July 14, 2020

Volume X, Number 196

July 14, 2020

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July 13, 2020

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Second Circuit Asks Whether It Should Further Limit FCPA’s Application

On March 11, 2020, the Second Circuit heard arguments in United States v. Chi Ping Patrick Ho, a case testing the reach of the Foreign Corrupt Practices Act (FCPA) much like the 2018 case United States v. Hoskins. And, once again, the Court raised serious questions about the DOJ’s attempt to apply that Act broadly.

IN DEPTH


In 2018, the US Court of Appeals for the Second Circuit rejected a broad reading of the Foreign Corrupt Practices Act (FCPA) by the US Department of Justice (DOJ), and issued a ruling that limited the reach of the Act in United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018). On March 11, 2020, the Second Circuit heard arguments in United States v. Chi Ping Patrick Ho, another case testing the reach of the FCPA. And, once again, the Court raised serious questions about the DOJ’s attempt to apply that Act broadly.

In December 2018, Chi Ping Patrick Ho, a Hong Kong official who ran a research organization run by CEFC China, was convicted of one count of conspiring to violate the FCPA, four counts of violating the FCPA, and additional counts for money laundering. DOJ alleged that Ho, on behalf of the Chinese conglomerate CEFC, had offered a $2 million cash bribe, hidden within gift boxes, to the president of Chad in an effort to obtain oil rights from the Chadian government. The president rejected the offer, and CEFC China did not obtain the advantage allegedly sought through the bribe offer. Ho then allegedly caused a $500,000 bribe payment to be made—via wire through the United States—to Uganda’s foreign affairs minister, and schemed to make a similar payment to Uganda’s president, in exchange for partnering in joint ventures in that country.

Ho appealed to the Second Circuit, challenging both his FCPA and money laundering convictions. While the money laundering charges does not seem vulnerable to a jurisdictional attack, the Court appeared to view the FCPA as more susceptible to a jurisdictional challenge. With respect to the FCPA violations, Ho argued that the “government’s theory of the case was internally inconsistent and legally insufficient.” In particular, DOJ rested its case on two theories. First, it claimed that the FCPA applied because Ho was an officer of a “domestic concern” under 15 U.S.C. §§ 78dd-2. That provision applies to domestic concerns and to their officers, directors, employees, agents or stockholders. Second, DOJ argued that the FCPA applied because Ho’s conduct fell under Section 78dd-3, a provision that applies to those who are not domestic concerns, but who commit their criminal acts “while in the territory of the United States[.]”

According to Ho, he can be subject to either one provision or the other, but not both. Ho pointed to the legislative history of § 78dd-3, noting that the provision was enacted 21 years after § 78dd-2, and that Congress intended the two provisions to be mutually exclusive. Ho noted that the Senate’s Committee Report stated the legislation was intended to provide for penalties for persons not covered by § 78dd-2.

DOJ argued that there was no ambiguity in the statutory language and thus it was inappropriate to consider the legislative history. Nonetheless, DOJ argued that nothing “in the language of the FCPA so much as suggests that Congress intended for the Government to have to choose to charge a given defendant under only one section, when he may have violated more than one section, removing an otherwise-applicable statute, with a different element, from the jury’s consideration.”

At oral argument, the Second Circuit panel focused on this issue, asking how a defendant could be guilty of both provisions. The panel further pressed DOJ on whether there were “two distinct wrongs” in the conduct at issue. DOJ asserted that helping a domestic organization carry out bribery and traveling to the United States to further an alleged scheme were two distinct acts that Congress intended to criminalize under the FCPA. Ho’s counsel, however, pointed to Hoskins, in which the Second Circuit had already found that § 78dd-3 was meant to cover conduct not already addressed by the existing provisions.

It is not yet clear how the Second Circuit will decide the Ho case, or when we can expect a decision. Nonetheless, over the past decade, DOJ has applied a broad reading to the FCPA. Hoskins was significant because it was the first case that reigned in the DOJ’s broad reading of the FCPA. The question now is whether Ho will be the second.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 86

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About this Author

Gordon Greenberg, Mc Dermott Law Firm, Los Angeles, Corporate and Litigation Law Attorney
Partner

Gordon A. Greenberg regularly represents clients in civil and criminal investigations, as well as in trials and congressional hearings. He has significant experience defending clients in high-stakes, bet-the-company matters that have civil and criminal components. Gordon has more than 30 years of experience handling a wide range of business crime investigations and trials.

Previously, Gordon was a federal prosecutor, serving as the chief of the Financial Investigations Unit in the Los Angeles US Attorney's Office, and was also a state and...

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Michael S. Stanek white-collar and securities defense, government investigations, Lawyer
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Michael (Mike) S. Stanek focuses his practice on white-collar and securities defense, government investigations, anti-corruption compliance and political law. He represents corporations, boards and individuals in a variety of enforcement matters, including the Foreign Corrupt Practices Act (FCPA) and the federal securities laws and regulations. He is highly skilled in designing, managing and executing global internal investigations and investigations before numerous government enforcement authorities. Mike also counsels clients with respect to corporate compliance policies, procedures, training and due diligence.

Mike previously served as counsel to US Senator Mazie K. Hirono on the US Senate Judiciary Committee’s Subcommittee on Oversight, Federal Rights and Agency Action. Mike also advised Senator Hirono on a wide range of hot-button issues, including data privacy, cybersecurity, financial services regulation, intellectual property, immigration, civil rights and campaign finance reform.

While in law school, Mike was a George Washington Scholar, a Thurgood Marshall Scholar and a Deans Fellow. He was also notes editor for the Public Contract Law Journal.

Following law school, Mike was seconded to a firm client in the tech industry, where he focused on securities, intellectual property and corporate transactions. He also served as a legal fellow with an immigration advocacy organization, focusing on legislative and regulatory reform.

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Paul M. Thompson, McDermott Will Emery, White Collar Criminal Defense,
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Paul M. Thompson is a partner in the law firm of McDermott Will & Emery LLP and serves as the Partner-in-Charge of the Firm’s Washington, D.C., office.  Paul focuses his practice on white-collar criminal defense, congressional investigations and appellate matters.  Paul has been repeatedly recognized by the National Law Journal in its Appellate Hot List.  He was named as a “Star” in Benchmark Litigation 2015 for his work on white-collar matters and appeals. 

Paul is a former federal prosecutor.  He has represented clients...

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Sarah Walters, Mcdermott Will Emergy, Trial Lawyer
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Sarah Walters is an experienced trial lawyer who focuses her practice on white collar criminal defense, regulatory enforcement and compliance matters, and complex civil litigation. In addition to both criminal and civil trial work, Sarah has substantial experience conducting internal investigations and assists companies in developing compliance policies and training programs.

Before joining McDermott, Sarah served 10 years as an Assistant United States Attorney in the Boston US Attorney’s office, holding the position of Chief of the Economic...

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