11th Circuit Confirms That Bribes Paid To Employees Of State-Owned Or Controlled Companies Violate The U.S. Foreign Corrupt Practices Act

The anti-bribery provisions of the U.S. Foreign Corrupt Practices Act ("FCPA") prohibit payments to "foreign officials" (i.e., non-U.S. government officials), which includes employees of a foreign government or an "instrumentality" of a foreign government. On May 16, 2014, in a widely-anticipated decision, the Eleventh Circuit largely adopted the government's longstanding position that a state-owned enterprise (in this case, a telecommunications company) may be such an "instrumentality" and consequently, corrupt payments to employees of such an enterprise were illegal bribes under the FCPA. This case is the first significant appellate decision to define who is a "foreign official" for purposes of FCPA liability, and makes clear that employees of a range of state-owned or controlled companies can be "foreign officials" so long as the company is both controlled by the state and performs a function that the state in question views as governmental. The decision provides some guidance as to both of these questions, but unsurprisingly leaves much to a case-by-case (and country specific) factual analysis of the relationship between the government and the statelinked entity.

In the case, United States v. Joel Esquenazi, the defendants were convicted of bribing officials of Telecommunications D'Haiti, S.A.M. ("Haiti Teleco").1 At trial, the U.S. Department of Justice ("DOJ") introduced evidence that the company had a monopoly on telecommunications services, it was 97% owned by Haiti's national bank, it had significant tax advantages, the government appointed all board members and its top officer, employees of Haiti Teleco had disclosed their assets under an anticorruption law, and the company was eventually privatized after the events in question.2 Under these facts, the court had little trouble concluding that Haiti Teleco was an instrumentality of a foreign government, and therefore that bribes paid to Haiti Teleco employees violated the FCPA. Ultimately, the court affirmed the convictions and sentences of the defendants, including the lead defendant, Joel Esquenazi, who received a 15-year sentence - the longest jail term ever imposed in an FCPA case.3

In doing so, the court drew a distinction between companies set up and run by governments to serve a public function and those in which the government was, in effect, a mere investor. Specifically, the court described an "instrumentality" as an entity that (i) is "controlled by a foreign...