Following close on the heels of a similar challenge, a second U.S. District Court judge in the Central District of California has upheld the DOJ’s interpretation of the term “foreign official” as it applies to the FCPA. On May 9, 2011, Judge James V. Selna held a hearing on a Motion to Dismiss in United States v. Carson, based in part on a challenge to the DOJ’s assertion that certain officials of state-owned entities qualified as foreign officials based on their companies being “instrumentalities” of a foreign country. Judge Selna’s written opinion denying the Motion to Dismiss was issued May 18, 2011, and held that “the question of whether state-owned companies qualify as instrumentalities under the FPCA is a question of fact” that turns on several factors. These include level of ownership or control, how the entity and its personnel are characterized by the foreign government, the entity’s purpose, its obligations and privileges under foreign law including exclusivity or controlling power in its functional area, and the circumstances surrounding its creation.
Judge Selna did not purport to have created an exclusive list of factors, and indicated that “no single factor is dispositive.” In denying the Motion to Dismiss, he stressed that because it is “a fact-specific question that depends on the nature and characteristics of the business entity,” the question of whether an entity is an instrumentality of a foreign country “is not entirely segregable from the evidence to be presented at trial.”
Judge Selna’s opinion is consistent with that of U.S. District Court Judge Howard Matz issued last month in the Lindsey case. These cases mark rare instances where courts have conducted an in-depth analysis of a challenge to the FCPA’s application, and both have now served to solidify the DOJ’s broad interpretation of what qualifies as an “instrumentality” of a foreign country, and who can thereby be considered a “foreign official” for purposes of applying the FCPA.