Mid-Year FCPA Report, Part II

Today, I continue my look at what I think were some of the most significant highlights from the first half of 2014 relating to the Foreign Corrupt Practices Act (FCPA). Yesterday, the focus was on corporate and individual enforcement. Today we review a very rare court of appeals decision on whether a state-owned enterprise is covered by the FCPA; yet another surprising result in an opinion release and finally take a look at some real world examples of why the FCPA is such a powerful and positive law for US companies doing business overseas.

Esquenazi Decision on State Owned Enterprises Covered by 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 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. One of their myriad defenses was that a state owned enterprise, such as Telco, was not an instrumentality and thereby not covered under the FCPA.

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.

The Court constructed a two-prong test to determine if a state owned enterprise is an instrumentality under the FCPA ...

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