At the crux of almost every Foreign Corrupt Practices Act (FCPA) internal investigation or government enforcement action involving alleged bribery is the question of whether the individual being allegedly bribed is a “foreign official” pursuant to the FCPA. This is so because the FCPA does not define who can be considered a foreign official. As a result, the government has consistently advocated for a broad interpretations of the term foreign official, attempting to expand the reach of the FCPA to include state-owned enterprises that are not a part of any foreign government and whose employees would then be considered foreign officials.
To date, the appellate courts have not considered the government’s broad interpretations. On May 9, however, two separate appeals challenging the government’s broad interpretations reached the 11th Circuit. Along with the individual defendants, commentators and the defense bar are hoping for a resolution that will limit the government’s overly aggressive interpretations of the FCPA.
Joel Esquenazi and Carlos Rodriguez, the former president and vice president of Terra Telecommunications Corp., respectively, were found guilty of seven counts of violating the FCPA, 12 counts of money laundering, one count of money laundering conspiracy and one count of conspiracy to violate the FCPA and to commit wire fraud. Esquenazi and Rodriguez were sentenced to 15 years and seven years, respectively, and have challenged their convictions and sentences on several bases, one of which is the breadth of the government’s interpretation of “foreign official.”
The scope of the government’s efforts to enforce the FCPA have expanded to the point that government officials have acknowledged the uncertainty and the government’s broad interpretation of who is considered to be a foreign official under the FCPA. Assistant Attorney General Lanny Breuer has noted that some foreign officials are “obvious,” such as health ministers and customs officials. Others, however, may not be obvious, such as “doctors, pharmacists, lab technicians and other health professionals who are employed by state-owned facilities.” Breuer has noted it was possible, under certain circumstances and in certain countries, that “nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product in a foreign country will involve a ‘foreign official’ within the meaning of the FCPA.”
According to Professor Michael Koehler of Butler University, the government’s interpretation of “foreign official” is broader than what Congress intended when enacting the FCPA. Indeed, Professor Koehler has previously argued that it is clear from legislative history that the terms “‘foreign government official,’ ‘foreign public official’ and ‘foreign official’ all refer to the same thing—traditional foreign government officials.” Professor Koehler has further argued that, in passing the FCPA, “Congress intended to prohibit payments to this narrow recipient category of traditional foreign government officials performing official or public functions.”
For companies operating in foreign countries, the government’s broad interpretation of the term can have a chilling effect on business operations abroad. Indeed, these challenges in the 11th Circuit come as businesses and the Chamber of Commerce are lobbying Congress to amend the FCPA. Among the changes being sought, is a narrower definition of “foreign official.”
For FCPA practitioners, an answer to the question of who is a foreign official cannot come soon enough, as advising clients is inherently difficult given the lack of clarity provided by the text of the FCPA. Moreover, an answer will provide companies operating abroad a proper framework from which they can operate within the terms of the FCPA. The 11th Circuit need only answer the question put before it by Esquenazi and Rodriguez in order to clarify a law that is in desperate need of judicial interpretation.