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First-Ever Corporate Criminal Conviction for Bribery Law Violation Thrown Out

Wednesday, December 14, 2011
Sandler, Travis & Rosenberg Trade Report

The first-ever criminal conviction of a corporation for violations of the Foreign Corrupt Practices Act was overturned Dec. 1 by a U.S. district court due to prosecutorial misconduct. The U.S. believes its attorneys only committed “honest mistakes” and is appealing the dismissal.

This case involves an alleged scheme carried out by a California company and a Mexican intermediary to bribe officials of a state-owned electric utility company in Mexico. Two of the company’s executives were each convicted of one count of conspiracy to violate the FCPA and five counts of FCPA violations, and the intermediary was convicted of one count of money laundering conspiracy. The case was also notable because it addressed the question of whether officials of a state-owned company are considered foreign officials within the scope of the FCPA.

The court states that most district judges, when faced with motions that allege governmental misconduct, are reluctant to find that the prosecutors’ actions were flagrant, willful or in bad faith. In this case, however, the court is “compelled to find that the government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the court.” The court said these acts of misconduct not only “affected the verdicts” considering that the case against the defendants “was far from compelling,” but it also subjected the defendants to “immense” financial costs and an “emotional drubbing … [that] undoubtedly was even worse.”

FCPA enforcement has been a major priority for the Justice Department in recent years, with drastic increases in the number of investigations and civil penalties, which often amount to millions of dollars. A growing number of observers have accused DOJ of being overzealous in its pursuit of FCPA violators, a position seemingly bolstered by the district court’s criticism of the department’s behavior in that case. Critics are seeking to temper this aggressiveness in several ways, including by amending the FCPA itself, which was the topic of a congressional hearing in June.

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