How to Determine whether a Payment to a Foreign Government Official is a Bribe or a Grease Payment under the Foreign Corrupt Practices Act
“The Foreign Corrupt Practices Act (FCPA) prohibits offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business.” (A Guide to the U.S. Foreign Corrupt Practices Act. SEC / DOJ 2012) At issue is whether the payment described herein falls under §78dd-2(b), “Exception for routine governmental action.”
§78dd-2(b) of the FCPA states that “Subsections (a) and (i) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.”
§78(h) of the FCPA (“Definitions”) provides guidance as to what Congress intended to be included as “routine governmental action.” §78(h)(4)(A) states that “The term ‘routine governmental action’ means only an action which is ordinarily and commonly performed by a foreign official in –
§78(h)(4)(B) of the FCPA specifies that “[T]he term ‘routine governmental action’ does not include any decision by a foreign official whether, or on what terms, to award new business or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”
INTERPRETATION OF THE FCPA
A case which addressed the issue of facilitative payments for routine governmental action is United States v. Jean Rene Duperval, 12-13009 (11th Cir. 2015) Duperval was the Assistant Director General and Director of International Affairs for Teleco, an “instrumentality” of Haiti. In that role Duperval managed contracts with foreign telecommunication companies. In one scheme Duperval received one-half the amount by which moneys owed to Teleco by another company were reduced, plus ten-thousand dollars and a Rolex watch. In a second scheme Duperval received sixty percent of an individual’s consulting fee who worked for the company who Duperval extended the contract of in addition to two cents for each minute added to the telephone contract, which totaled $150,000.00.
On appeal Duperval contended that the jury should have been instructed as to a possible defense in the form of the facilitative payment for routine governmental action exception to the FCPA. The Court of Appeal rejected this argument. The court cited a Fifth Circuit case in impressing that “[a] brief review of the types of routine governmental actions enumerated by Congress show how limited Congress wanted to make the… exception.” United States v. Kay, 359 F.3d 738, 750 (5th Cir. 2004) The actions contemplated by Congress to be encompassed by the exception are “largely non-discretionary, ministerial activities performed by mid or low level foreign functionaries.” (Id. at 751) Allowable payments under the exception are “grease” payments to expedite the receipt of routine services. Id. at 747
The Duperval court found that the overseeing, awarding and renewal of multi-million dollar telecommunications contracts is not an “action of a similar nature” to the actions enumerated in the Act. 15 U.S.C. § 78dd-2(h)(4)(A)(v). Furthermore, Duperval was not a low nor mid-level official, but a high-ranking official. The circumstances of this case fall squarely within what the FCPA defines as not being a routine governmental action in § 78dd-2(h)(4)(B): “The term ‘routine governmental action’ does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”
There are further cases which illustrate payments which fall beyond the scope of the facilitative payment for routine governmental action exceptions. For example, an Oklahoma based corporation violated the FCPA when its subsidiary made payments to Argentine customs officials around $166,000 to secure customs clearance for equipment and materials that lacked required certifications or whose importation violated local law and to pay a lower than applicable duty rate. These payments violated the FCPA because their purpose was to not have to comply with local law and receive favorable financial treatment. In re Helmerich & Payne, Inc. ( July 29, 2009)
In this case, the company’s Venezuelan subsidiary also paid Venezuelan customs officials around $7,000.00 to permit the importation and exportation of equipment and materials not in compliance with local regulations and to avoid a full inspection of the imported goods. Again, this payment violated the FCPA because its purpose was to be permitted to import goods which were not in compliance with local law and avoid inspection of the goods, thereby undermining local quality control standards. Id.
Another case involved a global supplier of oil drilling products making 378 payments totaling $2.1 million to Nigerian Customs Service officials for the purpose of receiving preferential treatment during the customs process, including the reduction or elimination of customs duties. Vetco Gray Controls Inc., et al., No. 07- Dept. of Justice, FCPA Op. Release 04-01 ( Jan. 6, 2004). cr-4 No. (S.D. Tex. Jan. 5, 2007) The payments reflected a corrupt intent to cause the customs officials to deviate from the normal customs process for the benefit of the payor in receiving less stringent inspection and lower duties. Accordingly, the payments did not constitute facilitative payments, but bribes.
ANALYSIS FOR DETERMINING WHETHER A PAYMENT IS A BRIBE OR A FACILITATIVE PAYMENT FOR ROUTINE GOVERNMENTAL ACTION
Determining whether a payment falls within the facilitative payment exception boils down to the answers to several key questions:
If the services received in consideration for the payment fall into any of the above categories or are actions of a similar nature, then they satisfy this element of the facilitative payment for routine governmental action exception. However, if what was received in return for the payment was the gaining of an advantage by being awarded a contract or the renewal of a contract or other special treatment achieved by undermining local law, such as diminished inspections or the lowering of duty owed, those results would indicate a bribe.
The position and rank of the government official who received the payment is an important indicator of whether a payment is a facilitative payment for routine governmental action or a bribe because it reflects the degree of discretion the official has over the present or future circumstances of the payor. If the payment is made to a low-level official who lacks the power to affect the circumstances of the payor, then the payment is likely facilitative. If the payment is made to a high-level official with the power and ability to benefit the position of the payor, such as by renewing a contract or reducing moneys owed, that is indicative of a bribe.
That application of the foregoing factors provide a framework by which to analyze and interpret whether a payment to a foreign official is a bribe or a grease payment under the FCPA.
To receive credit the defendant must be “in custody.” (Pen. Code, § 2900.5, subd. (a).) Thus, a defendant can receive pre-sentence credits for time that he or she was on probation so long as they were in custody during the period of time for which credits are sought. If a jail term were imposed as a condition of probation and the timer were served, then the time served in jail as a condition of probation would be eligible for pre-sentence credits. However, if the time was not served, the defendant was subsequently arrested and the sentence executed, then, even though the jail term was a condition of probation, there would be no credit for it, because no time was spent in custody.
Jail is not the only form of being “in custody.” Penal Code 2900.5 states that time “in custody” can include time in “a jail, camp, work furlough facility, halfway house, rehabilitation facility, hospital, prison, juvenile detention facility, or similar residential institution . . . .” The non-jail facility must be custodial and cannot be a voluntary placement by the defendant. (In re Wolfenberger (1977) 76 Cal.App.3d 201, 203-205.) Examples in which a defendant may receive presentence credit for time in custody include:
• Rehabilitation facility. (People v. Rodgers (1978) 79 Cal.App.3d 26; People v. Darnell (1990) 224 Cal.App.3d 806, 809-811.)
• Time spent in a residential drug treatment program as part of a Proposition 36 sentence. (People v. Davenport (2007) 148 Cal.App.4th 240.) Exception: A person does not receive any actual custody credit for time spent as an outpatient in a drug rehabilitation program. (People v. Schnaible (1985) 165 Cal.App.3d 275, 277-278.) Similarly, a mentally disordered sex offender, defendants found not guilty by reason of insanity, and mentally disordered offenders do not receive actual custody credit for time in an unlocked outpatient facility. (Pen. Code, §§ 1600.5, 2972, subd. (c).)
• Time in a hospital upon a finding of incompetency pursuant to Penal Code section 1368. (People v. Cowsar (1974) 40 Cal.App.3d 578, 579-581.)
• Diagnostic facility. (Pen. Code, § 1203.03 subd. (g); People v. Goodson (1990) 226 Cal.App.3d 277, 280.)
• Juvenile detention facility. (In re Eric J. (1979) 25 Cal.3d 522, 534-536.)
• Home Detention. Due to various statutory amendments, whether a defendant receives actual credit for home detention will depend on when the defendant was in home detention.
Pursuant to Penal Code §2900.5, whether a defendant receives pre-sentence credits hinges on whether the defendant was “in custody” for the applicable period of time. Being released on probation does place restrictions on an individual, such as the waiving of Fourth Amendment Rights or may place some restriction on travel. However, to be considered “in custody” requires a greater restraint on one’s freedom than merely being on probation. It requires being in jail or in some involuntary residential program.
Craig Coley was arrested on November 11, 1978 for the murder of a 24 year old woman and her four year old son, which had occurred in Simi Valley, California that same day. Newspapers which cited other plausible suspects were heavily criticized. After a first trial ended in a hung jury Coley was convicted in the Ventura Superior Court and sentenced to life in prison without the possibility of parole. Evidence included testimony that Coley had been seen leaving the woman’s house upset 2 weeks prior to the murders. After appeals had been exhausted a court ordered that all physical evidence be destroyed.
A Petitioner for clemency on the basis of factual innocence caused Governor Brown to order an investigation in 2015. Despite the order to destroy all evidence there was, by chance, remaining physical evidence recovered which DNA analysis matched to other individuals but not Coley.
The November 22, 2017 Pardon by California Governor, Jerry Brown, stated that the original police investigation into the murders was mishandled by Simi Valley police and that Coley may have been framed.
This case is a tragedy on multiple levels. A young woman and a four year old boy lost their lives. An innocent man spent his adult life in prison for a crime he did not commit. And the perpetrator of the crime went free.
There was a rush to judgment, the facts were maneuvered to match that rush to judgment and journalists who dared to question whether the pieces of the puzzle actually fit were criticized in an effort to silence them. An order to destroy evidence at any point in a case is anathema to the truth.
This case is a reminder that the justice system is fallible because it is subject to tunnel vision and a presumption of guilt in place of innocence and that vigilance in defending each case is necessary to safeguard the individual and societal liberties aspired to and enshrined in the Constitution of the United States.