even less frequently. With multiple FCPA trials scheduled for this fall, the Second Circuit’s ruling will no doubt bolster prosecutors’ confidence and encourage intensified enforcement.2
Ng’s Bribery Scheme
Ng Lap Seng is a Chinese national who, in 2009-2010, was developing a multi-billion dollar real estate project in Macau that would include hotels, luxury apartment buildings and a convention center.3 Ng allegedly wanted to increase the profile of his convention center and surrounding property by hosting an annual conference conducted by the U.N.4 He was charged with bribing two U.N. ambassadors over a five-year period to assist him in securing a contract to host that conference.5 Ng provided these bribes in the form of hiring one ambassador to work at a media entity he controlled, purchasing a vacation for a second ambassador’s family, funding a U.N. concert arranged by the second ambassador, and paying the ambassadors’ relatives for no-show jobs and sham contract work.6
In exchange for these bribes, the ambassadors wrote to the U.N. Secretary General urging the U.N. to select Ng’s convention center as the site of the annual conference.7 The ambassadors also persuaded the relevant U.N. committee to issue a letter in which the committee stated its support for hosting the conference at Ng’s convention center.8 The second ambassador, who by that point was serving as President of the U.N.’s General Assembly, led a trip with other U.N. officials to inspect Ng’s convention center and voiced his continued support for holding the U.N. conference at that site.9 Eventually, the U.N. selected Ng’s convention center to host the conference.10 Ng signed an agreement that obligated him to make the convention center available at no cost to the U.N.11
The FCPA Does Not Require Intent to Induce a Foreign Government Official to Commit a Formal “Official Act” in Exchange for a Bribe.
The Second Circuit held that the government did not need to prove that Ng intended for the U.N. ambassadors to commit an “official act” in support of his bribery scheme.12 The U.S. Supreme Court had previously imposed a restrictive definition of an “official act” in the landmark case of McDonnell v. United States.13 That case established that a bribery violation under 18 U.S.C. § 201(b)(1)(A), the general bribery statute, occurs only if, in exchange for a payment, a government official exercises some type of formal government power — i.e., engages in an “official act” — to resolve a specific question or proceeding pending before the government.14 An “official act” cannot include informal exercises of government influence such as setting up a meeting or organizing an event at which other government officials might consider taking some form of government action.15 The Second Circuit refused to impose an official act requirement in the context of an FCPA prosecution.
The court noted that, unlike 18 U.S.C. § 201, the FCPA does not include the phrase “official act.”16 Instead, the FCPA criminalizes bribing a foreign official for any of four specified purposes, including to “secur[e] any improper advantage” for the defendant to “obtain,retain, or direct business.”17 The Second Circuit confirmed that the FCPA criminalizes only quid pro quo bribery.18 However, the quo that an FCPA offender procures through bribery need not fit the narrow definition of an “official act” as defined by the Supreme Court in McDonnell.19
An FCPA Violation Occurs Even If the Foreign Official Does Not Breach Any Duty Owed to His or Her Foreign Government or Public International Organization.
The Second Circuit also rejected Ng’s argument to restrict the scope of what qualifies as corrupt intent under the FCPA. In order to act “corruptly,” a defendant must act “with the bad purpose of accomplishing either an unlawful end or result, or a lawful end or result by some unlawful method or means.”20 Ng argued that this element required proof that he intended for the U.N. ambassadors to violate an official duty that they owed to the U.N., and that the prosecutors elicited no such proof at trial.21
The Second Circuit held that Ng’s argument was inconsistent with precedent, which recognized that the FCPA outlaws corrupt payments “to influence an official,” even if not in breach of any official duty.22 The FCPA prohibits several forms of impermissible bribery, only one of which is “inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official.”23 Since only a subset of the FCPA’s prohibitions involve a foreign official breaching his or her official duties, not all violations of the FCPA require proof that such a duty was violated.24
A Defendant Can Violate the FCPA Even Without Profiting Directly From Business Obtained Through Bribery.
Finally, the Second Circuit rejected Ng’s argument that the FCPA’s requirement that any bribery assist the defendant in “obtaining or retaining business for or with, or directing business to, any person” referred solely to commercial business, and was not satisfied where he intended to make his convention center available at no cost to the U.N.25 The court did not take issue with Ng’s view that “business,” in the context of the FCPA, meant commercial activity.26 However, the court concluded that a jury could reasonably find this element satisfied, on the grounds that Ng directed business to the U.N., rather than to his own business venture.27 The court also noted that, while the commercial benefits of such a transaction appeared to belong entirely to the U.N., hosting the conference might also maximize the long-term profits of Ng’s business.28
The Department of Justice has been pursuing broad interpretations of the FCPA for years. Most of its cases have been resolved through out-of-court settlements with corporate entities, which provide, at best, non-binding guidance to practitioners about the contours of the FCPA. The DOJ’s success in United States v. Ng Lap Seng provides an appellate victory just as the DOJ’s FCPA Unit commences a slate of six trials this fall — three of which will occur in district courts within the Second Circuit — at which the DOJ’s interpretation of the FCPA and other bribery-related statutes will likely continue to be tested.