Use of the Travel Act to Prosecute Foreign Commercial Bribery

Under its interpretation of Bowman, the district court found that Congress desired the Travel Act to punish conduct taking place in foreign territory. See Carson, Order Denying Defendants' Motion, at 8-9. The court pointed out that the Travel Act's title ' “Interstate and foreign travel or transportation in aid of racketeering enterprises” ' suggested a clear intent that bribes paid in foreign commerce were encompassed by the statute, even in the face of the Supreme Court's caution that laws that contain the words “foreign commerce” are not necessarily intended to apply abroad. See Morrison, 130 S. Ct. at 2882 (quoting E.E.O.C. v. Aramco, 499 U.S. 244, 251 (1991)). The district court judge acknowledged that Morrison's rather sweeping language to the effect that the presumption against extraterritorial application applies “in all cases” invites a debate whether Bowman remains good law. Moreover, the strict distinction between criminal statutes and civil statutes ' as implicitly set forth by Bowman ' was not articulated in Morrison. Yet, absent the Supreme Court's explicitly overruling Bowman, the district court reasoned that it was obligated to presume Congress's intent that U.S. federal criminal statutes apply extraterritorially when restricting them would severely diminish their effectiveness ' a path that has also been taken by other federal courts. See Carson, Order Denying Defendants' Motion, at 8-9; see also, e.g., United States v. Weingarten, 632 F.3d 60, 66 (2d Cir. 2011); United States v. Leija-Sanchez, 602 F.3d 797, 799 (7th Cir. 2010).

California's Commercial Bribery Law Permits
Extraterritorial Application

Prosecution under the Travel Act requires the government to prove violation of the underlying state (or federal) statute that reaches the alleged conduct. This is because the Travel Act “proscribes not the unlawful activity per se, but the use of interstate facilities with the requisite intent to promote such unlawful activity.” United States v. Welch, 327 F.3d 1081, 1092 (10th Cir. 2003). In Carson, the government invoked a provision of California's penal code that prohibits, inter alia, offering or giving “corruptly” money or anything of value to a company employee, who in return agrees to use his position to benefit the bribe payer. Cal. Penal Code ' 641.3(a) (“Any employee who solicits, accepts, or agrees to accept money or any thing of value … in return for using or agreeing to use his or her position for the benefit of that other person, and any person who offers or gives an employee money or any thing of value under those circumstances, is guilty of commercial bribery.”).

The defendants raised two principal arguments against the application of California's commercial bribery statute as a vehicle for the Travel Act count. They pointed out that the California law has never before been used to prosecute foreign commercial bribery, and argued that the California legislature did not intend extraterritorial reach. Defendants acknowledged that states have jurisdiction to enforce their laws to pursue conduct taking place elsewhere if the conduct produces harm inside the state, but they denied that harm could have arisen in California through the defendants' alleged offer of bribes to employees of foreign companies. The district court disposed of defendants' extraterritorial argument, noting that a different provision of California's penal code, ' 778a, expressly authorizes the prosecution of statutorily-defined criminal activity executed in part in California and culminating either within or without the state. Cal. Penal Code ' 778a (“[T]he person is punishable for that crime in this state in the same manner as if the crime had been committed entirely within this state.”). The district court also cited to a number of decisions in which courts have applied the law to offenses committed in part in California and in part in foreign jurisdictions, including in the bribery context. See, e.g., People v. Brown, 91 Cal. App. 4th 256, 266-67 (2001); Bryant v. Mattel, Inc., No. CV 04-9049 DOC (RNBx), 2010 WL 3705668, at *8-9 (C.D. Cal. Aug. 2, 2010). Accordingly, the court deemed California state law to reach defendants' alleged conduct.

Conclusion

The Carson defendants' motion seeking dismissal of their indictment under the Travel Act raises intriguing issues about the government's intended use of the Travel Act to prosecute foreign commercial bribery.

Carson exemplifies an effort by the government to pursue foreign commercial bribery through the Travel Act and underlying state law due to the inherent limitation of the FCPA, which, unlike the UK Bribery Act, reaches bribery of only foreign officials. In many foreign bribery schemes, corrupt payments are made not only to public officials, but also to private business executives. Should the U.S. government continue to press ahead with Travel Act indictments, companies and individuals will face serious risks in addition to those posed by the anti-bribery provisions of the FCPA.

It is also likely that the arguments of the Carson defendants concerning the extraterritorial application of the Travel Act will receive further attention by district and appellate courts in the future. Although the district court in Carson categorized the Travel Act indictments as not implicating the presumption against extraterritorial application, a different factual scenario ' with defendants located (or at the relevant times acting) outside the state whose bribery law is being applied ' may generate different conclusions even under Carson's reasoning. It is, in any case, apparent that the impact of Morrison on criminal law enforcement, if any, has not yet been fully resolved. Given the sweeping language in Morrison, it remains entirely possible that direct appellate review or Supreme Court action, including an express overruling or limitation of Bowman and its progeny, could severely crimp the government's ability to employ the Travel Act or other statutes to plug perceived gaps in the FCPA.

Paul R. Berger is a partner and David M. Fuhr is an associate in the Washington, DC, office of Debevoise & Plimpton LLP. Bruce E. Yannett is a partner in the firm's New York office. The authors may be reached at [email protected], [email protected], and [email protected].

In last month's issue, we began discussion of the ongoing case, United States v. Carson, in which the government charged the defendants with violating the Travel Act in order to reach alleged foreign bribery of private individuals, as opposed to government officials. The discussion continues herein.

The Lingering Effect of Bowman

The district court did not limit its analysis to ruling that defendants' alleged conduct did not require an extraterritorial application of the Travel Act. The court also found that the Travel Act could be applied extraterritorially despite the presumption adopted in Morrison. (The U.S. Supreme Court in 2010 held in Morrison v. Nat'l Austl. Bank Ltd. that ' 10(b) of the Securities Exchange Act of 1934 provides no “cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges.”
130 S. Ct. 2869, 2875 (2010)). Noting that Morrison examined a civil enforcement provision of the Securities Exchange Act of 1934, the district court ruled that the presumption against extraterritoriality ' according to Supreme Court precedent that was not discussed, let alone overruled, in Morrison ' does not apply with the same force to criminal statutes. The district court relied for that proposition on a 1922 decision, United States v. Bowman, which involved a criminal conspiracy to defraud a U.S. corporation that was planned and executed entirely outside the United States. 260 U.S. 94, 98 (1922). In upholding the indictment in Bowman, the Supreme Court recognized that limiting the jurisdiction of U.S. courts in criminal cases to acts committed solely within the territory of the United States would “leave open a large immunity for frauds as easily committed by citizens on the high seas and in foreign countries as at home.” Id. (holding that criminal statutes, “as a class, [are] not logically dependent on their locality for the government's jurisdiction, but are enacted because of the right of the government to defend itself against obstruction, or fraud wherever perpetrated … “). For that reason, extraterritorial application may be inferred for certain criminal laws from the nature of the offense, notwithstanding the general rule that failure by Congress to express its intent to apply the law extraterritorially will limit its reach to conduct wholly within U.S. territory. Id.

Under its interpretation of Bowman, the district court found that Congress desired the Travel Act to punish conduct taking place in foreign territory. See Carson, Order Denying Defendants' Motion, at 8-9. The court pointed out that the Travel Act's title ' “Interstate and foreign travel or transportation in aid of racketeering enterprises” ' suggested a clear intent that bribes paid in foreign commerce were encompassed by the statute, even in the face of the Supreme Court's caution that laws that contain the words “foreign commerce” are not necessarily intended to apply abroad. See Morrison , 130 S. Ct. at 2882 (quoting E.E.O.C. v. Aramco , 499 U.S. 244, 251 (1991)). The district court judge acknowledged that Morrison's rather sweeping language to the effect that the presumption against extraterritorial application applies “in all cases” invites a debate whether Bowman remains good law. Moreover, the strict distinction between criminal statutes and civil statutes ' as implicitly set forth by Bowman ' was not articulated in Morrison. Yet, absent the Supreme Court's explicitly overruling Bowman, the district court reasoned that it was obligated to presume Congress's intent that U.S. federal criminal statutes apply extraterritorially when restricting them would severely diminish their effectiveness ' a path that has also been taken by other federal courts. See Carson , Order Denying Defendants' Motion, at 8-9; see also, e.g., United States v. Weingarten , 632 F.3d 60, 66 (2d Cir. 2011); United States v. Leija-Sanchez , 602 F.3d 797, 799 (7th Cir. 2010).

California's Commercial Bribery Law Permits
Extraterritorial Application

Prosecution under the Travel Act requires the government to prove violation of the underlying state (or federal) statute that reaches the alleged conduct. This is because the Travel Act “proscribes not the unlawful activity per se, but the use of interstate facilities with the requisite intent to promote such unlawful activity.” United States v. Welch , 327 F.3d 1081, 1092 (10th Cir. 2003). In Carson, the government invoked a provision of California's penal code that prohibits, inter alia, offering or giving “corruptly” money or anything of value to a company employee, who in return agrees to use his position to benefit the bribe payer. Cal. Penal Code ' 641.3(a) (“Any employee who solicits, accepts, or agrees to accept money or any thing of value … in return for using or agreeing to use his or her position for the benefit of that other person, and any person who offers or gives an employee money or any thing of value under those circumstances, is guilty of commercial bribery.”).

The defendants raised two principal arguments against the application of California's commercial bribery statute as a vehicle for the Travel Act count. They pointed out that the California law has never before been used to prosecute foreign commercial bribery, and argued that the California legislature did not intend extraterritorial reach. Defendants acknowledged that states have jurisdiction to enforce their laws to pursue conduct taking place elsewhere if the conduct produces harm inside the state, but they denied that harm could have arisen in California through the defendants' alleged offer of bribes to employees of foreign companies. The district court disposed of defendants' extraterritorial argument, noting that a different provision of California's penal code, ' 778a, expressly authorizes the prosecution of statutorily-defined criminal activity executed in part in California and culminating either within or without the state. Cal. Penal Code ' 778a (“[T]he person is punishable for that crime in this state in the same manner as if the crime had been committed entirely within this state.”). The district court also cited to a number of decisions in which courts have applied the law to offenses committed in part in California and in part in foreign jurisdictions, including in the bribery context. S ee, e.g., People v. Brown , 91 Cal. App. 4th 256, 266-67 (2001); Bryant v. Mattel, Inc., No. CV 04-9049 DOC (RNBx), 2010 WL 3705668, at *8-9 (C.D. Cal. Aug. 2, 2010). Accordingly, the court deemed California state law to reach defendants' alleged conduct.

Conclusion

The Carson defendants' motion seeking dismissal of their indictment under the Travel Act raises intriguing issues about the government's intended use of the Travel Act to prosecute foreign commercial bribery.

Carson exemplifies an effort by the government to pursue foreign commercial bribery through the Travel Act and underlying state law due to the inherent limitation of the FCPA, which, unlike the UK Bribery Act, reaches bribery of only foreign officials. In many foreign bribery schemes, corrupt payments are made not only to public officials, but also to private business executives. Should the U.S. government continue to press ahead with Travel Act indictments, companies and individuals will face serious risks in addition to those posed by the anti-bribery provisions of the FCPA.

It is also likely that the arguments of the Carson defendants concerning the extraterritorial application of the Travel Act will receive further attention by district and appellate courts in the future. Although the district court in Carson categorized the Travel Act indictments as not implicating the presumption against extraterritorial application, a different factual scenario ' with defendants located (or at the relevant times acting) outside the state whose bribery law is being applied ' may generate different conclusions even under Carson's reasoning. It is, in any case, apparent that the impact of Morrison on criminal law enforcement, if any, has not yet been fully resolved. Given the sweeping language in Morrison, it remains entirely possible that direct appellate review or Supreme Court action, including an express overruling or limitation of Bowman and its progeny, could severely crimp the government's ability to employ the Travel Act or other statutes to plug perceived gaps in the FCPA.

Paul R. Berger is a partner and David M. Fuhr is an associate in the Washington, DC, office of Debevoise & Plimpton LLP. Bruce E. Yannett is a partner in the firm's New York office. The authors may be reached at [email protected], [email protected], and [email protected].