United States v. Esquenazi: In Issue of Nationwide First Impression, Panel Defines What Counts as an "Instrumentality" of a Foreign Governemnt for Purposes of the Foreign Corrupt Practices Act

United States v. Esquenazi, No. 11-15331, SDFla

 

Circuit Judge Martin joined by Circuit Judge Jordan and Senior Circuit Judge Suhrheinrich (6th Cir.)

 

Summary:  The defendants were convicted of conspiracy, violations of the Foreign Corrupt Practices Act (“FCPA”), and money laundering.  They owned a company that purchased phone time from foreign vendors and resold the minutes to U.S. customers. Their company contracted with a telephone company in Haiti that was effectively owned and run by the Haitian government.  Defendants eventually became indebted to the telephone company in an amount over $400,000.  The defendants attempted to negotiate a side deal to reduce their debt whereby minutes were shaved off of their bills and 50% of what the company saved was paid to the telephone company’s officials.

 

After the trial concluded, the government received a declaration from the current Haitian prime minister stating that the telephone company was not a state enterprise, which was later amended to clarify that there was no law specifically designating the telephone company as a public institution.  The defendants sought a new trial based on the declaration, which the district court denied.

 

The FCPA prohibits any domestic concern from making use of the mails to bribe a foreign official or any person while knowing that a thing of value will be given to any foreign official for the purpose of influencing the foreign official to assist the domestic concern in obtaining business.  A foreign official includes any officer or employee of a foreign government or any department, agency, or instrumentality thereof.  The issue in this appeal was whether the telephone company was an instrumentality of the foreign government.  This was an issue of first impression in the Eleventh Circuit and, apparently, nation-wide.

 

Ultimately, the panel defined instrumentality as an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.  Relevant factors for making a decision about whether the entity was controlled by the government included: (1) the foreign government’s formal designation of the entity; (2) whether the government has a majority interest in the entity; (3) the government’s ability to hire and fire the entity’s principals; and (4) the extent to which the entity’s profits, if any, go directly into the government’s fisc.  The issue of whether the entity performs a function the government treats as its own included: (1) whether the entity has a monopoly over the function it exists to carry out; (2) whether the government subsidizes the costs associated with the entity’s provision of services; (3) whether the entity provides services to the public at large in the foreign country; and (4) whether the public and the government in that foreign country generally perceive the entity to be performing a governmental function.

 

Based on this definition, the panel concluded that the district court’s jury instructions on the FCPA charge was sufficient.  It also rejected the defendants’ sufficiency of the evidence challenge to the FCPA convictions on the basis of the “instrumentality” instruction.

 

Next, the defendants challenged whether they had sufficient knowledge to be convicted under the FCPA. The panel found that the district court’s instruction, which stated that the defendants must have known, or believed that the bribes would ultimately reach the hands of a foreign official was sufficient. 

 

The panel did agree that it was error for the district court to give a deliberate ignorance instruction because the evidence here pointed only to actual knowledge or no knowledge, and such an instruction is appropriate only where there is evidence in the record showing the defendant purposely contrived to avoid learning the truth.  However, this error was found to be harmless.

 

The defendants also raised a Brady claim concerning the government's alleged failure to disclose the declaration from the Haitian official. To establish a Brady violation, a defendant must show: (1) the government possessed evidence, including impeachment evidence, favorable to the defense; (2) the defense did not possess the evidence nor could it have obtained it with reasonable diligence; (3) the prosecution suppressed the favorable evidence; and (4) had the evidence been disclosed to the defense, a reasonable probability exists that the trial outcome would have been different, i.e. the evidence was material.  The panel found the declaration was not Brady material because the government did not have the declaration in its possession until after trial.

 

The panel then rejected a variety of minor challenges to applications of the sentencing guidelines and whether various convictions merged.

 

The defendants convictions were affirmed.