By Gregory A. Brower and Thomas J. Krysa. Mr. Brower is a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC. Mr. Brower also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance. Mr. Krysa is a Shareholder in Brownstein Hyatt’s Boulder, CO office.

The U.S. Court Appeals for the Second Circuit recently decided that the government need not show that an “official act” was performed in exchange for a corrupt payment in order to prove a violation under the Foreign Corrupt Practices Act’s (FCPA) anti-bribery provision.  In so deciding, the court rejected the argument that the U.S. Supreme Court’s 2018 decision in United States v. McDonnell requires evidence of an official act in FCPA cases.  This is a clear win for the Department of Justice and confirms that the “quo” part of the FCPA’s quid pro quo requirement is to be interpreted very broadly.

The case involved the prosecution of a Chinese national, Ng Lap Seng, who paid more than $1 million to two United Nations ambassadors in order to secure a U.N. commitment to use his property in Macau as the site for an annual U.N. conference.  DOJ alleged that the payments violated 18 U.S.C. § 666, which prohibits corrupt payments to organizations like the U.N. that receive more than $10,000 in federal funding annually, and violated the FCPA, which makes it a crime to give anything of value to a foreign official with the corrupt purpose of obtaining an improper business advantage.  While the trial court instructed the jury that the §666 bribery count required that the government prove an “official act,” it rejected the Ng’s request to give a similar instruction on the FCPA count.  Following his conviction, Ng appealed, arguing that the McDonnell decision requires that the official-act element be part of an FCPA jury instruction.

The Second Circuit rejected this argument, distinguishing the language of the FCPA and that of §666 from the language of 18 U.S.C. § 201 which was the federal bribery statute at issue in McDonnell.¹ After comparing and contrasting the three statutes, the court stated that [f]rom these textual differences among various bribery statutes, we conclude that the McDonnell “official act” standard, derived from the quo component of the bribery as defined by §201(a)(3), does not necessarily delimit the quo components of the other bribery statutes….”  The court went on to explain as follows:

“[T]he FCPA…prohibits giving anything of value in exchange for any of four specified quos. While the first FCPA quo referencing an ‘act or decision’ of ‘foreign official in his official capacity’ might be understood as an official act, the FCPA does not cabin ‘official capacity’ acts or decisions to a definitional list akin to that for official acts in section 201(a)(3).  Nor does it do so for acts or omissions that violate an official’s ‘duty,’ or that affect or influence the act or decision of a foreign government.  Finally, the FCPA prohibits bribing a foreign official to ‘secur[e] an improper advantage’ in obtaining, retaining, or directing business, without requiring that the advantage be secured by an official act as limited by the section 201(a)(3) definition.

What does this mean for FCPA enforcement going forward?  Clearly, this decision is a good one for DOJ in that the Second Circuit has now joined several other federal circuits in declining to extend the McDonnell “official acts” requirement to other federal bribery statutes, including, in this case, both §666 and the FCPA.  This is important because it has the effect of confirming the broad range of activities that can legally constitute the quo in FCPA prosecutions.  So, while this decision does, on one hand, confirm that the FCPA requires a quid pro quo, the decision also clarifies that the quo does not have to be an “official act” of the type required in a §201 prosecution under McDonnell.  This interpretation gives DOJ more leeway when identifying an actionable quo, but arguably gives potential targets of FCPA investigations far less clarity on just what type of quo actually violates the law.

Note

1. Interestingly, the court decided that the official-act requirement of McDonnell also does not apply to §666 cases, and the district court’s McDonnell instruction on this count was, therefore, unnecessary.  However, the court concluded that while the district court erred by giving this instruction, the error was “harmless beyond a reasonable doubt because the jury, having found Ng guilty under the higher McDonnell official act standard, would certainly have found him guilty under a proper instruction omitting that unnecessary standard.”