NEUER BEITRAG AUF CPA Compliance and Ethics Blog

May 19, 2014

Common Sense in the Definition of ‘Instrumentality’ Under the FCPA

In what can only be called a judicial decision based on common sense the 11th Circuit Court of Appeals, in an opinion released on May 16, upheld the convictions of Joel Esquenazi and Carlos Rodriguez for violations of the Foreign Corrupt Practices Act (FCPA) and certain US anti-money laundering (AML) laws. The two had engaged in a long running bribery scheme with the Haitian telephone company, Telecommunications d’Haiti, S.A.M (Teleco). The pair were convicted and sentenced to lengthy jail terms, Esquenazi receiving 15 years and Rodriguez receiving 7 years. In this post, I will review the 11th Circuit’s opinion and tomorrow I will try and articulate some of its lessons for the compliance practitioner.

This opinion was the first time that a Court of Appeals had reviewed the FCPA question of what is an ‘instrumentality’ under the Act. Both defendants had argued that instrumentality could only mean (1) “that only an actual part of the government would qualify as an instrumentality” or (2) the FCPA should be construed to encompass only foreign entities performing ‘core’ governmental functions similar to departments or agencies. The Court rejected both arguments.

As to the first argument, the Court said “that contention is too cramped and would impede the “wide net over foreign bribery” Congress sought to cast in enacting the FCPA.” The court rejected several points that the defense raised in the second argument. In addition to some rejections of technical statutory constructions, the Court went into detail about two separate Congressional actions regarding the FCPA.

Grease Payments

The Court noted that the facilitation payment exemption to the FCPA specifically excepted liability “to FCPA liability for “any facilitating or expediting payment to a foreign official . . ...

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