Charging Foreign Officials Who Take Bribes with Conspiracy to Violate the FCPA

The Foreign Corrupt Practices Act prohibits U.S. persons and companies from paying bribes to foreign officials to obtain or retain business. The statute applies only to those who pay the bribes, not to foreign officials who receive them. But a recent Supreme Court decision may revive a long-dormant legal theory: charging foreign officials with conspiracy to violate the FCPA.

Congress passed the FCPA in 1977 to combat U.S. companies participating in foreign corruption. In recent years FCPA enforcement has become a major priority for the Department of Justice and the SEC. FCPA cases have resulted in some of the largest criminal and civil fines in history. And although private citizen Donald Trump criticized the law in the past, Attorney General Sessions recently affirmed the Trump administration remains committed to its enforcement.

The FCPA is an unusual corruption statute in at least one respect. Bribery laws generally apply to both sides of a corrupt transaction, prohibiting the receipt of bribes by a public official as well as the payment of those bribes. The FCPA, by contrast, applies only to the bribe payer. Foreign officials who receive bribes may be subject to prosecution in their own country, but the language of the FCPA does not prohibit their actions.

Forty years after the FCPA’s passage, the economy is more global and interconnected than ever. DOJ is much more aggressive about asserting criminal jurisdiction over events that take place primarily in other countries. There are cases where DOJ may want to charge the foreign official accepting FCPA bribes. This may be particularly true when the official has extensive ties to and activities within the United States, or when prosecution in the official’s own country seems unlikely.

Because the FCPA does not apply to the bribe recipients, DOJ must look to other theories to hold them accountable. For example, in some recent cases DOJ has charged foreign officials with money laundering of funds received as part of an FCPA scheme.

But DOJ may have a more direct option: charging foreign officials who receive bribes with conspiracy to violate the FCPA. Conventional wisdom has been that such conspiracy charges are improper. This is based in large part on a single 1991 Court of Appeals case, United States v. Castle. But a recent Supreme Court decision casts doubt on Castle and may breathe new life into the conspiracy theory.

Bribery usually punishes both sides of the corrupt transaction

The Conspiracy Precedent: United States v. Castle

There was a time when DOJ believed it could charge foreign officials with conspiracy to violate the FCPA. In Castle the government used that theory to prosecute four individuals – two U.S. citizens and two Canadian officials. The Americans had allegedly paid the Canadians a $50,000 bribe to secure a contract to provide buses to the Saskatchewan government.

The conduct of the Americans plainly fell within the statute. But the Canadian defendants claimed they could not be charged with conspiracy to violate the FCPA. They argued the conspiracy charge was an improper attempt to circumvent Congress’s decision not to criminalize the foreign officials’s conduct.

The U.S. Court of Appeals for the Fifth Circuit agreed. The court said Congress knew any FCPA bribery transaction would necessarily involve a foreign official. But Congress chose not to criminalize the receipt of the bribe. Prosecuting foreign officials for conspiracy, the court held, would amount to an improper end run around this Congressional policy decision.

The Mann Act and Gebardi v. United States

The Castle court relied primarily on a 1932 Supreme Court case, Gebardi v. United States. Gebardi involved a prosecution under the Mann Act, which prohibited the transportation of women across state lines for “immoral purposes.” The Mann Act punished those doing the transporting but did not criminalize the actions of the woman being transported.

In Gebardi a woman agreed to cross state lines with her lover to have sex. When they were charged with conspiracy to violate the Mann Act, she argued the charge was improper. She noted that Congress deliberately chose not to criminalize her conduct in the Mann Act itself. To allow a conspiracy charge, she claimed, would subvert this Congressional decision. The Supreme Court agreed and dismissed the conspiracy case.

The Castle court held that the reasoning of Gebardi squarely applied to the FCPA. Failing to criminalize the receipt of bribes by foreign officials, the court said, represented “an affirmative legislative policy to leave unpunished a well-defined group of persons who were necessary parties to the acts constituting a violation of the substantive law.” Given that legislative decision, it was improper for prosecutors to use conspiracy to charge the foreign officials that the FCPA left unpunished.

Baltimore police were charged with extortion in Ocasio

Conspiracy and Ocasio v. United States

Since 1991 Castle has been widely cited for the proposition that it’s improper to charge foreign officials with conspiracy to violate the FCPA. But the Supreme Court’s decision last term in Ocasio v. United States suggests the high court would not agree.

In Ocasio the defendant was a Baltimore police officer. He, some fellow officers, and the owners of an auto garage took part in a scheme in which the garage owners paid the officers to refer car accident victims to the garage for repairs.

Officer Ocasio and the garage owners were charged with conspiracy to violate the Hobbs Act. That act prohibits extortion “under color of official right” by a public official. This is a common federal corruption charge, particularly in cases involving state or local officials.

In Evans v. United States the Supreme Court held that extortion under color of official right is basically equivalent to the receipt of a bribe. But the Hobbs Act applies only to the public official, not to the person who pays. So as interpreted by Evans the Hobbs Act, like the FCPA, is an odd bribery statute: it prohibits only one side of a two-sided corrupt transaction.

In Officer Ocasio’s case, that meant prosecutors couldn’t charge the garage owners with violating the Hobbs Act directly. So they charged the garage owners and the officers with conspiracy to violate the Hobbs Act. The government’s theory was that although the garage owners could not violate the Hobbs Act, they were still capable of conspiring to help the officers violate it. In effect, the garage owners were charged with conspiring to help the police officers extort money from the garage owners themselves.

Ocasio argued the conspiracy charge was improper. Part of his argument was similar to that made by the defendant in Gebardi. Although every Hobbs Act extortion case necessarily involves at least two parties, Congress expressly chose not to punish the person who pays the public official. Prosecuting the payer for conspiracy to violate the Hobbs Act, Ocasio argued, would undermine this Congressional decision.

Supreme Court precedent supports charging foreign officials with conspiracy to violate the FCPA

The Supreme Court on the Nature of Conspiracy

The Supreme Court disagreed with Officer Ocasio. The Court relied on basic principles of conspiracy law. It noted that conspiracy has always been a separate offense from the underlying crime. In a conspiracy charge, the crime is the agreement itself – the joint undertaking to engage in criminal activity.

Conspiracy does not require that the co-conspirators successfully commit the crime that is the object of the conspiracy. It does not require that each co-conspirator agree to commit or facilitate each and every element of the underlying crime. In fact, a conspirator may be convicted even if he was legally incapable of committing the underlying offense. Conspirators need only agree to help some member of the conspiracy commit the crime.

In Ocasio’s case, the garage owners conspired with the police officers to help the officers violate the Hobbs Act. The Court held this conspiracy theory was sound even though the garage owners, who were not public officials, would be legally incapable of committing extortion under color of official right: “It is sufficient to prove that the conspirators agreed that the underlying crime be committed by a member of the conspiracy who was capable of committing it. In other words, each conspirator must have specifically intended that some conspirator commit each element of the substantive offense.”

The Mann Act Precedents

The Ocasio Court also discussed Gebardi, as well as an even earlier Mann Act case, United States v. Holte (1915). In Holte the Court rejected the claim that it was impossible for the woman transported across state lines to be guilty of conspiracy to violate the Mann Act. The Court gave an example of a prostitute who buys the train tickets, arranges for the travel, and then crosses state lines with a companion. In such a case, the Court said, there was no reason the woman could not be charged with conspiracy even though the terms of the Mann Act did not cover her conduct.

The Court in Ocasio concluded Holte and Gebardi mean that merely participating in a two-sided transaction will not always be enough to charge the person not covered by the statute  with conspiracy. However, there could be cases where the active participation of the other party would rise to the level where a conspiracy charge would be warranted. Gebardi, the Court held, rejected the conspiracy charge not because it was inherently improper but simply because there was no evidence that the woman in that case had actually joined the conspiracy.

The Court concluded: “Holte and Gebardi make perfectly clear that a person may be convicted of conspiring to commit a substantive offense that he or she cannot personally commit. They also show that when that person’s consent or acquiescence is inherent in the underlying substantive offense, something more than bare consent or acquiescence may be needed to prove that the person was a conspirator.”

Charging Foreign Officials with Conspiracy to Violate the FCPA

Ocasio suggests the current Supreme Court would not agree with the Castle court’s reading of Gebardi. Like the FCPA, the Hobbs Act expressly fails to criminalize the acts of one of the two necessary parties in a criminal transaction. The court in Castle held that this Congressional judgment meant a conspiracy charge would always be improper. But the Supreme Court in Ocasio rejected a similar claim.

Castle essentially concluded that Congress’s failure to include foreign officials in the FCPA immunizes those officials from any FCPA-related charge, even under separate statutes. The current Supreme Court is unlikely to be sympathetic to that argument. If Congress wants to pass a statute prohibiting any charges of any kind against foreign officials who accept bribes, it is free to do so. But the Court is unlikely to infer such a broad policy decision from the silence in the FCPA. It is much more likely to find, as it did with the Hobbs Act, that nothing in the FCPA alters the basic law of conspiracy.

This suggests DOJ could properly charge a foreign official who receives bribes with conspiracy to violate the FCPA. The theory would be that the foreign official conspired to help U.S. persons violate the FCPA by bribing that official. Just as the garage owners in Ocasio conspired to help others extort money from the owners, foreign officials could conspire to help others pay bribes to the foreign officials.

This charge would be most appropriate where the foreign official was aggressively encouraging the bribes. As the Court noted in Ocasio, something more than mere passive participation likely would be required to find the officials guilty of a conspiracy. But if they were actively engaged in the scheme, a conspiracy charge may be warranted.

In a case where the foreign official is aggressively demanding bribes, punishment of the official may be particularly justified. The bribe payers arguably are being “shaken down.” They may feel they have little choice but to pay. Charging only the bribe payers in such a case is akin to charging only the victims of extortion in a Hobbs Act case – it may let the most culpable party off the hook.

Of course, cases where DOJ is interested in prosecuting the foreign official may be relatively rare. Where the official is more of a passive recipient, conspiracy charges may not be warranted. In many cases diplomatic, jurisdictional, evidentiary, or other concerns will counsel against filing charges.

But in appropriate cases, DOJ should consider charging foreign officials who accept bribes with conspiracy to violate the FCPA. Ocasio suggests the Department’s legal position more than twenty-five years ago in Castle was correct: conspiracy is a separate crime and there is no barrier to prosecution.

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Selling Access: President Trump, Corruption, and the Legacy of Bob McDonnell

President Donald Trump took office last week amid a storm of controversy over ethics and potential conflicts of interest. There are widespread concerns about possible corruption in the Trump administration. A key focus has been the Emoluments Clause of the Constitution, which forbids federal officials to accept any payments or gifts from foreign governments. Trump’s extensive international business holdings appear to make violations of that clause almost inevitable. (I wrote last November about the Emoluments Clause and how it relates to bribery; you can find that post here.)

Trump recently did announce some steps to transfer control of his businesses to his sons, although it is unclear to what extent that has actually taken place. The head of the U.S. Office of Government Ethics, Walter Shaub, pronounced these efforts wholly inadequate  – and promptly found himself summoned to Capitol Hill to explain his temerity to a Congressional committee. Then this past Monday a public watchdog group and several prominent law professors filed a lawsuit asking a federal court to rule that the new president is already violating the Emoluments Clause.

But the Emoluments Clause is only one of the conflict of interest issues surrounding President Trump. A related ethical concern is the potential for access to the President and his administration to be used as a bargaining chip in his private business dealings. Businesses or governments could secretly agree to provide benefits to Trump-owned businesses in exchange for a private audience with the President or other Executive Branch officials, where they could lobby for government actions that would benefit them. The breadth of the President’s business holdings — and his refusal to divest himself of those holdings – creates an unprecedented risk of such conflicts.

Trump and his family have already demonstrated what might charitably be called a lack of sensitivity to the ethical issues that surround selling access to the White House. In December a nonprofit where Trump’s sons were registered as directors promoted an inaugural event called “Opening Day,” supposedly to benefit unnamed charities related to conservation. It offered donors of $1 million attendance at a private reception with the President-elect, as well as a four-day hunting or fishing excursion with one of his sons. In another incident, a charitable group ran an on-line auction of an opportunity to have coffee with Trump’s daughter Ivanka. The bidding was above $70,000 before the effort was shut down following media inquiries.

Even though the money from such events may go to charity, the buyer’s motives are not necessarily charitable. For example, the high bidder in the auction for coffee with Ms. Trump told the New York Times that he wanted to urge her to persuade her father not to go too far in restricting immigration. Another bidder hoped to speak to her about the Trump administration’s relationship with the Turkish government.

These efforts to sell access to the President and his family raised ethical red flags for a simple reason: access is valuable. Time on any senior government official’s schedule is a scarce commodity. Those able to meet personally with that official (or his family) have an advantage generally unavailable to ordinary citizens: the ability to directly and privately advocate for their own interests. Attempts to cash in on access to government officials – even for charitable causes – are deemed inappropriate because time with those who are supposed to serve all citizens should not be auctioned off to the highest bidder.

But public charity sales of access are just the tip of the potential ethics iceberg. Of far greater concern are transactions that could take place entirely out of public view. For example, imagine this hypothetical: a foreign company is negotiating some kind of deal with a Trump organization business. The company’s officers make it known that they will offer a sweetheart deal at substantial savings if, in exchange, Trump sets up a meeting for them with the Secretary of Commerce to discuss removing certain import restrictions that apply to the company’s products. (Note that because this hypo involves a private company, not a foreign government, the Emoluments Clause would not apply.)

Trump agrees and the deal goes through. Because it involves two private companies, it is not publicly disclosed. Trump then calls the Secretary of Commerce and says, “These guys are friends of mine, I’d like you to meet with them and hear what they have to say about these import sanctions.” Trump doesn’t tell the Secretary about the art of his deal with the company. He also doesn’t tell the Secretary how to decide the question, but the Secretary is no dummy and can read between the lines to see what would please the boss. The meeting happens, the import restrictions are lifted, both sides are happy, and the country is none the wiser.

Remarkable as it may seem, if such a scheme took place it would not violate federal bribery law. And for that, President Trump can thank the former Governor of Virginia – and the U.S. Supreme Court.

Image of Bob McDonnell, former governor of Virginia, whose case paved the way for corruption in the Trump administration

Access for Sale: McDonnell v. United States

Regular readers know that I’ve written a number of posts about McDonnellhere, here, and here, for example – that provide more details about the case. In brief, former Virginia Governor Robert McDonnell and his wife Maureen were prosecuted for essentially selling access to Virginia government officials. Businessman Jonnie Williams was interested in having Virginia universities conduct research on his company’s dietary supplement Anatabloc. Over a two-year period he gave the McDonnells a variety of personal gifts and loans worth more than $170,000.

In exchange, the McDonnells agreed to help promote Anatabloc within the Virginia government. Governor McDonnell arranged meetings for Williams with various government health officials and researchers so Williams could make his pitch. He also held a product launch event for Anatabloc at the Governor’s mansion, attended by state health officials and other government employees.

The McDonnells were found guilty of multiple counts of corruption following a jury trial, and the Fourth Circuit Court of Appeals unanimously upheld their convictions. But last June the U.S. Supreme Court unanimously reversed, holding that the actions taken by McDonnell on Williams’ behalf were too inconsequential to support a bribery conviction.

The Supreme Court held that simply arranging a meeting, making a phone call, or holding an event did not constitute an “official act” under federal bribery law. An official act, the Court said, requires the public official to take some more substantive steps to resolve a particular question or matter that may be pending before the government, or to pressure another official to do so. Preliminary actions or political courtesies such as arranging a meeting, the Court held, do not rise to that level.

After McDonnell, merely arranging access to government officials may not form the basis of a corruption conviction, even in extreme circumstances. For example, a governor could establish a policy whereby anyone who wanted to meet with a member of his administration had to pay the governor $10,000 to arrange the meeting. Similarly, a company could offer millions of dollars in secret benefits or concessions to a Trump business in exchange for a private dinner with the President or meeting with a Cabinet official. Neither arrangement would violate federal bribery law.

Bribery laws aim to prevent government officials from using their public office to enrich themselves by offering favorable treatment to those willing to pay. Determining whether such a corrupt arrangement exists requires looking at the entire agreement – the quid, the pro, and the quo – and not just focusing on a single side of the equation. The McDonnell decision, through its myopic focus on the meaning of “official act,” effectively took off the table an entire area of public corruption law: the sale of access to government officials.

Image of a bribe taking place - bribery is a key corruption offense

Not All Access is Created Equal

Those familiar with the ways of Washington may observe that access is always up for sale to some extent. It’s just a reality of politics. Large campaign or PAC donors are regularly treated to private events with public officials. For example, large donors to the Presidential Inaugural last week were rewarded with access in the form of a candlelight dinner with Trump and Vice-President Pence at Washington’s Union Station.

This is part of what motivated the Supreme Court in McDonnell. The Court was concerned that if providing access could support a bribery conviction, then many routine interactions with supporters and political courtesies might end up being prosecuted. But again, this mistakenly focuses only on one side of the equation. It’s true that arranging a meeting may be an innocent political courtesy, just as voting on a bill may be a routine political act. But if either is done in direct exchange for a corrupt, secret gift that enriches the politician, that is neither innocent nor routine.

In deciding whether a sale of access might be corrupt, one should consider the whole picture. For example, donations to campaigns take place within a legal framework that generally involves at least some public disclosure and contribution limits. The public is able to see who is supporting the official and to what extent, and to judge the official’s actions accordingly. Sunlight is the best antidote for corruption.

Our current campaign finance system, whatever its flaws, is legal. Contributions made within the framework of that system come with almost a presumption of regularity, and are on a completely different footing from secret, undisclosed gifts. Access may be provided after such contributions, but proving corrupt intent in a case involving lawful contributions will be extremely difficult.

Another distinction is the type of access provided. There’s a big difference between attending a dinner or reception with a few hundred other donors (even by candlelight) and a one-on-one private meeting with an official. The former is more likely to be just a social event where the donors enjoy simply being in the presence of power and perhaps get a chance for a selfie; that is not a setting conducive to corrupt, secret deals.

But the most crucial factor on the quid side of the analysis can be summed up in the immortal words of Watergate’s Deep Throat: follow the money. Campaign contributions go to the campaign, a separate legal entity, as do donations for things such as PACs or Inaugural events. The public official is benefitting indirectly, to be sure, but the support is directed more at the office and campaign and not to line the official’s own pockets.

Contrast this with what Jonnie Williams gave to the McDonnells – secret gifts that enriched the family personally. These were not campaign contributions or other legitimate donations. Rolex watches, New York shopping sprees, and sweetheart loans do not show up on campaign finance reports, are not subject to any legal limits, and personally enrich the official. Unlike routine campaign or PAC contributions, secret gifts to a politician have no legitimate or legally recognized purpose and automatically have the whiff of corruption about them.

The point of all this is simply that it should not be enough to say, “Well, all he did was arrange a meeting, so there can be no corruption.” All of the circumstances surrounding any alleged deal have to be examined. The secret sale of access to public officials causes the exact harm that laws against bribery are intended to prevent: politicians enriching themselves by handing out favors only to those willing to pay. Unfortunately, the McDonnell decision has created a safe harbor for just that kind of corruption.

The Need for Divestiture

Some might suggest this is not a serious problem because there are other potential controls besides the criminal law. For example, the attempts to sell access for charitable causes that I mentioned at the top of this article were exposed and then cancelled. Perhaps the voters and the media can police any such misconduct and shame officials into proper behavior. Ultimately, unhappy voters can always express their displeasure at the ballot box.

But the problem with relying on public pressure and media scrutiny to police such actions is that it assumes full access to information. Most corruption takes place in secret. Although the charitable fundraising efforts were necessarily public, backdoor deals are not. Corruption and conflicts of interest can be very difficult to detect. This is why divestiture of assets that pose a potential conflict is so important: it removes even the possibility of using the power of one’s office to profit off of those assets.

The scenarios outlined here are hypothetical, of course. But the potential for this President to enrich himself and his family through the power of his office is truly extraordinary. With a green light from the Supreme Court, Trump and his family are free to use access to Washington power as a bargaining chip in his private business dealings, taking comfort in the fact that even if their actions come to light, they will not be unlawful.

Yet another way in which the Trump presidency is unprecedented.

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The Emoluments Clause, Bribery, and President Trump

Like a previously unknown contestant on “The Apprentice,” the Emoluments Clause has been catapulted to stardom by Donald Trump. There has probably been more written about this obscure section of the Constitution in the past few weeks than in its entire previous 229-year history. Debate is raging about the meaning of the Emoluments Clause. Many people are saying that president-elect Trump’s foreign business holdings and relationships create a risk — or even a virtual certainty– that he will be embroiled in a constitutional crisis from day one of his presidency.

Some recent commentary has suggested the Emoluments Clause is basically an anti-bribery provision, but this is only partially correct. As a ban on public officials accepting gifts, the clause is indeed related to laws against bribery and conflicts of interest. But the Emoluments Clause differs from bribery in important ways, and those differences have significant implications for President Trump and his new administration.

I should note up front that everyone is sort of flying blind when it comes to the Emoluments Clause. There is basically no precedent concerning the clause and the Supreme Court has never interpreted it. We’ve also never had a president-elect with such extensive foreign business entanglements. For many questions about how the clause would apply to Trump, the most honest answer is, “we’re not entirely sure.” So with that caveat . . . .

What is the meaning of the emoluments clause in the constitution?

What Does the Emoluments Clause Prohibit?

The Emoluments Clause arose out of the framers’ fears about potential foreign influences on their fledgling country. Contained in Article I, Section 9, Clause 8 of the Constitution, it provides:

No Title of Nobility shall be granted by the United States; And no Person holding any Office of Profit or Trust under them, shall, without the Consent of Congress, accept of any present, Emolument, Office, or Title, of any kind whatsoever, from any King, Prince, or foreign State.

No one is concerned about Trump being granted an office or title from a foreign government, and no one is particularly worried about him receiving presents from Kings or Princes. The most relevant prohibitions are on the receipt of any “present” or “emolument” from a “foreign state.” An emolument is generally defined as a profit, fee, or compensation arising from an office or employment. “Present” presumably has its ordinary meaning of a gift, or something freely given without any strings attached.

Simply put, then, the clause prohibits government officials from accepting gifts or payments from a foreign government.

How Is the Emoluments Clause Related to Bribery?

The crime of bribery requires a quid pro quo. In exchange for something of value, a public official agrees to be influenced in the exercise of the powers of his or her office. Bribery is the quintessential corruption offense; the political process is corrupted because the public official acts not for the good of all but to benefit the person who is paying off the official.

In an op-ed in the New York Times, Professor Zephyr Teachout recently wrote that the Emoluments Clause is “essentially an anti-bribery rule.” Commentators at NPR and The New Republic have said the same thing. But this is not entirely accurate. When it comes to gifts from foreign states, the Emoluments Clause actually is far more sweeping than bribery because it does not require a quid pro quo. Even if the term “emolument” is read to imply compensation in exchange for a particular service (which is far from clear), the term “present” is far broader and contains no such implication.

Unlike bribery, the Emoluments Clause does not require that the public official agree to do anything in exchange for the gift. It doesn’t even require that the gift be linked to some particular official act, as does the federal gratuities statute. In this sense the Emoluments Clause is more akin to a simple gift ban, similar to those contained in most codes of ethics for government employees. It appears to guard against not only actual influence of public officials, as would occur with a bribe, but also the mere appearance of potential influence or divided loyalties that could be created by even a gift.

For a gift from a foreign government to constitute a bribe, President Trump would need to agree to perform some official act or be influenced in the exercise of his powers in exchange. But if a foreign government gave the President a present simply out of admiration, or out of hope that it might curry favor with the President, that would violate the Emoluments Clause even though it would not be a bribe.

In another sense, bribery is broader than the Emoluments Clause because it applies to private parties, not just to foreign states. So if a private foreign corporation or individual gave the President a gift in exchange for some exercise of his official power, that would be a bribe even though it would not violate the Emoluments Clause.

In short, there are many violations of the Emoluments Clause that would not be bribes, and many bribes that would not violate the Emoluments Clause.

Does the Emoluments Clause Apply to the President?

It’s not 100% clear – unlike some provisions of the Constitution, the clause does not specifically name the President and refers only to those holding an “office of profit or trust” under the United States. At least one commentator, Seth Tillman of Maynooth University in Ireland, argues that this and other historical clues suggest the clause was not intended to apply to the President.

But this appears to be a minority view. An “office of profit or trust” under the United States would logically seem to include the presidency. It would be quite strange if the framers did not intend the ban on potential foreign influence to extend to the highest office in the land, where such influences could potentially do the most damage.

Adam Liptak recently wrote in the New York Times about how a newly-elected President Obama sought legal advice from the Department of Justice concerning whether he could accept the Nobel Peace Prize without violating the Emoluments Clause. The DOJ Office of Legal Counsel, in its written opinion, considered it beyond debate that the presidency was “surely” an office of profit or trust under the United States. That seems correct.

bribery

Does Bribery Apply to the President?

Yes. Trump made headlines last week when he told the New York Times that “the President can’t have a conflict of interest.” Federal criminal statutes related to conflicts of interest are contained in the 200-series of Title 18. It’s true that 18 U.S.C. § 202(c)  provides that a number of those laws – including the primary conflict of interest law, 18 U.S.C. § 208, prohibiting acts “affecting a personal financial interest” – do not apply to the President.

But this does not mean it is impossible for a President to have a conflict of interest. Hopefully Trump does not really believe he is free to pursue federal policies designed to benefit his personal financial interests. The universe of concerns about conflicts of interest is not encompassed by the federal criminal code; simply because something may not be a felony does not make it appropriate Presidential behavior. Indeed, the Emoluments Clause itself is plainly animated by a desire to avoid even a perception of potential conflicts of interest.

In any event, unlike the conflict of interest statutes, the President is not exempted from the federal bribery statute, 18 U.S.C. § 201. That law applies to any “officer or employee or person acting for or on behalf of the United States,” which certainly includes the President.

donald_trump_27484786540

How Could Trump Violate the Emoluments Clause?

Trump has numerous overseas business ventures and properties, as well as business relationships with many foreign entities. Once he is President, any business transaction with a foreign government that is anything less than completely arms-length could potentially violate the clause. If a foreign government gave him a sweetheart deal on a particular project, or purchased assets or paid rent at above-market rates, or pressured state-owned banks to give Trump favorable loan terms, those could be considered gifts or emoluments. A foreign government could also grant permits or approvals for Trump projects on more favorable terms or cancel investigations related to Trump deals, all of which could be considered financial benefits to Trump.

Some have suggested that even at fair market rates, any foreign government transaction with a Trump business — such as diplomats staying at the new Trump hotel in D.C. — would be payment for a service and therefore a prohibited emolument.

But there are a number of potential qualifications and loopholes. First, the clause only prohibits gifts from a “foreign state,” so gifts from a foreign private corporation would not violate the clause. Presumably a number of Trump’s overseas deals are with private companies and not with governments. (This is why President Obama ultimately was able to accept the Nobel Peace Prize money – the Department of Justice concluded that the prize was coming from a private organization, the Nobel Committee, that was sufficiently independent from the Norwegian government.)

A factual issue could arise concerning whether foreign corporations that are government owned or controlled would be treated as a foreign state for purposes of the clause. The answer should be yes if the clause is not to be completely undermined. (An analogous issue arises under laws such as the Foreign Corrupt Practices Act, where employees of state-controlled private corporations are often deemed to be “foreign officials.”) As Liptak reported, in the opinion for President Obama the Department of Justice noted it believes that corporations owned or controlled by a foreign government are presumptively foreign states for purposes of the Emoluments Clause. Whether this was true in any particular case would likely depend on the degree of state control.

Another issue could arise if a gift was given to the Trump Organization rather than to President Trump personally. Because corporations are generally considered distinct “persons” under the law, a gift to Trump’s corporation might not be considered a gift to the President. But because it is a privately-held corporation, arguably even a gift to the corporation should be deemed a gift to Trump. Some commentators recently argued that gifts to the Clinton Foundation should be considered gifts to Hillary Clinton for purposes of the Emoluments Clause – presumably the same analysis would apply to gifts to the Trump Organization.

A separate question could arise if the present was given to one of the Trump children, or one of their businesses. Assuming they are not holding an office in the new administration, such a gift would appear not to violate the clause. But particularly given the important role Trump’s family seems to play in his administration, the underlying concerns about outside influences and conflicts of interest would certainly still be present. This would seem to violate the spirit of the clause, if not the letter.

Finally, it appears that Congress could simply give Trump a pass on all of this. The Emoluments Clause provides that presents or emoluments may not be accepted “without the consent of Congress.” That suggests Congress could pass some kind of blanket permission for President Trump to pursue his businesses without worrying about the clause. How something like that would play politically would be another matter.

What Is the Remedy for a Violation of the Emoluments Clause?

There’s probably a reason there are no court cases interpreting the Emoluments Clause: most commentators think it is non-justiciable. In other words, no one would have standing to bring a lawsuit and a court would not be able to fashion a workable remedy. As Professor Jonathan Adler noted in the Volokh Conspiracy blog, if the clause is violated “the only remedies will be political.”

Political remedies include elections. If voters are upset by President Trump’s foreign entanglements they could toss him out of office in four years. Political remedies could also include hearings on Capitol Hill. Congress could issue sternly-worded resolutions of disapproval that Trump could dismiss with a Tweet storm. Congress presumably could pass legislation that would impose some restrictions consistent with the clause, although enforcing it would again be problematic.

Or political remedies could include impeachment.

Is Violating the Emoluments Clause an Impeachable Offense?

The Impeachment Clause, Article II, Section 4 of the Constitution, provides:

The President, Vice President and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.

Although it’s not a crime, a violation of the Emoluments Clause most likely is an impeachable offense. The phrase “high crimes and misdemeanors” is generally understood to refer not to criminal law but to political violations and misconduct related to public office. Impeachment is a political process, not a criminal one. As Hamilton wrote in The Federalist No. 65, impeachable offenses “proceed from the misconduct of public men . . . from the abuse or violation of some public trust.”

That being said, the meaning of the phrase “high crimes and misdemeanors” is not completely settled. There was a lot of debate about it during the impeachment of President Bill Clinton. Clinton’s lawyers argued that “high crimes and misdemeanors” meant misconduct related to the exercise of public office. They maintained that Clinton’s behavior in his personal life did not meet that standard. Congress, of course, ultimately disagreed.

But a violation of the Emoluments Clause would be directly related to the exercise of Trump’s public office and his abuse of that trust. As such it should qualify as a “high crime or misdemeanor.” It would be strange indeed if the framers included the prohibition against emoluments but contemplated no possible remedy for its violation. The most logical remedy is impeachment.

And in the end, as then-Congressman Gerald Ford famously remarked, “An impeachable offense is whatever a majority of the House of Representatives considers it to be at a given moment in history.” If Congress were to conclude that a violation of the Emoluments Clause was (or was not) an impeachable offense, there would be no real way to challenge that conclusion.

What Would Be the Remedy if Trump Committed Bribery?

If President Trump were to violate federal bribery law, the issue again would be the proper remedy. Whether or not a sitting President can be indicted is another question that was debated during the Bill Clinton investigation and has never been fully resolved. The Supreme Court did rule in the Paula Jones case, Clinton v. Jonesthat a President is not immune from civil litigation based on events that took place before he took office, but that is a different matter.

Indicting a sitting President raises far thornier issues. How would the President’s own Justice Department and Attorney General prosecute a criminal case against the President? Could the federal courts hear such a case without violating the separation of powers? What if a sitting President were convicted and sent to prison while still in office? And could a convicted President Trump pardon himself?

For all of these reasons, the better view is probably that a sitting President cannot be indicted for a crime. (This is also the official position of the Department of Justice.) The appropriate remedy for a President who commits criminal acts would once again be the impeachment process. In fact the Impeachment Clause (quoted above) specifically lists bribery as one of the grounds for impeachment.

If a President were impeached for bribery and removed from office, then presumably criminal bribery charges could be pursued against him or her as a private citizen. Article I, Section 3, Clause 7 of the Constitution provides that after removal by impeachment an official “shall nevertheless be liable and subject to Indictment, Trial, Judgment and Punishment, according to Law.” But again, we are in uncharted waters.

Bottom Line – The Meaning of the Emoluments Clause

The Emoluments Clause is far more sweeping than the laws against bribery, at least when it comes to gifts from foreign governments. Almost any transaction involving Trump businesses and a foreign state or state-controlled entity is going to raise questions about whether any improper emolument was involved, even if Trump did not agree to do anything in return.

For any violation of either bribery law or the Emoluments Clause, the likely remedy is impeachment, not a lawsuit or criminal charges. And for those who believe a Republican Congress would never impeach a Republican President, bear in mind that if Trump were removed from office that would leave us with: President Pence.

That might be an outcome many Republicans would find very desirable.

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DOJ Doubles Down on the FIFA Indictment

This past May the U.S. Department of Justice stunned the international sports world by unveiling a 161 page, 47 count federal indictment charging widespread corruption within the Federation Internationale de Football Association (FIFA), the global soccer organization. Last week, DOJ made it clear that the May indictment was merely the tip of the FIFA corruption iceberg.

The original indictment charged fourteen defendants: nine current and former FIFA officials, four sports marketing executives, and one intermediary. (I wrote about that indictment in a post you can find here.) Now a superseding indictment, unsealed last week, has added sixteen additional FIFA defendants and has nearly doubled the number of charges: the new indictment runs 236 pages and contains 92 felony counts. (The DOJ press release and a link to the superseding indictment can be found here.)

A superseding indictment, as the name implies, replaces the original indictment in a case that is already pending. It generally means the grand jury has continued to investigate and has voted to add additional charges, additional defendants, or — as in this case — both.

The fundamental nature of the case remains the same: senior FIFA officials and officials within FIFA’s constituent organizations are alleged to have accepted more than $200 million in bribes and kickbacks in exchange for being influenced in awarding lucrative sports marketing contracts, rigging FIFA elections, agreeing to participate in certain competitions, and awarding the right to host soccer’s premier event, the World Cup.

When the superseding indictment was unsealed, DOJ also announced that eight additional defendants have pleaded guilty since the first indictment, bringing the total number of known guilty pleas to fourteen. Three of the eight – Jeffrey Webb, a former senior FIFA official; Alejandro Burzaco, former manager of an Argentinian sports marketing company; and José Marguilies, who acted as an intermediary for bribe payments – were among the fourteen defendants charged in the original indictment. Due to their pleas, they are not charged in the superseding indictment. The remaining five new guilty pleas came from FIFA officials and sports executives who waived indictment and pleaded guilty under seal.

The sixteen new defendants thus join the eleven remaining original defendants in the superseding indictment. Although the basic nature of the allegations is unchanged, the superseding indictment against the (now) twenty-seven defendants dramatically expands the universe of charges, including not only charges against the new defendants but also additional charges against the original defendants.

The FIFA superseding indictment greatly expands the conspiracy case

The Structure of the FIFA Superseding Indictment

Despite its length, the superseding indictment, like the original, consists almost entirely of three types of charges:

  • The Racketeer Influenced and Corrupt Organizations Act (RICO)
  • Money laundering and money laundering conspiracy
  • Wire fraud and wire fraud conspiracy

A massive RICO conspiracy lasting for more than twenty years continues to be the heart of the indictment. RICO is the statutory glue that allows the many different corruption schemes and far-flung defendants to be joined together in a single prosecution.

RICO requires that the defendants conducted of the affairs of an “enterprise” through a pattern of racketeering activity. As in the original indictment, the government charges that FIFA, its six continental confederate organizations, and other soccer organizations and sports marketing companies together constitute a single RICO enterprise, bound together by the common purpose and goal of promoting soccer worldwide. Because FIFA soccer organizations are present in more than 200 countries and territories around the world, this RICO enterprise is undoubtedly one of the most sweeping ever charged.

The alleged enterprise includes all six of FIFA’s continental confederate organizations, including those governing soccer in Asia, Africa and Europe. Almost all of the alleged corruption, however, relates to officials and events in only two of those organizations: CONCACAF, the confederation covering North and Central America and the Caribbean; and CONMEBOL, the confederation covering South America. (The United States Soccer Federation is a member of CONCACAF.)

To establish the required “pattern of racketeering activity,” the indictment alleges a series of different corruption schemes involving various soccer tournaments, different sports marketing and media agreements, and events such as the selection of the host city for the World Cup. The original indictment charged twelve such schemes. The superseding indictment has expanded one of those schemes and added three new ones, for a total of fifteen.

The individual criminal schemes are charged using two principal statutes: wire fraud and money laundering. The essence of each scheme is a series of bribes and/or kickbacks involving FIFA officials or officials from FIFA member organizations, along with financial transactions designed to facilitate or disguise the payments. Most of the alleged bribes were paid by individuals (a number of whom have been indicted or have pleaded guilty) seeking lucrative contracts for soccer media and marketing rights or to have certain countries participate in tournaments they were promoting.

To charge bribery and kickbacks the indictment uses honest services wire fraud, charging that various officials violated the duty of honest services they owed to FIFA and its member organizations. (For a more detailed analysis of the use of honest services fraud to charge bribery, see my posts here and here.)

The money laundering charges stem from financial transactions, many of them international wire transfers, used to facilitate the bribe payments and/or to conceal those payments. The defendants are accused of using various intermediaries, secret bank accounts, shell companies, and other methods to disguise the nature, source and ownership of the funds involved in various bribery transactions. They are also charged with transmitting funds across the U.S. border in order to promote their criminal activity, a form of international money laundering.

Following the overarching RICO conspiracy charge that encompasses all defendants, the great bulk of the indictment consists of a series of wire fraud and money laundering charges related to each of the fifteen different schemes in turn. Each of these schemes involves a different set of corruption allegations and a different combination of defendants. There are also a handful of additional charges, including tax fraud and obstruction of justice, that apply to only a couple of the defendants.

soccer balls

What’s New in the Superseding Indictment

The most significant change in the superseding indictment is, of course, the addition of the sixteen new defendants. All of the new defendants are current or former FIFA or FIFA-affiliated officials, seven from CONCACAF and nine from CONMEBOL.

The superseding indictment answers a lot of questions that were raised by the original charges in May. That first indictment included many allegations that described the criminal acts of anonymous individuals identified only by number, as in “co-conspirator #1” and “co-conspirator #2.” The superseding indictment includes many of those same allegations, but with formerly anonymous co-conspirators now identified as among the new defendants. As a result, a fuller picture of many of the corruption allegations has started to emerge.

The other significant change is the addition of three entirely new corruption schemes and the expansion of a fourth. One new scheme, titled “CONMEBOL Copa Libertadores Scheme #2,” charges a number of CONMEBOL officials with accepting millions of dollars in bribes over more than a decade in connection with selling the broadcast rights to a popular South American soccer tournament. A second, titled the “UNCAF Region Friendlies Scheme,” alleges that FIFA officials in El Salvador, Guatemala, Costa Rica and elsewhere accepted bribes in exchange for agreeing to participate in various “friendlies” soccer matches organized by private promoters. (UNCAF is a regional federation within CONCACAF that includes the soccer organizations of countries in Central America.)

The third new scheme, the “CONCACAF Media and Marketing Rights Scheme,” charges that several CONCACAF officials accepted hundreds of thousands of dollars in bribes in connection with an unsuccessful attempt to influence the sale of the media marketing rights to CONCACAF tournaments. It also alleges that various conspirators — including current FIFA vice president and CONCACAF president Alfredo Hawit — obstructed justice in July 2015, following the first indictment, by creating phony contracts and other documents to attempt to conceal their participation in this scheme.

Finally, the superseding indictment greatly expands the allegations in a scheme contained the original indictment titled the “UNCAF Region World Cup Qualifiers Scheme.” The scheme alleges that soccer officials from nearly every country in Central America solicited and accepted hundreds of thousands of dollars in bribes in connection with the sale of the media rights to their country’s World Cup qualifying matches.

The Nature of the Case and What to Watch Going Forward

The superseding indictment seems to take great pains to describe the effect of the FIFA corruption scheme on the United States. As did the original indictment, it stresses that a number of financial transactions related to the bribe payments were routed through U.S. banks. A number of the new charges also emphasize how some soccer matches in tournaments that were the subject of various bribe schemes were played in the U.S., or how the U.S. media market made up a significant portion of some media rights that were the subject of bribes, or how some bribes were actually paid within the U.S. These details may help address questions that have been raised over whether the United States was really the appropriate place to prosecute a massive corruption scheme in which the overwhelming majority of criminal acts took place in other countries.

The heart of the case remains bribery, on a massive and worldwide scale. The “victims” in a bribery case often do not suffer any identifiable economic damages. For example, if a Congressman takes a bribe in exchange for awarding a defense contract, the money for the bribe comes not from the Congressman’s constituents but from the bribe payer. The constituents are harmed not by losing money but in a more intangible way: by losing their right to the fair, honest, and unbiased services of the person elected to represent them. The harm is more diffuse; the damage is the corruption of the system, not a direct monetary loss as in a fraud case.

Similarly, in the FIFA case, the principal harm is the deprivation of the right of various FIFA member organizations and individuals to the honest and impartial services of the FIFA defendants who were supposed to represent their interests, and the resultant corruption of the entire FIFA decision-making process. The indictment does suggest other types of harm as well; for example, the wire fraud allegations claim that the defendants deprived their victims not only of the intangible right to honest services (the bribery allegation) but also of tangible money or property. But how this deprivation of money or property allegedly took place is never spelled out, and it appears that honest services fraud is definitely the primary theory.

There is one very interesting paragraph in the superseding indictment that did not appear in the original. It appears in the description of the racketeering conspiracy and is titled “Embezzlement and Misappropriation.” It alleges that “The conspirators’ corruption of the enterprise extended beyond the payment and receipt of bribes and kickbacks,” and notes that FIFA maintained hundreds of millions of dollars in various programs intended to benefit its member organizations, including youth leagues. It further alleges that certain defendants, including former CONCACAF executives Jack Warner and Jeffrey Webb, embezzled or otherwise misappropriated some of these funds, “including funds intended for natural disaster relief.”  News reports suggest this last clause refers to alleged embezzlement of funds intended to aid the victims of the 2010 earthquake in Haiti.

But after unveiling this tantalizing new allegation, the indictment provides no further detail and no specific charges related to this embezzlement. The DOJ press release concerning the superseding indictment does not mention embezzlement at all. We will have to await further developments to learn more details about any such misappropriation of FIFA funds, whether related to natural disaster relief or otherwise. Webb has already pleaded guilty and may well be a key source of this information for the prosecution.

The defendants who have pleaded guilty have agreed to forfeit more than $40 million, and DOJ is seeking tens of millions more in forfeiture. Typically, forfeited proceeds would go to the U.S. treasury, but this case is a bit unusual because the U.S. and its citizens are not the primary victims of most of the alleged misconduct. The DOJ press release notes that all forfeited money is being held in reserve so it can be used to satisfy any future orders of restitution entered at sentencing, “for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.” This could mean that some of the forfeited money ends up being distributed to the soccer organizations outside the U.S. whose officials were involved in the corruption.

The eight additional guilty pleas that DOJ announced last week are significant. Most, if not all, of these defendants are likely cooperating in the ongoing investigation, providing DOJ with information and testimony that will allow it to pursue the corruption allegations even further.

But in terms of the future of the investigation, the most significant thing to note about the superseding indictment is that it contains references to another 24 still unnamed and unidentified co-conspirators. That means there are at least two dozen more potential defendants out there – some of whom likely have already pleaded guilty under seal and are cooperating as the grand jury investigation continues.

And that means when it comes to FIFA corruption, the Department of Justice is just getting warmed up.

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