At an in Chambers hearing on February 16, 2012, Judge James Selna issued an Order in U.S. v. Carson, addressing the jury instructions regarding the terms "foreign official" and "instrumentality." In doing so, Judge Selna rejected a number of the proposed instructions submitted by the defendants, sticking closing to the list of non-exclusive factors he identified in his prior decision on this issue.
On April 8, 2009, prosecutors indicted six former executives of Control Components, Inc. (which designs and manufactures service control valves for use in the nuclear, oil and gas, and power industries). The Government alleged that that the group conspired to pay bribes to officials of foreign state-owned companies in China, Malaysia, and the United Arab Emirates in order to secure contracts which yielded approximately $46.5 million in profits.
The defendants moved to dismiss the Indictment, arguing, among other things, that the FCPA extended to payments made to employees of foreign state-owned companies. That issue has been raised (unsuccessfully) in numerous cases, including the Lindsey Manufacturing case (where the jury verdict was subsequently vacated on different grounds), the O’Shea case (in which the FCPA charges were later dismissed) and the Haitian Teleco case (which resulted in a sentence of record length for one defendant).
As discussed here, on May 18, 2011, Judge Selna denied the motion to dismiss, holding that "the question of whether state-owned companies qualify as instrumentalities under the FCPA is a question of fact." He concluded that issue could not be segregated from the evidence to be presented at trial. He noted that he could not simply assume as a matter of law that a state-owned company was an "instrumentality" under the FCPA, but there were several factors (none of which were dispositive) that must be considered:
• the foreign state’s characterization of the entity and its employees;
• the foreign state’s degree of control over the entity;
• the purpose of the entity’s activities;
• the entity’s obligations and privileges under the foreign state’s law, including whether the entity exercises exclusive or controlling power to administer its designated functions;
• the circumstances surrounding the entity’s creation; and
• the foreign state’s extent of ownership of the entity, including the level of financial support by the state (e.g., subsidies, special tax treatment, and loans).
He also directed the parties to submit proposed jury instructions regarding the "instrumentality" issue. In the summer of 2011, the parties submitted proposed jury instructions and objections (discussed here).
The Government requested that the Court instruct the Jury that "[a]n ‘instrumentality’ of a foreign government is any entity through which a foreign government achieves an end or purpose, and can include state-owned entities" and that the jury should consider the six non-exclusive factors identified by the Court. Defendants requested that the jury be instructed that "[t]o conclude that a business enterprise is an "instrumentality" of a foreign government, you must conclude beyond a reasonable doubt that the business enterprise is part of the foreign government itself," and that the Government must establish four factors, including a majority ownership by the state. Defendants also requested a separate instruction that the Government must prove beyond a reasonable doubt that a defendant knew that the transaction at issue involved a foreign official.
In the February 16, 2012 Order, Judge Selna rejected a number of the defendants’ requests, including:
• the request that the entity be defined as "part of the foreign government" or that the jury be required to consider whether it was majority-owned by the Government;
• the request that the jury find that the Government controlled the entity; and
• the request that the jury find that the entity existed "for the ‘sole and exclusive purpose of performing a public function traditionally carried out by’ the foreign government."
In short, Judge Selna "decline[d] to adopt the bright-line approach which turns on a mandatory set of criteria advanced by defendants." He found that the instructions proposed by the Government were appropriate in making a fact-based inquiry to determine whether an entity is an "instrumentality" under the FCPA. The Judge also held that "there is no basis to instruct the jury must find each factor is present."
The Court also considered the instructions for the terms "corruptly," "willfully," and "knowing," three other requirements under the FCPA. Finally, the Court rejected the Government’s request to include an instruction that it is not required to "prove that the defendant knew the legal definition of ‘foreign official’ under the FCPA or knew that the intended recipient of the payment or gift fell within the legal definition."
At present, the Carson case is scheduled to be tried on June 5, 2012.