General Practice, Solo & Small Firm DivisionMagazine
Business and Commercial Law
It’s a matter of bribery.
The Feds’ powers are greatly expanded. Is your client company safe?
By Craig A. Raabe and Sean Johnston
In 1984, Congress enacted 18 U.S.C. 666 in an effort to protect federally funded programs from going into the red through theft and embezzlement by the direct bribery of federal officials. It also made it a crime to commit bribery in connection with private citizens who have a relation to federally funded programs. This article examines the breadth of 666.
The Supreme Court, in Salinas v. United States, concluded that the antibribery provision in 666 uses "expansive, unqualified language, both as to the bribes forbidden and the entities covered." One commonly invoked section of the statute prohibits the corrupt offer, payment or receipt of anything valuable in connection with a business transaction that’s worth $5,000 or more with any business organization or state or local government that receives more than $10,000 in federal funds in any year. In other words, if you or your employee offers a bribe or kickback to a person in a company or state or local agency that gets more than $10,000 from the federal government in any year, your company may be criminally liable for federal bribery.
There are four prongs in 666:
• a corrupt demand, offer, payment or receipt of payment;
• of anything of value;
• with an intent to influence a transaction involving $5,000 or more;
• involving a business organization or state or local government that receives more than $10,000 within one year of the corrupt act.
The first element of 666 is a corrupt act. Congress intended to expand the federal bribery law beyond the act of bribing employees of the federal government to the act of bribing anyone in an organization or agency who deals with federal funds. In protecting these interests, Congress also sought to prohibit both attempted and completed bribery. In Salinas, the court emphasized that the plain language of 666 should control its interpretation. The plain language of 666 imposes criminal liability on any person who actually pays or receives a bribe or who "demands," "solicits," "agrees to accept," "offers" or "agrees to give" a bribe. It is no defense that the bribe is never paid.
The second element requires that something of value is offered as a bribe. The bribe offered does not have to be of any particular nature to trigger criminal liability. Stated plainly, the statute "prohibits accepting or agreeing to accept ‘anything of value.’" The Court summarized this element of the offense as the "transfer of personal property or other valuable consideration." The scope of this prong cannot be underestimated, particularly in areas of business that employ "aggressive" marketing tactics. Many courts have stated that the "anything of value" clause must be interpreted broadly in order to protect the national interest against federal bribery. The phrase "anything of value" includes subjective value to the recipient, such as "amusement," "assistance in arranging a merger," provision of valuable information, a promise to hire an employee and "conjugal visits" in prison, which actually were involved in Salinas.
The third prong of a 666 violation is an intent to influence or be influenced in a transaction "involving anything of value of $5,000 or more." Again, the Supreme Court placed no limitation on this language. The court termed this clause a "threshold," and cited the statute’s language that seemingly permits federal prosecutors to aggregate the value of a "series of transactions" in alleging the threshold, provided that the prosecutors can tie the corrupt act to the "series." It is this prong that was the centerpiece of Salinas. Salinas was the chief deputy at a county jail who arranged for "contact visits" between an inmate and the inmate’s wife. In exchange for the "contact visits," the inmate provided Salinas with watches and a pickup truck. The inmate was a federal prisoner, but he was in the county jail pursuant to a contract between the county and the federal marshal’s service, through which contract the federal government agreed to provide a grant to improve the facility and a per diem for each federal prisoner. Salinas argued that his conviction for federal bribery could not stand because there was no proof that the bribery affected federal funds. The Supreme Court disagreed, holding that the prohibition is not confined to a business or transaction which affects federal funds, and that the government is not required to prove that federal funds were involved in the bribery transaction.
The need for a connection of some sort between the bribe and the federal funds may be a slightly open issue even after Salinas. In Salinas, the court stated that because there was an unquestionable nexus between the bribe and the federal funds, it did not need to address the issue of whether such a nexus is required. In contrast, the Second Circuit Court of Appeals touched on this issue and noted that judicial interpretations requiring "some connection" between the bribe and federal funds were "undisturbed by Salinas."
The final prong of the bribery provision is that the federal funding to the entity involved exceed $10,000 within the year surrounding the corrupt act. The plain language of the statute defines "a grant, contract, subsidy, loan, guarantee [or] insurance" as qualifying forms of federal funding, but the statute also provides that "other form[s] of federal assistance" would qualify. The statute provides further that the "one-year" clause can be satisfied by any continuous 12-month period, whether before the act, after the act or a combination of both. Finally, Congress broadly defined the qualifying entity that receives the federal benefits, stating that it includes an organization or any state, local or Indian tribal governmental body, including agencies, boards, departments and the like.
One of the often-litigated provisions in this prong is the qualifying nature of the federal funding. Many courts view this prong quite broadly, often referring to the stated congressional policy of the statute of "protect[ing] the integrity" of federal funds. There is little question but that the Supreme Court has placed in purgatory the view that federal bribery under 666 should have an identifiable nexus between the corrupt act and the federal funds that Congress sought to protect in drafting the statute.
Given the expansive interpretation the Supreme Court has given 666, business organizations should examine their marketing practices for the potential for bribery. It is important to have a system in place to detect problems, whether through sales force training, greater scrutiny of sales force expense accounts, random interviews with customers’ purchasing departments, or similar procedures.
It is also important to have a system to deal with violations. More and more, federal prosecutors look to corporate America to police itself when violations occur, and government agencies and U.S. attorneys’ offices sometimes have formal and informal policies to protect business entities from prosecution in the event of self-reporting. To that end, it is important to know if such "amnesty" policies exist and to have a compliance program that addresses the issues on which prosecutors focus in deciding whether to charge an offense.
Craig A. Raabe is a partner at Robinson & Cole, LLP, in Hartford, Connecticut. Sean Johnston is a third-year law student at the University of Connecticut School of Law.
- This article is an abridged and edited version of one that originally appeared on page 11 in Business Law Today, March/April 1999 (8:4).