Supreme Court Denies Challenge to FCPA Definition of ‘Foreign Official’

The U.S. Supreme Court this week declined to hear a landmark case that would have helped clarify the definition of “foreign official” under the Foreign Corrupt Practices Act. The decision to deny the cert petition effectively upholds the government’s broad view of who qualifies as a foreign official under the FCPA—at least, for now.

In May 2014 the 11th Circuit Court of Appeals, in the case U.S. v. Esquenazi became the first appellate court in FCPA history to tackle what constitutes an “instrumentality” within the FCPA's definition of “foreign official,” which the statute vaguely defines as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof.” Companies have long struggled with whether employees of state-owned entities qualify as public officials under the FCPA, and that ruling provided some guidance on the issue.

The case resulted from a federal jury’s conviction in 2011 of Joel Esquenazi and Carlos Rodriguez for their roles in a scheme to bribe officials at Haiti Telecom, a Haiti state-owned telecommunications company. Esquenazi and Rodriguez were convicted at trial and sentenced to 15 and 7 years in prison, respectively.

On appeal to the 11th Circuit, defense attorneys argued that Teleco did not fall under the FCPA's definition of an “instrumentality,” because it is a foreign state-owned business—as opposed to a government agency. Therefore, the defense argued, the Teleco officials who received the bribes were not foreign officials under the FCPA.

On May 16, 2014, a three-judge panel for the 11th Circuit disagreed, affirming the convictions and sentences of both Esquenazi and Rodriguez. In its opinion, the court disagreed with the defendants that an instrumentality should be an actual part of the government. 

The Supreme Court’s Oct. 6 cert denial in the case “means that the 11th Circuit decision stands as a final decision,” Mike Koehler, a law professor at Southern Illinois University School of Law, wrote in his blog the FCPA Professor.  “Cert denial does not mean that the Supreme Court agreed or disagreed with the 11th Circuit decision.”

Koehler added that the Supreme Court’s decision not to review Esquenazi may be due, in part, to the absence of a circuit split on the foreign official issue. The absence of case law is largely the product of alternative resolution vehicles used by the Department of Justice and Securities and Exchange Commission.

“So long as these dynamics continue, Supreme Court review of the key elements of a top-priority federal criminal statute of significant importance to all businesses and individuals engaged in international commerce is unlikely,” Koehler wrote.

Markus Funk and Michael Sink of law firm Perkins Coie, counsel for Esquenazi, said they knew Supreme Court review was a long-shot, “but, as the amicus petitions highlighted, the confusion the appellate court’s ruling added to the ongoing muddle of what qualifies as an ‘instrumentality’ of a foreign government provided some hope that the court might weigh in on this issue of great concern to the global business community,” the firm stated. “That the Court decided to pass on the opportunity is disappointing.”