On May 18th, U.S. District Court Judge James Selna (C.D. Cal.) denied the Carson "foreign official" challenge and concluded that "the question of whether state-owned companies qualify as instrumentalities under the FCPA is a question of fact." (See here for the prior post).
In connection with his pre-trial ruling, Judge Selna ordered the parties to submit their proposed "instrumentality" jury instructions and legal support by June 30th.
Last Thursday, the Carson defendants and the DOJ filed such proposed jury instructions and legal support. See here and here. This post summarizes the dueling jury instructions.
Before proposing jury instructions, defendants stated as follows.
"Defendants respectfully disagree with the Court’s May 18 Order denying their Motion to Dismiss (“the May 18 Order”) and continue to believe, as set forth in their Motion to Dismiss (the “Motion”) and the supporting Declaration of Professor Michael J. Koehler, that the FCPA does not criminalize payments made to employees of state-owned enterprises (“SOEs”). Defendants reserve all of their rights to challenge the May 18 Order, if necessary, on appeal. Were it not for the existence of the Court’s May 18 Order, Defendants would propose a jury instruction that states that “a state-owned enterprise is not a foreign government instrumentality within the meaning of the FCPA, and officers and employees of a state-owned enterprise therefore are not ‘foreign officials’ under the FCPA.” But given the existence of the Court’s May 18 Order, and without waiver of their right to challenge all aspects of that Order on appeal, Defendants herein propose a jury instruction that accepts the Court’s premise that “state-owned companies may be considered ‘instrumentalities’ under the FCPA, but whether such companies qualify as ‘instrumentalities’ is a question of fact.”
In preparing their proposed “instrumentality” jury instruction, defendants were "guided by three overarching principles."
"First, it will not be sufficient to merely provide the jury with a list of nonexclusive, unweighted factors – none of which is dispositive – and ask the jury to “figure it out,” as the government seems to suggest. That will provide the jury with no real standard for making an “instrumentality” determination and will be tantamount to giving the jury no instruction at all on the “instrumentality” issue."
"Second, in determining an appropriate jury instruction, the Court should not accept any invitation from the government to borrow wholesale from an “instrumentality” analysis used under another statute – such as the “organ” prong of the Foreign Sovereign Immunities Act (“FSIA”), a provision the government highlighted at the hearing on Defendants’ Motion. [...] The FSIA may provide some guidance (indeed, Defendants have had to consult FSIA case law, because the FCPA legislative history is devoid of any discussion of SOEs as “instrumentalities,” much less any discussion of which SOEs qualify and which do not qualify), but because it is a different statute than the FCPA – the FSIA is a civil statute aimed at determining, inter alia, when a foreign entity will be considered to be part of a foreign government for purposes of sovereign immunity – its applicability to interpreting the “instrumentality” provision of the FCPA, a criminal statute that by definition must be strictly construed, is necessarily limited."
"Third, in determining the correct “instrumentality” jury instruction, the goals and structure of the FCPA must be considered. The FCPA is aimed at combating foreign bribery, but it is not a general commercial anti-bribery statute. Rather, the FCPA is aimed at preventing the special harm caused by the bribery of foreign government officials. Accordingly, Congress criminalized payments only to a “foreign official,” a term expressly and narrowly defined in pertinent part as an “officer or employee of a foreign government or any department, agency, or instrumentality thereof.” The Court should provide the jury with an “instrumentality” instruction that accurately reflects Congress’s desire to criminalize payments made to foreign government officials, not payments made to employees of a company that is not, in both form and substance, actually part of the foreign government."
The proposed jury instruction then states, in full, as follows.
"The FCPA does not criminalize all payments made to foreign nationals, but only corrupt payments made to a “foreign official.” Therefore, in order for a defendant to be found guilty of an FCPA violation, the government must, among other things, prove beyond a reasonable doubt that the intended recipient of the corrupt payment at issue was a “foreign official” at the time of the alleged payment.
The term “foreign official” means any officer or employee of a foreign government (or any department, agency, or instrumentality thereof), or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality.
A “state-owned” business enterprise may, under certain circumstances, qualify as an “instrumentality” of a foreign government. On the other hand, not all “state-owned” business enterprises qualify as “instrumentalities” of a foreign government. It is up to you to determine, weighing all of the evidence, whether a particular business enterprise is or is not an “instrumentality” of a foreign government, and whether the officers and employees of that enterprise therefore are – or are not –“foreign officials” under the statute.
To conclude that a business enterprise is an “instrumentality” of a foreign government, you must conclude beyond a reasonable doubt that the business enterprise is part of the foreign government itself. In order to conclude that a business enterprise is part of the foreign government itself, you must find that the government has established, beyond a reasonable doubt, each of the following four elements:
First, the foreign government itself directly owns at least a majority of the business enterprise’s shares.
Second, the foreign government itself controls the day-to-day operations of the business enterprise, including the appointment of key officers and directors (who themselves may be government officials); the hiring and firing of employees; the financing of the enterprise through governmental appropriations or through revenues obtained as a result of government-mandated taxes, licenses, fees or royalties; and the approval of contract specifications and the awarding of contracts.
Third, the business enterprise exists for the sole and exclusive purpose of performing a public function traditionally carried out by the government. A “public function” is a function that benefits only the foreign government (and its citizens), not private shareholders. A business enterprise that exists to maximize profits rather than pursue public objectives does not perform a public function and therefore is not a foreign government instrumentality.
Fourth, employees of the business enterprise are considered to be public employees or civil servants under the law of the foreign country.
If the government fails to prove each of these four elements beyond a reasonable doubt for the “state-owned” business enterprise at issue in a particular count, and therefore fails to prove that the intended recipient of the alleged corrupt payment was a “foreign official,” you must find the defendant “not guilty” on that count.
A business enterprise is not a foreign government instrumentality if it is a mere subsidiary of a state-owned company. To qualify as a foreign government instrumentality, the business enterprise must, as set forth above, be directly and majority owned by the foreign government itself. Therefore, an employee of a business enterprise that is merely a subsidiary of another entity that is majority owned by the foreign government is not an employee of a foreign government instrumentality and is not a “foreign official.”
A business enterprise that operates on a normal commercial basis in the relevant market, i.e., on a basis which is substantially equivalent to that of a private enterprise, is not a foreign government instrumentality, and its employees therefore are not “foreign officials.”
The DOJ's proposed jury instruction states, in full, as follows.
"The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.
An “instrumentality” of a foreign government is any entity through which a foreign government achieves an end or purpose, and can include state-owned entities. In determining whether an entity is an instrumentality of a foreign government, you should consider the following:
(1) the circumstances surrounding the entity’s creation;
(2) the foreign government’s characterization of the entity and the entity’s employees, and whether the entity is widely perceived and understood to be performing official (i.e., governmental) functions;
(3) the foreign government’s control over the entity, including the foreign government’s power to appoint key directors or officers of the entity;
(4) the purpose of the entity’s activities, including whether the entity provides a service to the citizens of the jurisdiction;
(5) the entity’s obligations and privileges under the foreign country’s law, including whether the entity exercises exclusive or controlling power to administer its designated functions;
(6) the extent of the foreign government’s ownership of the entity, including the level of financial support by the foreign government (e.g., subsidies, special tax treatment, and loans)
These factors are not exclusive, and no single factor is dispositive. In addition, in order to conclude that an entity is an instrumentality of a foreign government, you need not find that all of the factors listed above weigh in favor of such a determination."