Summary
The Fifth Circuit considered whether alleged bribes to Haitian customs officials to reduce customs duties and sales taxes could fall within the Foreign Corrupt Practices Act's prohibition on payments made to assist in obtaining or retaining business. The court held that such payments could come within the FCPA and that the indictment sufficiently stated an offense, while noting that the defendants could seek more specific allegations concerning the business nexus element. The court reversed the district court's dismissal of the indictment and remanded for further proceedings.
Topics
Practice areas
Questions Presented
- Whether bribes to foreign officials to obtain unlawfully reduced customs duties and sales taxes can fall within the Foreign Corrupt Practices Act's prohibition on payments intended to assist in obtaining or retaining business.
- Whether the indictment was sufficient even though its business-nexus allegations tracked the statutory language without identifying the specific business or opportunity allegedly obtained or retained or explaining how the tax savings would assist in obtaining or retaining it.
Holdings
- Bribes paid to foreign officials to obtain unlawful reductions in customs duties and sales taxes can fall within the FCPA when the payments are intended to produce an effect that assists, directly or indirectly, in obtaining or retaining business. Such payments are not automatically outside or automatically within the statute; the government must prove the required business nexus.
- The indictment was sufficient as a matter of law even though it merely paraphrased the FCPA's business-nexus element and did not identify the particular business or opportunity sought or explain how the tax savings would assist in obtaining or retaining it.
Key quotations
“We hold that Congress intended for the FCPA to apply broadly to payments intended to assist the payor, either directly or indirectly, in obtaining or retaining business for some person, and that bribes paid to foreign tax officials to secure illegally reduced customs and tax liability constitute a type of payment that can fall within this broad coverage.” (¶ 53)
“We conclude that, as important to the statute as the business nexus element is, it does not go to the FCPA's core of criminality.” (¶ 70)
“As we conclude that the business nexus element of the FCPA does not go to the core of criminality of that statute, we hold that the indictment in this case is sufficient as a matter of law.” (¶ 72)
Factual background
American Rice, Inc., a Houston-based rice exporter, conducted business in Haiti through its subsidiary, Rice Corporation of Haiti. The indictment alleged that Kay and Murphy authorized bribes to Haitian customs and tax officials to accept false shipping documents understating the quantity and value of imported rice, thereby reducing customs duties and sales taxes. The alleged bribes were paid through direct payments, intermediaries, and monthly retainers, and the defendants allegedly used interstate and foreign commerce instrumentalities to carry out the scheme.
Procedural history
A grand jury charged Kay and Murphy with twelve FCPA counts based on alleged bribes to Haitian customs and tax officials to reduce customs duties and sales taxes on rice imported into Haiti. The Southern District of Texas dismissed the superseding indictment for failure to state an offense, reasoning that bribes to obtain favorable tax treatment could not satisfy the FCPA's business-nexus requirement. The Fifth Circuit reversed and remanded.
Remand instructions
The case was remanded for further proceedings consistent with the opinion. The district court could consider whether to require the government to provide more specific allegations concerning the FCPA's business-nexus element.