More definitions are provided about FCPA in new appeals court ruling

Under a new ruling on the FCPA, the instrumentality provision can include state-owned companies

Attorneys will now have more guidance about legal definitions after a federal appeals court ruled on the increasingly important Foreign Corrupt Practices Act (FCPA).

On Friday, a panel of judges from the 11th Circuit Court of Appeals ruled the act's “instrumentality” provision can include state-owned companies.

The FCPA is a key anti-bribery law that prevents U.S. corporations or their employees from bribing foreign officials to curry favor in business dealings.

As a practical matter, by their ruling, the judges kept in place the convictions of two ex-Terra Telecommunications Corp. executives, Joel Esquenazi and Carlos Rodriguez, who were convicted of bribing officials at Haiti Teleco, a state-owned company.

Esquenazi was sentenced to 15 years in prison, which is believed to be the longest-ever sentence for violating the FCPA.

Friday’s ruling also was believed to be the first time an appeals court explained who is considered a foreign official under the FCPA, which is related to the concept of instrumentality.

“An ‘instrumentality’ under…the FCPA is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own,” the opinion, written by Appeals Court Judge Beverly Martin, read in part, The Wall Street Journal reported.

Michael A. Sink, a partner at Perkins Coie who represented Esquenazi, told InsideCounsel, “The decision represents the first time an appellate court has construed the definition of ‘instrumentality’ under the FCPA – an open issue that has plagued individuals and businesses doing business overseas for years.”

“The Court’s opinion can be read to narrow the Government’s nearly unbounded interpretation of ‘instrumentality’ that potentially converted any entity with even nominal government ownership into a ‘foreign official,’” he added.

As far as questions of appeal, Sink added in the statement, “We are still weighing various options, but a petition for certiorari is likely.”

Meanwhile, Peter Carr, a Justice Department spokesman said in a statement about the ruling, “We are pleased with the decision and believe it will prove helpful to the department’s FCPA enforcement efforts.” He declined further comment.

Attorneys for Rodriguez chose not to comment on the decision, news reports said.

The U.S. government, through the Justice Department and Securities and Exchange Commission, has increased demands on businesses when it comes to monetary settlements for violations of the FCPA.

There are also new inquiries by federal officials on possible violations of the FCPA, with one of the latest being with Goldman Sachs. It appears the inquiry relates to the bank’s hiring practices in Asia, according to InsideCounsel.

 

Further reading:

Goldman Sachs is latest U.S. company to get investigated for FCPA concerns

Wal-Mart releases first Global Compliance Report, shows increased controls since FCPA scandal

U.K. releases guidelines for new Bribery Act

 
 
 

Contributing Author

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Ed Silverstein

Ed Silverstein is a veteran writer and editor for magazines, websites and newspapers. A graduate of Harvard's Kennedy School of Government, he has won several...

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