Two Cases Could Narrow FCPA By Applying Snyder Gratuities Ruling

Two significant, but hardly noticed, legal challenges alleging violations of the Foreign Corrupt Practices Act promise to be disruptive, as courts will be invited to curtail the scope of the corporate bribery law.

After the Supreme Court’s landmark decision in Snyder v. United States, two sets of FCPA defendants have argued that courts should follow Snyder’s holding that gratuities that are paid to an official after an official act has been done (and not promised beforehand) aren’t prohibited by the federal program bribery statute.

Although District Judge Jacqueline Becerra of the US District Court for the Southern District of Florida recently rejected one defendant’s challenge in USA v. Zaglin that Snyder’s reasoning applies to the FCPA, the issue likely will be addressed once the defendant raises the issue on appeal to the Eleventh Circuit.  Another case in the Southern District of Florida, United States v. Piñate, is currently pending. A different ruling in Piñate would have a huge impact on future enforcement of the FCPA.

In Snyder, the justices addressed a seemingly narrow question: whether the federal program bribery statute, 18 U.S.C. §666, applies not only to bribery—quid pro quo payments made to influence an official act—but also gratuities or rewards given after-the-fact for actions already taken.

Reasoning through the statutory text, structure, and legislative history of Section 666, the court held that the statute hadn’t contemplated gratuities and differentiated them from bribery. In doing so, the Supreme Court continued a trend of narrowing of federal bribery statutes and also the broader principle that criminal statutes should be interpreted narrowly—like a “scalpel.” Moving forward, cases alleging bribery under Section 666 will require proof of a quid pro quo agreed to or paid in advance of a desired action, but absence of such proof will be fatal to a case.

The defendants in Piñate and Zaglin asked courts to adopt the reasoning underlying Snyder’s gratuity question for cases involving similar language and policies underlying the prohibitions against bribery in the FCPA.

Both defendants were charged with violating the FCPA through after-the-fact payments, or gratuities: Roger Alejandro Piñate Martinez is charged with directing illicit payments to the chair of the Philippine Commission on Elections after obtaining contracts relating to the 2016 Philippine national elections. Georgia businessman Carl Zaglin was charged and recently convicted of violating the FCPA for directing illicit payments to Honduran government officials after receiving contracts for police uniforms.

The government charged these payments as FCPA violations, contending they constituted FCPA bribery despite a lack of advance promise or payment demonstrating an explicit quid pro quo.

In their motions to dismiss, Piñate and Zaglin analyzed the FCPA using the same six factors the Supreme Court applied in its analysis of Section 666 in Snyder. They argued that the text, history, structure, and statutory punishments of the FCPA, as well as the principles of federalism and fair notice, limit the FCPA only to bribery and similarly don’t apply to after-the-fact payments.

They contended that, unlike statutes that outright criminalize gratuity payments, (such as 18 U.S.C. § 201), the FCPA’s language included no gratuities provision or even any ambiguous language like the term “reward” at issue in Snyder. They also contended that the FCPA criminalizes only payments made to influence business and that business can’t be influenced by payments after the fact.

Both defendants also argued that the principles emphasized by the Snyder court, respect for federalism and fair notice to defendants, are equally applicable in the context of the FCPA, where an expansive application of the FCPA threatens overzealous and unforeseen prosecutions. This is of particular concern, given that FCPA charges often accompany money laundering charges predicated on the anti-bribery statutes of foreign countries, exposing defendants to a complex combination of foreign and domestic bribery rules that have evolved over recent decades.

Arguing against an overbroad interpretation of Snyder aligns with the Trump administration’s more focused approach to FCPA enforcement. The challenges could invite higher-level scrutiny within the DOJ concerning the desirability of pursuing future cases that arguably extend enforcement of the statute to its legal limits.

The DOJ thus far has avoided engaging directly with the multi-factor analysis offered by defendants in Piñate and Zaglin. In its opposition to these motions to dismiss, the government has simply asserted that Snyder was “not an FCPA case,” sidestepping the question of whether the Supreme Court’s reasoning should apply to the FCPA.

This reluctance to address the issue directly may reflect a recognition that Snyder’s logic, if extended to the FCPA, could greatly narrow the statute’s reach. The government’s reluctance to engage on the merits of the issue suggests an awareness that some court—be it a district court, appellate court, or the Supreme Court—may eventually adopt Snyder in the FCPA context.

The debate over the FCPA’s scope occurs amid shifting enforcement priorities in Washington. The current administration has indicated a focus on targeted enforcement of the FCPA.

In Zaglin, the defendant also argued that his case doesn’t involve any US or foreign competitors for the contracts in question and therefore doesn’t raise US interests. Future defendants are likely to make similar arguments, which may resonate with current DOJ leadership.

When US interests aren’t directly implicated and foreign law already penalizes illegal behavior, courts may be persuaded that overexpansive prosecution of gratuities under the FCPA similarly isn’t supported by the text and original intent of the statute.

If expanded beyond Section 666, Snyder’s reasoning puts at stake the scope of the FCPA and other US anti-bribery statutes. As such, the district courts’ decision of the gratuities question in Piñate, and any subsequent appellate decision in the Zaglin case,​ have the potential to reshape the contours of FCPA enforcement and contribute to a broader trend limiting the discretion and power of prosecutors in enforcing anti-corruption laws.

Read the article on Bloomberg Law here.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.