Are Money Laundering Laws DOJ's Tools in Expanding Reach of FCPA?
The National Law Journal
Over the past five years, the U.S. Department of Justice has pushed anti-bribery investigations and prosecutions to dominate global law enforcement's focus. The explosion of anti-bribery actions from 2007 to 2010 was characterized by large corporate financial settlements and very few challenges to DOJ's authority. The second generation of these cases, however, has demonstrated weaknesses in DOJ's enforcement of the archaic Foreign Corrupt Practices Act (FCPA). DOJ appears undeterred nonetheless and has recently turned to the U.S. money laundering laws to circumvent the FCPA's substantive and legislative limitations and expand its jurisdictional reach.
The current prosecution of Juthamas Siriwan, the former governor of the Tourism Authority of Thailand, and her daughter, Jettisopa Siriwan, for supposed money laundering violations is a perfect example of DOJ's recent strategy. The Siriwan case is the progeny of the 2009 conviction of Gerald and Patricia Green for violating the FCPA by making payments to Juthamas Siriwan by wire transfer to accounts in her daughter's name. From 2002 to 2007, the Greens paid Siriwan more than $1.8 million in exchange for more than $14 million in tourism contracts. After the Greens' convictions, DOJ did what it consistently does in FCPA investigationsit followed the trail of the Greens' bribes and filed charges against others involved in the bribery scheme. But what is surprising about the Green follow-up investigation/prosecution is that DOJ turned its focus to Juthamas Siriwan, a foreign public official.
Foreign public officials are exempt from FCPA prosecution, yet their prosecution by the government is the latest attempt by DOJ to stretch the bounds of its self-anointed global anti-corruption authority. In Siriwan, DOJ charged the former governor even though her alleged acceptance of bribes is plainly excepted from the FCPA's subject matter jurisdiction. This limitation is not only a well-settled tenet of FCPA jurisdiction; it is also part of a long-standing public policy of respecting sovereign nations' right to deal with its own public officials. After all, the United States does not want other countries prosecuting U.S. officials.
To get around these limitations, DOJ decided to charge Juthamas Siriwan with money laundering violations. Siriwan moved to dismiss the indictment. At a January 30, 2012, hearing on Siriwan's motion, District Judge George Wu challenged DOJ's ability to charge money launderingwhich requires an underlying crime or "specified unlawful activity"when the specified unlawful activity is a crime that necessarily cannot be brought against the defendant (in this case, because Siriwan is a foreign public official).
In opposition, DOJ essentially denied that its case arose from the FCPA at all; rather, the heart of its prosecution, it argued doggedly at the January 30 hearing, is the purported "misuse of [the] United States financial system" and the specified unlawful activity "is the use of the financial system to send that kickback money out." As part of the underlying bribery scheme, the Thai tourism authority purportedly sent funds to the Greens in exchange for tourism-related services; the Greens then wired a portion of the funds as kickbacks from U.S. banks and off this country's shores to Siriwan, through her daughter, to banks in the Isle of Jersey, Singapore and the United Kingdom. Because the bribery payments originated at U.S. banks, and Siriwan instructed the Greens as to where the payments should be sent, DOJ has contended, Siriwan did not trespass the FCPA but insteadonce the bribe purportedly was, as a matter of law, said and doneviolated the U.S. money laundering laws, simply by receiving money.
Wu was not convinced by the government's argument and noted with some amazement that under DOJ's prosecution philosophy, the money laundering laws would result in higher penalties for the bribe-accepting and FCPA-exempt government officials (20-year maximum sentence) than are provided in the FCPA (five -year maximum): "I understand that you are not charging bribery. You're trying to get around charging bribery by saying that it's all right if you engage in the bribe so long as you don't have the money go to you through a banking system that goes from this country to a foreign country. Once it does that, then you're subject to even greater penalties."
DOJ's claim that it did not charge Siriwan with bribery, while technically correct, is difficult to believe. In the indictment, DOJ clearly portrayed the case as an anti-bribery prosecution. The first paragraph of the indictment offers an overview of the FCPA, and the following 13 paragraphs focus on Siriwan's role in the Greens' bribery scheme. Even Siriwan's alleged manipulation of the U.S. financial system, which, according to DOJ, is evidenced by her request of the Greens for payment by wire transfer, is a classic example of bribery. Whatever impact the former governor's requests may have had on the U.S. financial system does not make the conduct any "less bribery." And the fact that Siriwan specified what at best amounts to a preferred method of payment does not somehow transform what in substance is bribery to an act of control over the U.S. financial system.
In the same vein, the notion that DOJ alleged a sufficient specified unlawful activity basis for its money laundering charge cannot withstand scrutiny. The fact alone that the requested payments originated in the United States fails to provide a nexus between the United States and Siriwan's own intentional acts to support the charge. What if, hypothetically, the governor had communicated with the Greens by telephone to request a cash payment in a briefcase? What if the cash had traveled from the United States by airplane and the deliverer violated some U.S. banking law in the process of obtaining and carrying the funds? And what if, in response to Siriwan's requests, the Greens wired funds from an account held at a U.S. bank outside the United States? These examples are no less troubling than the idea that simply because the bribery funds were wired from the United States, Siriwan is somehow guilty of U.S. money laundering. The fact is, in each instance, Siriwan would have no direct influence over the U.S. financial system.
At the end of the January 30 hearing, Wu questioned the United States' interest in the case since the funds subject to forfeiture originated in Thailand, and he deferred ruling on the viability of DOJ's charge until Thailand decides whether to honor DOJ's request to extradite Siriwan. Whether DOJ's legal arguments are ultimately found by Wu to meet the legal elements of money laundering (assuming Wu even has to make that call, in the event extradition succeeds) should be a secondary concern to the court. DOJ often attempts to stretch its authority beyond what Congress intended. The use of the money laundering laws to backdoor the FCPA is an example, and courts should be hesitant to allow DOJ to, in essence, make new laws. A ruling by Wu dismissing the indictment would force DOJ to work with Congress to draft and pass long-overdue amendments to the FCPA that would allow corporations and individuals to know what the law provides instead of relying on DOJ's evolving interpretations.
Without strong court action, charging individuals considered to be "foreign public officials" with money laundering violations to extend DOJ's prosecution of FCPA violators will continue. It is up to the defense bar to raise the challenges identified by Siriwan and highlighted by Wu in Siriwan. Just this past February, Jean Duperval, a Haitian telecom official, was convicted by a jury in Miami for money laundering under the same theory raised by DOJ in the Siriwan indictment. Unfortunately, Duperval did not raise any of the issues identified in Siriwanhe did not challenge DOJ's use of the money laundering laws to circumvent FCPA limitations, the appropriateness of the United States prosecuting the case instead of Haiti, and using money laundering to charge higher penalties than the underlying corruption offense. DOJ's victory in the Duperval case may give DOJ a false sense of satisfaction and embolden its use of money laundering to charge what are in substance nonactionable FCPA violations.
Likewise, the term "public official" has been broadly construed by DOJ to enable it to charge corporations under the FCPA. In the end, the FCPA does not prohibit commercial briberylike the United Kingdom's Anti-Bribery Act of 2010only foreign public corruption, and we may soon see DOJ using the broad "public official" definition to charge many individuals, including doctors and lawyers, that may not consider themselves government officials. DOJ has not forgotten these individuals and some may be within DOJ's reach. Even if they aren't, Siriwan and Duperval suggest that DOJ may begin using money-laundering charges to go after FCPA-exempt individuals for FCPA crimes. The immediate lesson of Siriwan is that these individuals are at least not without some defense.
Stay tunedthe next hearing in Siriwan is set for November 29.
William V. Roppolo is a partner at Baker & McKenzie in Miami whose practice focuses on defending multinational corporations and individuals caught up in the expanding U.S. regulatory framework. Joseph Mamounas is an associate in that office. His litigation practice focuses on international arbitration, white-collar criminal defense and complex commercial matters.
This article originally appeared in The National Law Journal.