With FCPA under scrutiny, will DOJ expand use of Travel Act?

March 12, 2012

If the Foreign Corrupt Practices Act is Peyton Manning, the Travel Act could turn out to be his little brother Eli.

Allow me to explain. As we all know, until the last several months, FCPA has been one of the Justice Department’s Hall of Fame success stories. Prosecutors have reaped billions in settlements with corporations accused of bribing foreign officials to obtain state-sponsored contracts. The list of FCPA defendants that signed plea deals — including Siemens and Halliburton — is long and sobering, which means the Justice Department met the dual goals of buffing up its prosecution record and satisfying the larger U.S. policy interest in deterring overseas corruption. But of late the department’s FCPA record has taken a hit (sort of like Peyton’s neck) with the dismissal of the Lindsey Manufacturing and Africa sting case.

Is this the moment for the Travel Act to catch up with its better-known brother, a la Eli Manning?

William Sullivan of Pillsbury Winthrop Shaw Pittman told me Monday that government prosecutors have shown a “renewed interest” in the Travel Act, a broad, catch-all law originally designed to combat racketeering. (In a terrific discussion of the Travel Act last month at Thomson Reuters News and Insight, Mike Emmick of Sheppard Mullin Richter & Hampton said the law “makes it a crime to engage in any interstate or foreign travel, or to use any mail or facility in foreign or interstate travel, with the intent to ‘carry on’ or ‘facilitate’ any ‘unlawful activity,'” including bribery.) As Sullivan explained in a new Pillsbury client alert, the Travel Act actually allows greater leeway than the FPCA, since it doesn’t target just bribes to foreign officials. Any bribe, or even attempted bribe, with a commercial purpose can trigger prosecution under the Travel Act, so long as the accused corporation is subject to an underlying state law prohibiting bribery for commercial purposes. (And as Sullivan notes, prosecutors can usually find some state law to fit their allegations.)

The Travel Act also permits the government to extend the statute of limitations through a hybrid federal conspiracy charge that claims the defendants intended to violate the FCPA and the Travel Act. “This makes it much easier for prosecutors to string together seemingly unlinked fact patterns, and also affords prosecutors additional advantages with respect to statutes of limitations, as the statute is tolled until the last act in furtherance of the conspiracy,” the Pillsbury client alert said.

There have already been a few instances of the government bringing Travel Act charges in conjunction with FCPA allegations, most notoriously in the Control Components Inc case. The California-based power generation-valve maker itself pleaded guilty in 2009 to bribing officials in China, Malaysia, and the United Arab Emirates, agreeing to pay $18.2 million for violating the FCPA and the Travel Act. The Travel Act charge was based on a California state law barring commercial bribery.

The individual CCI defendants have mounted the only challenge to the government’s use of the Travel Act as an adjunct to the FCPA. In a fascinating 38-page brief filed last June, defense counsel at Gibson, Dunn & Crutcher; Sidley Austin; Bienert, Miller & Katzman; and the Law Office of David Wiechert argued that the Travel Act is unconstitutionally vague with regard to alleged foreign bribery, so the indictment violated the defendants’ due process rights. They also asserted that prosecutors can’t extend the Travel Act to alleged overseas bribery under the Supreme Court’s 2010 ruling in Morrison v. National Australia Bank, which (you’d better know by now!) holds that U.S. laws don’t apply abroad unless Congress so specified.

The judge overseeing the case, U.S. District Judge James Selna of Los Angeles federal court, denied the motion to dismiss the Travel Act counts of the indictment, but defense counsel are expected to appeal that ruling if their clients are convicted.

One of those defense lawyers, Nicola Hanna of Gibson, Dunn, wouldn’t comment specifically on the CCI case. He agreed, however, with Pillsbury’s Sullivan that corporations have to be on the lookout for Travel Act violations, particularly as defendants and business groups try to narrow the government’s definition of foreign officials under the FCPA. “You may see this more and more,” Hanna said. “The statute has broader sweep (than FCPA).”

I’ve questioned whether it makes sense for U.S. prosecutors to go after News Corp for allegedly bribing British police officials to supply news tips. It’s a stretch of the FCPA to call cops “state officials,” after all, and to suggest that news stories are the sort of state-controlled contracts the FCPA typically addresses. But the Travel Act is much less of a stretch. If the government is bound and determined to bring criminal charges against News Corp, I wouldn’t be surprised to see the Travel Act get its MVP moment.

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