In the past month, defendants in three separate cases have challenged the Department of Justice (DOJ) definition of “foreign official” under the Foreign Corrupt Practices Act (FCPA). The central question in all three cases is whether an officer or employee of a state-owned or state-controlled enterprise (SOE) qualifies as a foreign official. The motions to dismiss can be found here: U.S. v. Carson, et. al., U.S. v. Enrique Faustino Aguilar Noriega, et. al., and U.S. v. O’Shea.
The FCPA prohibits corrupt payments to “foreign officials” for the purpose of obtaining or retaining business. Under the FCPA, “foreign official” is narrowly defined as an “officer or employee of a foreign government or any department, agency, or instrumentality thereof.”
The DOJ’s argument hinges entirely on the theory that an SOE is an “instrumentality” of a foreign government and that its employees are therefore “foreign officials” within the meaning of the FCPA. Causing much of the uncertainty surrounding DOJ enforcement of the FCPA is the fact that the statute fails to define “department,” “agency,” or “instrumentality.”
The defendants in all three cases make similar arguments. First, that the DOJ improperly assumes that officers and employees of SOEs are “foreign officials” because the statute does not explicitly state so, the legislative history does not support such an assumption, and no court has ever sufficiently considered the issue. Second, the court must dismiss the charges under a rule of construction which states that courts must resolve ambiguities in criminal statutes in favor of the accused. Lastly, that if employees of SOEs are “foreign officials,” then the FCPA is unconstitutionally vague since its terms force people to guess at its meaning.
These FCPA challenges are a fight that is long overdue. As the defendants in U.S. v. Carson et. al. state in their motion to dismiss, for several years many commentators have noted the “vagueness of the ‘foreign official’ definition in particular, as well as the vagueness of the FCPA generally.” In support of the motion to dismiss, Mike Koehler, Associate Professor of Business Law at Butler University and author of the well-known “FCPA Professor” blog, submitted a 151-page declaration outlining the legislative history of the FCPA. As Koehler points out, the roots of the problem date back to the inception of the statute when, “despite being aware of SOEs, despite exhibiting a capability for drafting a definition that expressly included SOEs in other bills . . . Congress chose not to include such definition” in the bill that ultimately became the FCPA in 1977.
The first hearing for the motion to dismiss in U.S. v. Carson, et. al. and U.S. v. Enrique Faustino Aguilar Noriega, et. al. is set for March 21.