United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS February 4, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
__________________________ Clerk
No. 02-20588
__________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
DAVID KAY; DOUGLAS MURPHY,
Defendants-Appellees.
___________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
(No. Crim.A.H-01-914)
___________________________________________________
Before WIENER, BENAVIDES and DENNIS, Circuit Judges.
WIENER, Circuit Judge:
Plaintiff-appellant, the United States of America
(“government”) appeals the district court’s grant of the motion of
defendants-appellees David Kay and Douglas Murphy (“defendants”) to
dismiss the Superseding Indictment1 (“indictment”) that charged
them with bribery of foreign officials in violation of the Foreign
Corrupt Practices Act (“FCPA”).2 In their dismissal motion,
defendants contended that the indictment failed to state an offense
against them. The principal dispute in this case is whether, if
1
A copy of the Superseding Indictment is appended hereto in
its entirety and identified as Appendix A.
2
15 U.S.C. § 78dd-1 et seq. (2000).
proved beyond a reasonable doubt, the conduct that the indictment
ascribed to defendants in connection with the alleged bribery of
Haitian officials to understate customs duties and sales taxes on
rice shipped to Haiti to assist American Rice, Inc. in obtaining or
retaining business was sufficient to constitute an offense under
the FCPA. Underlying this question of sufficiency of the contents
of the indictment is the preliminary task of ascertaining the scope
of the FCPA, which in turn requires us to construe the statute.
The district court concluded that, as a matter of law, an
indictment alleging illicit payments to foreign officials for the
purpose of avoiding substantial portions of customs duties and
sales taxes to obtain or retain business are not the kind of bribes
that the FCPA criminalizes. We disagree with this assessment of
the scope of the FCPA and hold that such bribes could (but do not
necessarily) come within the ambit of the statute. Concluding in
the end that the indictment in this case is sufficient to state an
offense under the FCPA, we remand the instant case for further
proceedings consistent with this opinion. Nevertheless, on remand
the defendants may choose to submit a motion asking the district
court to compel the government to allege more specific facts
regarding the intent element of an FCPA crime that requires the
defendant to intend for the foreign official’s anticipated conduct
in consideration of a bribe (hereafter, the “quid pro quo”) to
produce an anticipated result —— here, diminution of duties and
taxes —— that would assist (or is meant to assist) in obtaining or
2
retaining business (hereafter, the “business nexus element”). If
so, the trial court will need to decide whether (1) merely quoting
or paraphrasing the statute as to that element (as was done here)
is sufficient, or (2) the government must allege additional facts
as to just what business was sought to be obtained or retained in
Haiti and just how the intended quid pro quo was meant to assist in
obtaining or retaining such business. We therefore reverse the
district court’s dismissal of the indictment and remand for further
consistent proceedings.
I. FACTS AND PROCEEDINGS
American Rice, Inc. (“ARI”) is a Houston-based company that
exports rice to foreign countries, including Haiti. Rice
Corporation of Haiti (“RCH”), a wholly owned subsidiary of ARI, was
incorporated in Haiti to represent ARI’s interests and deal with
third parties there. As an aspect of Haiti’s standard importation
procedure, its customs officials assess duties based on the
quantity and value of rice imported into the country. Haiti also
requires businesses that deliver rice there to remit an advance
deposit against Haitian sales taxes, based on the value of that
rice, for which deposit a credit is eventually allowed on Haitian
sales tax returns when filed.
In 2001, a grand jury charged Kay with violating the FCPA and
subsequently returned the indictment, which charges both Kay and
Murphy with 12 counts of FCPA violations. As is readily apparent
3
on its face, the indictment contains detailed factual allegations
about (1) the timing and purposes of Congress’s enactment of the
FCPA, (2) ARI and its status as an “issuer” under the FCPA, (3) RCH
and its status as a wholly owned subsidiary and “service
corporation” of ARI, representing ARI’s interest in Haiti, and (4)
defendants’ citizenship, their positions as officers of ARI, and
their status as “issuers” and “domestic concerns” under the FCPA.
The indictment also spells out in detail how Kay and Murphy
allegedly orchestrated the bribing of Haitian customs officials to
accept false bills of lading and other documentation that
intentionally understated by one-third the quantity of rice shipped
to Haiti, thereby significantly reducing ARI’s customs duties and
sales taxes. In this regard, the indictment alleges the details of
the bribery scheme’s machinations, including the preparation of
duplicate documentation, the calculation of bribes as a percentage
of the value of the rice not reported, the surreptitious payment of
monthly retainers to Haitian officials, and the defendants’
purported authorization of withdrawals of funds from ARI’s bank
accounts with which to pay the Haitian officials, either directly
or through intermediaries —— all to produce substantially reduced
Haitian customs and tax costs to ARI. Further, the indictment
alleges discrete facts regarding ARI’s domestic incorporation and
place of business, as well as the particular instrumentalities of
interstate and foreign commerce that defendants used or caused to
be used in carrying out the purported bribery.
4
In contrast, without any factual allegations, the indictment
merely paraphrases the one element of the statute that is central
to this appeal, only conclusionally accusing defendants of causing
payments to be made to Haitian customs officials:
for purposes of influencing acts and decisions of such
foreign officials in their official capacities, inducing
such foreign officials to do and omit to do acts in
violation of their lawful duty, and to obtain an improper
advantage, in order to assist American Rice, Inc. in
obtaining and retaining business for, and directing
business to American Rice, Inc. and Rice Corporation of
Haiti. (Emphasis added).
Although it recites in great detail the discrete facts that the
government intends to prove to satisfy each other element of an FCPA
violation, the indictment recites no particularized facts that, if
proved, would satisfy the “assist” aspect of the business nexus
element of the statute, i.e., the nexus between the illicit tax
savings produced by the bribery and the assistance such savings
provided or were intended to provide in obtaining or retaining
business for ARI and RCH. Neither does the indictment contain any
factual allegations whatsoever to identify just what business in
Haiti (presumably some rice-related commercial activity) the illicit
customs and tax savings assisted (or were intended to assist) in
obtaining or retaining, or just how these savings were supposed to
assist in such efforts. In other words, the indictment recites no
facts that could demonstrate an actual or intended cause-and-effect
nexus between reduced taxes and obtaining identified business or
retaining identified business opportunities.
5
In granting defendants’ motion to dismiss the indictment for
failure to state an offense, the district court held that, as a
matter of law, bribes paid to obtain favorable tax treatment are not
payments made to “obtain or retain business” within the intendment
of the FCPA, and thus are not within the scope of that statute’s
proscription of foreign bribery.3 The government timely filed a
notice of appeal.
II. ANALYSIS
A. Standard of Review
We review de novo questions of statutory interpretation, as
well as “whether an indictment sufficiently alleges the elements of
an offense.”4 As a motion to dismiss an indictment for failure to
state an offense is a challenge to the sufficiency of the
indictment, we are required to “take the allegations of the
indictment as true and to determine whether an offense has been
stated.”5
“[I]t is well settled that an indictment must set forth the
offense with sufficient clarity and certainty to apprise the accused
of the crime with which he is charged.”6 The test for sufficiency
3
United States v. Kay, 200 F. Supp. 2d 681, 686 (S.D. Tex.
2002).
4
United States v. Santos-Riviera, 183 F.3d 367, 369 (5th Cir.
1999).
5
United States v. Hogue, 132 F.3d 1087, 1089 (5th Cir. 1998).
6
United States v. Bearden, 423 F.2d 805, 810 (5th Cir. 1970)
(citations omitted).
6
is “not whether the indictment could have been framed in a more
satisfactory manner, but whether it conforms to minimum
constitutional standards”; namely, that it “[(1)] contain[] the
elements of the offense charged and fairly inform[] a defendant of
the charge against which he must defend, and [(2)], enable[] him to
plead an acquittal or conviction in bar of future prosecutions for
the same offense.”7
Because an offense under the FCPA requires that the alleged
bribery be committed for the purpose of inducing foreign officials
to commit unlawful acts, the results of which will assist in
obtaining or retaining business in their country, the questions
before us in this appeal are (1) whether bribes to obtain illegal
but favorable tax and customs treatment can ever come within the
scope of the statute, and (2) if so, whether, in combination, there
are minimally sufficient facts alleged in the indictment to inform
the defendants regarding the nexus between, on the one hand, Haitian
taxes avoided through bribery, and, on the other hand, assistance
in getting or keeping some business or business opportunity in
Haiti.
B. Words of the FCPA
“[T]he starting point for interpreting a statute is the
language of the statute itself.”8 When construing a criminal
7
United States v. Ramirez, 233 F.3d 318, 323 (5th Cir. 2000).
8
Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc. 447 U.S.
102, 108 (1980).
7
statute, we “must follow the plain and unambiguous meaning of the
statutory language.”9 Terms not defined in the statute are
interpreted according to their “ordinary and natural meaning...as
well as the overall policies and objectives of the statute.”10
Furthermore, “a statute must, if possible, be construed in such
fashion that every word has some operative effect.”11 Finally, we
have found it “appropriate to consider the title of a statute in
resolving putative ambiguities.”12 If, after application of these
principles of statutory construction, we conclude that the statute
is ambiguous, we may turn to legislative history. For the language
to be considered ambiguous, however, it must be “susceptible to more
than one reasonable interpretation”13 or “more than one accepted
meaning.”14
The FCPA prohibits payments to foreign officials for purposes
of:
9
Salinas v. United States, 522 U.S. 52, 57 (1997) (citations
and quotation marks omitted).
10
United States v. Lowe, 118 F.3d 399, 402 (5th Cir. 1997)
(citations omitted).
11
United States v. Nordic Village, Inc., 503 U.S. 30, 36
(1992) (recognizing this principle as a “settled rule”); United
States v. Naranjo, 259 F.3d 379, 383 (5th Cir. 2001) (citing Nordic
Village, Inc.).
12
United States v. Marek, 238 F.3d 310, 321 (5th Cir. 2001).
13
Lowe, 118 F.3d at 402.
14
United Serv. Auto. Ass’n v. Perry, 102 F.3d 144, 146 (5th
Cir. 1996).
8
(i) influencing any act or decision of such foreign
official in his official capacity, (ii) inducing such
foreign official to do or omit to do any act in violation
of the lawful duty of such official, or (iii) securing
any improper advantage...in order to assist [the company
making the payment] in obtaining or retaining business
for or with, or directing business to, any person.15
None contend that the FCPA criminalizes every payment to a foreign
official: It criminalizes only those payments that are intended to
(1) influence a foreign official to act or make a decision in his
official capacity, or (2) induce such an official to perform or
refrain from performing some act in violation of his duty, or (3)
secure some wrongful advantage to the payor. And even then, the
FCPA criminalizes these kinds of payments only if the result they
are intended to produce —— their quid pro quo —— will assist (or is
intended to assist) the payor in efforts to get or keep some
business for or with “any person.” Thus, the first question of
statutory interpretation presented in this appeal is whether
payments made to foreign officials to obtain unlawfully reduced
customs duties or sales tax liabilities can ever fall within the
scope of the FCPA, i.e., whether the illicit payments made to obtain
a reduction of revenue liabilities can ever constitute the kind of
bribery that is proscribed by the FCPA. The district court answered
this question in the negative; only if we answer it in the
affirmative will we need to analyze the sufficiency of the factual
15
15 U.S.C. § 78dd-1(a)(1).
9
allegations of the indictment as to the one element of the crime
contested here.
The principal thrust of the defendants’ argument is that the
business nexus element, i.e., the “assist...in obtaining or
retaining business” element, narrowly limits the statute’s
applicability to those payments that are intended to obtain a
foreign official’s approval of a bid for a new government contract
or the renewal of an existing government contract. In contrast, the
government insists that, in addition to payments to officials that
lead directly to getting or renewing business contracts, the statute
covers payments that indirectly advance (“assist”) the payor’s goal
of obtaining or retaining foreign business with or for some person.
The government reasons that paying reduced customs duties and sales
taxes on imports, as is purported to have occurred in this case, is
the type of “improper advantage” that always will assist in
obtaining or retaining business in a foreign country, and thus is
always covered by the FCPA.
In approaching this issue, the district court concluded that
the FCPA’s language is ambiguous, and proceeded to review the
statute’s legislative history.16 We agree with the court’s finding
of ambiguity for several reasons. Perhaps our most significant
statutory construction problem results from the failure of the
16
Kay, 200 F. Supp. 2d at 683. Neither the district court nor
this court concludes that the ambiguity in the FCPA even closely
approaches the level of vagueness, in the constitutional criminal
sense, that could lead to declaring the statute void for vagueness.
10
language of the FCPA to give a clear indication of the exact scope
of the business nexus element; that is, the proximity of the
required nexus between, on the one hand, the anticipated results of
the foreign official’s bargained-for action or inaction, and, on the
other hand, the assistance provided by or expected from those
results in helping the briber to obtain or retain business. Stated
differently, how attenuated can the linkage be between the effects
of that which is sought from the foreign official in consideration
of a bribe (here, tax minimization) and the briber’s goal of finding
assistance or obtaining or retaining foreign business with or for
some person, and still satisfy the business nexus element of the
FCPA?
Second, the parties’ diametrically opposed but reasonable
contentions demonstrate that the ordinary and natural meaning of the
statutory language is genuinely debatable and thus ambiguous. For
instance, the word “business” can be defined at any point along a
continuum from “a volume of trade,” to “the purchase and sale of
goods in an attempt to make a profit,” to “an assignment” or a
“project.”17 Thus, dictionary definitions can support both (1) the
government’s broader interpretation of the business nexus language
as encompassing any type of commercial activity, and (2) defendants’
argument that “obtain or retain business” connotes a more pedestrian
understanding of establishing or renewing a particular commercial
17
Webster’s Encyclopedic Unabridged Dictionary, at 201 (1989).
11
arrangement. Similarly, although the word “assist” suggests a
somewhat broader statutory scope,18 it does not connote specificity
or define either how proximate or how remote the foreign official’s
anticipated actions that constitute assistance must or may be to the
business obtained or retained.
Third, absent a firm understanding of just what “obtaining or
retaining business” or “assist” actually include, the parties’
remaining arguments prove little. For instance, the separation of
the statutory prohibition into two aspects —— (1) seeking to induce
a foreign official to act in consideration of a bribe (quid pro quo)
(2) for purposes of assisting in obtaining or retaining business
(business nexus) —— provides little insight into the precise scope
of the statute. The government may be correct in its contention
that the quid pro quo requirement expands the scope of the statute,
because Congress otherwise could have dispensed with the quid pro
quo requirement entirely and simply prohibited only those payments
resulting directly in obtaining or retaining business contracts.
It is at least plausible, however, as defendants argue, that the
quid pro quo requirement was not necessarily meant to expand the
statutory scope, but instead was meant to distinguish acts of a
foreign official in his official capacity from acts in his private
18
Invoking basic economic principles, the SEC reasoned in its
amicus brief that securing reduced taxes and duties on imports
through bribery enables ARI to reduce its cost of doing business,
thereby giving it an “improper advantage” over actual or potential
competitors, and enabling it to do more business, or remain in a
market it might otherwise leave.
12
capacity. Similarly, defendants might be right in urging that the
business nexus element restricts the scope of the statute to a
smaller universe of payments than those made to obtain any
advantage; yet it is conceivable that this restriction was included
to exempt more marginal facilitating payments, but not the types of
payments that defendants are accused of making.
Neither does the remainder of the statutory language clearly
express an exclusively broad or exclusively narrow understanding of
the business nexus element. The extent to which the exception for
routine governmental action (“facilitating payments” or “grease”)
is narrowly drawn reasonably suggests that Congress was carving out
very limited categories of permissible payments from an otherwise
broad statutory prohibition.19 As defendants suggest, however,
19
Section 78dd-1(b) excepts from the statutory scope “any
facilitating or expediting payment to a foreign official...the
purpose of which is to expedite or to service the performance of a
routine governmental action by a foreign official....” 15 U.S.C.
§ 78dd-1(b). Section 78dd-1(f)(3)(A), in turn, provides that:
[T]he term routine governmental action” means only an
action which is ordinarily and commonly performed by a
foreign official in –
(i) obtaining permits, licenses, or other official
documents to qualify a person to do business in a foreign
country;
(ii) processing governmental papers, such as visas
and work orders;
(iii) providing police protection, mail pick-up and
delivery, or scheduling inspections associated with
contract performance or inspections related to transit of
goods across country;
(iv) providing phone service, power and water
supply, loading and unloading cargo, or protecting
perishable products or commodities from deterioration; or
(v) actions of a similar nature. 15 U.S.C. § 78dd-
1(f)(3)(A).
13
another plausible implication for including an express statutory
explanation that routine governmental action does not include
decisions “to award new business to or to continue business with a
particular party,”20 is that Congress was focusing entirely on
identifiable decisions made by foreign officials in granting or
renewing specific business arrangements in foreign countries, and
not on a more general panoply of competitive business advantages.
The fourth and final interpretive factor, the statute’s title
—— “Foreign Corrupt Practices Act” —— is more suggestive of a
relatively broad application of its provisions, but only slightly
so. By itself, such a generic title fails to make one
interpretation of the statutory language more persuasive than
another, much less establish one as the only reasonable construction
of the statute.21 In sum, neither the ordinary meaning nor the
provisions surrounding the disputed text are sufficiently clear to
20
15 U.S.C. § 78dd-1(f)(3)(B).
21
Defendants also contend that the few reported decisions
under the FCPA lend additional support to their narrow reading of
the statutory language, because each of these cases involved
payments linked to the acquisition or renewal of contracts or
commercial agreements. See, e.g., United States v. Liebo, 923 F.2d
1308, 1311-12 (8th Cir. 1991) (defendant paid gifts to foreign
official in exchange for contract approval); United States v.
Castle, 925 F.2d 831, 832 (5th Cir. 1991) (defendants made a
payment to win bid to provide buses to Canadian provincial
government). According to defendant, these cases did not involve
payments made to influence some aspect of existing business, i.e.,
some particular cost of doing business. Defendants nevertheless
concede, and the government reiterates, that none of these
decisions squarely addresses the scope of the “obtain and retain
business” language.
14
make the statutory language susceptible of but one reasonable
interpretation. Inasmuch as Congress chose to phrase the business
nexus requirement obliquely, and to say nothing to suggest how
remote or how proximate the business nexus must be, we cannot
conclude on the basis of the provision itself that the statute is
either as narrow or as expansive as the parties respectively claim.
C. FCPA Legislative History
As the statutory language itself is amenable to more than one
reasonable interpretation, it is ambiguous as a matter of law. We
turn therefore to legislative history in our effort to ascertain
Congress’s true intentions.
1. 1977 Legislative History
Congress enacted the FCPA in 1977, in response to recently
discovered but widespread bribery of foreign officials by United
States business interests. Congress resolved to interdict such
bribery, not just because it is morally and economically suspect,
but also because it was causing foreign policy problems for the
United States.22 In particular, these concerns arose from
22
The House Committee stated that such bribes were “counter
to the moral expectations and values of the American public,”
“erode[d] public confidence in the integrity of the free market
system,” “embarrass[ed] friendly governments, lower[ed] the esteem
for the United States among the citizens of foreign nations, and
lend[ed] credence to the suspicions sown by foreign opponents of
the United States that American enterprises exert a corrupting
influence on the political processes of their nations.” H.R. Rep.
No. 95-640, at 4-5 (1977); S. Rep. No. 95-114, at 3-4 (1977),
reprinted in 1977 U.S.C.C.A.N. 4098, 4100-01..
15
revelations that United States defense contractors and oil companies
had made large payments to high government officials in Japan, the
Netherlands, and Italy.23 Congress also discovered that more than
400 corporations had made questionable or illegal payments in excess
of $300 million to foreign officials for a wide range of favorable
actions on behalf of the companies.24
In deciding to criminalize this type of commercial bribery, the
House and Senate each proposed similarly far-reaching, but non-
identical, legislation. In its bill, the House intended “broadly
[to] prohibit[] transactions that are corruptly intended to induce
the recipient to use his or her influence to affect any act or
decision of a foreign official....”25 Thus, the House bill
contained no limiting “business nexus” element.26 Reflecting a
somewhat narrower purpose, the Senate expressed its desire to ban
payments made for the purpose of inducing foreign officials to act
“so as to direct business to any person, maintain an established
business opportunity with any person, divert any business
opportunity from any person or influence the enactment or
23
H.R. Rep. No. 95-640, at 5; S. Rep. No. 95-114, at 3.
24
H.R. Rep. No. 95-640, at 4; S. Rep. No. 95-114, at 3.
25
H.R. Rep. No. 95-640, at 7 (emphasis added).
26
H.R. Conf. Rep. No. 95-831, at 12 (1977), reprinted in 1977
U.S.C.C.A.N. 4120, 4124-25.
16
promulgation of legislation or regulations of that government or
instrumentality.”27
At conference, compromise language “clarified the scope of the
prohibition by requiring that the purpose of the payment must be to
influence any act or decision of a foreign official...so as to
assist an issuer in obtaining, retaining or directing business to
any person.”28 In the end, then, Congress adopted the Senate’s
proposal to prohibit only those payments designed to induce a
foreign official to act in a way that is intended to facilitate
(“assist”) in obtaining or retaining of business.
Congress expressly emphasized that it did not intend to
prohibit “so-called grease or facilitating payments,”29 such as
“payments for expediting shipments through customs or placing a
transatlantic telephone call, securing required permits, or
obtaining adequate police protection, transactions which may involve
even the proper performance of duties.”30 Instead of making an
express textual exception for these types of non-covered payments,
the respective committees of the two chambers sought to distinguish
27
S. Rep. No. 95-114, at 17; S. 305, 95th Cong. § 103
(proposing to ban payments that induce action by a foreign official
so as “to assist...in obtaining or retaining business for or with,
or directing business to, any person, or influencing legislation or
regulations of that government or instrumentality”).
28
H.R. Conf. Rep. 95-831, at 12.
29
H.R. Rep. No. 95-640, at 4; S. Rep. No. 95-114, at 10.
30
S. Rep. No. 95-114, at 10.
17
permissible grease payments from prohibited bribery by only
prohibiting payments that induce an official to act “corruptly,”
i.e., actions requiring him “to misuse his official position” and
his discretionary authority,31 not those “essentially ministerial”
actions that “merely move a particular matter toward an eventual act
or decision or which do not involve any discretionary action.”32
In short, Congress sought to prohibit the type of bribery that
(1) prompts officials to misuse their discretionary authority and
(2) disrupts market efficiency and United States foreign
relations,33 at the same time recognizing that smaller payments
intended to expedite ministerial actions should remain outside of
the scope of the statute. The Conference Report explanation, on
which the district court relied to find a narrow statutory scope,
truly offers little insight into the FCPA’s precise scope, however;
it merely parrots the statutory language itself by stating that the
purpose of a payment must be to induce official action “so as to
assist an issuer in obtaining, retaining or directing business to
any person.”34
31
H.R. Rep. No. 95-640, at 7-8; S. Rep. No. 95-114, at 10.
32
H.R. Rep. No. 95-640, at 8. Similarly, when the House
defined “foreign official” it excluded those individuals “whose
duties are essentially ministerial or clerical.” Id.
33
See Lamb v. Phillip Morris, Inc., 915 F.2d 1024, 1029 (6th
Cir. 1990) (finding that “the FCPA was primarily designed to
protect the integrity of American foreign policy and domestic
markets”).
34
H.R. Conf. Rep. 95-831, at 12.
18
To divine the categories of bribery Congress did and did not
intend to prohibit, we must look to the Senate’s proposal, because
the final statutory language was drawn from it,35 and from the SEC
Report on which the Senate’s legislative proposal was based.36 In
distinguishing among the types of illegal payments that United
States entities were making at the time, the SEC Report identified
four principal categories: (1) payments “made in an effort to
procure special and unjustified favors or advantages in the
enactment or administration of the tax or other laws” of a foreign
country; (2) payments “made with the intent to assist the company
in obtaining or retaining government contracts”; (3) payments “to
persuade low-level government officials to perform functions or
services which they are obliged to perform as part of their
governmental responsibilities, but which they may refuse or delay
unless compensated” (“grease”), and (4) political contributions.37
The SEC thus exhibited concern about a wide range of questionable
payments (explicitly including the kind at issue here) that were
35
As the House intended its proposed legislation to apply even
more broadly to payments soliciting any corrupt act by a foreign
official, we assume that any restrictions of scope emanated from
the Senate version.
36
Report of the Securities and Exchange Commission on
Questionable and Illegal Corporate Payments and Practices,
submitted to the Senate Banking, Housing and Urban Affairs
Committee, May 12, 1976 [hereinafter, “SEC Report”]. The Senate
Report explained that its bill was identical to the bill introduced
the year before, which in turn, was based substantially on the SEC
Report and its recommendations. S. Rep. No. 95-114, at 2.
37
SEC Report, at 25-27 (emphasis added).
19
resulting in millions of dollars being recorded falsely in corporate
books and records.38
As noted, the Senate Report explained that the statute should
apply to payments intended “to direct business to any person,
maintain an established business opportunity with any person, divert
any business opportunity from any person or influence the enactment
or promulgation of legislation or regulations of that government or
instrumentality.”39 We observe initially that the Senate only
loosely addressed the categories of conduct highlighted by the SEC
Report. Although the Senate’s proposal picked up the SEC’s concern
with a business nexus, it did not expressly cover bribery
influencing the administration of tax laws or seeking favorable tax
treatment. It is clear, however, that even though the Senate was
particularly concerned with bribery intended to secure new business,
it was also mindful of bribes that influence legislative or
regulatory actions, and those that maintain established business
opportunities, a category of economic activity separate from, and
much more capacious than, simply “directing business” to someone.
The statute’s ultimate language of “obtaining or retaining”
mirrors identical language in the SEC Report. But, whereas the SEC
Report highlights payments that go toward “obtaining or retaining
government contracts,” the FCPA, incorporating the Senate Report’s
38
Id. at a (Introduction), 25-27.
39
S. Rep. No. 95-114, at 17 (emphasis added).
20
language, prohibits payments that assist in obtaining or retaining
business, not just government contracts. Had the Senate and
ultimately Congress wanted to carry over the exact, narrower scope
of the SEC Report, they would have adopted the same language. We
surmise that, in using the word “business” when it easily could have
used the phraseology of SEC Report, Congress intended for the
statute to apply to bribes beyond the narrow band of payments
sufficient only to “obtain or retain government contracts.” The
Senate’s express intention that the statute apply to corrupt
payments that maintain business opportunities also supports this
conclusion.
For purposes of deciding the instant appeal, the question
nevertheless remains whether the Senate, and concomitantly Congress,
intended this broader statutory scope to encompass the
administration of tax, customs, and other laws and regulations
affecting the revenue of foreign states. To reach this conclusion,
we must ask whether Congress’s remaining expressed desire to
prohibit bribery aimed at getting assistance in retaining business
or maintaining business opportunities was sufficiently broad to
include bribes meant to affect the administration of revenue laws.
When we do so, we conclude that the legislative intent was so broad.
Congress was obviously distraught not only about high profile
bribes to high-ranking foreign officials, but also by the
pervasiveness of foreign bribery by United States businesses and
businessmen. Congress thus made the decision to clamp down on
21
bribes intended to prompt foreign officials to misuse their
discretionary authority for the benefit of a domestic entity’s
business in that country. This observation is not diminished by
Congress’s understanding and accepting that relatively small
facilitating payments were, at the time, among the accepted costs
of doing business in many foreign countries.40
In addition, the concern of Congress with the immorality,
inefficiency, and unethical character of bribery presumably does not
vanish simply because the tainted payments are intended to secure
a favorable decision less significant than winning a contract bid.
Obviously, a commercial concern that bribes a foreign government
official to award a construction, supply, or services contract
violates the statute. Yet, there is little difference between this
example and that of a corporation’s lawfully obtaining a contract
from an honest official or agency by submitting the lowest bid, and
—— either before or after doing so —— bribing a different government
official to reduce taxes and thereby ensure that the under-bid
venture is nevertheless profitable. Avoiding or lowering taxes
reduces operating costs and thus increases profit margins, thereby
40
We recognize that all payments to foreign officials exist
on a continuum in which any payment, even if only to connect
telephone service in two days instead of two weeks, marginally
improves a company’s competitive advantage in a foreign country.
Nevertheless, Congress was principally concerned about payments
that prompt an official to deviate from his official duty, not
necessarily payments that get an official to perform properly those
usually ministerial duties required of his office. As explained
infra, Congress enacted amendments in 1988 in an effort to reflect
just how limited it envisioned the grease exception to be.
22
freeing up funds that the business is otherwise legally obligated
to expend. And this, in turn, enables it to take any number of
actions to the disadvantage of competitors. Bribing foreign
officials to lower taxes and customs duties certainly can provide
an unfair advantage over competitors and thereby be of assistance
to the payor in obtaining or retaining business. This demonstrates
that the question whether the defendants’ alleged payments
constitute a violation of the FCPA truly turns on whether these
bribes were intended to lower ARI’s cost of doing business in Haiti
enough to have a sufficient nexus to garnering business there or to
maintaining or increasing business operations that ARI already had
there, so as to come within the scope of the business nexus element
as Congress used it in the FCPA. Answering this fact question,
then, implicates a matter of proof and thus evidence.
In short, the 1977 legislative history, particularly the
Senate’s proposal and the SEC Report on which it relied, convinces
us that Congress meant to prohibit a range of payments wider than
only those that directly influence the acquisition or retention of
government contracts or similar commercial or industrial
arrangements. On the other end of the spectrum, this history also
demonstrates that Congress explicitly excluded facilitating payments
(the grease exception). In thus limiting the exceptions to the type
of bribery covered by the FCPA to this narrow category, Congress’s
intention to cast an otherwise wide net over foreign bribery
suggests that Congress intended for the FCPA to prohibit all other
23
illicit payments that are intended to influence non-trivial official
foreign action in an effort to aid in obtaining or retaining
business for some person. The congressional target was bribery paid
to engender assistance in improving the business opportunities of
the payor or his beneficiary, irrespective of whether that
assistance be direct or indirect, and irrespective of whether it be
related to administering the law, awarding, extending, or renewing
a contract, or executing or preserving an agreement. In light of
our reading of the 1977 legislative history, the subsequent 1988 and
1998 legislative history is only important to our analysis to the
extent it confirms or conflicts with our initial conclusions about
the scope of the statute.
2. 1988 Legislative History
After the FCPA’s enactment, United States business entities and
executives experienced difficulty in discerning a clear line between
prohibited bribes and permissible facilitating payments.41 As a
result, Congress amended the FCPA in 1988, expressly to clarify its
original intent in enacting the statute. Both houses insisted that
their proposed amendments only clarified ambiguities “without
changing the basic intent or effectiveness of the law.”42
41
S. Rep. No. 100-85, at 53 (1987) (stating that “the method
chosen by Congress in 1977 to accomplish [the task of
distinguishing grease payments from bribery] has been difficult to
apply in practice”).
42
Id. at 54; H.R. Rep. No. 100-40, pt. 2, at 77 (1987)
(stating that the amendments, particularly the exception for
facilitating payments, “will reflect current law and Congressional
24
In this effort to crystallize the scope of the FCPA’s
prohibitions on bribery, Congress chose to identify carefully two
types of payments that are not proscribed by the statute. It
expressly excepted payments made to procure “routine governmental
action” (again, the grease exception),43 and it incorporated an
affirmative defense for payments that are legal in the country in
which they are offered or that constitute bona fide expenditures
directly relating to promotion of products or services, or to the
execution or performance of a contract with a foreign government or
agency.44
We agree with the position of the government that these 1988
amendments illustrate an intention by Congress to identify very
limited exceptions to the kinds of bribes to which the FCPA does not
intent more clearly”).
43
15 U.S.C. §§ 78dd-1(b) & (f)(3)(A). See supra note 19 for
language of these subsections.
44
15 U.S.C. § 78dd-1(c). The subsection provides in full:
It shall be an affirmative defense to actions under subsections (a)
or (g) of this section that ——
(1) the payment, gift, offer, or promise of anything of value
that was made, was lawful under the written laws and regulations of
the foreign official’s, political party’s, party official’s, or
candidate’s country; or
(2) the payment, gift, offer, or promise of anything of value
that was made, was a reasonable and bona fide expenditure, such as
travel and lodging expenses, incurred by or on behalf of a foreign
official, party, party official, or candidate and was directly
related to ——
(A) the promotion, demonstration, or explanation of
products or services; or
(B) the execution or performance of a contract with a
foreign government or agency thereof. Id.
25
apply. A brief review of the types of routine governmental actions
enumerated by Congress shows how limited Congress wanted to make the
grease exceptions. Routine governmental action, for instance,
includes “obtaining permits, licenses, or other official documents
to qualify a person to do business in a foreign country,” and
“scheduling inspections associated with contract performance or
inspections related to transit of goods across country.”45
Therefore, routine governmental action does not include the issuance
of every official document or every inspection, but only (1)
documentation that qualifies a party to do business and (2)
scheduling an inspection —— very narrow categories of largely non-
discretionary, ministerial activities performed by mid- or low-level
foreign functionaries. In contrast, the FCPA uses broad, general
language in prohibiting payments to procure assistance for the payor
in obtaining or retaining business, instead of employing similarly
detailed language, such as applying the statute only to payments
that attempt to secure or renew particular government contracts.
Indeed, Congress had the opportunity to adopt narrower language in
1977 from the SEC Report, but chose not to do so.46
45
15 U.S.C. § 78dd-1(f)(3)(A).
46
Defendants argue that Congress intended to maintain the
statute’s narrow scope by excluding from the routine governmental
action exception “any decision by a foreign official whether, or on
what terms, to award new business to or to continue business with
a particular party....” 15 U.S.C. § 78dd-1(f)(3)(B). We disagree
with defendants’ contention that the language these amendments
indicates a narrow statutory scope. Read in light of Congress’s
original desire to stamp out foreign bribery run amok, we find that
26
Defendants argue, nevertheless, that Congress’s decision to
reject House-proposed amendments to the business nexus element
constituted its implicit rejection of such a broad reading of the
statute. The House bill proposed new language to explain that
payments for “obtaining or retaining business” also includes
payments made for the “procurement of legislative, judicial,
regulatory, or other action in seeking more favorable treatment by
a foreign government.”47 Indeed, defendants assert, the proposed
amendment itself shows that Congress understood the business nexus
provision to have narrow application; otherwise, there would have
been no need to propose amending it.
Contrary to defendants’ contention, the decision of Congress
to reject this language has no bearing on whether “obtaining or
retaining business” includes the conduct at issue here. In
explaining Congress’s decision not to include this proposed
amendment in the business nexus requirement, the Conference Report
stated that the “retaining business” language was
not limited to the renewal of contracts or other
business, but also includes a prohibition against corrupt
payments related to the execution or performance of
contracts or the carrying out of existing business, such
as a payment to a foreign official for the purpose of
obtaining more favorable tax treatment....The term should
its intention in 1988 to exclude from the grease exception
“decision[s] by a foreign official whether, or on what terms...to
continue business with a particular party” replicates the equally
capacious language of prohibition in the 1977 legislative history.
47
H.R. Conf. Rep. 100-576, at 918 (1988), reprinted in 1988
U.S.C.C.A.N. 1547, 1951.
27
not, however, be construed so broadly as to include
lobbying or other normal representations to government
officials.48
At first blush, this statement would seem to resolve the instant
dispute in favor of the government; however, the district court
interpreted Congress’s decision to leave the business nexus
requirement unchanged as a determination not to extend the scope of
the statute. The court thus declined to defer to the report
because, in the court’s estimation, the legislative history
“consist[ed] of an after-the-fact interpretation of the term
‘retaining business’ by a subsequent Congress more than ten years
after the enactment of the original language.”49
We agree that, as a general matter, subsequent legislative
history about unchanged statutory language would deserve little or
no weight in our analysis. The Supreme Court has instructed that
“the interpretation given by one Congress (or a committee or Member
thereof) to an earlier statute is of little assistance in discerning
the meaning of that statute.”50 In this case, moreover, Congress’s
enactment of subsequent legislation did not include changes to the
business nexus requirement itself.
Nevertheless, the Supreme Court has also stated that
“[s]ubsequent legislation declaring the intent of an earlier statute
48
H.R. Conf. Rep. No. 100-576, at 918-19 (emphasis added).
49
Kay, 200 F. Supp. 2d at 685.
50
Central Bank of Denver v. First Interstate Bank of Denver,
511 U.S. 164, 185 (1994) (citations omitted).
28
is entitled to great weight in statutory construction.”51 And, we
have concluded that Congress is “at its most authoritative [when]
adding complex and sophisticated amendments to an already complex
and sophisticated act.”52 Although in 1988 Congress refused to
alter the business nexus requirement itself, it did enact exceptions
and defenses to the statute’s applicability, both of which the
pertinent Conference Report language helps to explain vis-à-vis the
statute’s overall scope. And it must be remembered that clarifying
the scope of the 1977 law was the overarching purpose of Congress
in enacting the 1988 amendments.53 Thus, the legislative history
that the district court rejected as irrelevant in fact explains how
the 1988 amendments relate to the original scope of the statute and
concomitantly to the business nexus element.
First, the Conference Report expresses what is implied by the
new affirmative defense for bona fide expenditures for the execution
or performance of a contract. The creation of a defense for bona
fide payments strongly implies that corrupt, non-bona-fide payments
51
Red Lion Broad. Co. v. FCC, 395 U.S. 367, 380-81 (1969).
52
Mount Sinai Hosp. v. Weinberger, 517 F.2d 329, 343 (5th Cir.
1975).
53
We recognize that the Supreme Court has warned repeatedly
that “the views of a subsequent Congress form a hazardous basis for
inferring the intent of an earlier one.” Consumer Prod. Safety
Comm’n, 447 U.S. at 117 (citations omitted). The amendments
Congress passed in 1988, however, expressly sought to clarify
Congress’s intent from 1977. Thus, the views and amendments of
Congress in 1988 are necessary to our analysis of the precise scope
of the original law.
29
related to contract execution and performance have always been and
remain prohibited. Instead of leaving this prohibition implicit,
though, the Conference Report’s description of “retaining business”
explained that this phrase, and thus the statutory ambit, includes
“a prohibition against corrupt payments related to the execution or
performance of contracts....”54
Similarly, in its 1988 statutory description of routine
governmental action, Congress stated that this exception does not
include decisions about “whether, or on what terms...to continue
business with a particular party,”55 which must mean, conversely,
that decisions that do relate to “continu[ing] business with a
particular party” are covered by, i.e., are not excepted from, the
scope of the statute. The Conference Report, in turn, states that
“retaining business” means “the carrying out of existing business,”
thereby simply repeating statutory intent without explaining it.56
We discern no meaningful distinction between the phrase “continuing
business” in the statutory text, and “carrying out of existing
business” in the Conference Report.
Third, the Conference Report states that “retaining business”
should not be construed so broadly as to include lobbying or “other
54
H.R. Conf. Rep. 100-576, at 918 (emphasis added).
55
15 U.S.C. § 78dd-1(f)(3)(B).
56
H.R. Conf. Rep. No. 100-576, at 918.
30
normal representations to government officials.”57 This statement
directly reflects the Conference Committee’s decision not to include
language from the House bill focusing on legislature and regulatory
activity so as to avoid any interpretation that might curb
legitimate lobbying or representations intended to influence
legislative, judicial, regulatory, or other such action. Thus, like
other language of the report, far from being irrelevant to
Congress’s intentions in 1988, this provides a direct explanation
of why Congress elected not to include the newly proposed language.
The remaining contested language in the 1988 Conference Report
states that “retaining business” includes —— covers —— payments such
as those made “to a foreign official for the purpose of obtaining
more favorable tax treatment.”58 We know that the SEC was concerned
specifically with these types of untoward payments in 1977, and that
Congress ultimately adopted the more generally-worded prohibition
against payments designed to assist in obtaining or retaining
business. This specific reference in the Conference Report
therefore appears to reflect the concerns that initially motivated
Congress to enact the FCPA. But even if this language is not
dispositive of the question, the rest of the passage does reflect
57
Id. at 918-19.
58
Id. at 918 (emphasis added).
31
Congress’s purpose in passing the 1988 amendments, and therefore
deserves weight in our analysis.
Finally, it is inaccurate to suggest, as defendants do, that
this report language constituted an attempt to insert by subterfuge
a meaning for “retaining business” that Congress had expressly
rejected in conference. The only language that Congress chose not
to adopt regarding the business nexus requirement concerned payments
for primarily legislative, judicial, and regulatory advantages.59
Corrupt payments “related to the execution or performance of
contracts or the carrying out of existing business” have no direct
connection with the proposed language on legislative, judicial, and
regulatory action, and thus were not part of the proposed
amendment.60
3. 1998 Legislative History
In 1998, Congress made its most recent adjustments to the FCPA
when the Senate ratified and Congress implemented the Organization
of Economic Cooperation and Development’s Convention on Combating
Bribery of Foreign Public Officials in International Business
59
We recognize that the House proposal prohibited payments for
“procurement of legislative, judicial, regulatory, or other action
in seeking more favorable treatment by a foreign government.” H.R.
Rep. No. 100-40, pt. 2, at 75. Applying the ejusden generis maxim,
we must conclude that by using a term as vague as “other action”
directly after the words “legislative, judicial, or regulatory,”
Congress intended to include only actions quite similar to these
types in its amendment, not any other conceivable action (aside
from discrete contractual arrangements) that might result in
favorable treatment from a foreign government.
60
H.R. Conf. Rep. No. 100-576, at 918.
32
Transactions (the “Convention”). Article 1.1 of the Convention
prohibits payments to a foreign public official to induce him to
“act or refrain from acting in relation to the performance of
official duties, in order to obtain or retain business or other
improper advantage in the conduct of international business.”61
When Congress amended the language of the FCPA, however, rather than
inserting “any improper advantage” immediately following “obtaining
or retaining business” within the business nexus requirement (as
does the Convention), it chose to add the “improper advantage”
provision to the original list of abuses of discretion in
consideration for bribes that the statute proscribes. Thus, as
amended, the statute now prohibits payments to foreign officials not
just to buy any act or decision, and not just to induce the doing
or omitting of an official function “to assist...in obtaining or
retaining business for or with, or directing business to, any
person,”62 but also the making of a payment to such a foreign
official to secure an “improper advantage” that will assist in
obtaining or retaining business.63
The district court concluded, and defendants argue on appeal,
that merely by adding the “improper advantage” language to the two
61
Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions, Dec. 17, 1997, art. 1.1, S.
Treaty Doc. No. 105-43, 37 I.L.M. 1, 4 (1998) (emphasis added).
62
See 15 U.S.C. § 78dd-1(a)(1).
63
Id.
33
existing kinds of prohibited acts acquired in consideration for
bribes paid, Congress “again declined to amend the ‘obtain or
retain’ business language in the FCPA.”64 In contrast, the
government responds that Congress’s choice to place the Convention
language elsewhere merely shows that Congress already intended for
the business nexus requirement to apply broadly, and thus declined
to be redundant.
The Convention’s broad prohibition of bribery of foreign
officials likely includes the types of payments that comprise
defendants’ alleged conduct. The commentaries to the Convention
explain that “‘[o]ther improper advantage’ refers to something to
which the company concerned was not clearly entitled, for example,
an operating permit for a factory which fails to meet the statutory
requirements.”65 Unlawfully reducing the taxes and customs duties
at issue here to a level substantially below that which ARI was
legally obligated to pay surely constitutes “something [ARI] was not
clearly entitled to,” and was thus potentially an “improper
advantage” under the Convention.
As we have demonstrated, the 1977 and 1988 legislative history
already make clear that the business nexus requirement is not to be
interpreted unduly narrowly. We therefore agree with the government
64
Kay, 200 F. Supp. 2d at 686.
65
Commentaries on the Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions, 37
I.L.M. at 8 [hereinafter “Commentaries”].
34
that there really was no need for Congress to add “or other improper
advantage” to the requirement.66 In fact, such an amendment might
have inadvertently swept grease payments into the statutory ambit
—— or at least created new confusion as to whether these types of
payments were prohibited —— even though this category of payments
was excluded by Congress in 1977 and remained excluded in 1988; and
even though Congress showed no intention of adding this category
when adopting its 1998 amendments.67 That the Convention, which the
Senate ratified without reservation and Congress implemented, would
also appear to prohibit the types of payments at issue in this case
only bolsters our conclusion that the kind of conduct allegedly
engaged in by defendants can be violative of the statute.68
66
Although Congress intended to expand the scope of the FCPA
in its implementation of the Convention, such expansion did not
clearly implicate the business nexus element. Obviously, Congress
added “any improper advantage” to the quid pro quo requirement.
Other ways in which Congress intended to expand FCPA coverage
included: (1) amending the statute to apply to “any person,”
instead of the more limited category of issuers registered under
the 1934 Act and domestic concerns; (2) expanding the definition of
“foreign official” to include officials of public international
organizations; and (3) extending the FCPA to cover “acts of U.S.
businesses and nationals in furtherance of unlawful payments that
take place wholly outside the United States.” S. Rep. No. 105-277,
at 2-3.
67
Even though the Commentaries to the Convention also excepted
small facilitation payments from its scope, a change in the
business nexus requirement to include “other improper advantage”
still may have created undue confusion as to whether payments
previously allowed were now prohibited by the statute, as the
Convention’s precise understanding of “facilitating payments” may
ultimately differ with Congress’s.
68
Indeed, given the United States’s ratification and
implementation of the Convention without any reservation,
35
4. Summary
Given the foregoing analysis of the statute’s legislative
history, we cannot hold as a matter of law that Congress meant to
limit the FCPA’s applicability to cover only bribes that lead
directly to the award or renewal of contracts. Instead, we hold
that Congress intended for the FCPA to apply broadly to payments
intended to assist the payor, either directly or indirectly, in
obtaining or retaining business for some person, and that bribes
paid to foreign tax officials to secure illegally reduced customs
understandings or alterations specifically pertaining to its scope,
we would find it difficult to interpret the statute as narrowly as
the defendants suggest: Such a construction would likely create a
conflict with our international treaty obligations, with which we
presume Congress meant to comply fully. See Restatement (Third) of
Foreign Relations Law, § 115, cmt. a (1987) (“It is generally
assumed that Congress does not intend to repudiate an international
obligation of the United States by nullifying a rule of
international law or an international agreement as domestic law, or
by making it impossible for the United States to carry out its
obligations.”); Boureslan v. Aramco, 857 F.2d 1014, 1023 (5th Cir.
1988) (King, J. dissenting) (recognizing the “presumption that
Congress does not intend to violate international law”). We
recognize that there may be some variation in scope between the
Convention and the FCPA. The FCPA prohibits payments inducing
official action that “assist[s]...in obtaining or retaining
business”; the Convention prohibits payments that induce official
action “to obtain or retain business or other improper advantage in
the conduct of international business.” Potential variation exists
because it is unclear whether the Convention’s “other improper
advantage in the conduct of international business” language
requires a business nexus to the same extent as does the FCPA.
This case, however, does not require us to address potential
discrepancies (including whether they exist) between the scope of
the Convention and the scope of the statute, i.e., payments that
clearly fall outside of the FCPA but clearly fall within the
Convention’s prohibition or vice versa, because we have already
concluded that the type of bribery engaged in by defendants has the
potential of violating the statute.
36
and tax liability constitute a type of payment that can fall within
this broad coverage. In 1977, Congress was motivated to prohibit
rampant foreign bribery by domestic business entities, but
nevertheless understood the pragmatic need to exclude innocuous
grease payments from the scope of its proposals. The FCPA’s
legislative history instructs that Congress was concerned about both
the kind of bribery that leads to discrete contractual arrangements
and the kind that more generally helps a domestic payor obtain or
retain business for some person in a foreign country; and that
Congress was aware that this type includes illicit payments made to
officials to obtain favorable but unlawful tax treatment.
Furthermore, by narrowly defining exceptions and affirmative
defenses against a backdrop of broad applicability, Congress
reaffirmed its intention for the statute to apply to payments that
even indirectly assist in obtaining business or maintaining existing
business operations in a foreign country. Finally, Congress’s
intention to implement the Convention, a treaty that indisputably
prohibits any bribes that give an advantage to which a business
entity is not fully entitled, further supports our determination of
the extent of the FCPA’s scope.
Thus, in diametric opposition to the district court, we
conclude that bribes paid to foreign officials in consideration for
unlawful evasion of customs duties and sales taxes could fall within
the purview of the FCPA’s proscription. We hasten to add, however,
that this conduct does not automatically constitute a violation of
37
the FCPA: It still must be shown that the bribery was intended to
produce an effect —— here, through tax savings —— that would “assist
in obtaining or retaining business.
D. Sufficiency of the Indictment
As in every indictment, the instant indictment’s allegations
must clearly inform the defense of what it is that the government
intends to prove in satisfying each element of the crime, and must
enable the defendant to assert double jeopardy and not be subject
to prosecution for charges not presented to the grand jury. Here,
the question of sufficiency of the factual allegations centers on
the business nexus element of the crime, viz., the producing-cause
relationship between the substantial avoidance or evasion of duties
and taxes and getting or keeping business in Haiti. This, in turn,
poses the question, what allegations of the indictment, if any, so
inform the defendants of the government’s intended proof of such
linkage as to be sufficient for mounting a defense?69 Because the
district court determined that the alleged bribes are of a type that
can never be covered by the FCPA, that court never reached or
addressed the sufficiency of the indictment vis-à-vis the business
nexus element. We shall do so now in an effort to assist the
district court’s proceedings on remand.
69
See, e.g., United States v. Richards, 204 F.3d 177, 192 (5th
Cir. 2000) (finding that an indictment was sufficient, despite the
supposed failure to allege clearly the materiality element of the
offense, because the facts alleged “warrant[ed] an inference that
the false statements were material”) (citation omitted).
38
We observe as a preliminary matter that this is the kind of
case that a relatively few reported opinions have analyzed to
determine whether an indictment that sets out the elements of the
offense charged merely by tracking the words of the statute itself,
is insufficient. Most reported opinions that have addressed this
issue appear to approve the practice of tracking the statute as long
as the words used expressly set out all of the elements necessary
to constitute the offense.70 The cases in which an indictment that
parrots the statute is held to be insufficient turn on a
determination that the factual information that is not alleged in
the indictment goes to the very core of criminality under the
statute.
The Supreme Court took this approach in Russell v. United
States,71 in which it found indictments defective because the
allegations under 2 U.S.C. § 192, which prohibits witnesses before
congressional committees from “refus[ing] to answer any question
pertinent to the question under inquiry,”72 failed to identify the
“question under inquiry.” The Court ruled that the “core of
criminality” under the statute was the pertinency to the subject
70
See, e.g., United States v. Davis, 336 F.3d 920, 922-24 (9th
Cir. 2003); United States v. Akers, 215 F.3d 1089, 1101 (10th Cir.
2000); United States v. Monus, 128 F.3d 376, 388 (6th Cir. 1997);
United States v. Cochran, 17 F.3d 56, 61 (3d Cir. 1994); United
States v. Chandler, 996 F.2d 1073, 1097 (11th Cir. 1993); United
States v. Young, 618 F.2d 1281, 1286 (8th Cir. 1980).
71
369 U.S. 749 (1962).
72
Id. at 752 n.2.
39
under inquiry of the question a witness refused to answer.73 The
Court stated:
Where guilt depends so crucially upon such a specific
identification of fact, our cases have uniformly held
that an indictment must do more than simply repeat the
language of the criminal statute.74
The Court concluded that the indictments failed this test because,
even though they did list the questions that the defendants had
refused to answer, they failed totally to specify the topic under
inquiry, which was the key to the legality or illegality of the
defendants’ acts.75 In short, the defendants faced trial with the
“chief issue undefined.”76
The First Circuit, in United States v. Murphy,77 followed
Russell to invalidate an indictment that charged the defendant with
threatening a particular witness to influence his testimony in an
official proceeding. The indictment quoted the statute,78 and
identified the threatened witnesses and the date of the threat.79
The indictment did not, however, identify any official proceeding.
In invalidating the indictment for that omission, the First Circuit
73
Id. at 764.
74
Id. at 771.
75
Id. at 765-68.
76
Id. at 766.
77
762 F.2d 1151 (1st Cir. 1985).
78
18 U.S.C. § 1512(a)(1).
79
Murphy,762 F.2d at 1153.
40
concluded that the missing information went to the core of
criminality under the statute. Without that information, reasoned
the Murphy court, the defense did not know what proceeding the grand
jury was charging the defendants with attempting to influence.80
United States v. Pirro81 exemplifies the difficulties courts
confront with this kind of issue. In that case, the indictment
charged violations of Section 7206 of the Internal Revenue Code
(“I.R.C.”), which makes it a felony for “any person ... [to]
[w]illfully make [] and subscribe [] any [tax] return ... which he
does not believe to be true and correct as to every material
matter.”82 The allegations were that the defendant, the company
president who signed its tax return, failed to report another
individual’s “ownership interest” in the company on its tax return
for a particular year, and also misstated his own ownership interest
in that company on the return.83 The Pirro majority concluded that
the indictment was deficient in several respects, including its
failure to charge a violation of a known legal right and its failure
to allege the essential facts constituting the offense charged. In
finding the indictment insufficient, the majority relied on the
80
Id. at 1154-55 (“[T]he indictment was defective because it
did not adequately apprise the defendants of the charges against
them.”).
81
212 F.3d 86 (2d Cir. 2000).
82
26 U.S.C. § 7206(1). See also Pirro, 212 F.3d at 97.
83
Id. at 87-88.
41
Supreme Court’s opinion in Russell.84 The flaw identified by the
Pirro majority was the indictment’s failure to allege what it was
that made the omission from the tax return criminal.85 The
allegation that the “ownership interest” of the chairman was not
reported was found insufficient because the term “ownership
interest” was generic, and no specifics were provided. The statute
—— I.R.C. § 7206(1) —— prohibits an omission only if there is a duty
to report.86 The majority reasoned that because the term “ownership
interest” is broader than “share ownership,” and there was no duty
to report the interest at issue, absent other shareholders, the
government’s allegation might (or might not) make the tax return
incorrect and thus violative of the statute.87
The thrust of the vigorous dissent in Pirro was that the
indictment did allege a crime and did so with sufficient specificity
when it alleged that the defendant violated the law by failing to
disclose identified ownership interests in the tax return.88 The
dissent emphasized that indictments that do little more than track
the language of the statute and state the time and place of the
84
Id. at 92-95.
85
Id. at 93.
86
Id.
87
Id. at 93-94.
88
Id. at 100-04.
42
alleged crime in proximate terms are sufficient.89 In Pirro, the
indictment provided dates and times, tracked the statute, and
alleged all the elements of the offense by tracking the statute.
The dissent found that the definition of the offense did not include
any “generic term” that required a “descen[t] to particulars,”
asserting that even without the added information that the defendant
wanted, the parties knew the issues.90 Consequently, the dissent
was satisfied that the indictment was sufficient, leaving for trial
—— not pretrial, on a scant record —— the question whether the
government could prove its case with sufficient evidence.91
Here, the issue can be phrased in a number of ways. In
Russell-like terms, the issue is whether the alleged quid pro quo
of bribery-obtained reductions in sales taxes and customs duties has
an “intent-to-assist” nexus to obtaining or retaining business in
the foreign country. As explained ad nauseam in the foregoing
analysis of the legislative history of the FCPA, the “assist” nexus
is indisputably the element of the crime that distinguishes it from
garden-variety bribery on the broad end of the spectrum and bribery
to obtain or retain a particular government contract on the narrow
end.92 In terms of the sufficiency of the indictment, however, the
89
Id. at 92-93.
90
Id. at 93 (quoting United States v. Cruikshank, 92 U.S. 542
(1875)).
91
Id. at 105.
92
See supra at ___.
43
question is whether the business nexus element —— which in the
instant indictment is merely a paraphrase of that part of the
statute —— goes to the “core of criminality”93 under the statute and
contains generic terms, requiring more particularity. Stated
differently, the question is whether the lack of detail in that part
of the indictment that deals with this one element is more like an
absence of detail as to how the crime was committed than a failure
to specify what the crime was.
Obviously, an indictment does not have to set out evidence or
details of how a crime was committed as long as it gives the
defendant notice of what the government is charging.94 Here, the
question is whether the statutory prohibition against a bribe that
“assists [the defendant] in obtaining and retaining business” for
some person can properly be viewed as containing only “generic”
terms, which demand more particularity in the indictment. Without
more, the words “assists” and “business” are certainly candidates
for classification as generic terms. There are innumerable ways and
degrees of assisting; and —— as we have seen in conjunction with the
FCPA’s legislative history —— “business” is as broad as it is tall.
True, there are many crimes that include nexus elements, such as
effects on interstate commerce or use of the mails in connection
93
Russell, 369 U.S. at 764.
94
See, e.g., United States v. Ellender, 947 F.2d 748 (5th
Cir. 1991) (“To comply with [Federal Rule of Criminal Procedure]
7(c), an indictment need not provide the evidentiary details of the
government’s case.”) (citations omitted).
44
with a scheme to defraud, in which the nexus element cannot be said
to go to the core of criminality. For such crimes, the courts
appear to take the approach that those kinds of nexus elements can
be alleged without factual detail and still not violate the Fifth
or Sixth Amendments.
The line between deficient and sufficient factual detail in an
indictment is not a bright one, particularly when, as here, the
statute itself does not clearly define the offense. Although the
instant indictment does allege in sufficient detail the linkage
between the payment of bribes and the tax benefit obtained (quid pro
quo), it does not detail any “assist” nexus between the tax benefit
and getting or keeping business. Like the defendants, we are left
to ask how the tax benefit was intended to assist in obtaining or
retaining business, and what was the business or business
opportunities sought to be obtained or retained? All that is known
from the indictment is that the business involves rice imported into
Haiti at below-legal tax and custom rates.
Although we recognize that lowering tax and customs payments
presumptively increases a company’s profit margin by reducing its
cost of doing business, it does not follow, ipso facto, —— as the
government contends —— that such a result satisfies the statutory
business nexus element. Even a modest imagination can hypothesize
myriad ways that an unwarranted reduction in duties and taxes in a
large-volume rice import operation could assist in obtaining or
retaining business. For example, it could, as already indicated,
45
so reduce the beneficiary’s cost of doing business as to allow the
beneficiary to underbid competitors for private commercial
contracts, government allocations, and the like; or it could provide
the margin of profit needed to fend off potential competition
seeking to take business away from the beneficiary; or, it could
make the difference between an operating loss and an operating
profit, without which the beneficiary could not even stay in
business; or it could free up funds to expend on legitimate lobbying
or other influence-currying activities to favor the beneficiary’s
efforts to get, keep, or expand its share of the foreign business.
Presumably, there are innumerable other hypothetical examples of how
a significant diminution in duties and taxes could assist in getting
or keeping particular business in Haiti; but that is not to say that
such a diminution always assists in obtaining or retaining business.
There are bound to be circumstances in which such a cost reduction
does nothing other than increase the profitability of an already-
profitable venture or ensure profitability of some start-up venture.
Indeed, if the government is correct that anytime operating costs
are reduced the beneficiary of such advantage is assisted in getting
or keeping business, the FCPA’s language that expresses the
necessary element of assisting is obtaining or retaining business
would be unnecessary, and thus surplusage —— a conclusion that we
are forbidden to reach.
If the business nexus element does go to the core of
criminality of the FCPA, a criminal defendant cannot be left to read
46
the government’s mind to determine what existing businesses or
future business opportunities the government might, at trial, try
to link causally with assistance provided by a lessened customs and
tax burden. If business nexus is core, then in addition to alleging
at least minimally sufficient facts that, if proved, will meet the
other elements of a violation of the FCPA (such as the citizenship
of the briber, the identity of the qualified business entity, the
particular instrumentalities of foreign and interstate commerce
employed, the identity of the foreign country and of the officials
to whom the suspect payments are made, and the sought-after unlawful
actions taken or not taken by the foreign official in consideration
of the bribes), a sufficient FCPA indictment would also have to
allege facts that at least minimally put the defense on notice of
what business transactions or opportunities were purportedly sought
to be obtained or retained, and how the results of the foreign
official’s unlawful acts were meant to “assist” in getting or
keeping such business. In other words, if the business nexus
element goes to the core of the FCPA’s criminality, the indictment
would have to allege facts that, if proved, would establish an
intended causal assistance link between the illicit benefit of
reduced taxes and duties and the obtaining or retaining of the
business venture or activity thus identified.
As noted at the outset of this opinion, the indictment contains
no such specific allegations. Except for closely paraphrasing the
objective “purpose” language of the statute regarding the aim of the
47
bribe being to produce some conduct by a foreign official, the
results of which (quid pro quo) will assist in obtaining or
retaining foreign business for some person (business nexus), the
indictment alleges nothing whatsoever about (1) the nature of the
assistance purportedly intended or produced by the lowered taxes,
(2) the identity of the particular business or business opportunity
the obtaining or retaining of which was being sought, or (3) the
way (nexus) such assistance was supposed to help get or keep such
business or opportunity.95 As such, the indictment’s sufficiency
hinges on a determination whether the business nexus element of the
crime is core.96
95
The potential lacuna in the instant indictment is
distinguishable from the failure of the indictment clearly to
allege the element of materiality in Richards, in which we found
the indictment sufficient because the other facts alleged in it
“warrant[ed] an inference that the false statements were material.”
204 F.3d at 192. Except for the overbroad, generic reference to
the rice business, no combination of facts here alleged in the
indictment allow an inference of what business was purportedly
obtained or retained or how the illicit tax savings produced by the
bribery were intended to assist ARI or RCH in obtaining or
retaining it.
96
On appeal, as in the district court, defendants advance
alternative bases for holding the indictment insufficient. One
such defense was grounded in the rule of lenity in the face of the
statute’s ambiguity, and another was grounded in the fair-warning
requirement of the Due Process Clause in the face of the dearth of
case law on the subject. As today we reverse the district court’s
dismissal of the indictment as insufficient and remand for further
proceedings which might include a requirement that the government
be more specific regarding the business nexus element, we do not
address these alternative propositions. They can, however, be
addressed for the first time by the district court on remand.
48
We conclude that, as important to the statute as the business
nexus element is, it does not go to the FCPA’s core of criminality.
When the FCPA is read as a whole, its core of criminality is seen
to be bribery of a foreign official to induce him to perform an
official duty in a corrupt manner. The business nexus element
serves to delimit the scope of the FCPA by eschewing applicability
to those bribes of foreign officials that are not intended to assist
in getting or keeping business, just as the “grease” provisions
eschew applicability of the FCPA to payments to foreign officials
to cut through bureaucratic red tape and thereby facilitate matters.
Therefore, the indictment’s paraphrasing of the FCPA’s business
nexus element passes the test for sufficiency, despite alleging no
details regarding what business is sought or how the results of the
bribery are meant to assist, passes the test for sufficiency.
III. CONCLUSION
We cannot credit the district court’s per se ruling that the
fiscal benefits of the mal-administration of foreign revenue laws
by foreign officials in consideration for illicit payments by United
States businessmen or business entities can never come within the
scope of the FCPA. Just as bribes to obtain such illicit tax
benefits do not ipso facto fall outside the scope of the FCPA,
however, neither are they per se included within its scope. We are
satisfied that —— for purposes of the statutory provisions
criminalizing payments designed to induce foreign officials
49
unlawfully to perform their official duties in administering the
laws and regulations of their country to produce a result intended
to assist in obtaining or retaining business in that country —— an
unjustified reduction in duties and taxes can, under appropriate
circumstances, come within the scope of the statute.
As the district court held the indictment insufficient based
on its determination that the kind of bribery charged in the
indictment does not come within the scope of the FCPA, that court
never reached the question whether the indictment was sufficient as
to the business nexus element of the crime, for which the charging
instrument merely tracked the statute without alleging any discrete
facts whatsoever. As we conclude that the business nexus element
of the FCPA does not go to the core of criminality of that statute,
we hold that the indictment in this case is sufficient as a matter
of law. For the foregoing reasons, therefore, the judgment of the
district court dismissing the indictment charging defendants with
violations of the FCPA is reversed and the case is remanded for
further proceedings consistent herewith.
REVERSED and REMANDED.
50
51
52
53
54
55
56
57