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The V&E Report
Insights in Government Enforcement and Investigations

Second Circuit Considers Reach of Bribery Laws Beyond U.S.

On November 7, 2019, a Second Circuit panel1 heard oral argument on whether the use of United States wire services in effecting a bribery scheme is enough, without more, to pull defendants within the scope of U.S. criminal honest-services wire fraud statutes.2 Appellants Juan Angel Napout, the former president of the South American soccer confederation known as CONMEBOL, and Jose Maria Marin, the former president of the Brazilian soccer federation known as the Brazilian Football Confederation, were convicted of wire fraud and racketeering in 2017, where after a six-week trial, the jury found that they had fraudulently awarded broadcast and media rights to international soccer tournaments to officials in Paraguay, Argentina, and Brazil. This was the only trial stemming from a series of arrests of Fédération Internationale de Football Association (“FIFA”) and international soccer officials following a wide-ranging corruption probe into a variety of issues including whether high-ranking officials were leveraging their positions within FIFA to enrich themselves by taking bribes.3 Napout and Marin were sentenced to nine and four years in prison, respectively.

Napout and Marin jointly appealed their convictions in February 2019, disputing what they describe as the “unprecedented application” of the honest-services wire fraud statutes “to an entirely foreign private-employment relationship.”4 The honest-services fraud statute prohibits “depriv[ing] another of honest services through bribes or kickbacks supplied by a third party who has not been deceived.”5 To secure such a conviction, the prosecutor must prove “the existence of a quid pro quo agreement.”6 According to Napout and Marin, “Congress did not intend the honest-services wire-fraud statutes to apply outside the United States.”7

In a pre-trial ruling, the district court rejected Napout’s argument that U.S. commercial bribery statutes are not applicable to him because commercial bribery is not illegal in Paraguay and Argentina and the connection between the conduct and the U.S. was at most incidental.8 On appeal, Napout asked the Second Circuit, “by what authority does the United States purport to police the relationship between a Paraguayan employee and his Paraguayan employer, and an alleged scheme involving South Americans that took place almost entirely in South America[?]”9  According to Napout, this case is the first time in which the U.S. has convicted an individual under the honest- services wire fraud statutes, where the (1) employee was a foreigner, (2) employer was a foreign organization, and (3) conduct constituting the offense occurred in a foreign country.10

Marin similarly argued on appeal that the district court erred by refusing to admit Marin’s proffered evidence that commercial bribery is not illegal under Brazilian law, where Marin’s alleged actions relevant to the case occurred.11 According to Marin, the district court’s rulings prevented him from arguing that he lacked the criminal intent necessary to be convicted due to his good-faith belief that taking bribes was not illegal under Brazilian law.12

The Second Circuit seemed unconvinced by petitioners’ arguments. The judges pointed out that the fraud occurred under the FIFA and CONMEBOL codes of conduct, which clearly prohibit bribery. The   judges characterized the use of U.S. wires to transfer bribery payments as the “actus reus” — i.e., bad act — supporting application of U.S. law. The judges expressed concerns that a ruling for petitioners would be paramount to allowing U.S. banks to effectuate fraud in clear violation of U.S. criminal statutes.

The judges further suggested that the use of U.S. wires in and of itself might be sufficient to grant U.S. jurisdiction over the conspiracy under the honest-services wire fraud statutes. Were the Second Circuit to make a formal ruling consistent with this position, such a ruling could broaden the reach of the U.S. honest-services wire fraud statutes to encompass crimes that occur abroad and rely, at least in part, on the U.S. banking system for their execution. Such a ruling would appear, at first blush, to be at odds with the presumption against extraterritorial application of United States laws — i.e., the canon of statutory construction stating, “when a statute gives no clear indication of an extraterritorial application, it has none.”13  Accordingly, all those interested in the future enforcement of U.S. criminal statutes abroad should follow this case closely.

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1 The panel consisted of Circuit Judges Joseph F. Bianco, Peter W. Hall, and Robert D. Sack.

See U.S. v. Napout et al., 18-2750-cr(L), 18-2820-cr(CON) (2d. Cir.).

See U.S. v. Napout et al., 332 F. Supp. 3d 533 (E.D.N.Y. 2018).

4 Brief for Petitioner Napout at 1, U.S. v. Napout et al., 18-2750-cr(L), 18-2820-cr(CON) (2d. Cir. Feb. 8, 2019).

Skilling v. United States, 561 U.S. 358, 404 (2010).

United States v. Silver, 864 F.3d 102, 111 (2d Cir. 2017).

7 Brief for Petitioner Napout at 2; see also 18 U.S.C. §§ 1343, 1346, 1349, and 1962.

8 Id. at 17.

Id. at 1.

10 Id. at 29.

11 Brief for Petitioner Marin at 29-36, U.S. v. Napout et al., 18-2750-cr(L), 18-2820-cr(CON) (2d. Cir. Feb. 8, 2019).

12 Id. at 28.

13 Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 115 (2013).

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Authors

Amy Lamoureux Riella

Amy Lamoureux Riella Partner

Laurel S. Fensterstock

Laurel S. Fensterstock Senior Associate

William L. Lewis

W. Logan Lewis Associate