U.S. v. Esquenazi (Amicus Brief of Washington Legal Foundation Et Al)

8/11/2019 U.S. v. Esquenazi (Amicus Brief of Washington Legal Foundation Et Al).

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No. 14-189

IN THE

Supreme ourt of the United States

JOEL ESQUENAZIand CARLOS RODRIGUEZ,Petitioners,

v.

UNITED STATES OFAMERICA,Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

BRIEF OFWASHINGTON LEGAL FOUNDATION

AND THE INDEPENDENCE INSTITUTE

ASAMICI CURIAE IN SUPPORT OF PETITIONERS

Richard A. Samp

(Counsel of Record)

Cory L. Andrews

Washington Legal Foundation

2009 Massachusetts Ave., NW

Washington, DC 20036

202-588-0302

[email protected]

Date: September 11, 2014


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QUESTION PRESENTED

The Foreign Corrupt Practices Act of 1977, 15U.S.C. 78dd-1et seq. (FCPA), makes it unlawful forcertain persons or entitiesincluding all U.S.businessesto make payments to a foreign official forthe purpose of obtaining or retaining business. TheFCPA defines foreign official as including any officeror employee of a foreign government or any department,agency, or instrumentality thereof. 15 U.S.C. 78dd-2(h)(2)(A). Petitioners were convicted of violating theFCPA, and given draconian prison sentences, based onevidence that they made payments to officials of HaitiTeleco, a stock corporation that provides telephoneservice within Haiti, based on the lower courtsconclusion that Haiti Teleco was an instrumentalityof the government of Haiti.

Amici curiae address only the first questionpresented by the Petition:

Is a corporation an instrumentality of a foreign

government within the meaning of the FCPA if it meetsthe definition of instrumentality established by theEleventh Circuitan entity controlled by thegovernment of a foreign country that performs afunction the controlling government treats as itsowneven though: (1) the foreign government hasnever designated the corporation as being a part of thegovernment; (2) the corporation issues common stock,and the foreign government was not among the initialstockholders; and (3) the corporation performs afunction (here, providing telephone service) that is not

a traditional government function?


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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . v

INTERESTS OFAMICI CURIAE . . . . . . . . . . . . . . . 1

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . 2

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . 6

REASONS FOR GRANTING THE PETITION . . . . 9

I. Review Is Warranted Because theBusiness Community Is Badly in Need ofGuidance Regarding a Term That HasGone Undefined for Far Too Long: Who Isa Foreign Official Under the FCPA? . . . . . . 9

II. Review Is Warranted Because theE l e v e n t h C i r c u i t C o n s t r u e dInstrumentality Far Too Broadly . . . . . . . 14

III. Review Is Warranted to Address theConflict Between the Eleventh CircuitsDecision and This Courts DecisionsRegarding What Constitutes anInstrumentality of Government . . . . . . . . 19


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Page

IV. Review Is Warranted Because CompaniesOperating Overseas Are Facing aConstitutionally Intolerable Level ofUncertainty Regarding the Scope of theFCPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25


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TABLE OF AUTHORITIES

Page(s)

Cases:Connecticut Natl Bank v. Germain, 503 U.S. 249 (1992) . . . . . . . . . . . . . . . . . . . . . . . . 15

DiPierre v. United States, 131 S. Ct. 2225 (2011) . . . . . . . . . . . . . . . . . . . . . . 18

Gustavson v. Alloyd Co.,

513 U.S. 561 (1995) . . . . . . . . . . . . . . . . . . . . . . . . 17

Jarecki v. G.D. Searle & Co., 367 U.S. 303 (1961) . . . . . . . . . . . . . . . . . . . . . . . . 17

King v. United States, cert. denied, 132 S. Ct. 2740 (2012) . . . . . . . . . . . . . 1

Lanzetta v. New Jersey, 306 U.S. 451 (1939) . . . . . . . . . . . . . . . . . . . . . . . . 23

Lebron v. Natl R.R. Passenger Corp., 513 U.S. 374 (1995) . . . . . . . . . . . . . . . 19, 20, 21, 22

Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) . . . . . . . . . . . . . . . . . . . . . . . 15

Natl Muffler Dealers Assn v. United States, 440 U.S. 472 (1972) . . . . . . . . . . . . . . . . . . . . . . . . 17

Regional Rail Reorganization Act Cases,

419 U.S. 102 (1974) . . . . . . . . . . . . . . . . . . . . . . . . 21

Skilling v. United States, 561 U.S. 358 (2010) . . . . . . . . . . . . . . . . . . . . . . . . 23


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vi

Page(s)Yates v. United States, No. 13-7451,cert. granted, 134 S. Ct. 1935 (2014) . . . . . . . . . . . . . . . . . . . . . . . 1

Statutes and Regulations:

Foreign Corrupt Practices Act of 1977, 15 U.S.C. 78dd-1et seq. (FCPA) . . . . . . . . passim

15 U.S.C. 78dd-2(a)(1) . . . . . . . . . . . . . . . . 4, 9

15 U.S.C. 78dd-2(e) . . . . . . . . . . . . . . . . 23, 2415 U.S.C. 78dd-2(h)(2)(A) . . . . . . . . . . . 4, 5, 7

10, 14, 1728 C.F.R. 80.1et seq. . . . . . . . . . . . . . . . . . . . . . . . 24

Miscellaneous:

Blacks Law Dictionary(9th ed. 2009) . . . . . . . . . . . 15

Michael E. Clark, What Is a Foreign Official?: Vague Term Complicates Corrupt Practices Act Compliance, WLFLEGAL BACKGROUNDER (Nov. 18, 2011) (available at www.wlf.org/upload/ legalstudies/legalbackgrounder/11-18-11Clark_ LegalBackgrounder.pdf) . . . . . . . . . . . . . . . . . . 1, 11

Michael Koehler, The Facade of FCPA Enforcement, 41 GEO.J.INTL L. 907 (2010) . . . . . . . . . . . . . 11, 12

Michael Koehler, The Noticeably Missing Hypo- thetical and the Governments Two Instrumen-

tality Positions(Nov. 19, 2012) (available at http://www.fcpaprofessor.com/the-noticeably- missing-hypothetical-and-the-governmentstwo-instrumentality-positions) . . . . . . . . . . . . . . . 24


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BRIEF OFWASHINGTON LEGAL FOUNDATION

AND THE INDEPENDENCE INSTITUTEASAMICI CURIAEIN SUPPORT OF PETITIONERS

INTERESTS OFAMICI CURIAE

The Washington Legal Foundation (WLF) is anon-profit public interest law firm and policy centerwith supporters in all 50 states.1 WLF devotes asubstantial portion of its resources to promotingbusiness civil liberties and the rule of law.

In particular, WLF regularly appears in this andother federal courts, both as counsel of record forcriminal defendants and as an amicus curiae, inopposition to overly expansive use of the criminal lawsagainst legitimate businesses and their employees. See,e.g., Yates v. United States, No. 13-7451,cert. granted,134 S. Ct. 1935 (2014); King v. United States, cert.denied, 132 S. Ct. 2740 (2012). WLF regularly publishesarticles addressing the need to adopt reasonable limits

on the scope of prosecutions under the Foreign CorruptPractices Act of 1977, 15 U.S.C. 78dd-1 et seq.(FCPA). See,e.g., Michael E. Clark, What Is a ForeignOfficial?: Vague Term Complicates Corrupt PracticesAct Compliance, WLFLEGAL BACKGROUNDER(Nov. 18,2011) (available at www.wlf.org/upload/legalstudies/

1 Pursuant to Supreme Court Rule 37.6, amici curiaestatethat no counsel for a party authored this brief in whole or in part;and that no person or entity, other than amiciand their counsel,

made a monetary contribution intended to fund the preparation orsubmission of this brief. More than 10 days prior to the due date,counsel for amiciprovided counsel for Respondent with notice oftheir intent to file. All parties have consented to the filing; lettersof consent have been lodged with the Court.


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legalbackgrounder/11-18-11Clark_LegalBackgrounder.pdf) (hereinafter, WLF Backgrounder).

The Independence Institute is a public policyresearch organization created in 1984, and founded onthe eternal truths of the Declaration of Independence.The Independence Institute has participated as anamicusor party in many constitutional cases in federaland state courts. Its amicus briefs in District ofColumbia v. HellerandMcDonald v. Chicago(under the

name of lead amicus ILEETA, the International LawEnforcement Educators & Trainers Association) werecited in the opinions of Justices Alito, Breyer, andStevens. The Independence Institutes briefs inNFIBv. Sebelius explicated the original constitutionalstructure of federalism.

Under the broad interpretation of the FCPAadopted by the Eleventh Circuit, businesses and theiremployees are potentially subject to criminalprosecution for payments made to a vast number offoreign individuals, including many individuals who arenot considered government officials as that term iscommonly understood. Amiciare concerned that theappeals courts counter-intuitive statutoryinterpretationthe first appellate decision to addressthe meaning of the relevant provisionswill interferewith the ability of American firms to engage in routineoverseas business transactions. Moreover, because nocompany is willing to assume the criminal prosecutionrisk that challenging the Justice Departments broad

FCPA interpretations would entail, amiciare concernedthat the erroneous decision below will effectively createa nationwide standard for the foreseeable future unlessthis Court agrees to review the decision.


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STATEMENT OF THE CASE

The facts of this case are set out in detail in thePetition. Amici wish to highlight several facts ofparticular relevance to the issue on which this brieffocuses.

During the years at issue here, Petitioners JoelEsquenazi and Carlos Rodriguez were senior officers ofTerra Communications Corp., a Florida company that

purchased phone time from foreign vendors and resoldthe minutes to customers in the United States. Amongthe foreign vendors with whom Terra regularlyconducted business was Telecommunications DHaitiS.A. (Haiti Teleco), which controlled virtually alltelecommunications services within Haiti.

As the United States readily conceded in itsfollow-on prosecution of a Haiti Teleco official, Terra fellvictim to a shakedown by senior executives at HaitiTeleco. Although the government stated that everyoneknew that Terra was contractually entitled to purchasephone time at low rates, the executives: (1) jacked upthe rates charged to Terra; (2) disconnected Terrawhen it could not afford to pay the higher rates; and (3)told Terra that it would not be reconnected unless itpaid large fees directly to the executives. See ROA,Transcripts, Book 7, 3/12/2012 Tr. (Doc. #774), at 90-91.Prosecutors described these events as the art of theshakedown. [Haiti Teleco executive Jean ReneDuperval] reminded Terra [who] was in charge, he

reminded them who had the power to disconnect orreconnect, and who had the power to lower rates. Id.at 91. Prosecutors added:


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Thats what a shakedown can be. I know youreentitled to 7 cents, but what can I get to make ithappen?

Ill give you $10,000 a month.

Sold. That is the violation here.

Id.at 99.

Prosecutors contended that Petitioners violatedthe FCPA when they acquiesced to the shakedownefforts and authorized payments to the Haiti Telecoexecutives between 2001 and 2004 in order to returnrates charged for phone time to the lower ratesstipulated in Terras contract.

A principal issue contested at trial was whetherHaiti Teleco was an instrumentality of thegovernment of Haiti during the years in question; if not,then Petitioners did not violate the FCPA. See 15U.S.C. 78dd-2(a)(1) (prohibiting payments to aforeign official for the purpose of obtaining orretaining business); 15 U.S.C. 78dd-2(h)(2)(A)(defining a foreign official as including any officer oremployee of a foreign government or any department,agency, or instrumentality thereof). Petitionerscontended that Haiti Teleco was notan instrumentalitybecause that term does not encompass corporations thata foreign government did not create and that did notperform a traditional government function, even if (as

here) a foreign government temporarily owned acontrolling share of the corporations common stock.

The trial court rejected Petitioners proposed


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traditional government function instruction andinstructed the jury that its instrumentalitydetermination should consider, inter alia, whetherHaiti Teleco provides services to the citizens andinhabitants of Haiti and whether the Haitiangovernment owned a majority of Haiti Telecos shares.Pet. App. 24. The jury convicted Petitioners on allcounts, including one count of conspiracy to violate theFCPA and seven counts alleging specific payments madein violation of the FCPA. Petitioner Esquenazi was

sentenced to 15 years imprisonment; PetitionerRodriguez was sentenced to seven years.

The Eleventh Circuit affirmed. Pet. App. 1-50.The court recognized that [t]he FCPA does not definethe term instrumentality and that neither it nor anyother appellate court had previously addressed themeaning of the term. Id. at App. 10. It furtherrecognized that instrumentality is a word susceptibleof more than one meaning. Id. at App. 11. Afterexamining the language of 78dd-2(h)(2)(A) and thebroader statutory context in which the word is used,id. at App. 13, the court concluded that, for FCPApurposes, an instrumentality is an entity controlledby the government of a foreign country that performs afunction the controlling government treats as its own.Id.at App. 20.

The court then included a noncomprehensive listof some factors that may be relevant in determiningwhether the courts control and treats as its own

standards have been met, including whether thegovernment owns a majority of the corporate stock andwhether the corporation provides services to the publicat large in the foreign country. Id. at App. 20 - App.


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23. Conspicuously absent from the list is anyconsideration of the specific services offered by thecorporation, to determine whether those services are ofthe sort that are generally understood to be traditionalgovernment functions.

Applying its definition of instrumentality andexamining the evidence in the light most favorable tothe prosecution, the appeals court stated, [W]e havelittle difficulty concluding sufficient evidence supported

the jurys necessary finding that Teleco was a Haitianinstrumentality. Id. at App. 27. In particular, thecourt pointed to evidence that Haiti owned most of theshares of Haiti Teleco and that the company maintaineda monopoly over telecommunications services in thecountry. Ibid.

SUMMARY OF ARGUMENT

This case presents an issue of exceptionalimportance to the business community. Although theFCPA was adopted nearly 40 years ago, the statute hasbeen the subject of remarkably few court decisions. Theresult is that there is very little definitive guidanceregarding the statutes meaning that can assistbusinesses in avoiding criminal violations, yet they areurgently in need of such guidance in light of thesignificant increase in FCPA enforcement activityduring the past decade.

The issue raised by this casewho are the

foreign officials to whom the FCPA restrictspayments?is the single greatest source of confusionregarding the scope of the FCPA. Until the EleventhCircuit ruled in this case, nofederal appeals court had


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addressed that issue. Moreover, amiciare unaware ofany other cases in the appellate pipeline that raise theissue. The reason for the dearth of cases is readilyapparent. Although federal prosecutors have initiatednumerous FCPA proceedings in recent years,everylargebusiness entity against which a proceeding was initiatedhas entered into a settlement agreement. In light of thehuge negative consequences that would befall anycompany that contested and lost an FCPA case,businesses are categorically unwilling to challenge in

court government assertions that payments it madeviolated the FCPA. Given the absence of any case law,review is urgently needed to provide the businesscommunity with concrete guidance regarding theFCPAs definition of a foreign official (and thesubsidiary term instrumentality). In the absence ofsuch guidance from this Court, businesses will have tonavigate these unsettled waters with only the negligibleguidance provided by the decision belowwith verylittle likelihood that other appeals courts will weigh inany time soon. The Eleventh Circuits guidance is thinindeed; by stating explicitly that its list of relevantfactors is non-exclusive, the appeals court leavesAmerican businesses to guess at when a corporationwhose controlling shareholder is a foreign governmentwill be deemed an instrumentality of that governmentfor FCPA purposes.

Review is also warranted because the court belowhas adopted a definition of instrumentality that is farbroader than anything set forth in the FCPA. The

Eleventh Circuits definition is inconsistent with thelanguage of 78dd-2(h)(2)(A) as well as the overallstructure of the FCPA. In particular, because the wordinstrumentality appears in conjunction with the


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words department and agency, the maxim noscitura sociis(a word is known by the company it keeps) callsinto doubt the Eleventh Circuits decision to includeentities within the definition of instrumentality thatbear little resemblance to the common understanding ofa government department or agency.

The appeals courts definition is also inconsistentwith Congresss and this Courts use of the terminstrumentality in other contexts. In particular, the

Court has never used that term in conjunction with acorporation that was not created by the governmentitself and where the government merely acted in amanner consistent with its (temporary) role as amajority shareholder.

The appeals courts decision is particularlyproblematic because it arises in a criminal law contextin which an individuals good-faith disagreement with aprosecutors interpretation of a statutory term can (anddid here) result in imposition of a lengthy prison term.The Eleventh Circuit conceded that the wordinstrumentality is capable of multiple meanings. Itadopted an extremely broad definition of the term, andat the same time it heightened potential uncertainty byinsisting that whether a particular entity is aninstrumentality of a foreign government is a questionof fact to be determined by the jury. Indeed, theuniversal response among defense lawyers was that thedecision left the issue even more muddled than it hadbeen previously. The U.S. Department of Justice has

declined to exercise the full extent of its authority toprovide safe-harbor guidance that would reduce thelevel of uncertainty. As a result, the competitiveness ofAmerican businesses in overseas markets suffers when


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companies refrain from engaging in legal activities outof a fear that they might expose themselves to FCPAliability. Review is warranted to resolve thatconstitutionally intolerable level of uncertainty.

The United States has waived its right to respondto the Petition, perhaps in an effort to signal to theCourt that the issues raised are unimportant and thusthat review should be denied. The United States cannotin good faith assert that the issues raised herein are not

of paramount importance. The principal question raisedby the Petition (who qualifies as a foreign official forpurposes of FCPA payment restrictions?) is at issue ina significant number of the numerous recent FCPAinvestigations, yet this is the first occasion the questionhas reached the appellate level, and there is littlelikelihood that the question will again reach this Courtin the foreseeable future. At the very least, the UnitedStates ought to be directed to file a response andexplain why it believes that the case is unworthy of theCourts attention.

REASONS FOR GRANTING THE PETITION

I. Review Is Warranted Because the Business

Community Is Badly in Need of Guidance

Regarding a Term That Has Gone

Undefined for Far Too Long: Who Is a

Foreign Official Under the FCPA?

The FCPA makes it unlawful for certain persons

or entitiesincluding all U.S. businessesto makepayments to a foreign official for the purpose ofobtaining or retaining business. 15 U.S.C. 78dd-2(a)(1). The statute defines the term foreign official


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as including, inter alia, any officer or employee of aforeign government or any department, agency, orinstrumentality thereof. 15 U.S.C. 78dd-2(h)(2)(A).The United States contends that the payments byPetitioners at issue in this case were improper becauseHaiti Teleco is an instrumentality of a foreigngovernment (Haiti) and thus that Haiti Teleco officialsto whom Petitioners made payments were foreignofficials for purposes of the FCPA.

The FCPA does not define the terminstrumentality. Nor has the Department of Justiceissued regulations for the purpose of clarifying themeaning of that term. Indeed, as the appeals courtconceded, Pet. App. 10, the decision below marked thefirst occasion on which a federal appeals court addressedthe meaning of that term, which has been part of federallaw for nearly 40 years. Review of that decision iswarranted to provide the business community withbadly needed guidance regarding this frequently

recurring issue.

As the appeals court recognized,instrumentality is a word susceptible of more thanone meaning. Pet. App. 11. Companies conductingbusiness overseas have struggled throughout theFCPAs 40-year history to understand which of theforeign companies with which they deal meet thestatutes definition of an instrumentality of a foreigngovernment and thus are subject to the FCPAs

payment prohibitions. In particular, the statute doesnot explain whether sovereign ownership or control ofacommercialenterprise (i.e., a profit-seeking enterprisethat markets goods or services routinely made available


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by the private sector) can ever qualify as aninstrumentality of a foreign government that holds acontrolling interest in the enterprise. There isconsiderable reason to doubt that the FCPA addressespayments made to employees of a commercialenterprise, regardless whether at the time of paymentthe controlling shareholder happened to be a foreigngovernment. After all, as one commentator has noted,Congress passed the FCPA in 1977 with a clear intent

to address foreign bribery of government officials. TheFCPA was not intended to prohibit private, orcommercial bribery. WLF Backgrounder,supra, at 3.The special concern that Congress expressed regardingthe corrosive, anti-democratic effect of bribes paid togovernment officials is viewed by many as inapplicableto payments made to individuals employed by anenterprise engaged in profit-seeking, commercialventures.

One leading commentator has opined that no

FCPA element is more urgently in need of judicialscrutiny than the FCPAs foreign official element.Michael Koehler, The Facade of FCPA Enforcement, 41GEO.J.INTL L. 907, 966 (2010) (concluding that in 2/3of all recently settled FCPA proceedings, prosecutorspointed to a commercial enterprise as theinstrumentality of a foreign government to whichpayments were made).

Professor Koehlers article explains at length why

there have been no previous appellate decisionsconstruing what constitutes a foreign official and aninstrumentality of a foreign government within themeaning of the FCPA, despite the frequency with which


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the issue arises. Virtually all FCPA investigations endwith the company under investigation declining tocontest prosecutors FCPA claims, paying substantialfines, and entering into a pre-litigationsettlementeither through a plea agreement, a non-prosecution agreement, or a deferred prosecutionagreement. Id.at 909. Even when they disagree withthe legal theories underlying prosecutors FCPA claims,American companies have been unwilling to challenge

those claims because they realize that a courtroom losscould result in death for the corporation and lengthyprison sentences for senior executives. Id.at 923-25.Simply put, challenging the DOJ is too risky. In fact,no company has challenged the DOJ in an FCPAenforcement action in the last 20 years. Id.at 927;seealso id.at 963-64 (As a practical matter, to challenge aDOJ legal interpretation in an FCPA enforcementaction, a company would first need to be criminallyindicted, something no member of a board of directorsis going to let happen regardless of the ultimate

criminal fine or penalty the DOJ is seeking.).

Although these issues have not been litigated,they have arisen with growing frequency as Americancompanies increase their level of activity in countrieswhere host governments play a much more direct rolein commercial enterprises than governments in NorthAmerica and Western Europe typically do. For example,many of the overseas commercial affairs of citizens ofthe United Arab Emirates (UAE) are coordinated

through Dubai World, an investment vehicle whollyowned and operated by the Emirate of Dubai. DubaiWorlds massive commercial activities span more than100 countries around the world and are virtually never


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conducted in the name of the Dubai government, yetone could plausibly argue under the Eleventh Circuitstest that each of the subsidiaries of Dubai World is aninstrumentality of the UAE, and that payments madeto employees of Dubai World are thus subject to FCPArestrictions. Similar issues arise with respect tocommercial entities based in China, where the linebetween private commercial enterprises and those inwhich the national government exercises control is often

quite murky.

The decision below provides little, if any,guidance for companies seeking answers to theirinstrumentality questions, and likely introducesadditional confusion. In particular, by specifying thatits list of relevant factors is non-exclusive, Pet. App. 20a,the Eleventh Circuits decision leaves open thepossibility that other, unspecified factors might controlfuture instrumentality cases. And given the absenceof other cases in the litigation pipeline raising similar

issues, denial of the Petition in this case will deprivecompanies of badly needed guidance for the foreseeablefuture.

Moreover, this Petition presents the Court witha particularly attractive vehicle for addressing theinstrumentality issue. There are no procedural issueslurking in the case that might prevent the Court fromreaching the merits of Petitioners claim thatcommercial entities that do not perform traditional

governmental functions are not instrumentalities ofa foreign government for purposes of the FCPA.Petitioners raised that claim at all stages of appellatereview. The judgment is finalPetitioners are already


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serving prison sentencesand the issue is outcome-determinative, i.e., if Petitioners are correct that HaitiTeleco is not an instrumentality of the Haitiangovernment, their convictions cannot stand.

II. Review Is Warranted Because the EleventhCircuit Construed Instrumentality Far

Too Broadly

Review is also warranted because the appealscourt misconstrued the term instrumentality. Thecourt adopted a definition of that term that gives theFCPA a far broader scope than the statute admits. Anexamination of the language of 15 U.S.C. 78dd-2(h)(2)(A), as well as the FCPA as a whole, indicate thatits payment restrictions apply to employees of entitiesthat perform traditional governmental functions, notmore broadly (as the Eleventh Circuit held) toemployees of virtually any entity over which a foreigngovernment exercises control.

Petitioners convictions rest on the UnitedStatess contention that Robert Antoine and Jean ReneDupervalthe two Haiti Teleco officials accused byprosecutors of shak[ing] down Terrawere foreignofficials within the meaning of the FCPA. The statutedefines a foreign official in relevant part as anyofficer or employee of a foreign government or anydepartment, agency, or instrumentality thereof. 15U.S.C. 78dd-2(h)(2)(A). While prosecutors do not

contend that Haiti Teleco was either a department oragency of the Haitian government, they do contendthat it was an instrumentality of the governmentaterm not defined in the statute or any implementing


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regulation. That contention is inconsistent with normalrules of statutory construction.

Statutory construction begins with statutory text.Courts properly presume that the legislature says in astatute what it means and means in a statute what itsays there. Connecticut Natl Bank v. Germain, 503U.S. 249, 253-54 (1992). [V]ague notions of a statutesbasic purpose are . . . inadequate to overcome the

words of its text regarding the specific issue underconsideration.Mertens v. Hewitt Assocs., 508 U.S. 248,261 (1993). The word instrumentality refers to athing that one uses to accomplish ones intendedpurposes. See, e.g., Blacks Law Dictionary (9th ed.2009) (an instrumentality is A means or agencythrough which a function of another entity isaccomplished, such as a branch or governing body.).When applied to a government, the use of the wordinstrumentality thus connotes an entity designed tocarry out the functions/purposes of government. All

agree that Congress adopted the FCPA to addresspayments made to government officials, not privatecommercial bribery. Accordingly, Congresss use of theword instrumentality suggests that Congress had inmind entities that carry out government functions asthat term has traditionally been understood byCongress. The operation of a for-profit commercialenterprise (particularly where, as here, the privatesector would be willing and able to step forward to fillany void created by the absence of a government-run

commercial enterprise) is, while not unheard of, not atraditional function of governments.

The Eleventh Circuits far broader construction


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of the term instrumentality is not consistent with theforegoing analysis. The appeals court defined aninstrumentality as any entity that performs afunction the controlling government treats as its own,without regard to the type of function at issue. Pet.App. 20. While the court included a noncomprehensivelist of some factors that may be relevant indetermining whether the courts control and treatsas its own standards have been met, id.at App. 20 -

App. 23, it is difficult to imagine that there could ever bea commercial enterprise of which a foreign governmentwas the majority owner that did not fall within theEleventh Circuits definition of an instrumentality ofthe government.2 Review is warranted to address theinconsistency between the statutory language and theappeals courts overly broad definition of the term

2 The Eleventh Circuit appears to have derived several ofits relevant factors out of thin air, and they likely were adopted

merely as a means of confirming its pre-determined conclusion thatHaiti Teleco is an instrumentality of the government of Haiti.For example, one of the factors that the court said points in thedirection of an instrumentality finding is if the entity providesservices to the public at large in the foreign country. Pet. App. 23.But virtually all commercial enterprises, Haiti Teleco included, seekto provide services to the public at large (on the theory that alarger customer base breeds increased profits), so this factor doesnothing to distinguish government-controlled commercialenterprises that should be classified as governmentinstrumentalities from those that should not be so classified.Another factor identified as relevant by the appeals court waswhether the entity has a monopoly over the function it exists to

carry out. Id.at App. 22. But the fact that a foreign governmenthas granted a monopoly to a favored commercial enterprise is morelikely an indication that the government desires that the enterprisebe extremely profitable, not that the enterprise is carrying out someuniquely governmental function.


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instrumentality.

The Eleventh Circuits statutory interpretationis also inconsistent with the noscitur a sociiscanon: aword should be given meaning by the words around it.The FCPA uses the word instrumentality in parallelwith the words department and agency, suggestingthat entities meeting the definition of aninstrumentality of a foreign government would be

roughly similar to entities meeting the definition of adepartment or an agency of the government. TheUnited States does not contest that a government-owned commercial enterprise would not ordinarily beclassified as a department or agency of thegovernment, a description more commonly applied toregulatory bodies (e.g., EPA, FDA, or OSHA) or toentities that carry out uniquely governmental functions(e.g., a police or fire department or the Federal Reserve).Congresss use of the word instrumentality inassociation with the words department and agency

indicates that similar limitations should be applied tothe word instrumentality. As this Court hasexplained, The maxim noscitur a sociis, that a word isknown by the company it keeps, while not aninescapable rule, is often wisely applied where a word iscapable of many meanings in order to avoid the givingof unintended breadth to the Acts of Congress. Jareckiv. G.D. Searle & Co., 367 U.S. 303, 307 (1961). Accord,Natl Muffler Dealers Assn v. United States, 440 U.S.472, 485 n.20 (1972); Gustavson v. Alloyd Co., 513 U.S.

561, 575 (1995).

Finally, even if a court were to conclude that 78dd-2(h)(2)(A) is ambiguous with respect to whether


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overseas.

III. Review Is Warranted to Address the

Conflict Between the Eleventh Circuits

Decision and This Courts Decisions

Regarding What Constitutes an

Instrumentality of Government

Review is also warranted because the appeals

courts definition of instrumentality is inconsistentwith Congresss and this Courts understanding, inother contexts, regarding when an entity should bedeemed an instrumentality of government. WLFrecognizes that instrumentality has multiplemeanings and that it is not wholly implausible thatCongress intended to assign a different meaning to theword in the context of the FCPA than it has in othercontexts. Nonetheless, the fact that the Courtsunderstanding of an instrumentality of governmentin other contexts differs from the Eleventh Circuits

understanding of that term in the FCPA contextprovides at least some basis for suspecting that theappeals court has misunderstood Congresss meaning inthis case.

This Courts traditional understanding of whenan entity is an instrumentality of government is bestillustrated by a series of cases that have addressedwhether certain entities are subject to constraintsimposed by the U.S. Constitution. The Court has

explained that an entity is subject to constitutionalconstraints if and only if it is an instrumentality ofthe United States. Thus, the Court held inLebron v.Natl R.R. Passenger Corp., 513 U.S. 374, 394 (1995),


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that Amtrak is subject to First Amendment constraintsbecause, the Court concluded, Amtrak is an agency orinstrumentality of the United States. Amtrak arguedthat it was not an instrumentality because it wasestablished in corporate form and because its directors,although appointed by the President, had some degreeof independence (e.g., the President could not removethem for cause). The Court disagreed, concluding thatAmtrak was a government instrumentality because it

had been created by Congress to serve a specificgovernmental goal: to ensure the continuation ofpassenger railroad service at a time when the privatesector had concluded that it would no longer providesuch services because they could not be operatedprofitably. Id. at 973-75. The Court contrasted theinstrumentality status of Amtrak with that ofcorporations whose common stock or other securitiesare acquired by the federal government on a temporarybasis:

Amtrak is not merely in the temporary control ofthe Government (as a private corporation whosestock comes into federal ownership might be); it isestablished and organized under federal law forthe very purpose of pursuing federalgovernmental objectives.

Id.at 973-74 (emphasis added). In other words, Amtrakwas deemed an instrumentality of the federalgovernment for First Amendment purposes not because

its actions were controlled by the government (althoughthey were) but because it was a corporation created toserve a uniquely governmental purpose (the provision oftransportation services unavailable from private, profit-


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seeking commercial enterprises).

The distinction the Court drew between Amtrakand Conrail (another railroad corporation controlled bythe federal government)4 is instructive. In a 1974decision, the Court had determined that Conrail was notan instrumentality of the United States and thus wasnot subject to constraints imposed by the FifthAmendments Takings Clause. Regional Rail, 419 U.S.

at 152 (Conrail is not a federal instrumentality byreason of the federal representation on its board ofdirectors.). Even though the federal governmentcontrolled both corporations through its control of theirrespective boards of directors, the key distinctionbetween the two was that the responsibility of theConrail directors was to operate Conrail at a profit forthe benefit of its shareholders, id., while theresponsibility of the Amtrak directors was to serve agovernmental purpose (the provision of unprofitablepassenger rail service that was otherwise unavailable).

Lebron, 513 U.S. at 399. The Court explained, Amtrak

4 In 1973, Congress arranged for the creation of theConsolidated Rail Corp. (Conrail), a corporation whose functionwas to assist in the reorganization and continued operation of eightrailroads that had become bankrupt and were unable to reorganizesuccessfully under existing bankruptcy law. Congress providedConrail with substantial debt financing and then placed the federalgovernment temporarily in control of Conrails board of directors toprotect the governments investment. See Regional RailReorganization Act Cases, 419 U.S. 102, 152 (1974) (Congress

granted the federal government control of Conrails board ofdirectors to protect the United States important interest inassuring payment of the obligations guaranteed by the UnitedStates. Full voting control of Conrail will shift to the shareholdersif federal obligations fall below 50% of Conrails indebtedness.).


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is worlds apart from Conrail: The Government exerts itscontrol not as a creditor but as a policymaker, and noprovision exists that will automatically terminate upontermination of a temporary financial interest. Id.

The interests of the Haitian government in HaitiTeleco resembled the interests of the United States inConrail, not the interests of the United States inAmtrak. The Haitian government purchased its majority

stock holdings in Haiti Teleco at some point after thecorporations formation. During the period that thegovernment controlled Haiti Teleco, it operated thecorporation just as it would have operated any othercommercial venture. The telecommunications servicesHaiti Teleco provided undoubtedly would have beenprovided by the private sector on a profit-making basishad the government not adopted laws prohibitingcompetition, a prohibition that enhanced Haiti Telecosprofitability. The government controlled theappointment of senior corporate officials, but that was its

right as the majority shareholder. Its control ended themoment the government sold its shares in connectionwith its privatization initiative. Accordingly, under thisCourts traditional understanding of what constitutes aninstrumentality of a government, Haiti Teleco was notan instrumentality of the Haitian government. HaitiTeleco was no more a government instrumentalitythan were General Motors and AIG when, for severalyears following the 2008 financial meltdown, the UnitedStates government controlled both corporations by virtue

of being their majority shareholder.


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IV. Review Is Warranted Because Companies

Operating Overseas Are Facing a

Constitutionally Intolerable Level of

Uncertainty Regarding the Scope of the

FCPA

Review is also warranted because continueduncertainty regarding the scope of the FCPA has createda constitutionally intolerable dilemma for companies

operating overseas. As the Court has long recognized,the constitutional right of due process guarantees thatno person should be forced to speculate as to themeaning of penal statutes. Lanzetta v. New Jersey, 306U.S. 451, 453 (1939). Due process also requires thatpenal requirements be drafted with sufficient clarity soas to discourage arbitrary and discriminatoryenforcement. Skilling v. United States, 561 U.S. 358,403 (2010). In the absence of further clarification fromthis Court, the FCPAs restrictions on payments toforeign officials cannot meet those basic due process

requirements.

The FCPA does not define the wordinstrumentality. Although the statute grants theDepartment of Justice authority to issue guidance thatwould allow companies more easily to determine when acorporation with ties to a foreign government should bedeemed an instrumentality of that government,see15U.S.C. 78dd-2(e), it has steadfastly refused to providethe binding guidance that companies need if they are to

compete vigorously in overseas markets while at thesame time ensuring that they do not run afoul of U.S.


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criminal laws.5 The result is that business executives,when confronted with shakedown schemes of the sort towhich Petitioners fell victim, are forced to guess atwhether making the payments necessary to allow themto remain in business will also expose them to FCPAprosecution. As this case makes harshly clear, anincorrect guess regarding how federal prosecutors willchoose to enforce the law can have disastrousconsequences.

American businesses and their employees shouldnot be required to continue to confront dilemmas of thissort. The Court should grant review in order to answeronce and for all who are the foreign officials to whomthe FCPA restricts payments.

5The business community is in general agreement that theJustice Department regulations implementing 78dd-2(e) are oflittle use for companies seeking guidance; they are overlycumbersome, provide little if any real guidance, and offer virtuallyno protection from subsequent prosecutions. See28 C.F.R. 80.1et seq. The Justice Departments November 2012 informal FCPAguidance document is similarly unhelpful; it (1) includes nohypotheticals discussing application of the foreign officialrequirement; and (2) conflicts with SEC guidance by indicating thatan entity might qualify as an FCPA instrumentality even when

foreign government stock ownership is less than 50%. SeeMichaelKoehler, The Noticeably Missing Hypothetical and the GovernmentsTwo Instrumentality Positions(Nov. 19, 2012) (available at http://www.fcpaprofessor.com/the-noticeably-missing-hypothetical-and-the-governments-two-instrumentality-positions).


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CONCLUSION

The Court should grant the Petition.

Respectfully submitted,

Richard A. Samp (Counsel of Record)Cory L. Andrews

Washington Legal Found.2009 Massachusetts Ave, NWWashington, DC [email protected]

September 11, 2014

Documents

U.S. v. Esquenazi (Amicus Brief of Washington Legal Foundation Et Al)