Is Anyone Not a Foreign Official Under the FCPA?

The FCPA prohibits corrupt payments to “foreign officials,” defining a foreign official as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof … or any person acting in an official capacity for or on behalf of any such government or department … ” 15 U.S.C. ' 78dd-2(h)(2)(A).

The DOJ has brought cases against companies and individuals in relation to their dealings with SOEs based on a broad reading of the term “instrumentality,” a term not otherwise defined in the statute. According to one survey of FCPA prosecutions in 2009, two-thirds of the prosecutions against companies that year related to SOEs, with DOJ and the SEC pursuing a disproportionate number of cases in a handful of industries like energy, telecommunications and health care. Mike Koehler, The Foreign Corrupt Practices Act in the Ultimate Year of Its Decade of Resurgence, 43 Ind. L. Rev. 389, 411-13 (2010). Some recent examples include:

• A deferred prosecution agreement and $2 million fine for payments made to physicians employed at Chinese state-owned hospitals in exchange for physicians directing their hospitals to purchase the defendant U.S. corporation's medical devices. U.S. v. AGA Medical Corp., 0:08-cr-00172-1 (D. Minn. 2008).
• Charges leading to a $402 million criminal settlement for, inter alia, bribes allegedly made by KBR to officials of Nigeria LNG, a joint venture between private multinational energy companies owning 51% of the joint venture, and Nigeria's state-owned oil company owning 49%, for the purpose of securing engineering and procurement contracts. U.S. v. Kellogg, Brown and Root LLC, 09-cr-071 (S.D. Tex. 2009).
• Indictments of officers of a Florida company for payments made to officials of Honduras' national telecommunications company ' including the senior in-house attorney of that company ' in exchange for interconnection agreements and preferential rates. U.S. v. Granados, 1:10-cr-20881 (S.D.Fla. 2010).

The government's approach appears to subsume nearly every entity that has some government ownership, even if the amount of government ownership is less than 50% of an otherwise privately owned entity or the entity is engaged in purely commercial pursuits. From a domestic perspective, this approach has potentially absurd results: if the U.S. were a foreign country, American International Group officers would have to be deemed foreign officials by virtue of the government's takeover of that company as part of TARP.