WASHINGTON, Jan 20 (Reuters) - As the U.S. Justice Department has stepped up its enforcement of an anti-foreign
bribery law, it has faced the expected stiff resistance from the
Now it faces the unexpected as courts are pushing back, too.
In an unusual verbal order issued earlier this week, a
federal judge in Houston dismissed without sending to the jury a
case against a Texas man accused of authorizing bribes to
government officials in Mexico, on behalf of his former
employer, a unit of ABB Group.
The government's principal witness "knows almost nothing",
U.S. District Judge Lynn Hughes said in announcing his decision
to acquit the defendant, John O'Shea, according to a transcript.
Prosecutors also did not produce evidence to "conclude
beyond a reasonable doubt" that a middleman did nothing for
Swiss power products company ABB beyond pay the bribes, he said.
The decision is the latest in a string of setbacks for the
Justice Department unit that prosecutes violations of the
Foreign Corrupt Practices Act, a 1970s law that bars U.S.-linked
companies and individuals from paying bribes to officials of
foreign governments in exchange for business.
After several years of record penalties, with companies
paying $1.8 billion in 2010 alone, businesses started pushing
The U.S. Chamber of Commerce launched a campaign more than a
year ago to lobby for changes to the FCPA, and Democrats in the
House and Senate have indicated they might support amendments.
Judges, too, have begun to turn up the heat in recent
In November, months after a jury had convicted a California
manufacturing company and its executives of paying bribes to
officials in Mexico, a federal judge there dismissed the
indictment and said prosecutors had engaged in misconduct to
obtain it in the first place.
In December, a federal judge in Washington, D.C., dismissed
a conspiracy charge in a sprawling bribery case tied to the arms
industry, weakening the case against several defendants just
before it went to the jury, and leaving one defendant free to
The government has indicated it plans to appeal the
California ruling; the jury in the Washington, D.C., case has
not yet returned a verdict.
The Justice Department team has had some big wins. A Florida
defendant was sentenced to 15 years in prison in October after a
jury convicted him of participating in a scheme to bribe
officials in Haiti, for example.
But in some recent high-profile cases, judges have ruled
against the government.
"Clearly, with increased enforcement of the FCPA, there will
inevitably be increased litigation," said a spokeswoman for the
department, Laura Sweeney.
"But there is also no question that it is important that
potential violations of the FCPA be investigated and that the
Department pursue cases when it believes the evidence and the
law support them," she said.
Sweeney declined to comment on any pending matters.
STANDARD OF CONDUCT
Most foreign bribery cases are settled by companies and
never go to court, leaving the exact boundaries of the law
FCPA lawyers are "trying to continually fashion conclusions
from different contexts, and it's very hard to know what the
standard of conduct is that is subject to enforcement," said
Laura Flippin, a senior Justice Department official during the
Bush administration who is now a partner at DLA Piper.
"Courts are wrestling with the same questions," she said.
Partly in response to similar criticisms, Assistant Attorney
General Lanny Breuer, who heads the criminal division, said in
November the department would soon issue guidance on how it
interprets the law.
"The FCPA is an important mechanism for holding individuals
and corporations accountable for fostering corruption abroad,
and for motivating others to act responsibly," he said at the
time. "We must ensure that it stays that way."
LIMITED ACCESS TO EVIDENCE, WITNESSES
Other defense lawyers interpreted the trial defeats more as
a function of the difficulties in prosecuting foreign bribery
cases, which involve troves of evidence held overseas beyond the
reach of U.S. enforcement agencies.
Prosecutors also often have little leverage over witnesses
In the ABB case, the judge this week chastised the
government for not building a more thorough case.
The government's top witness gave answers that were
"abstract and vague, generally relating to gossip"; prosecutors
failed produce important records and people; and they didn't
adequately trace the money, Hughes said.
"It's not easy for the government to prosecute these cases,"
said Joel Androphy, who along with Sarah Frazier defended the
"They rarely have the ability to obtain testimony
from witnesses, and it's hard to get documents, but defense
lawyers should put the government to its burden and not confess
without a trial," he said in an interview.
Hughes has questioned the Justice Department's FCPA
enforcement efforts in the past.
In 2010 he slashed by 40 percent a $28.5 million criminal
fine ABB initially agreed to pay to resolve charges that it
violated the Foreign Corrupt Practices Act, and said the fault
lay not with the company but with individuals.
"It obviously has not been a good few months for the Justice
Department's enforcement efforts against individuals," said
Philip Urofsky, a former federal prosecutor who supervised the
department's FCPA cases and is now a partner at Shearman &
"The difficulty still is not so much with the law, as with
the difficulty in proving these cases at trial," he said.
The judicial setbacks could prompt a rethinking within the
department about which cases are tagged for prosecution, former
DOJ lawyers said.
"It wouldn't surprise me if the leadership of the division
would get involved," in more closely vetting cases to avoid
future embarrassment, said one former Justice official who
declined to be named.
Lisa Rickard, who heads the Institute for Legal Reform at
the Chamber of Commerce, said in a statement the group was
"encouraged that the courts are starting to provide more
judicial oversight" of FCPA matters.
"But we still believe that the amount of interpretive
guidance under the FCPA is lacking," she said.
(Reporting by Aruna Viswanatha)
Follow us on Twitter: @ReutersLegal