One of the factors to determine just who is a foreign
governmental official under the Foreign Corrupt Practices Act (FCPA), is
whether a foreign government is involved. There are currently a triumvirate of
pending cases where the defendants have challenged a basic Department of
Justice tenet that businesses owned by foreign governments are
"instrumentalities thereof" foreign governments and thereby covered under the FCPA.
The three cases are the CCI case in Central District of California, the Lindsey
Manufacturing case, also in the Central District in California and the John
O'Shea case, currently in the Southern District of Texas.
As reported by the FCPA
Professor and the
FCPA Blog on Wednesday, the Department of Justice was denied the right to
file a Declaration from the US State Department in the Lindsey Manufacturing
case. As reported by the FCPA Blog the Declaration of Clifton M. Johnson,
Assistant Legal Adviser for Law Enforcement and Intelligence in the Legal
Adviser's Office said that "the judge should not grant the defendants' motion
to dismiss because it would adversely impact U.S. foreign policy. [Johnson]
asserted that the FCPA was consistent with the OECD anti-bribery convention and
that the "foreign official" and state-owned entity coverage of the FCPA must be
maintained." The FCPA Blog opined that this ruling could be a "key defeat in
the battle over who's a "foreign official" under the FCPA".
We believe however that the point may be much simpler in
the Lindsey Manufacturing case. Unlike the CCI case, this case deals with
alleged bribery and corruption regarding the Mexican electric utility company,
Comisión Federal de Electricidad (CFE). In the CCI case, the defendants are
have alleged to violated the FCPA in regards to bribery and corruption of
various telecom companies, most generally in Asia. (The O'Shea case also
involves allegations of bribery involving CFE.)
The Lindsey case is the first case in which the DOJ has
filed any briefing on the issue of who is a foreign governmental official. In
its Opposition to the Defendants' Motion to Dismiss, the DOJ notes that under
the Mexican Constitution,
the supply of electricity is solely a
government function. Specifically, Article 27 provides: It is exclusively a
function of the general Nation to conduct, transform, distribute, and supply
electric power which is to be used for public service. No concessions for this
purpose will be granted to private persons and the Nation will make use of the
property and natural resources which are required for these ends.
The DOJ goes on to point out that the CFE is effectively
controlled by the government of Mexico by the appointment of CFE's Governing
Board, as well as the Director General. The DOJ concludes that the "CFE is part
of the Mexican government, mandated by its constitution, formed by its laws,
owned in its entirety by the people of Mexico" and is constituted to serve the
people of Mexico. It would not seem that you can have a much more clear cut
case that whatever legal form the CFE might take, it is a part of the
government of Mexico.
The defendants accept the argument that the CFE is a
government owned enterprise but claim that this disqualifies the CFE "as an
entity properly addressed by [the FCPA]." The defendants response seems to boil
down to the following, "commercial operations of a foreign government that
provide power supply are not instrumentalities" within the meaning of the
FCPA. Therefore their employees cannot be foreign officials.
The correct question appears to be precisely before the
trial court. A hearing on the defendants' Motion to Dismiss is currently
scheduled for today, at 9:30 AM PDT. If you are attending please tweet away
Visit the FCPA Compliance and Ethics Blog, hosted by Thomas Fox, for more commentary on FCPA
compliance, indemnities and other forms of risk management for a worldwide
energy practice, tax issues faced by multi-national US companies, insurance
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© Thomas R. Fox, 2011
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