Last Week’s FCPA Decision In The Government’s Favor Is A Limited Setback For Subjects Of Federal Corruption Inquiries
As efforts by U.S. regulators to police foreign corruption have dramatically increased in recent years, practitioners have lamented the lack of caselaw interpreting the U.S. Foreign Corrupt Practices Act (the “FCPA”). The primary source of guidance about the FCPA’s scope and application has been settlement agreements between subjects of corruption investigations and federal regulators. In these settlements, however, defendants often implicitly agree to an expansive view of the FCPA in return for putting FCPA-related problems behind them. One of the lurking questions about the meaning of the FCPA has been the scope of the definition of “foreign official” as used in the FCPA and whether it covers officers and employees of state-owned entities. In a highly anticipated opinion last week in U.S. v. Noriega, et al., 10-CR-01031 (C.D. Cal. 2010), a federal judge in the Central District of California answered this question in favor of the government, ruling that a state-owned corporation may qualify as an “instrumentality” of a foreign government and, therefore, officers of these corporations may qualify as “foreign officials” under the FCPA. But a close review of the court’s reasoning suggests this decision might not be as significant a setback for subjects of FCPA inquiries as the outcome might suggest.