No “official act” required: Second Circuit rules Supreme Court’s McDonnell opinion does not apply to FCPA

August 15, 2019

Government Investigations & White Collar Defense Alert

Author(s): Mark Knights, Robert Fisher, Michael Strauss, Scott Seitz

The Foreign Corrupt Practices Act’s anti-bribery provisions are broad, encompassing a variety of different prohibitions. A recent appellate decision affirms that prosecutors, in charging violations of those provisions, do not face the limitations that apply to domestic public-sector bribery.

In the three years since the United States Supreme Court overturned former Virginia governor Bob McDonnell’s convictions for honest services fraud and Hobbs Act extortion based on his alleged acceptance of bribes,[1] lower federal courts repeatedly have been asked to decide whether the McDonnell opinion applies with equal force to other federal bribery statutes. On Friday, August 9, the Second Circuit became the first federal Court of Appeals to address — and reject — a McDonnell challenge to a conviction under the FCPA when it issued its opinion in United States v. Seng. The Second Circuit’s opinion sends an important message to companies attempting to comply with the FCPA.

McDonnell: In McDonnell, bribery was defined for the jury by reference to the general public-sector bribery statute, 18 U.S.C. § 201. Section 201 makes it a crime for a public official to demand, seek, receive, accept, or agree to receive or accept anything of value in exchange for “being influenced in the performance of any official act.” The government asserted that McDonnell ran afoul of this prohibition by accepting loans and gifts in exchange for various favors, including setting up meetings with and contacting other government officials, and hosting events.

Not so, the Supreme Court held. To prove an “official act,” the government must (a) identify some “question, matter, cause, suit, proceeding or controversy” involving a “formal exercise of governmental power” and that is “pending” or “may be brought” before the official, and (b) prove that the official made a decision or took action on that matter (or at least agreed to do so).[2] “Setting up a meeting, talking to another official, or organizing an event,” without more, does not pass muster.[3]

Seng and the FCPA: The defendant in Seng sought to take advantage of the narrow McDonnell holding. The government alleged Seng paid two United Nations officials as part of his scheme to have the U.N. designate his Macau real estate complex as the permanent site for an annual conference. A jury convicted him of violating the FCPA and other federal statutes. On appeal, Seng argued that under McDonnell, FCPA bribery requires proof of an “official act.”

The Second Circuit disagreed. Bribery, the court noted, is “generally understood to mean the corrupt payment or offering of something of value to a person in a position of trust with the intent to influence his judgment or actions” — i.e., a quid pro quo.[4] And while the necessary act an official provides in exchange for payment under § 201 (the statute at issue in McDonnell) must be an “official act,” Congress could — and did — identify a different, broader set of acts that form the basis for FCPA bribery.

Specifically, the FCPA makes it a crime to, with corrupt intent, give a foreign official anything of value to obtain any one of four results:

  • “influencing any act or decision of such foreign official in his official capacity”;
  • “inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official”;
  • “securing any improper advantage”; or
  • “inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality.”[5]

The Second Circuit observed that “[w]hile the first FCPA quo referencing an ‘act or decision’ of a ‘foreign official in his official capacity’ might be understood as an official act, the FCPA does not cabin ‘official capacity’ acts or decisions to a definitional list akin to that for official acts under [§ 201].”[6] Nor, the court held, did the vagueness and other constitutional concerns Seng raised warrant applying the McDonnell standard to read the statute more narrowly. The court accordingly affirmed Seng’s convictions under the FCPA.

Bottom line: Seng’s message is clear: The type of bribery the FCPA prohibits is more expansive than that prohibited by the public-sector federal bribery statute. Although paying an official to set up a meeting, talk to other officials, or organize events may not violate § 201, it may well constitute an FCPA violation. Businesses attempting to limit or assess their FCPA liability should be mindful of the FCPA’s broad sweep when fashioning their anticorruption policies. These policies must be designed to address — and protect against — each company’s unique bribery risks. To truly appreciate those risks, and to align their behavior with DOJ’s FCPA enforcement policy and corporate compliance expectations, companies must make on-site risk assessments part and parcel of their compliance regimes.

  1. McDonnell v. United States, 136 S.Ct. 2355 (2016).
    [Back to reference]
  2. McDonnell, 136 S.Ct. at 2371-71.
    [Back to reference]
  3. Id.
    [Back to reference]
  4. United States v. Seng, No. 18-1725-cr, slip op. at 37-38 (2d Cir. Aug. 9, 2019).
    [Back to reference]
  5. Id. at 39-43 (quoting 15 U.S.C. §§ 78dd-2(a)(1), 78dd-3(a)(1)).
    [Back to reference]
  6. Id. at 42.
    [Back to reference]

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

Back to top