On April 20, 2011 the District Court released its written
decision on the defendant's Motion to Dismiss in the Lindsey Manufacturing
case. The FCPA
Professor reported on the decision last week and discussed the seemingly
unusual request made by the Department of Justice. This request was that the DOJ
asked the Court to take judicial notice that the Mexican entity "CFE is a
decentralized public entity, not a corporation." The trial court termed this
request "astounding" and declined this request.
Our focus will be on the trial court's finding that the
Mexican entity CFE was an "instrumentality" as defined under the Foreign
Corrupt Practices Act (FCPA). The trial court rejected the defendants'
contention that an "instrumentality" under the FCPA must share all the
characteristics of a foreign government department or agency. The trial court
further rejected the defendants' contention that "instrumentality" must be
defined as to what consistent with department and agency. The trial court held
that since "instrumentality" is a different word; it is logical to assume that
it means something other than department or agency.
The trial court did provide a non-exclusive list of
factors which could determine if an entity is an "instrumentality" under the
FCPA. They are:
After listing out these factors the trial court found
that CFE had all of these characteristics. CFE was created by Mexican statute
as a "decentralized public entity". The governing Board is comprised of high
level Mexican government officials. CFE describes itself as a governmental
agency. CFE performs a function, the supply of electricity, which is enshrined
in the Mexican Constitution as "exclusively a function of the general nation".
The trial court's ruling does seem logical. Although the
District Court in the Lindsey Manufacturing case is the first to rule on this
issue, the CCI case was the first case where a similar Motion to Dismiss was
filed. As the state owned entities in the CCI case are not the CFE there may be
a different District Court ruling. We eagerly await the outcome of that Motion
For a copy of the District Court's ruling, click here.
Visit the FCPA Compliance and Ethics Blog,
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© Thomas R. Fox, 2011
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