On August 9, 2019, the US Court of Appeals for the Second Circuit upheld a Chinese real estate developer’s conviction in United States v. Ng Lap Seng.1 The Court rejected defendant’s attempt to read an “official act” requirement into the Foreign Corrupt Practices Act (FCPA) or into 18 USC § 666. The FCPA prohibits corporations and individuals from paying bribes to foreign officials to obtain or retain business. Section 666 broadly applies to theft or bribery related to entities that receive federal funds and includes a provision that prohibits paying a bribe to influence or reward an agent of an organization that receives federal funds in connection with business.
In 2017, Ng was convicted of paying and conspiring to pay bribes in violation of the FCPA and § 666. The jury found that Ng paid bribes to United Nations officials in an effort to secure the United Nations’ designation of his real estate complex as the permanent site for its Office for South-South Cooperation annual convention.
Ng appealed his conviction, arguing in part that prosecutors had not proven Ng paid bribes in exchange for an “official act” as required by the US Supreme Court’s decision in McDonnell v. United States. In McDonnell, the Supreme Court held that the federal anti-bribery law (18 USC § 201) requires prosecutors to prove that the bribe was paid in exchange for an “official act.”
The Second Circuit refused to extend McDonnell’s holding to the FCPA or § 666, holding that the McDonnell “official act” standard is derived from the text of § 201(a)(3) and does not necessarily define the requirements for all bribery statutes. The Court evaluated the quid and quo elements of the FCPA and § 666 and found that the statutes’ requirements are broader than those of the federal anti-bribery laws. The Court thus declined to limit liability under the FCPA and § 666 to bribes paid in exchange for an “official act.”
Notably, the Second Circuit’s decision in Ng Lap Seng is consistent with its rationale in United States v. Hoskins.2 In Hoskins, the Court similarly adhered to the FCPA’s text and was reluctant to broaden the scope of FCPA liability. The Court used the FCPA’s text and legislative history to reject the government’s argument that traditional theories of conspiracy and accomplice liability can be used to prosecute an individual who could not be primarily liable for FCPA violations.3
The holdings in Ng Lap Seng and Hoskins are indisputably narrow. However, corporations and individuals should take notice of how courts view these novel theories as their success or failure is instructive on how to approach future FCPA enforcement actions. FCPA enforcement against individuals will continue as corporations are incentivized to identify key individuals involved in misconduct to garner cooperation credit and negotiate a more favorable settlement.4 Given the dearth of FCPA case law, prosecutors and individual defendants have attempted to—and will likely continue to—apply other bribery case law and liability principles in bringing and defending against individual FCPA enforcement actions.
__________________
1 United States v. Ng Lap Seng, No 18-1725 (Aug. 9, 2019).
2 United States v. Hoskins, No. 16-1010 (Aug. 24, 2018).
3 Legal Alert: Shortening the long arm of the law–the Second Circuit limits the extraterritorial reach of the Foreign Corrupt Practices Act
4 Legal Alert: US Department of Justice relaxes Yates Memorandum’s requirements for earning cooperation credit
[View source.]
