Fifth Circuit Decides Government Appeal in FCPA and Money Laundering Case
On February 8, 2023, the Fifth Circuit reversed a trial court’s dismissal of a criminal indictment charging two defendants with Foreign Corrupt Practices Act and money laundering violations. Although clearly a government victory, the case leaves open several issues relevant to FCPA prosecutions and international criminal investigations more generally and highlights important differences between criminal and civil advocacy.
In 2019, a grand jury in the Southern District of Texas returned an indictment charging Daisy Teresa Rafoi Bleuler (“Rafoi”), Paulo Jorge Da Costa Caquiero Murta (“Murta”) (collectively “the defendants”), and others with conspiring to violate the FCPA, conspiring to commit money laundering, and substantive money laundering charges. The indictment was based on an alleged scheme to solicit bribes from companies that did business with Venezuela’s state-owned oil company and stated that Rafoi and Murta, who worked at Swiss wealth management firms, assisted in laundering the proceeds of that scheme.
As a basis for the FCPA conspiracy charge, the government relied on an FCPA provision prohibiting “agents” of “domestic concern[s]” from bribing foreign officials,1 and, alternatively, on an FCPA provision making it unlawful for “person[s]” “in the territory of the United States” to “use . . . the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of” a scheme to bribe foreign officials.2
The district court granted both defendants’ motions to dismiss the indictment and granted Murta’s motion to suppress statements he had made to Portuguese authorities, who interviewed him at the request of U.S. authorities prior to his indictment.
After getting the required consent of the Solicitor General, the government appealed
The Fifth Circuit’s Decision
The Fifth Circuit’s opinion reinstated the indictment and reversed the grant of the suppression motion. The decision contains several points of interest related to the FCPA and money laundering and to advocacy in the criminal context more generally.
Sufficiency of FCPA allegations as “enumerated actors” The Court’s held that the indictment sufficiently alleged that the defendants had conspired to violate the FCPA. First, the Court held indictment sufficiently pled the defendants were liable as “enumerated actors,” i.e., as falling in the categories of defendants specifically mentioned in the FCPA, in both defendants’ cases as “agents” of a “domestic concern,” see 15 U.S.C. § 78dd-2, and in Murta’s case as someone who committed an FCPA violation “while in the territory of the United States,” see 15 U.S.C. § 78dd-3.
In addition, the Court rejected the argument that the term “agent,” which is not defined in the FCPA, was unconstitutionally vague. The Court held that, even if "governed by its common law meaning,” “a person of common intelligence would have understood that Defendants, allegedly setting up accounts on behalf of others to obfuscate” funds derived from an alleged bribery scheme," "were treading close to a reasonably-defined line of illegality” under an agency theory.
The Court’s holdings here were grounded in the low bar for the sufficiency of an indictment. While a civil complaint must state “plausible” allegations with sufficient factual detail under the now-familiar Twombly/Iqbal standard, the Fifth Circuit noted that a criminal indictment will survive a motion to dismiss as long as “each count contains the essential elements of the offense charged, the elements are described with particularity, and the charge is specific enough to protect the defendant against a subsequent prosecution for the same offense.” Moreover, the court explained that a defendant cannot challenge an indictment “on the ground that the allegations are not supported by adequate evidence”; instead the proper forum for such a challenge is a “trial of the charge on the merits.”
Left Open Issue of Whether One Could Violate the FCPA By “Conspiring with an enumerated actor.” In light of its holding that the indictment sufficiently alleged the defendants were “enumerated actors,” the Court declined to reach, and in a footnote, expressly left open, the issue of whether the defendants could also be liable under the FCPA for “conspiring” with an agent of a domestic concern. In doing so, the Fifth Circuit avoided a potential circuit split with the Second Circuit which had held that a person could not be “guilty as an accomplice or a co-conspirator for an FCPA crime that he or she is incapable of committing as a principal[.]” United States v. Hoskins, 902 F.3d 69, 76 (2d Cir. 2018) (“Hoskins I”). Notably, the Justice Department’s official “Resource Guide to the U.S. Foreign Corrupt Practices Act” indicates that DOJ views Hoskins’ holding as limited to the Second Circuit and not binding on DOJ elsewhere. See Resource Guide at 36.
Analysis of Money Laundering Charges. The Court also rejected the defendants’ argument that the money laundering charges brought by the government required a showing that the defendants’ committed the offense while they were physically present in the United States. Critical to the Court’s decision was the fact that the money laundering statute, 18 U.S.C. § 1956, explicitly contains an extraterritorial jurisdiction provision, which allows for prosecution when the “the conduct occurs in part in the United States,” 18 U.S.C § 1956(f)(1). Again, the Court deferred heavily towards the plain language of the indictment, noting “whether there is proof that Defendants did, in fact, engage in conduct that took place in part in the United States [even if they were not physically present] is surely a fair subject for a trial defense. But for now, the allegations that Defendants engaged in conduct that occurred in part in the Southern District of Texas satisfy the money- laundering statute’s extraterritorial provision.”
Tolling Provision. In a matter of first impression, the Court also addressed the scope of 18 U.S.C. § 3922, a provision that allows for the tolling of the statute of limitations, for up to three years, if (1) the government applies for tolling, (2) the application must be “filed before return of an indictment,” and (3) the court must find by a preponderance of the evidence both that (a) “an official request has been made” for foreign evidence and (b) “it reasonably appears” that such evidence is or was in that foreign nation. 18 U.S.C. § 3292. The Court concluded that the “before the return of the indictment” language is “most naturally read” to refer to an indictment charging the defendant in question, and not prior indictments arising out of the same investigation. Notably, the Court did not reach the other factors, in particular the showing that the government must make to establish that the evidence “reasonably appears” to be located in a foreign nation.
Suppression ruling. Finally, the Fifth Circuit also reversed the trial court’s suppression of statements that defendant Murta made to Portuguese authorities during an interview prior to indictment. While Murta was not given Miranda warnings prior to his interview, the Fifth Circuit noted that Miranda warnings are required only when a person is subject to “custodial interrogation.” In a highly fact-specific analysis, the Fifth Circuit concluded that that Murta was not, in fact, subject to a “custodial interrogation,” because the restrictions on his freedom of movement during the interview were not akin to being arrested and that the setting of the interview did not resemble the “stationhouse environment” found to be coercive in Miranda.
- The Court’s decision highlights the importance of both pre-charge advocacy and trial advocacy in criminal cases. Unlike in a civil action, whether dispositive motions may be filed before trial, and often are successful, motions to dismiss in criminal cases face a steep uphill battle, given the deference courts afford to a facially valid indictment. A criminal defendant’s only real chances to contest the factual allegations against him or her are (i) through pre-charge advocacy, intended to convince the government not to bring a case, or (ii) at trial.
- The Court’s decision expressly leaves open the question of whether one who is not an “enumerated actor” can still be liable under the FCPA for conspiring with an enumerated actor. As noted above, the Second Circuit has rejected this theory, although the Fifth Circuit expressly leaves it open in Rafoi.
- The Court’s suppression ruling highlights the risks that potential defendants face when speaking to government authorities---even non-U.S. government authorities---at any time, even before charges are filed. Any meeting with governmental authorities should be treated as “on the record” and the subject of thorough preparation for the client and counsel.
1 See 15 U.S.C. § 78dd-2.
2See 15 U.S.C. § 78dd-3.
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