Yesterday on the podcast, the FCPA Compliance and Ethics Report, I posted the full oral argument from the Supreme Court in the case of McDonnell v. US (shout out to Web Hull for sending it to me), which is the appeal of the former governor of Virginia Bob McDonnell of his conviction for public corruption under the Hobbs Act. McDonnell and his wife, Maureen, were convicted in 2014 of public corruption, charges stemming from $177,000 in gifts, luxury vacations and loans they accepted from Jonnie R. Williams Sr. The former Chief Executive Officer (CEO) of Star Scientific Inc., Williams was a wealthy Virginia businessman who wanted the governor and his wife to promote his tobacco-based dietary supplement business.
Many have asked me about this case and whether it might impact enforcement of the Foreign Corrupt Practices Act (FCPA) going forward. For reasons I will lay out in this post, I think both the law and facts are sufficiently different that, whatever the outcome in McDonnell, it will not impact FCPA enforcement going forward.
Dahlia Lithwick, writing in an article for the online publication Slate, entitled “The Everybody Does It Defense”, said the former governor is urging that his conviction be overturned because “definition of having done “official actions” in exchange for gifts under the Hobbs Act and the honest services statute be limited to exercising actual governmental power or pressuring others to use government power. The Hobbs Act was established in 1946 and has been used to criminalize acts of robbery or extortion that affect interstate commerce, basically the equivalent of bribery. The honest services statute used to apply to a broad range of fraud, but in 2010 in Skilling v. United States, the Supreme Court limited the statute to bribery or kickbacks.”
The Hobbs Act also reaches acts by public officials acting in their official capacity. A public official commits a crime when he obtains a payment to which he is not entitled knowing that it was made in exchange for official acts. The statute is not limited to federal officials (that is how it was used to convict McDonnell) and unlike the FCPA; the payor is not liable under the law. Basically the government need only prove a public official agreed to take some official action in exchange for payment as opportunities arose to do so to be convicted under the Hobbs Act.
At oral argument in the McDonnell case, the Roberts court focused on the quo of quid pro quo or the action taken by the former government and not the $177,000. In briefing and before the Court in oral argument, the government conceded the amount of the quid was not determinative of a violation of the law. Chief Justice Roberts was probably the most circumspect in oral argument with his questioning to indicate that (1) he believed responding to citizen’s petitions and requests for government action was the basic function of a government official and (2) unless there was a bag of cash paid directly for a decision; there was no violation of the Hobbs Act.
The Justices also were very concerned about the vagueness of the Hobbs Act and the discretion it gave to prosecutors to bring political corruption charges. Lithwick wrote, “Breyer worries the Department of Justice will have too much power in determining what is and isn’t corruption for officials across the country. “As you describe it,” he says, “for better or for worse, it puts at risk behavior that is common, particularly when the quid is a lunch or a baseball ticket …””
Both of these positions are antithetical to an analysis under the FCPA. The FCPA prohibits actions which “(A) (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; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person;”.
Clearly the focus of the FCPA is the quid part of defendant’s actions. Even if you applied the Roberts Court discomfort with the vagueness of the FCPA language of “influencing any act or decision” it seems clear that the language “securing an improper advantage” and “in obtaining or retaining business” is sufficiently clear to pass even the scrutiny of this current Supreme Court. Indeed I am not aware of any FCPA criminal enforcement resolution, by the Department of Justice (DOJ), where the standard was not met at trial where a conviction resulted, or not agreed to by the defendant in the settlement resolution such as a criminal plea or Deferred Prosecution Agreement.
Why does all of this matter? As Lithwick notes, “It will be an amazing thing if – in a year when voters across the spectrum are infuriated and sickened by the influence of money in politics – the Supreme Court decides that poor Bob McDonnell should be let off the hook because he only did what every politician does every day: Take a lot of money to open doors for a rich guy. But maybe the line between money and influence is too fuzzy and ubiquitous to even be said in words anymore.”
Yet at the federal level, our rights as citizens to petition our government for redress is enshrined in the 1st Amendment to the US Constitution and reads, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” [emphasis supplied] With the adoption of the 14th Amendment, through the incorporation doctrine, this protection of the right to redress was expanded to cover all state and federal courts and legislatures, and the executive branches of the state governments. In other words, what the Roberts Court seems to be saying is you can pay any amount you want as a gift, as long as the government official does not engage in a official act to award a benefit based upon the payment.
It is good thing that is not what the FCPA states. Moreover, as the Fifth Circuit Court of Appeals, in the decision Kay v. US, 359 F.3d 738, 750-51 (5th Cir. 2004), held “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”. The Court also noted, “Congress’s intention to implement the [OECD] 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.”[emphasis supplied]
At least one Court got it right.
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