Jury Convicts on Both Bites at the Apple in FCPA Case
V&E FCPA and Global Anti-Corruption Update, December 14, 2018
FCPA cases infrequently make it to trial. But, on December 5, 2018, a jury convicted Chi Ping “Patrick” Ho on seven counts related to his participation in bribery schemes involving officials of Chad and Uganda. Even more unique is the fact that Ho was convicted based on two separate FCPA theories: (1) being an agent of a domestic concern (15 U.S.C. § 78dd-2); and (2) being a foreign person who commits prohibited acts while present in the United States (15 U.S.C. § 78dd-3) — theories that before this case many believed to be mutually exclusive.
The government had alleged that Ho, a Hong Kong native, was an agent of a domestic concern because he served as the head of an NGO — the China Energy Fund Committee — that was based in Hong Kong and Virginia, and was registered as a Section 501(c)(3) charitable organization in Virginia. Though not alleged to have been based in the U.S. offices, Ho was also accused of performing acts within the United States including participation in a conference in New York City, where some initial introductions were made with eventual participants in the scheme. The complaint also noted wire transfers that passed through New York financial institutions as a potential jurisdictional hook.
Ho had moved to dismiss several of the FCPA counts before trial, arguing that the parallel § 78dd-2 and § 78dd-3 charges were contrary to the intent of Congress. The FCPA statutory regime is structured with progressively defined jurisdictional categories of individuals or companies. An “issuer” (someone who sells federally regulated securities in the United States) falls into category 1 (§ 78dd-1). An entity or person that is not an issuer, but otherwise a domestic concern (a U.S. citizen or entity based within the United States) falls into category 2 (§ 78dd-2). And someone who is neither an issuer nor domestic concern, but acts in furtherance of a foreign bribery scheme while on U.S. soil, falls into category 3 (§ 78dd-3). In Ho’s view, charging him as an agent of a domestic concern under category 2, excluded him from liability under category 3, which by definition excludes jurisdiction over domestic concerns. Ho also argued that the legislative history of the FCPA demonstrates that Congress never intended § 78dd-3 to be an additional basis for prosecuting a person who already fell within the purview of the FCPA. The government, on the other hand, asserted that the categories were not mutually exclusive because the strict language of § 78dd-3 excluded domestic concerns, not agents of domestic concerns. The U.S. District Court for the Southern District of New York denied the motion to dismiss and allowed the government to pursue charges under both theories.
The practical impact of being convicted under both § 78dd-2 and § 78dd-3, however, may become less significant at the sentencing stage. For instance, when determining an applicable guideline range, courts group counts with substantially the same harm pursuant to Section 3D1.2 of the U.S. Sentencing Guidelines. Nevertheless, it will be important to follow any appeal of this case to the Second Circuit, which issued a significant FCPA ruling earlier this year in United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018), rejecting an aggressive jurisdictional argument made by the government. It will be interesting to see if the court will again quash a DOJ effort to expand its FCPA jurisdictional toolbox.
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