Entities, often under intense pressure to settle and get FCPA charges behind them, rarely challenge this aggressive jurisdictional position. Nonetheless, this stance has had important implications for FCPA enforcement. The need to access foreign evidence and witnesses, for instance, has created a system in which the DOJ and SEC must rely heavily upon companies’ cooperation to perform investigations abroad and voluntarily report the results. The inherent challenges in accessing evidence and witnesses located in foreign jurisdictions also can create material delays in FCPA investigations, and they raise concerns about the quality of evidence being used to prosecute and defend FCPA charges, sometimes years after the relevant conduct took place.
These issues and challenges frequently beg the question whether the United States is the appropriate authority to prosecute such cases, where the evidence, witnesses, and conduct are located overseas and where alternative jurisdictions often have an even greater interest in enforcement. Until the legal limits of U.S. “territorial” jurisdiction are tested more fully, however, entities operating globally that encounter potential corruption issues with even minimal U.S. contacts can expect to be subject to FCPA jurisdiction.
Jurisdiction under FCPA Antibribery Provisions
Statutory Bases of FCPA Jurisdiction
Under the FCPA, the DOJ and SEC have jurisdiction over several categories of U.S. and non-U.S. entities and individuals. First, U.S.- and foreign-based issuers, as well as U.S. citizens, nationals, residents, and U.S.-based entities, are subject to FCPA jurisdiction if they “use . . . the mails or any means or instrumentality of interstate commerce” “in furtherance of” a proscribed foreign bribery offense. 15 U.S.C. §§ 78dd-1(a), 78dd-2(a). Under this theory of “territorial” jurisdiction, in order for jurisdiction to attach, a corrupt act must have a nexus to the territory of the United States.
Second, foreign entities (other than issuers) and individuals also are subject to “territorial” jurisdiction if they “corruptly . . . make use of the mails or any means or instrumentality of interstate commerce,” or if they “commit any other act in furtherance of” a corrupt payment, “while in the territory of the United States.” Id. § 78dd-3(a).
Third, U.S.-based issuers as well as U.S. citizens, nationals, residents, and U.S.-based entities are subject to jurisdiction for corrupt payments, or acts in furtherance of such payments, committed anywhere in the world. Id. §§ 78dd-1(g), 78dd-2(i). Under this “nationality” jurisdiction, the United States can assert jurisdiction by virtue of an entity’s organization under U.S. laws, or an individual’s U.S. nationality, citizenship, or residency.
U.S. Enforcement Authorities’ Expansive Interpretation of FCPA “Territorial” Jurisdiction
The DOJ and SEC have adopted a notably broad interpretation of the FCPA’s “territorial” jurisdictional provisions. In recently issued FCPA guidance, the DOJ and SEC jointly reaffirmed their position that U.S.- and foreign-based issuers, and U.S. citizens, nationals, residents, and entities, can be subject to territorial jurisdiction for any use of interstate commerce in furtherance of a corrupt payment to a foreign official, including “placing a telephone call or sending an e-mail, text message, or fax from, to, or through the United States” or “sending a wire transfer from or to a U.S. bank or otherwise using the U.S. banking system.” See U.S. Dep’t of Justice & U.S. Sec. Exch. Comm’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act 11 (Nov. 14, 2012). The DOJ and SEC also took the position that foreign entities and individuals can be subject to FCPA liability if they engage in any act in furtherance of a corrupt payment while in the United States. Id. Thus, as explained in the FCPA guidance, “a foreign national who attends a meeting in the United States that furthers a foreign bribery scheme may be subject to prosecution, as may any co-conspirators, even if they did not themselves attend the meeting.” Id. at 12. The DOJ and SEC further took the position that foreign entities and individuals may be subject to FCPA liability if they aid and abet, conspire with, or act as an agent of an issuer or U.S. citizen, national, resident, or entity, regardless of whether the foreign entity or individual itself took any action while in the United States. Id.
Although not explicitly set forth in the joint FCPA guidance, the DOJ, in particular, through its public statements and in settled cases, has taken the position that even fleeting contact with U.S. territory may constitute a sufficient U.S. nexus to assert territorial jurisdiction over foreign entities and individuals for conduct that occurred outside the United States. For instance, in a settled enforcement action against JGC Corp., a Japanese engineering and construction firm accused of making corrupt payments to Nigerian government officials, the DOJ suggested that wire transfers through correspondent bank accounts in the United States in furtherance of a bribery scheme may be sufficient to satisfy territorial jurisdiction. See U.S. v. JGC Corp., No. 11-cr-260, Information ¶¶ 20(e), 22 (S.D. Tex. Apr. 6, 2011). Going even further, the DOJ’s settled enforcement action against Magyar Telekom, Plc., a Hungarian subsidiary of Deutsche Telekom and (at the time) an issuer of American depository receipts on the New York Stock Exchange, asserted territorial jurisdiction based solely on the transmission and storage of two e-mails on U.S. servers. See U.S. v. Magyar Telekom, Plc., No. 1:11CR00597, Information ¶¶ 2, 24, 26(c), 47 (E.D. Va. Dec. 29, 2011).
Limits to FCPA “Territorial” Jurisdiction
Because the vast majority of entities, in particular, settle with the DOJ and SEC rather than face indictment, the validity and limits of this expansive interpretation of FCPA territorial jurisdiction generally have not been tested.
Nonetheless, a recent district court decision in the so-called SHOT Show trial suggests that FCPA jurisdiction over foreign entities and individuals is not without limits. This litigation originated from a “sting” operation, following which 22 defendants were arrested in Las Vegas and Miami at the Shooting, Hunting & Outdoor Trade Show (SHOT Show) Conference. The DOJ asserted territorial jurisdiction over one of the defendants, a U.K. citizen and managing director of a nonissuer located in the United Kingdom, based on allegations that he had mailed a package containing an allegedly corrupt purchase agreement from the United Kingdom to the United States. See U.S. v. Patel, No. 1:09-cr-00335, Trial Tr. 5:11–14, 7:17–8:2 (D.D.C. June 6, 2011). The district court judge ultimately rejected the DOJ’s position and dismissed the FCPA charge, reasoning that, for territorial jurisdiction to attach, the corrupt act must—as the plain language of the statute suggests—take place “while in the territory of the United States.” Id. at 11:7–9, 29:12–13.
This decision, which suggests a requirement of physical presence in the United States in connection with an allegedly corrupt act, calls into question much of the DOJ and SEC’s expansive construction of territorial jurisdiction over foreign entities and individuals under the FCPA. Until additional courts speak to the issue, however, the DOJ and SEC are unlikely to back off their more expansive views of jurisdiction.
Practical Implications of Broad FCPA “Territorial” Jurisdiction: Obtaining Foreign Evidence and Extradition
The DOJ and SEC’s assertion of broad territorial jurisdiction over foreign entities and individuals for conduct that occurred outside the United States continues to have meaningful practical implications. Often in FCPA cases, much (if not all) of the evidence, witnesses, and defendants are located overseas. To access these foreign resources, U.S. authorities necessarily must rely upon the cooperation of foreign governments, investigators, and prosecutors. Although cooperation among anticorruption enforcement officials around the globe is at its peak, obtaining foreign cooperation still creates many obstacles for the DOJ and SEC: the process can be lengthy, not all foreign authorities are willing to cooperate, and the resulting delays may implicate the U.S. statute of limitations for FCPA violations. As a result, the DOJ and SEC are heavily reliant upon the cooperation of companies under investigation, and the involvement of outside company counsel, to perform FCPA investigations abroad and voluntarily report the results.
Framework for International Cooperation in FCPA Investigations
The DOJ and SEC seek to obtain cooperation from foreign authorities during FCPA investigations through a variety of international mechanisms.
The DOJ seeks to obtain foreign evidence and cooperation through Mutual Legal Assistance Treaties (MLATs) with foreign criminal authorities. In February 2010, for instance, the DOJ announced that 56 new agreements regarding mutual legal assistance (MLA) and extradition had become effective between the United States and the European Union. See Press Release 10-108, Dep’t of Justice, U.S./EU Agreements on Mutual Legal Assistance and Extradition Enter into Force (Feb. 1, 2010). These MLATs were intended to “modernize law enforcement and judicial cooperation,” while the extradition agreements were intended to facilitate extradition between the United States and European Union. Id. The DOJ characterized these agreements as a “milestone in cooperation on criminal matters.” Id.
The SEC’s Office of International Affairs seeks to obtain foreign cooperation through several international mechanisms, including the International Organization of Securities Commissions Multilateral Memorandum of Understanding, which facilitates the exchange of information between the SEC and other signatory securities regulators, bilateral information-sharing memoranda of understanding (MOUs) with foreign securities authorities, and ad hoc agreements with foreign regulators. The SEC also benefits from MLATs administered by the DOJ and formal letters rogatory between U.S. courts and foreign judicial authorities.
Challenges Faced by U.S. Enforcement Authorities During International FCPA Investigations
Despite this framework for international cooperation, the DOJ and SEC face a number of challenges when conducting FCPA investigations abroad. First, gathering and obtaining evidence outside the United States, and authenticating this evidence for admission at trial, can pose challenges, particularly when relevant transactions were routed through countries with which the United States does not have a strong MLA relationship.
Second, MLATs, MOUs, and other agreements with foreign enforcement authorities do not always ensure that U.S. authorities will, in fact, receive cooperation and assistance. As the SEC has explained, the United States has “experienced the gamut of cooperation” in response to MLA requests, “from full-scale sharing of domestic investigative files on short notice to outright non-compliance.” See U.S. Sec. Exch. Comm’n, Response of the United States, Questions Concerning Phase 3, Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery 22 (May 3, 2010) [hereinafter U.S. Response to OECD].
These varying levels of cooperation may originate, in no small part, from differences in disclosure and data privacy rules between the United States and foreign jurisdictions. The European Union and its member states, for instance, have enacted protections surrounding the collection and storage of personal data and the transfer of such data outside the European Union, which, even in the presence of MLATs and MOUs, have created obstacles in foreign cooperation that have delayed investigations. See, e.g., Directive 95/46/EC of the European Parliament and of the Council of the European Union, Oct. 24, 1995 (protecting individuals’ fundamental right to data privacy); French Law No. 68-678, July 26, 1968, amended by Law No. 80-538, July 16, 1980, arts. 1, 1-bis (commonly known as the “French Blocking Statute,” which prohibits French individuals and entities from communicating certain categories of information to foreign public officials and further prohibits requesting, investigating, or communicating such information for use in foreign judicial or administrative proceedings).
As a result of these challenges, the United States has encountered material delays in obtaining evidence and extradition from foreign countries. For instance, the DOJ’s December 2011 prosecution of former executives and agents of Siemens AG, all of whom were foreign nationals, for their alleged participation in a scheme to bribe Argentine government officials, has been hampered by the fact that, as the DOJ represented in a letter to the court: “The defendants in this case all reside overseas and none of the defendants is currently in custody. As such, none of the defendants will be arraigned in the immediate future.” Letter from Preet Bharara, U.S. Att’y, Dep’t of Justice, to Denise Cote, U.S. District J., Southern District of New York, U.S. v. Sharef et al., No. 11-CR-1056 (S.D.N.Y. Dec. 15, 2011).
The DOJ’s 2005 indictment of Viktor Kozeny, a Czech national residing in The Bahamas, who was accused of participating in a scheme to bribe Azeri government officials, also has been significantly delayed by challenges in obtaining extradition. Although the United States and The Bahamas have signed an extradition treaty, the United States unsuccessfully has sought Kozeny’s extradition from The Bahamas for seven years, and it recently lost an appeal for extradition to the highest appellate court for The Bahamas. See Superintendent of Her Majesty’s Foxhill Prison and United States v. Kozeny, Privy Council Appeal No. 0073, ¶ 2 (Judicial Comm. of the Privy Council Mar. 28, 2012) (Bah.).
Not only can these procedural challenges result in significant delays, but these delays often give rise to claims that the five-year statute of limitations for FCPA violations has expired. See 18 U.S.C. § 3282 (DOJ); 28 U.S.C. § 2462 (SEC). The running of the limitations period may be suspended under certain limited circumstances. For instance, the limitations period may be tolled for up to three years in cases where the DOJ has made an MLA request for foreign evidence, so long as the DOJ obtains a court order suspending the statute of limitations within the five-year limitations period. 18 U.S.C. § 3292; U.S. v. Kozeny, 493 F. Supp. 2d 693, 709 (S.D.N.Y. 2007), aff’d, U.S. v. Kozeny, 541 F.3d 166, 174 (2d Cir. 2008). The limitations period also may be tolled in DOJ actions alleging scheme liability under the so-called continuing violation doctrine, where the limitations period does not begin to run until the date of the last violation in furtherance of the scheme if at least one of the alleged ongoing violations occurred within the five-year limitations period. See Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 114–15 (2002); Kozeny, 493 F. Supp. 2d at 714–15. Nonetheless, the SEC has recognized that “statutes of limitations can pose challenges when the schemes are complicated, well concealed, and involve multiple foreign jurisdictions.” See U.S. Response to OECD at 22.
As a result of the challenges inherent in gaining access to foreign evidence, witnesses, and defendants, the DOJ and SEC are heavily reliant upon the cooperation of companies under investigation, including the involvement of outside company counsel, to perform FCPA investigations abroad and voluntarily report the results. Additionally, as part of their cooperation, it is not uncommon for companies to agree to toll the statute of limitations.
Policy Implications of Broad FCPA Jurisdiction
The reality is that, in the face of pressure to settle FCPA-related charges, entities rarely challenge the DOJ and SEC’s broad jurisdictional assertions. Yet, as evidenced by the court’s decision in U.S. v. Patel, the DOJ and SEC may have gone too far in asserting jurisdiction over foreign entities and individuals on the basis of de minimis U.S. contacts.
Moreover, delays in obtaining foreign evidence and witnesses raise questions concerning criminal defendants’ ability to gather evidence to defend themselves at trial, as well as U.S. prosecutors’ ability to present such evidence to prosecute FCPA charges. As evidenced by Kozeny, cases involving evidence, witnesses, and defendants located outside the United States may not be brought to trial until years after the alleged bad acts occurred, if ever. During that delay, witnesses’ memories may fade, or they may become unavailable to testify. Moreover, although the statute of limitations can be tolled, evidence can become stale or corrupted or can be destroyed during the intervening years.
These issues and challenges raise the question of whether it makes sense for the United States to prosecute all such cases, particularly where the evidence, witnesses, defendants, and even the corrupt payments are located overseas, and where alternative jurisdictions may have an even greater interest in an enforcement action. Nonetheless, unless the DOJ and SEC’s jurisdictional theories are challenged more regularly, the United States is unlikely to back away from its strategy of seeking “to establish rejection of transnational bribery as a global norm.” See U.S. Response to OECD at 14.