FCPA: Intent and Knowledge Requirements In Individual Prosecutions

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The Department of Justice seems to be focused on bringing more individual prosecutions which alleged that people instead of corporations have violated the Foreign Corrupt Practices Act (FCPA).  The FCPA makes it a federal criminal offense for any U.S. person or entity, or any foreign persons while in the U.S., directly or indirectly, to make a corrupt payment to any foreign government official to obtain or retain business (anti-bribery provisions) or to make false or misleading entries on a company’s books for any reason whatsoever (accounting provisions).  The statute is set out in 15 U.S.C. §§ 78dd-1 and 78dd-2.

Essentially, there are six elements that must be shown.  The government must prove the defendant is:  (1) a domestic concern or associated with one; (2) who made use of a means or instrumentality of interstate commerce (3) did so corruptly (4) in furtherance of an offer or payment of anything of value to any person (5) while knowing that the money would be offered or given directly or indirectly to any foreign official (6) for purposes of influencing any act or decision of such foreign official in his official capacity.

In any individual prosecution under the FCPA a critical element the government must prove beyond a reasonable doubt is an individual’s corrupt and criminal intent.

FCPA: Establishing Intent

Statute sets out the element that a person’s actions must be undertaken “corruptly” and/or “willfully”.   Model jury instructions used in individual prosecutions under the FCPA have either combined the elements of “corruptly and willfully” acting or simply added “willfully” as an additional element.   An act is undertaken corruptly if it is done voluntarily and intentionally, and with a bad purpose or evil motive to accomplish either an unlawful end or result, or to undertake a lawful end or result but accomplish it by some unlawful method or means. The term “corruptly” in FCPA is intended to connote that the offer, payment, or promise of a benefit to a foreign official was intended to influence that person to misuse his or her official position. The word “willfully” means that the act was committed voluntarily and purposely, with the intent to do something the law forbids; that is, with the bad purpose to disobey or disregard the law. While the person must have acted with intent to do something the law forbids, instructions state that in order to establish willfulness, the person need not be aware of the specific law or rule that his conduct may be violating.

FCPA Foreign Corrupt Practices Act

FCPA Foreign Corrupt Practices Act

Other instructions have set out that a violation of the FCPA must be “willful” and an action is willful if: 1) actions are intentional and not the result of an accident or mistake; and 2) the individual knows that his or her actions are in some way unlawful. As to the second point the defendant does not have to be aware of the existence of the FCPA itself, but the defendant must have proceeded with the knowledge that he or she was doing a “bad” act under the general rules of law, doing an act with a bad purpose, or undertaken the action without any ground to believe it was lawful.

As to the element of undertaking actions with a corrupt purpose, case law has held that “illegal conduct under the FCPA defined the “unlawful end or result” as corrupt since the jury had to have some standard by which to gauge lawfulness.”  See, e.g., United States v. Kay, 513 F.3d 432 (5th Cir. 2007).  In another case, the Court cited the Report by the United States Senate on the FCPA and held that; “[t]he word ‘corruptly’ is used [in the FCPA] in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position in order to wrongfully direct business to the payor or his client, or to obtain preferential legislation or favorable regulation. The word ‘corruptly’ connotes an evil motive or purpose, an intent to wrongfully influence the recipient.”  See,  Saybolt v. S.E. Schreiber, 327 F.3d 173 (2nd Cir. 2003)

FCPA: Establishing Knowledge

The FCPA states that this necessary element is present where;  “a person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if – (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstances exists of that such result is substantially certain to occur.” The statute also adds in section (h)(3)(B): “When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.”

FCPA: Conscious Avoidance

Government prosecutors can attempt to establish knowledge and intent through proof of “conscious avoidance”.  That is intent and knowledge under the FCPA may be established if ; “(1) the defendant asserts the lack of some specific aspect of knowledge required for conviction, and (2) the appropriate factual predicate for the charge exists, i.e., the evidence is such that a rational juror may reach the conclusion beyond a reasonable doubt that the defendant was aware of a high probability of the fact in dispute and consciously avoided confirming that fact.” See, United States v. Kozeny, 667 F.3d 122, (5th Cir. 2011).

Thus, it is critical in fashioning a defense for an individual charged under the Foreign Corrupt Practices Act to attack the intent and knowledge element of the offense.  The factual scenarios in FCPA cases are always complex and involve intricate business dealings.  If there is no actual bribe or payoff made, the government’s proof may be limited to some sort of vague conspiratorial allegation that efforts to satisfy a foreign country’s concerns for nationalization and local benefit, sometimes known as “local content” are de facto corrupt.  This simplistic approach could not be further from the reality of how business must be lawfully conducted in emerging third world economies.  Counsel should mine this area for valuable defense approaches and challenge the government to prove it up, rather than automatically trying to cooperate a client in order to avoid the risk of trial.

Trials under the FCPA are arduous, time consuming, and dense.  The government has encountered recent setbacks in prosecuting individuals represented by skilled attorneys willing to fight.  All clients and their lawyers should carefully consider a variety of challenges to the proof as the governmental burden in these elaborate and convoluted matters is tremendous.

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