Carson - Foreign Official - Oral Argument Transcript

8/6/2019 Carson - Foreign Official - Oral Argument Transcript

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4 UNITED STATES DISTRICT COURT

5 CENTRAL DISTRICT OF CALIFORNIA

6 SOUTHERN DIVISION

7 - - -

8 THE HONORABLE JAMES V. SELNA, JUDGE PRESIDING

9

UNITED STATES OF AMERICA,10 Plaintiff,

vs.11

SACR-09-00077-JVS12 STUART CARSON, et al.,

Defendants.13 --------------------------

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16 REPORTER'S TRANSCRIPT OF PROCEEDINGS

17 Santa Ana, California

18 May 9, 2011

19

20SHARON A. SEFFENS, RPR

21 United States Courthouse411 West 4th Street, Suite 1-1053

22 Santa Ana, CA 92701(714) 543-0870

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SHARON SEFFENS, U.S. DISTRICT COURT REPORTER


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1 APPEARANCES OF COUNSEL:

2 For the Plaintiff:

3 ANDRE BIROTTE, JR.United States Attorney

4 DENNISE D. WILLETTAssistant United States Attorney

5 Chief, Santa Ana Branch OfficeDOUGLAS F. MCCORMICK

6 Assistant United States Attorney411 West Fourth Street, Suite 8000

7 Santa Ana, CA 92701(714) 338-3541

8CHARLES E. DUROSS, Acting Chief

9 CHARLES LABELLA

NATHANIEL B. EDMONDS10 ANDREW GENTIN

Fraud Section11 Criminal Division, U.S. Department of Justice

1400 New York Avenue, N.W.12 Washington, DC 20005

(202) 353-355113

For Defendant STUART CARSON:14

NICOLA T. HANNA15 JOSHUA JESSEN

GIBSON, DUNN & CRUTCHER LLP16 3161 Michelson Drive, Suite 1200Irvine, CA 92612

17 (949) 451-3800

18 For Defendant HONG CARSON:

19 KIMBERLY A. DUNNESIDLEY AUSTIN LLP

20 555 West Fifth Street, Suite 4000Los Angeles, CA 90013

21 (213) 896-6060

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1 For Defendant PAUL COSGROVE:

2KENNETH M. MILLER

3 TERESA CESPEDES ALARCONBIENERT, MILLER & KATZMAN

4 115 Avenida MiramarSan Clemente, CA 92672

5 (949) 369-3700

6 For Defendant DAVID EDMONDS:

7 DAVID WIECHERT107 Avenida Miramar, Suite A

8 San Clemente, CA 92672(949) 361-2822

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10 ALSO PRESENT:

11 Mandarin Interpreter

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1 SANTA ANA, CALIFORNIA; MONDAY, MAY 9, 2011; 3:00 P.M.

2 THE CLERK: Item No. 17, SACV-09-00077-JVS, United

3 States of America versus Stuart Carson, et al.

4 Counsel, please state your appearance after I call

5 your client's name.

6 Stuart Carson.

7 MR. HANNA: Good afternoon, Your Honor. Nick

8 Hanna and Joshua Jessen on behalf of Stuart Carson who is

9 present in court.

10 THE CLERK: Hong Carson.

11 MS. DUNNE: Good afternoon, Your Honor. Kimberly

12 Dunne on behalf of Hong Carson who is present in court.

13 THE CLERK: Paul Cosgrove.

14 MR. MILLER: Good afternoon, Your Honor. Ken

15 Miller and Teresa Alarcon on behalf of Paul Cosgrove who is

16 present in court.

17 THE CLERK: David Edmonds.

18 MR. WIECHERT: Good afternoon, Your Honor. David

19 Weichert on behalf of David Edmonds who is present in court.

20 THE COURT: Good afternoon.

21 MR. MCCORMICK: Good afternoon, Your Honor. Doug

22 McCormick on behalf of the government, and with me today is

23 Andrew Gentin, Nathaniel Edmonds, and Charles LaBella from

24 the Crime Section of the Department of Justice.

25 Mr. Edmonds will be arguing for the government on



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1 the Motion to Dismiss.

2 THE COURT: All right. Good afternoon.

3 On Thursday, the defendants filed a pleading

4 entitled Supplemental to Defendants' Reply in Support of

5 Amended Motion to Dismiss Counts 1 through 10 of the

6 Indictment. We have got three of the four signatories to

7 this pleading here, so I would like to ask you some

8 questions.

9 Ms. Dunne, Mr. Wiechert, and Mr. Hanna, would you

10 not agree that counsel signing a pleading have a duty of

11 candor to the Court that's at least equivalent to the

12 obligations of a civil practitioner under Rule 11?

13 MR. HANNA: Yes.

14 MR. WIECHERT: Yes.

15 MS. DUNNE: Yes.

16 THE COURT: What am I to do with this supplement?

17 What is the purpose of tendering it?

18 MR. HANNA: Your Honor, it was our belief that the

19 comments from the attorneys who will argue this matter for

20 the government were relevant to the government's position

21 and relevant to our position, so we wanted to present that

22 and bring that to the Court's attention.

23 THE COURT: What you attached was just a page from

24 a website, correct?

25 MR. HANNA: It's called mainjustice.com. It's a



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1 journalistic-produced website.

2 THE COURT: But it's not a

3 governmentally-sponsored website is it?

4 MR. HANNA: No, Your Honor.

5 THE COURT: And the news story wasn't written by

6 Mr. Edmonds was it?

7 MR. HANNA: No. It's comments attributable to

8 him. We tried to get a copy of the actual tape-recorded

9 conversation that was presented. We were unable to get

10 that.

11 THE COURT: This supplement says in part: "First,

12 there is a reason the government's maximalist position on

13 the definition of 'foreign official' has avoided serious

14 judicial scrutiny for so long, and the reason is that

15 individuals and companies are reluctant to challenge the

16 government's interpretation for fear of consequences."

17 Let me ask you, Mr. Hanna, when you filed this

18 motion or since have you had any fear of consequences?

19 MR. HANNA: Your Honor, I'm sorry. We were

20 inartful. We weren't suggesting that we had fear during our

21 motion. We're suggesting that the reason the statute has

22 been in effect for 30 years and that companies end up

23 pleading guilty and these issues don't get vetted in front

24 of the Court is because the government takes a hard

25 position. And on an issue like this when they say it's up



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1 to the jury -- you can't decide until you get to the jury --

2 you know, the Court is not going to roll the dice --

3 somebody is not going to roll the dice, so they end up

4 striking a deal.

5 THE COURT: Are you telling me that you have had

6 no fear of consequences in bringing or prosecuting this

7 motion?

8 MR. HANNA: I have not had any fear of

9 consequences.

10 THE COURT: Ms. Dunne, have you had any fear of

11 consequences in bringing or prosecuting this motion?

12 MS. DUNNE: No, Your Honor.

13 THE COURT: Mr. Wiechert?

14 MR. WIECHERT: Well, when the motion was brought,

15 I hadn't seen the comments that were attributed to

16 Mr. Edmonds. The comments that were attributed to

17 Mr. Edmonds can be interpreted a couple of ways. The first

18 is that Mr. Edmonds has a personal belief that it's a waste

19 of time for a corporation to raise the issue of who is or

20 who is not a foreign official and that it would be a waste

21 of resources to take that issue up before the Court. The

22 other way to interpret it is that at the end of the day if

23 you raise that issue and you lose that issue, the government

24 is going to be seeking harsher sanctions against you at the

25 end of the day because you raised that issue.



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1 So when I read the comments that were attributed

2 to the representative of the Justice Department, I didn't

3 know whether his -- the intention behind the comments was to

4 fire a warning shot across the bow of anyone who wants to

5 raise these issues in court, or he was just expressing his

6 personal view that this argument is a loser. It can go both

7 ways.

8 To be frank, when I read the comments, I was

9 troubled by them because I viewed this as more -- it is more

10 likely than not a shot across the bow of entities or persons

11 raising the arguments. Now, the arguments were already in

12 the bank. So from the standpoint of at the time that we

13 filed this motion did we feel intimidated by the comments of

14 Mr. Edmonds that we didn't know about at the time we filed

15 the motion, no. Can they be interpreted as a shot across

16 the bow for parties who are raising this issue? I believe

17 they can be.

18 THE COURT: What's the factual basis for the

19 statement that I read, namely, that the parties have in fact

20 -- that litigants under this statute have in fact been

21 reluctant to challenge the government's interpretation for

22 fear of consequences? What's the factual basis for that

23 statement? Can any of you tell me that?

24 MR. HANNA: Your Honor, I can't cite a case where

25 that's occurred, but it's clear given the history of the



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1 statute that if you look at all the -- especially all the

2 settlements since 2004, companies are suing for -- they're

3 for suing peace. If you look at the CCI case, they didn't

4 challenge this. The government cited 35 plea agreements

5 where nobody raised this issue.

6 I think the government didn't want this issue to

7 be raised. They like the statute the way it's currently

8 being interpreted by them, and I think they are sending a

9 message by this statement that that's the way they like it.

10 That was the purpose of bringing this to the Court's

11 attention.

12 Your Honor, frankly, this is our pleading. If

13 there is any issue as to the pleading, it's my fault.

14 THE COURT: Well, everybody signed it.

15 MR. HANNA: I understand, but we prepared it, Your

16 Honor.

17 THE COURT: But when people sign it, there is some

18 significance to that whether you drafted it or not.

19 Mr. Wiechert, do you have any basis for that

20 statement that I read?

21 MR. WIECHERT: It's an inference.

22 THE COURT: No, no.

23 MR. WIECHERT: Yes, you can infer from facts.

24 THE COURT: What facts are you making the

25 inference based on?



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1 MR. WIECHERT: The facts are that this was a

2 statute that was passed in 1977 that on the face of the

3 statute determines -- over the course of 30-plus years of

4 jurisprudence, not one appellate decision has addressed this

5 issue. In fact, throughout the course of the 30-plus

6 years of jurisprudence --

7 THE COURT: I understand that from your paper. I

8 would like to know the factual basis for the statement to

9 which you put your name: "The reason is that individuals

10 and companies are reluctant to challenge the government's

11 interpretation for fear of consequences." What facts

12 support that statement?

13 MR. WIECHERT: Well, one, the fact that the

14 prosecutor himself talked about the negative consequences

15 that might befall organizations raising this challenge.

16 THE COURT: Can you show me in the web page where

17 any negative consequences were threatened by the prosecutor

18 in his speech?

19 MR. WIECHERT: "It is not necessarily the wisest

20 move for a company," is that prosecutor speak for things

21 aren't going to go well for you? It is not necessarily the

22 wisest move for a company to raise an issue that I think

23 should be granted for any defendant involved in a case

24 involving state-owned enterprises, and it hasn't been raised

25 at all by any corporation as far as I can tell.



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1 THE COURT: Ms. Dunne, what is your view on the

2 basis for that statement?

3 MS. DUNNE: Well, I concur that it was an

4 inference based on the historical handling of these cases.

5 It's not something that an institution has an interest in

6 raising. Now that individuals are bringing this question to

7 the Court's attention, it is an odd time particularly with

8 this motion pending for that statement to be made. I

9 thought it was an appropriate inference.

10 THE COURT: I don't find this supplement

11 particularly helpful. Thank you.

12 Mr. Edmonds, do you want to be heard on your

13 motion?

14 MR. EDMONDS: Would you like me to address the

15 supplement, or would like me to address the tentative

16 ruling?

17 THE COURT: I would like to hear from you on the

18 law.

19 MR. EDMONDS: In terms of the tentative ruling,

20 the government has reviewed Your Honor's tentative ruling,

21 and we believe that Your Honor's ruling on all the various

22 factors is sufficient. I'm happy to address any of the

23 specifics that Your Honor would like me to address, or I can

24 walk through my argument again, whichever you prefer.

25 THE COURT: I would be happy to hear you in



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1 rebuttal.

2 Mr. Hanna.

3 MR. HANNA: Thank you, Your Honor. We have

4 reviewed the Court's tentative. I have a number of points I

5 would like to raise with the Court. As an overview of the

6 comments, though, we think that the government's argument

7 that has been adopted in the tentative raises two

8 overarching issues. One is the fact that Congress did not

9 define the term "instrumentality."

10 We have concern essentially that the definition

11 that the government proposes and the Court adopted is

12 overbroad. We don't believe that definition was intended by

13 Congress. We believe it conflicts with other portions of

14 the statute, and we believe it's vague. Once you give a

15 definition, then the tentative definition of

16 "instrumentality" we believe is inherently vague and

17 overbroad and cannot be applied in a constitutional way.

18 For example, we now have four sets of factors:

19 two that the government has proposed, one with the OECD, and

20 one to us in the stipulation. We have a set of factors that

21 Judge Matz proposed in the ruling in the Lindsey case, the

22 Aguilar case, and we have a set of factors that the Court

23 proposes, which seems to be a compilation of the

24 government's factors.

25 In our view, none of those factors were spelled



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1 out by Congress. There is nothing in the statute that

2 supports those factors. We potentially have the anominalous

3 situation where if a jury in Los Angeles in the Aguilar case

4 were to reach a ruling on instrumentality based on factors

5 that Judge Matz believes were appropriate, which would be

6 different from the factors -- if any factors are used in

7 this case, and I think that is the definition of an

8 "arbitrary and vague" statute.

9 THE COURT: But how can you be sure of that until

10 we get to that day, and we actually settle the instructions?

11 MR. HANNA: Well, in our view, Your Honor, the

12 term "instrumentality" is inherently vague. By basically

13 using a dictionary definition and saying "instrumentality"

14 means anything -- an instrument through which the

15 governmental purpose is effectuated, we think that's

16 inherently vague. There has to be some standards. There

17 has to be something we can shoot at, and they can shoot at.

18 We can gather evidence in pursuit of our defense, and they

19 can gather evidence in pursuit of their case. We need to

20 know that now. I don't think it's fair to wait until the

21 jury is charged for all of us to find out what standards the

22 jury is going to decide the case on.

23 We believe -- and I will get into that in a

24 minute that --

25 THE COURT: Isn't it fairly self-evident if this



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1 matter proceeds to trial that the nature of each of the

2 entities in Counts 1 through 10 will be put before the jury

3 in a factual manner?

4 MR. HANNA: My question is how is the jury going

5 to apply those facts? They are going to be facts that come

6 out at trial. How is the jury going to decide what weight

7 particular factors are due, whether any of those factors are

8 relevant?

9 Let me give you a concrete example. There are two

10 entities that are identified in the substantive count, MPCC

11 and HMP. MPCC is a subsidiary of a subsidiary. It's owned

12 by two companies. As you will recall in the government's

13 declaration, it's owned by two companies. One of those

14 companies is in turn owned by another company, and that

15 company apparently is government-backed. What do we do with

16 that?

17 Let's assume those are the facts. I don't know

18 how that comes out. I don't know how a jury is going to

19 look at those facts and decide is this thing an

20 instrumentality under the law or is it not? In our view,

21 it's definitely not. It's a subsidiary of a subsidiary.

22 But the government has charged it. The way it currently

23 stands we are going to throw that in front of the jury and

24 say you have got to decide. I think there has to be some

25 parameters. Otherwise, it's completely arbitrary. There is



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1 no way a jury is going to make that decision that anyone is

2 going to understand how they came to that decision. The

3 prosecutors can charge whatever they want on the slimmest

4 read saying this thing has got some connection to some

5 government somewhere. Then it goes in front of jury and

6 let's the jury decide.

7 On the standard that I think the Court has

8 articulated, General Motors is arguably a government

9 instrumentality. It's got government investment. The

10 President of the United States essentially got rid of the

11 CEO. It's too big to fail. It's important to the economy.

12 We have a vested interest in this company. We own stock in

13 this company. I think one could argue that General Motors

14 is a government instrumentality under that theory. How is a

15 jury to decide whether it's in or whether it's out? That's

16 our concern. Nobody knows whether it's in or whether it's

17 out. The entities I have just discussed, I don't know if

18 they are in or out. I would argue they are out.

19 THE COURT: Well, you have argued they are all

20 out.

21 MR. HANNA: I have argued they are all out, but

22 those entities are perfect examples of what is a jury going

23 to do with that? We are going to argue that they are out.

24 The government is going to argue they are in. They are

25 going to go back in the jury room, and the first thing that



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1 is going to come out is a note saying how do we decide? I

2 think we need to know now what the rule is, and if this is

3 no rule or if it's unknowable, then it's got to go back to

4 Congress for clarification. That's our point.

5 We think, Your Honor, that McBoyle is right on

6 point. In the McBoyle case -- if you find the reasoning of

7 the tentative to meet McBoyle, I think McBoyle comes out

8 differently. If you look at McBoyle -- that was a Supreme

9 Court case, which was the theft of an airplane, interstate

10 transportation of a stolen airplane. There is no question

11 the defendant knew he was transporting a stolen airplane.

12 The question was does an airplane qualify as a

13 self-propelled vehicle? The government argued "vehicle" is

14 a broad term. That can encompass airplanes. It sure can.

15 But the Supreme Court analyzed it as follows. They said,

16 (a) in context, the term "vehicle" in the statute calls up

17 in your mind a land vehicle; (b) while airplanes were

18 well-known at the time, there is nothing in the legislative

19 history that says Congress was looking at airplanes; and (c)

20 even though the same policy relating to stolen cars applies

21 to stolen airplanes, we are not going to substitute our

22 judgment for Congress's judgment. Even if we think Congress

23 would have included airplanes had it dawned on them, we are

24 not going to substitute our judgment for that. Result,

25 conviction reversed.



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1 If you apply the rationale with the tentative,

2 though, in my view, the answer would be "vehicle" is a broad

3 enough word in the ordinary meaning that it could include an

4 airplane if you don't look at the legislative history, and

5 it's up to the jury to decide if an airplane has the right

6 characteristics that make it a vehicle. What's important in

7 McBoyle is even though the defendant had the requisite

8 criminal intent the law didn't clearly cover airplanes, and

9 the Court said send it back to Congress.

10 The words used to define "foreign official" in our

11 context call up in your mind a traditional government

12 official, so the outcome here should be the same as in

13 McBoyle. The Court should hold that the statute doesn't

14 cover nontraditional government departments and agencies and

15 political subdivisions and units. This is supported by

16 Skilling as well. If Congress isn't clear on a criminal

17 statute, it has to go back to Congress, and they have to

18 speak more clearly.

19 The Ninth Circuit decision in Hall we think

20 supports our view. In Hall -- and the Court cited it in the

21 tentative -- the relevant statute defined "government" to

22 include a branch, department, agency, instrumentality, very

23 much like our case.

24 In determining whether the Red Cross was an

25 instrumentality, the Ninth Circuit said no. According to



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1 the Ninth Circuit, they said the use of instrumentality,

2 which is undefined in that context, was simply an attempt to

3 include all parts of the government and not entities like

4 the Red Cross, even though they might be considered

5 instrumentalities in the broad sense. That was true even

6 though the Red Cross was an instrumentality under the Tax

7 Code. I would point out that in Exhibit J to

8 Mr. McCormick's declaration the Red Cross is listed as a

9 federal government-established organization. Despite all

10 that, the Ninth Circuit said that it's not an

11 instrumentality.

12 So Hall stands for two propositions in our view:

13 One, when Congress used the term "instrumentality" without a

14 definition, they're talking about traditional governmental

15 units; two, being an instrumentality depends on what the

16 statute says. It's statute specific.

17 The tentative says that Hall is not in conflict

18 because some state-owned entities are undoubtedly part of

19 the government. I respectfully submit that that just begs

20 the question. What is the government? In Hall, they were

21 talking about traditional government, the kind it calls up

22 in your mind when you hear foreign official. You don't

23 think of an engineer at a power plant. We think Hall was

24 focused on traditional governmental units and not those

25 types of entities that might have some governmental



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1 ownership or control or governmental formation or creation

2 like the Red Cross.

3 In our case, much like McBoyle, we don't think the

4 dictionary definition helps much. As the Court cited in the

5 tentative, there are varying definitions. Some of them I

6 think wouldn't include a state-owned enterprise, for

7 example, a branch of a governing body. When I think of

8 branch as a governing body, I think of the legislature or

9 the judiciary or something. I don't think of a power

10 company somewhere.

11 It's not at all clear from the text of the statute

12 or the legislative history that Congress intended to open up

13 the word "instrumentality" to basically anything else, and

14 Hall suggests otherwise. I think my starting point in

15 looking at the statute is it would have been very easy for

16 Congress to say, including state-owned enterprise or a

17 foreign corporation or however else they wanted to say it.

18 It would have been very easy if what they meant was anything

19 used to achieve an end or purpose of the government to use

20 those words. That would have been simple, but they didn't

21 use those words.

22 I think about if someone was drafting the statute

23 and they wanted to cover the traditional government, you

24 would write "government." You would think of a department.

25 You would think of an agency. If you are a good lawyer



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1 drafting the statute, you would think about all those other

2 myriad type of government entities, the FBI, Food & Drug

3 Administration, et cetera. You would want a word to capture

4 those because you wouldn't want some smart defense lawyer to

5 come in and say, well, that's a ministry, not an agency, not

6 a department.

7 If you use the term, though, "state-owned

8 enterprise" and that's what you are shooting for, that

9 brings up one immediate question. What do you mean? So if

10 you were drafting the statute and you really wanted

11 instrumentality to cover state-owned enterprise, the next

12 question you have to face is what do we mean by that? How

13 far? Majority-owned, minority-owned, subsidiaries, no

14 subsidiaries? You have to face that issue.

15 Clearly, for example, in the Foreign Sovereign

16 Immunities Act, they faced that issue, and they defined it

17 as majority-owned. The OECD defined it as majority-owned

18 and controlled. They even had an exclusion in Commentary 15

19 that said this is going to exclude any entities that are

20 operating on a normal commercial basis. So they addressed

21 that issue of what does it mean to be a state-owned entity

22 or instrumentality? You have to reach that question if that

23 really was your intent in drafting the statute if you really

24 wanted instrumentality to cover those type of entities.

25 The next question is what do we mean by that?



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1 Here Congress says zero. There is nothing about state-owned

2 enterprises being part of instrumentality. There is no

3 discussion about how far does this reach? Does it get to

4 subsidiaries? Does it not get to subsidiaries? Is it

5 majority? Is minority-owned enough? There is no discussion

6 whatsoever. My point is there most assuredly would have

7 been if that's what Congress was after.

8 Additionally, Your Honor on the definition, it

9 seems to me that under the government's analysis that is

10 carried over in the tentative, in order to figure out if

11 something is an instrumentality, you have got to delve into

12 the purpose of it, the creation, the local law, the

13 management of it, employment policies, all these types of

14 issues, none of which are spelled out in the statute or the

15 legislative history.

16 In 1977, many of these state-owned enterprises

17 were in Communist-controlled countries. I think it's a

18 little far-fetched to think that Congress really intended

19 folks to do that kind of analysis in a closed country to try

20 to figure out all of those -- creation of the entity, who is

21 on the board, and all of that sort of information. I think

22 they would have said something if that was really their

23 intent.

24 Finally, the problem we have with the definition

25 is that under the tentative no matter how much due diligence



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1 you do up front -- if you are a businessman, no matter how

2 much due diligence you do you never know until the moment

3 you are charged, you are tried, and a jury comes back with a

4 verdict whether or not you were dealing with an

5 instrumentality. That can't be the law. It can't be that

6 there is really no way to know for sure if you are violating

7 the law or not.

8 At bottom, it's not whether the term

9 "instrumentality" conceivably could include state-owned

10 enterprise. The question is did Congress clearly intend to

11 cover state-owned enterprise? We think there is no real

12 evidence that that was what Congress clearly intended.

13 The Court in the tentative looks to the Foreign

14 Sovereign Immunities Act for guidance. We think if you do

15 that, you should look at all of it, all of the guidance

16 related to the Foreign Sovereign Immunities Act. What's

17 important there is under the Doyle case that only applies to

18 majority-owned, directly-owned entities. By that I mean, if

19 one of these companies that sued in this court and defended

20 itself on the grounds of sovereign Immunities -- we are part

21 of the foreign government. You cannot sue us here -- five

22 out of eight of them wouldn't comply, wouldn't make it.

23 They wouldn't be considered by this Court as foreign

24 government instrumentalities, as part of a foreign

25 government, because they are subsidiaries or subsidiaries of



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1 subsidiaries. So how is it that an entity in this

2 courthouse one day is not part of a foreign government is

3 depending on the whim of a jury part of a foreign government

4 in a Foreign Corrupt Practices Act case? I think if we are

5 going to look to the Foreign Sovereign Immunities Act, we

6 have to look at all the interpretative guidance relating to

7 it and at least be consistent on that score.

8 Beyond the Foreign Sovereign Immunities Act, I

9 think the same principle applies, the same result is

10 compelled, by standards of corporate law. Subsidiaries and

11 parents are treated as separate independent companies unless

12 they are going to allege there is some alterego or some

13 piercing of the corporate veil or something like that. Five

14 of the eight entities are not directly owned by a

15 government. I think they should be out of the box on those

16 entities right off the bat. There is no dispute on that.

17 That's in their own declaration that was filed in this case.

18 The Court in its tentative -- we pointed to the

19 Foreign Sovereign Immunities Act and said, look, in the

20 Foreign Sovereign Immunities Act, they referenced

21 "instrumentality," and they defined it. Here they don't.

22 There is a reason for the distinction, and we thought this

23 distinction was persuasive. As I read the tentative, the

24 Court said the opposite inference is to be drawn there

25 because there is nothing in the FCPA. It has to be solely



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1 within the FCPA.

2 But actually there are two places in the FCPA in

3 which Congress explicitly put out a control ownership test,

4 two places. One is in the accounting provisions. The FCPA

5 has two got parts: anti-bribery, books and records. In the

6 books and records part, there is a section dealing with

7 internal controls. It says that if an issuer owns more than

8 50 percent of the voting power of another company it has

9 certain obligations. It spells it out. If they have more

10 than 50 percent of the voting power, they have certain

11 obligations. If they are 50 percent or less, then their

12 obligations are different. That's spelled out. So Congress

13 in the statute specifically put in a control test for the

14 accounting provision. They put no test for the foreign

15 official instrumentality provision.

16 THE COURT: Well, couldn't one draw the inference

17 that Congress did not wish to so restrict the bribery

18 aspects of the FCPA?

19 MR. HANNA: Except there is nothing to suggest

20 that.

21 THE COURT: That's the point. There is nothing.

22 MR. HANNA: All we are drawing on is the fact they

23 use the word "instrumentality." There is no definition.

24 There is nothing in the legislative history. If it's

25 correct that you have to look within the statute, clearly



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1 Congress said 50 percent in another part of the statute. So

2 they knew how to say it. They didn't say anything on

3 instrumentality.

4 THE COURT: Well, couldn't one infer that they did

5 not wish to so restrict instrumentality for purposes of the

6 bribery aspects of the Act?

7 MR. HANNA: Candidly, I think that would be

8 speculation. What we know is that Congress used the word

9 "instrumentality." We know that they didn't define it. We

10 know that they knew how to define it. We know that in other

11 portions of the statute they gave a control test. We know

12 that if they wanted to say corporation, more than 50

13 percent, they could have put it in there. We know if they

14 wanted to say state-owned enterprise, they could have put it

15 in there. They didn't say anything.

16 The question is, going back to first principles,

17 what do they mean by "instrumentality"? There is nothing in

18 the legislative history that is persuasive that suggests

19 they wanted that word "instrumentality" to include a foreign

20 corporation. In the definition of "domestic concern" -- the

21 Court cites it at Footnote 4. "Domestic concern," which

22 comes right above the "foreign official" definition is

23 defined as "any corporation, partnership, association, joint

24 stock company."

25 So they put it there. They didn't put it in the



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1 "foreign official" definition. I think that falls squarely

2 within what the Court was saying in terms of the canons of

3 interpretation. If they didn't put it there, we can infer

4 they didn't put it there for a reason. They didn't want it

5 to cover state-owned enterprise or corporation.

6 I would also point out that in the legislative

7 history there were 20 bills, one of which ultimately became

8 the FPCA. In several of them, they had an express

9 definition that included state-owned enterprise. None of

10 those made it. If you look at that package, you see that

11 Congress defined "control and ownership" in different parts

12 of the statute. Congress had competing bills, which

13 included state-owned enterprise. Congress didn't impose

14 those. Congress left the word with nothing. There is no

15 definition at all. There is nothing to suggest they wanted

16 state-owned enterprise to be included. I think it's

17 speculation to assume that they did.

18 The statute also, Your Honor, as I think we have

19 pointed out in our papers, doesn't work as a cohesive unit

20 if you include state-owned enterprise versus the

21 facilitating payment exception. Basically the exception

22 says if you make a small what they call grace payment it's

23 not illegal.

24 How did that come about? Initially, in the

25 statute, there was a definition of "foreign official" that



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1 had a provision that said, "Such term does not include any

2 employee of a foreign government or any department, agency,

3 or instrumentality thereof whose duties are essentially

4 ministerial or clerical." So that's how they tried to

5 accept it, through that language, "ministerial." To my

6 mind, that's indicating government bureaucrat.

7 In the hearings in 1988, they took it out and

8 changed it. Part of the rationale for changing it was

9 because you couldn't tell under the local laws very well

10 what the duties of these government officials were. It

11 wasn't always spelled out. Clearly, if you are looking for

12 the duties of an official under local law, that's government

13 based. The duties of a commercial -- an engineer aren't

14 going to be in the local law. They are talking about

15 government officials. So they changed the statute. They

16 changed the statute with an express facilitating payments

17 exception. It says, "It shall not apply to any facilitating

18 or expediting payment to a foreign official, political

19 party, or party official, the purpose of which is to

20 expedite the disputed performance of a routine governmental

21 action." Then they give some examples, and the examples are

22 all examples of low-level government functionality:

23 permits, licenses, government papers, visas, and that sort

24 of thing.

25 You have the anomalous situation if you include



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1 state-owned enterprises that if a person goes up to a

2 uniformed customs officer and gives them a small amount of

3 money to get a visa statement, that's illegal under the FPCA

4 under this exception, but if the same person goes up to a

5 secretary at a commercial business to get a paper expedited

6 or something, that may not be covered. That can't be right.

7 The interpretation that includes all these other entities

8 does violence to that provision.

9 The bona fided reasonable expense provision is

10 exactly the same. That provision says if you're charged

11 with an FPCA violation it's an affirmative defense if the

12 money was a bona fide expense in connection with a

13 government contract -- government or agency contract. It

14 doesn't say anything about instrumentality. So under that

15 reading -- the literal reading is if the expense was related

16 to a government contract you would have an affirmative

17 defense. If it's related to a commercial contract with an

18 entity that's owned by another company that's owned by

19 another company that's backed by the government, you are out

20 of luck with that affirmative defense. That can't be right.

21 That's why we say the statute doesn't work as intended to

22 interpret "instrumentality" beyond traditional government

23 components.

24 The Court also indicates that it's looking at the

25 purpose of the statute and, as I said, looks to the Foreign



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1 Sovereign Immunities Act and also looks at the domestic

2 SOEs. We submit the Court should look at the actual

3 legislative history. We think that's the best place to find

4 congressional intent. We think that when you look at the

5 legislative history it supports the defense.

6 There are at least two other cases look at the

7 legislative history in the FCPA context, the Kay case and

8 the Bodmer case. In Bodmer, they were trying to interpret

9 the phrase "otherwise subject to the jurisdiction of the

10 United States," what that meant. The Court said it was a

11 technical term, and the ordinary common-sense meaning

12 approach doesn't really help too much for that one. After

13 examining the legislative history, they said -- they

14 ultimately dismissed on rule of lenity grounds.

15 Like Bodmer, we think "instrumentality" is a

16 technical legal term, and as Hall said, it doesn't have a

17 consistent meaning. It's not a one size fits all. We think

18 when you look at the legislative history it's not

19 inconclusive. It supports us. It shows that there is no

20 express statement that state-owned enterprises are covered.

21 It shows that the genesis of this bill, the impetus for it,

22 was the large-scale bribery of foreign government officials

23 that had caused tremendous foreign policy damage to the

24 United States. You will see that foreign official is a

25 shorthand for foreign government official or foreign public



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1 official, and you will see the competing bills that included

2 an express definition of "state-owned enterprise" didn't

3 make it in the final version.

4 With respect to the rule of lenity, the Court

5 says there is no grievous ambiguity here. Well, Your Honor,

6 we cited in our brief commentary from the OECD, Chamber of

7 Commerce, former FPCA prosecutors, all pointing to the

8 ambiguity inherent in this government "instrumentality"

9 term. I don't think that it's correct to say it's clear on

10 its face. We respectfully submit that it's not. We submit

11 that the tax structure history and the purpose of the

12 statute would go to the defendants. We should win outright,

13 but if it's debatable at all, then the rule of lenity kicks

14 in.

15 Lastly, Your Honor, I want to talk a little bit

16 about the factors -- I kind of started with those factors --

17 and the concern we have about how a jury would go about

18 trying to figure out whether or not something is in or out.

19 The Court says it's a question of fact. We submit there has

20 to be a legal framework. There has to be some parameters.

21 There has to be an in or an out.

22 We talked about a legal instruction. There is

23 going to have to be a legal instruction to the jury.

24 There's Posner and a case we didn't cite, but I will Court

25 the cite to it, 840 F.2d 1333 (Seventh Circuit 1988). It



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1 says, "It is not true that the law is what a jury might make

2 out of statutory language. The law is the statute as

3 interpreted. The duty of interpretation is the judge's.

4 Having interpreted the statute, he must then convey the

5 statute's meaning as interpreted in words the jury can

6 understand."

7 So, at some point, we are going to have to fashion

8 a jury instruction that conveys to the jury what the

9 parameters are in words a jury can understand. I submit the

10 factors the Court pointed to, the factors Judge Matz pointed

11 to, and the factors the government pointed to don't do

12 anything to make this more clear. They are just factors.

13 We might as well say it was a full moon the night the

14 company came into being. They are just factors without

15 weight, without any standards at all, and it doesn't make

16 the ultimate decision -- is it an instrumentality? -- clear.

17 In terms of why the statute is my view so

18 dangerous, I want to point out that not all the allegations

19 in this case are about change. Starting at paragraph 19,

20 for example, there are allegations about improper wining and

21 dining of foreign officials, paying for meals, trips to

22 Disneyland and things like that. I will submit to the Court

23 that that kind of stuff happens all the time in U.S.

24 business. Taking clients out and taking customers out to

25 golf and paying for golf, that happens all the time. Taking



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1 customers and clients out to expensive meals, that happens

2 all the time. When you watch a Super Bowl, all those luxury

3 suites, they are all bought by companies that are

4 entertaining their customers there. That happens all the

5 time in America, and there is nothing illegal about it.

6 THE COURT: In America.

7 MR. HANNA: Correct. When you do it here in

8 America -- these are a list of many of them here, playing

9 golf here. My point is when you take out a government

10 official to golf, a congressman, a federal judge or

11 something --

12 THE COURT: Federal judges never get invited.

13 MR. HANNA: You are on notice that the rules may

14 be different. You are on notice that maybe you shouldn't

15 pay. You are on notice. But I would submit to you that

16 there is zero difference between an engineer at a

17 government-owned power company or an engineer at a

18 privately-owned power company. They look the same. They

19 dress the same. They act the same. They are in commercial

20 buildings. They are not in government buildings. There is

21 no difference.

22 To a layman, these distinctions between foreign

23 official and non-foreign official are not obvious. What is

24 perfectly legal with one -- taking one out to golf, for

25 example, and paying for it, customer relations to build a



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1 relationship -- may be illegal with the other. The other

2 may be a federal felony. That can't be right, Your Honor.

3 That can't be right, but that is the law that the government

4 would like this Court to put its stamp of approval on.

5 In conclusion, I think the Skilling case

6 ultimately is the proper lens through which the Court should

7 examine the statute. If you look back at the history of the

8 honest services statute, there was mail and wire fraud, and

9 in the 1940's, the government started pushing the envelope.

10 The Courts started going along with them. In McNally, the

11 Supreme Court said there is nothing about that in the

12 statute. Congress has to speak if that's what they want.

13 The next year Congress did speak by passing 1346.

14 Then for 20 years, the government pushed the envelope, and

15 the Courts allowed them to push the envelope on what exactly

16 is the meaning of the term "honest services," which is

17 inherently vague, but nobody found it to be inherently

18 vague. The Circuits were all over the map on what it means.

19 Finally, in Skilling, the Supreme Court said

20 Congress has to be clear. There is a core of conduct that

21 this statute was designed to get at, bribes and kickbacks,

22 but at to everything else, we are not sure if Congress

23 intended that. It has to go back to Congress. While that

24 was good news for Mr. Skilling, I'm sure that all the people

25 who pled guilty or who were convicted, who spent time in



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1 jail in that 20-year period, that was cold comfort to them.

2 That's what should happen here. The Court should

3 send this back to Congress. It's unclear. It's not the

4 Court's fault. It's not the government's fault. Congress

5 wasn't clear in passing the statute what it meant. The

6 answer is up front send it back to Congress. If the

7 government is so confident that they are right, that this is

8 an evil that has to be changed, let Congress do it. I don't

9 think this Court should do it.

10 Thank you.

11 THE COURT: Thank you.

12 Ms. Dunne.

13 MS. DUNNE: Your Honor, I obviously agree with

14 Mr. Hanna's comments, but given the Court's inclination, I

15 would like to focus on the question of whether the statute

16 is vague as applied to this case. I would submit that the

17 defendants had absolutely no notice as to what due diligence

18 they were supposed to have done to assess whether the

19 individuals with whom they were conducting business were

20 foreign officials.

21 The core of the statute here is official

22 corporation, so it is critical that the defendants knew what

23 facts they had to look at to determine and thereafter know

24 that an individual was a foreign official. In fact, the

25 only meaningful guidance -- and Mr. Hanna addressed it --



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1 would have suggested that the companies at issue in this

2 Indictment were in fact not instrumentalities of the

3 government because either they were subsidiaries or they

4 were normal commercial enterprises.

5 More importantly, if a state-owned enterprise was

6 not considered an instrumentality in these statutes, it

7 would be perfectly reasonable for someone to conclude that

8 if it's not a government instrumentality for a civil

9 statute, it certainly would not be an instrumentality for a

10 criminal statute.

11 Under the various factors that have been

12 identified by this Court, the government, and Judge Matz,

13 they come too late. There was nothing in the public debate

14 about how it could determine whether a state-owned

15 enterprise was in fact a government instrumentality. The

16 debate was about the fact that there was confusion. Nobody

17 understood how to do that.

18 What is most telling here about the fact that the

19 statute is vague as applied is the lack of clarity that is

20 evidenced by the government's own conduct. There is

21 absolutely no rhyme or reason as to the structure or

22 function of the entities that are named in this Indictment.

23 There is no reason to think the government applied any of

24 these so-called factors to identify whether one state-owned

25 enterprise was appropriately a government official and one



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1 was not.

2 Indeed, as the Court knows, because this

3 Indictment started with 236 transactions, the government

4 simply accepted all the entities that were identified by CCI

5 in this case. The department gave no thought whatsoever as

6 to how they would go about showing that one state or

7 enterprise was in fact a government instrumentality while

8 another one was not. The Indictment is silent. There is

9 absolutely no discovery that the defendants have received

10 that suggest some factual basis to make a determination that

11 any of the state-owned enterprises in this case are in fact

12 government instrumentalities, and we have been told that the

13 government has completed its Rule 16 production. So there

14 is absolutely nothing in the discovery that we received that

15 has addressed that point.

16 The first time we saw any analysis was with the

17 information that was submitted in conjunction with Agent

18 Smith's declaration. There is no individual that is on the

19 trial witness list that the defendants have received from

20 the government that is a representative of any of these

21 companies that could talk about any of the factors that the

22 Court has mentioned. And I would submit that the grand jury

23 was never advised in this case that there was any

24 determination that had to be made as to whether the

25 state-owned enterprises identified in this Indictment were



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1 in fact government instrumentalities.

2 If the government is just coming to the

3 realization of the need to delineate what makes a

4 state-owned enterprise a government instrumentality, how is

5 a reasonable person in defendant's position supposed to know

6 the fact-finding that was necessary to make this supposed

7 judgment? So the idea that these individuals over a decade

8 ago because the transactions go back to 2000 -- that they

9 were in a position to know what due diligence needed to be

10 conducted is completely unsupported.

11 It's particularly troubling in the context of

12 China where my client operated. As the government

13 acknowledges, there are thousands upon thousands of

14 state-owned enterprises in China, companies conducting

15 commercial transactions in which either the central

16 government has invested or many of the local governments.

17 Indeed, the Chinese economy over the last decade has been

18 moving towards a market-based capitalistic economy. What

19 that has led to was people to think that the government was

20 decentralizing, not that they were retaining holds on what

21 was now considered to be capitalistic entities.

22 A reasonable person had absolutely no basis to

23 know that they were supposed to conduct some factual inquiry

24 to identify which of these over 150,000 state-owned

25 enterprises -- and that was the number that the government



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1 put to the Court -- that somehow which ones of these were

2 supposed to be government instrumentalities versus the ones

3 that were not.

4 The scienter in the statute does not state its

5 application here as the Court suggests. The government

6 appears to have simply assumed the scienter based on the

7 fact that the entities were state owned in any part.

8 Indeed, in the government's opposition, it takes the

9 position that it's obvious that the Foreign Corrupt

10 Practices Act prohibits bribes to officials who work for

11 state-owned enterprises. I submit that's the wrong question

12 and it misses the point because it's unknown if an official

13 works at a state-owned enterprise until an analysis is done

14 to assess whether that company is in fact a government

15 instrumentality.

16 Now, while the government appears to acknowledge

17 based on the elements it has put in its opposition that it

18 will need to prove that the defendants knew that any alleged

19 payment was in fact being offered to a foreign official at

20 the time it was made, the point here is that there was

21 absolutely no basis for the defendants in advance of being

22 charged in this case, in advance of litigating this case

23 over two years, to know who, if anyone, in the state-owned

24 companies or the state-invested companies with which they

25 were dealing were government officials. It's obvious that



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1 the government didn't have a principal basis for making its

2 charging decisions either because there was no application

3 of any factors to identify which entities they were charged

4 and which they weren't.

5 So I would submit that it's unfair to preserve

6 this case simply because the government will have a high

7 evidentiary burden at trial when the defendants had no basis

8 to know of the events at issue that their business customers

9 might be foreign officials. Thank you.

10 THE COURT: Mr. Miller.

11 MR. MILLER: Thank you, Your Honor.

12 My comments -- number one, I agree with the

13 comments of co-counsel. Frankly, they are -- they are

14 similar to Ms. Dunne's comments, so I just want to warn the

15 Court of that in advance, but I hope they are still worth

16 making.

17 The key to the FPCA -- it's the core criminality

18 is a bribe of a public official to influence official

19 action. That's from the Kay II decision, 359 F.3d 738.

20 Because that is the core of what the statute gets at, the

21 mens rea has to address that core. The Court implied -- the

22 Court stated that the fact that there is a mens rea

23 requirement can save the statute from vagueness.

24 The key to that mens rea requirement is that the

25 defendant while he is acting knows the facts and knows that



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1 they violate the law. I submit that instrumentality under

2 the FPCA is undefined. The Court's definition of

3 "instrumentality" -- I would echo comments by co-counsel --

4 is really broad, an instrument, something by which an end is

5 achieved. That could apply to a pen. If it has to be an

6 entity, it could apply to Boeing, which is privately owned

7 but which the United States uses to achieve its end. It's

8 just a very, very broad principle.

9 If you look at the FCPA, it doesn't have any

10 definition. If you look at some of the other things that

11 have defined what an instrumentality is -- you could go with

12 Lebran, which says that basically anything Congress creates

13 is an instrumentality, but that case is completely

14 inapposite because what that case was about was -- Congress

15 created Amtrak. In creating Amtrak, somebody sued Amtrak

16 saying you violated my First Amendment rights. Amtrak said

17 look at all the statutes. We are not supposed to be an

18 instrumentality.

19 What the Court said was when Congress creates

20 something they can't make it so that it's not covered by the

21 Constitution. The Constitution is a priority, and anything

22 that Congress makes is going to be bound by that. The

23 concept that that could be an instrumentality really doesn't

24 aid us at all. On the other end of the spectrum, you have

25 got Hall, which says when Congress refers to agencies and



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1 instrumentalities, they generally just mean the government

2 itself.

3 Okay, on this side, we have got the government.

4 It's got to be the government itself. On this side, it's

5 anything Congress creates. That is a wide broad spectrum

6 that nobody knows about in advance. Well, you can look at

7 other things that kind of go in between, the Foreign

8 Sovereign Immunities Act. That says that SOEs can be

9 instrumentalities but not the subsidiaries of SOEs. So in

10 this case, that would wipe out a number of the counts if

11 that one was followed.

12 My point is it's very vague, and it applies to

13 this statute. The Court noted that we didn't make -- join

14 issue with any of the allegations in this particular

15 Indictment or what the government was specifically saying,

16 but we do with whether or not SOEs can be covered as an

17 instrumentality and whether or not subsidiaries of SOEs can

18 be included.

19 Because it is broad, because you have to know it

20 and you can't -- these factors are post-hoc things that the

21 Court is saying to people look back and know if you were

22 dealing with it, but you couldn't have known in realtime,

23 and the factors didn't even exist in realtime. Therefore,

24 this statute suffers from the primary problem of a vague

25 statute. The defendant cannot know in advance what conduct



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1 violates the statute. It comes back to the fact that

2 official bribery is the key aspect of the statute. You

3 can't know if you are doing that in advance, so I would

4 submit that the statute is vague.

5 THE COURT: Thank you.

6 Mr. Wiechert.

7 MR. WIECHERT: Thank you, Your Honor.

8 The first thing I would suggest is that the reason

9 why federal judges aren't invited to dinner or lunch is not

10 because people don't excellent banter in talking about

11 current events or just getting insight into what the

12 judicial frame mind is -- the reason I don't pay for a

13 judge's lunch -- I don't think anyone in this room would pay

14 for a judge's lunch -- is because a judge is a judge. We

15 all know that the judge has a certain status in our system.

16 It's one of the highest statuses there is. A judge decides

17 the law. A judge is appointed for life. That is the

18 essence of a public official.

19 That is the essence of the type of individual that

20 the drafters of the Foreign Corrupt Practices Act decided

21 that we don't want people influencing. That's why it is

22 clear to anyone in this room that we can't do that, not

23 because we don't want to talk to you or not because it

24 wouldn't be fun but because it's absolutely clear that

25 that's something that even a cup of coffee or a lunch may



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1 cross over the line. That isn't what we have here.

2 I think there are certain questions that the Court

3 has to determine to decide this motion. The answers have to

4 come from the government. From the standpoint of the

5 questions that the Court asked at the beginning of this

6 hearing, I think certain directions need to be pointed the

7 government's way as well.

8 The first question is what's the definition of

9 "instrumentality" under the Foreign Corrupt Practices Act?

10 The dictionary has three different definitions. One

11 definition is incredibly broad as all the other lawyers have

12 suggested. It could be a pen. It could be a jerk. It

13 could be an officer of the court. I'm an instrumentality.

14 Everyone here is an instrumentality because we all serve the

15 court, which is a judicial body which is a branch of this

16 government. So, first, under the Foreign Corrupt Practices

17 Act, what is the definition of an "instrumentality"?

18 Second of all, does someone have to know that the

19 person they are dealing with is a foreign official, not that

20 they are making a payment to someone who turns out to be a

21 foreign official? Is the mens rea that the person actually

22 needs to know that this person falls within the definition

23 of a foreign official under the Foreign Corrupt Practices

24 Act? I would suggest to the Court if that is the necessary

25 mens rea, there is absolutely no way anyone can be found to



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1 be violative of the Foreign Corrupt Practices Act on the

2 clause that they have made a payment to influence someone

3 who is an employee of an instrumentality.

4 The reason I say that is this. There are multiple

5 definitions of what a foreign official is in the context of

6 a state-owned enterprise. The government has certain

7 factors. Judge Matz has certain factors. This Court has

8 certain factors. The statute has no factors. What we do

9 know from the statute is that the term "instrumentality"

10 can't mean something that is instrumental. It can't be

11 that. It can't be the janitor in a company that does

12 10 percent of its business for a public entity. It can't be

13 the paralegal at Gibson, Dunn & Crutcher because Gibson,

14 Dunn & Crutcher does business for foreign governments. Most

15 of the lawyers here with big firms would qualify as foreign

16 officials under that term "instrumentality."

17 We know the term "instrumentality" in the statute

18 can be Definition No. 1. If it isn't Definition No. 1, what

19 is the definition? When does 30-percent ownership become

20 40-percent ownership? The government has taken positions

21 against certain companies that are less than half owned,

22 taken the position that those state-owned enterprises fall

23 within the scope of instrumentality. Why do they make that

24 decision? They make that decision because they have taken

25 the position that they will decide what factors bring it to



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1 the level of a foreign official. That's prosecutorial

2 common law. That is what has been made.

3 So when we present to the Court statements by the

4 Department of Justice that says the corporation shouldn't --

5 it wouldn't be wise for them to contest this issue -- the

6 reason we bring it to the Court's attention is to suggest to

7 the Court that the dearth of authority that governs this

8 issue is a derth of authority that has been generated by way

9 these cases have been prosecuted.

10 First of all, there was almost 20 years of

11 non-prosecution. Since that time, most of the cases have

12 been decided with plea agreements with corporations where

13 employees haven't even been touched. So when the Court is

14 looking at a lack of authority by any Appellate Court on

15 this issue, it really needs to get to the basics. The

16 basics are, number one, what does the statute say? We know

17 instrumentality cannot mean anything that's instrumental.

18 If that's the government's definition, we will take that up

19 to the Court of Appeals and the Supreme Court because that

20 can't be what it is.

21 If it's not that definition, how do we parse it?

22 How do we decide what this term means? Well, the next step

23 that at least most of us would consider would be going to

24 the legislative history. Looking at the Court's tentative

25 ruling, the Court didn't look at the legislative history.



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1 To me, in the context of this term which has no definition

2 within the scope of this statute, for the Court to take the

3 position that the legislative history is irrelevant, I think

4 is even more indicative that there is no way to decide what

5 this term means.

6 I actually at first thought that that was

7 something that was negative, that the Court should have

8 looked at that. But then as I thought about it, I said to

9 myself what's the legislative history going to do here? It

10 doesn't define what "instrumentality" is. It doesn't mean

11 instrumentality. And even if it tried to define

12 "instrumentality," they wouldn't put a defendant on notice

13 by reading the statute what instrumentality meant anyway.

14 The McBoyle case, which is another area that the

15 Court didn't address in its tentative ruling, I think is

16 totally on fours with this case. Not only is it on fours

17 because you have a statute that has a general definition of

18 "vehicle" that adopting the Court's analysis would be

19 similar to instrumentality -- everybody knows what a vehicle

20 is. Is an airplane a vehicle? Yes. Should an airplane

21 fall within the statute? The District Court said yes. It

22 went up to the Court of Appeals in the Tenth Circuit. The

23 Tenth Circuit said yes. It was Justice Holmes who said wait

24 a minute. This isn't clear. It isn't clear that (a)

25 Congress want to cover airplanes. It isn't clear that (b)



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1 somebody reading this statute would know airplanes were

2 covered.

3 How can somebody reading this statute know whether

4 a KHMP is covered, know whether a subsidiary of a power

5 company in Korea is covered? Would they know from Agent

6 Smith's declaration? Agent Smith's declaration doesn't even

7 mention the fact that KHMP under Korean law isn't subject to

8 public bribery sanctions. Now, Agent Smith is probably not

9 going to testify to explain why that wasn't mentioned in the

10 course of his declaration, nor was Mr. Johnson required to

11 attempt to explain why under the OECD primarily only three

12 countries are prosecuting people for foreign bribery out of

13 over 30 members of the OECD, that the foreign affairs of the

14 other members of the OECD have fallen apart because of this

15 dearth of prosecutions. Absolutely not. Does Mr. Johnson

16 bring that up in his declaration? No, but that doesn't

17 matter anyway.

18 The point here is this. We have a statute that on

19 its face you cannot discern what the meaning is. We have

20 some of the brightest legal minds by resume and position

21 throwing out different definitions for the same word.

22 Looking at the definition of the word, we know that the top

23 definition can't be what Congress meant when it passed this

24 statute. So how can it be decided that this isn't vague?

25 How if the tie goes to the defendants can it be decided that



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1 the rule of lenity really doesn't apply here, that the rule

2 of lenity is in the government's favor?

3 There are a few things in the tentative I want to

4 point out. I do this typically in argument. First, on page

5 six, the Court's heading "(b)(1) The meaning of the

6 statutory text is clear." I don't know how to interpret

7 that. Is the word "instrumentality" a word in the English

8 language? Yes. It is clearly defined in the English?

9 Well, no, because (a) there are three definitions, and (b)

10 under this statute, Congress never defined it. What does

11 instrumentality mean? In fact, going through the rest of

12 the tentative, all I know is that there are factors.

13 THE COURT: Sir, would you please modulate your

14 voice?

15 MR. WIECHERT: Sure.

16 THE COURT: I'm getting impression that someone

17 out there is shouting at me. I don't enjoy that.

18 MR. WIECHERT: I'm not shouting. I was just

19 trying to emote. The reason is because to me this issue

20 looking at the way -- we spent a lot of time going through

21 the legislative history because we thought it was important.

22 We think anytime a statute is ambiguous the Court should

23 look at the legislative history. We are looking at a

24 statute that uses a word that it does not define, a word

25 that has a tremendously general and vague meaning.



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1 We have a Supreme Court case that's on all fours

2 at least from my reading of McBoyle with this situation. It

3 was a person who was engaged in illegal conduct, who knows

4 it's illegal conduct, who switches the numbers on the

5 airplane that was stolen. It's not a question of whether or

6 not that person knew that they were stealing an airplane.

7 It's not a question that that person knw they were taking it

8 over state lines, and that that person knew it was wrong.

9 Yet we have one of the smartest jurists in the country

10 taking the position that that was not enough because

11 "vehicle" like "instrumentality" is a general and amorphous

12 term.

13 I would submit, Your Honor, that "vehicle" is far

14 less amorphous than "instrumentality" is. Then I read the

15 tentative ruling where it says that the meaning of statutory

16 text is clear. Yet I go through, and I understand that the

17 government submits factors, and Judge Matz submits factors,

18 and this Court submits factors, and they are all different.

19 So from the standpoint of the clarity of the statutory

20 meaning it is hard for me to get my hands around what that

21 statutory meaning is, which is why in the beginning I was

22 hoping that the Court would inquire with the government what

23 the government's position is of what "instrumentality" is

24 under the scope of the Foreign Corrupt Practices Act.

25 Turning to page eight, page eight focuses on



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1 domestic instrumentality, demonstrates that a state-owned

2 company could be considered an instrumentality. One of the

3 things I want to point out in the Court's discussion there

4 is that the cases the Court is citing are civil cases. Hall

5 is a civil case involving the Religious Freedom Act. When a

6 Court tries to distinguish Hall -- is suggesting that Hall's

7 statement that Congress sometimes uses instrumentality not

8 to expand the definition of a certain clause but just to

9 basically -- that you kind of throw in a tag-on at the end,

10 and that tag-on in the end isn't intended to expand the

11 other terms within the statute. The Court labeled that as

12 dicta.

13 That wasn't dicta. The Court made the decision

14 that the First Amendment determination of whether or not

15 this falls within government action is not changed by the

16 Religious Freedom Act. That was the Court's holding. That

17 was central to the Court's holding. To get to that holding,

18 the Court had to make a determination that the word

19 "instrumentality" was a nullity in that statutory language.

20 That's not dicta at all. Now, it may be speculation as to

21 why Congress put that language in there because they

22 couldn't determine it from the legislative history, but at

23 least they didn't go to the legislative history to determine

24 what Congress considered.

25 The bottom line is Lebron. Lebron is a case --



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1 again, a First Amendment case, a civil action. Was

2 somebody's rights to post a sign in a railroad station

3 infringed? What is interesting there is that the Court

4 cites other Supreme Court cases that say that Amtrak is not

5 an agency, but for First Amendment purposes, it was an

6 agency. That's not the kind of clarity that a criminal

7 statute can be based on.

8 There are so many -- the tentative ruling is

9 replete with the word "could." I have never seen a criminal

10 statute defined by what could be. That's not the way it

11 works. It is or it isn't. The bank is federally insured,

12 or the bank is not federally insured. It's not it could

13 fall under the scope of federal insurance. That's not how

14 criminal statutes are governed.

15 Either a plane is a vehicle under the statute, or

16 it's not a vehicle under the statute. It's not, well, the

17 plane has two or three seats -- maybe if it has four seats,

18 they will consider it a vehicle, but if it only has two

19 seats, it's not a vehicle. The notion that certain things

20 could or couldn't be -- how does one ultimately decide when

21 they are looking at the statute what is or what isn't? That

22 goes to the whole concept of notice.

23 The same use of the word on page 11 when

24 discussing the definition of "instrumentality" in the

25 Foreign Sovereign Immunities Act -- I think it's important



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1 because the Court has cited in its tentative ruling that if

2 it looks at the purpose of the Act, if it looks at the

3 history, that all of these support the notion that

4 state-owned enterprises should fall within the scope of

5 instrumentality. That's of course without consideration of

6 the legislative history.

7 This is a point that Ms. Dunne made, and I

8 just -- as someone who enjoys reading history and did a lot

9 of history in college and undergraduate in the 1970s, this

10 statute was not intended to be a general commercial bribery

11 statute. If you ask the government was this ever intended

12 to be a general commercial bribery statute, the answer would

13 be no. So if we can accept that and we can accept that we

14 weren't intended to be the world's policeman with regard to

15 all acts of foreign corruption, that we wanted to focus on

16 public officials, would we have passed a statute in 1977

17 that would basically be a general commercial bribery statute

18 in China, in Russia, in Vietnam, in North Korea, in all of

19 these countries that were our sworn enemies who were against

20 our way of life and how our economy was put together? That

21 just doesn't make any sense at all.

22 From a historical standpoint, instrumentality

23 would be something that would give us a wedge to make

24 criminal cases in China when we don't even have an airline

25 with them in the '70s? We had no way to get information out



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1 of the China in the '70s. That alone from a historical

2 perspective makes absolutely no sense.

3 So from the standpoint of going forward, Your

4 Honor, all I want to say is this. I still don't know what

5 the word "instrumentality" means. I have spent a heck of

6 lot more time looking at this issue than any of these

7 defendants did. There is no case that has defined the term.

8 In this case, we still haven't defined the term, and that is

9 just the inherent -- it just -- this is a case for

10 vagueness. We don't know what it is, and that's just not

11 good enough.

12 THE COURT: Thank you. We are going to take a

13 brief recess here.

14 (Recess.)

15 THE COURT: Mr. Edmonds.

16 MR. EDMONDS: Thank you, Your Honor.

17 I think we need to recall the basis for this

18 motion. This is a Motion to Dismiss. One of the facts --

19 one of the issues that none of the defendants really tried

20 to even discuss was whether or not there are factual issues

21 that are outstanding. Ultimately, that is the government's

22 first argument. It is the one which in the tentative ruling

23 this Court has looked to, whether or not there are factual

24 issues that are intertwined and must be proven at trial.

25 The government respectfully submits that there are factual



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1 issues that are out and that each of the various different

2 instrumentalities, different state-owned entities that are

3 alleged, will be proven at trial whether they are an

4 instrumentality or not.

5 I think all of the arguments that are there are

6 made passionately, are made with a great desire, for a

7 technical definition of what an "instrumentality" is. That

8 is something which has been repeated by the OECD, by others,

9 trying to define the precise scope of what an

10 instrumentality is, but that's not a sufficient basis at a

11 Motion to Dismiss.

12 The Motion to Dismiss looks specifically at

13 whether or not the defendants are sufficiently apprised of

14 the facts and whether or not they are protected from double

15 jeopardy. It's very clear what the standards are and what

16 they are challenged on. What they are essentially arguing

17 in all of these other aspects is that they do not know the

18 precise technical definition of what an "instrumentality"

19 is.

20 I want to go through just a couple of different

21 pieces in response to the various different arguments that

22 were made. One of the pieces that was discussed at length

23 was the scienter requirement and whether or not that is

24 sufficient to save the statute. I think that when we

25 examine the issues and the facts in evidence, when we see



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1 that these are not just golf outings that we are looking

2 at -- we are looking at cash payments that are made. We are

3 looking at someone landing in the United States and handing

4 over an envelope of $2,000. These are the scienter that

5 will be shown and will be relevant for a jury to consider.

6 We are looking at all these payments that are hidden in

7 various commissions, false invoices, coded e-mails, and

8 requests for the confidentiality of the individual that is

9 being bribed.

10 THE COURT: But I suppose the defendants would

11 have responded just like the fellow who stole the airplane.

12 There is no question he did something bad, but did he

13 violate the statute?

14 MR. EDMONDS: I think without a doubt that is one

15 of the aspects that is there. In the McBoyle case, I think

16 what is most relevant is looking at the context that is

17 there. The government went at length and the Court analyzed

18 the context of the FPCA, looked at the legislative history,

19 which the government submits did include references to

20 state-owned entities. Which through all the various

21 briefing and all the various arguments that were made, there

22 is no response to the various points which the government

23 pointed out where they did refer to Italian state oil

24 companies, quasi-governmental institutions. It's very clear

25 from the legislative history that it was a part of what was



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1 being considered. I think that the overall structure and

2 context of what is there is very different than what we see

3 in McBoyle where it is a very different type of statute.

4 We would submit for all of the various reasons

5 th

Carson - Foreign Official - Oral Argument Transcript

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