This post was also written by Leonard E. Hudson.
The Department of Justice suffered a “stinging” setback to its widely touted FCPA Africa Sting prosecution late last week when the first of four anticipated trials based upon its most aggressive Foreign Corrupt Practices Act investigation to date ended in a mistrial. The jury deadlocked after six weeks of trial and after taking six votes while failing to reach a unanimous verdict in the bribery trial of four arms salesmen alleged to have offered to pay bribes to obtain military contracts.
In January, 2010, DOJ indicted 22 individuals, including citizens of the UK and Israel, claiming violations of the FCPA as a result of the defendants’ alleged payment of bribes to officials of Gabon in order to obtain government contracts to provide that country with armor, weapons and military gear. The indictments were brought following a lengthy FCPA undercover sting operation in which the purported foreign official to whom the defendants allegedly caused bribes to be paid was, in reality, an FBI agent as was a purported middleman to the alleged scheme. This was DOJ’s first large-scale undercover operation in connection with an FCPA investigation. The investigation is another example of the ongoing cooperation between U.S. and UK law enforcement agencies, particularly in the anti-corruption area. In this investigation, the FBI teamed up with the UK’s City of London Police. On January 18, 2010, the two agencies executed a total of 21 search warrants in various locations in the U.S. and in London.
Following the indictments, United States District Court Judge Richard Leon (District of Columbia) rejected DOJ’s request that he try all of the defendants together and broke them up into smaller groups for trial. At the close of the government’s case of four defendants in the first trial, the judge entered judgments of acquittal on some of the counts, with the most significant ruling coming on the motion of defendant Pankesh Patel, a UK citizen and the managing director of a UK company that acts as a sales agent for companies in the law enforcement and military products industries. Patel challenged a substantive FCPA count that rests upon a statutory jurisdictional requirement that a foreign defendant engage in corrupt activities “while in the territory of the United States.” DOJ has become increasingly aggressive in asserting jurisdiction over non-US residents based upon actions taken outside of the US as causing or aiding and abetting a corrupt or improper payment to be made. For example, the government has based FCPA charges against non-US citizens on conduct such as sending wire transfers requests from an account in a foreign country to a financial institution in the United States, and on sending emails and facsimiles from the UK to the US. Here, DOJ claimed jurisdiction over Patel in the count in question based on his sending a DHL courier package containing a purchase agreement in furtherance of the alleged corrupt scheme from the UK to the United States.
Patel moved for acquittal under the relevant count, arguing that he did not engage in any prohibited conduct “while in the territory of the United States” as required by the statute. In granting Patel’s motion, the judge expressed substantial skepticism regarding DOJ’s contention that sending a DHL package from the UK met the jurisdictional requirement, calling the theory a “novel interpretation” of the law. In granting the acquittal motion, Judge Leon said that “the more cautious, conservative interpretation would be that each act has to be while in the territory of the United States.” Judge Leon’s ruling is believed to be the first entered against the government on this jurisdictional ground and should encourage foreign defendants in other FCPA cases to test the limits of DOJ’s aggressive jurisdictional theories.
DOJ has announced that it will refile its case against the four defendants and will proceed with its case against the remaining defendants.