Supreme Court Takes On “Another” in Upholding Hobbs Act Conviction

The Hobbs Act – a law promulgated in 1946 to deal with the infiltration of racketeering activity in labor unions – got a “W” in its column yesterday with the Supreme Court’s issuance of Ocasio v. United States.  Justice Alito, writing for the 5-3 majority, affirmed the convictions of a Baltimore police officer for Hobbs Act extortion and conspiracy to commit the same for accepting kickbacks in exchange for directing cars post-accident to his co-conspirator’s auto body shop for repairs.

The Hobbs Act is a vehicle typically used by federal prosecutors to charge a public official “who took ‘by colour of his office’ money that was not due to him for the performance of his official duties,” or more simply put, the Hobbs Act provides for the prosecution of law enforcement officials and politicians who accept bribes or extort others via their professional office.  Evans v. United States, 504 U.S. 255, 260 (1992). The definition of extortion under the Hobbs Act requires the obtaining of property (think money, gifts, entertainment, etc.) from another with his consent.  Id. at 265.

In a strict constructionist argument that would have made the late Justice Scalia proud, Ocasio argued that the Government did not carry its burden on this requisite element of the Hobbs Act by failing to prove that he had obtained property “from another.”  Sure, Ocasio accepted money in exchange for routing beat up cars to his co-conspirator’s repair shop, but he shrewdly pointed to the fact that he accepted the said property, i.e. his kickbacks, directly from his co-conspirator and not from another individual outside the conspiracy.  Therefore, he concluded that although his co-conspirators paid him off, there was no agreement – and could be no agreement – to obtain property from another individual or individuals. Clever argument?  Yeah.  Successful?  No.

Justice Alito rejected this argument, in sum, agreeing with the Government that Ocasio’s acceptance of kickbacks from his conspiring bribe payors, satisfied the “from another” element of the Hobbs Act.  Any suggestion proffered by the defense that the bribe must have been paid from an individual outside or beyond the conspiracy was swiftly dismissed by majority Justices Alito, Kennedy, Ginsburg, Breyer, and Kagan.  Moral of the story:  just like the man who becomes his own grandpa, one can now be both a victim and a co-conspirator under the Hobbs Act.

 

 

Britain’s Serious Fraud Office Secures First Convictions Under Bribery Act

Last Friday, news came from across the Atlantic that Britain’s Serious Fraud Office (“SFO”) had successfully obtained its first series of convictions under the UK’s Bribery Act of 2010 (the “Bribery Act”), which became effective in July 2011.

The SFO reported that a jury had found three men – Gary Lloyd West, former chief commercial officer at Sustainable AgroEnergy PLC, James Brunel Whale, former CEO of Sustainable Growth Group, and Stuart John Stone, a financial products sales director with SJ Stone Ltd. – guilty of numerous charges, including giving and receiving bribes in violation of the Bribery Act, stemming from their fraudulent promotion and sale of bio-fuel investment products to UK investors between April 2011 and February 2012. The scheme involved more than 250 investors, many of whom were duped into investing life savings and pension funds, and resulted in losses of over £23 million (approximately $36 million). Pete Brusch, “Britain Secures 1st Sentences Under 2010 Anti-Bribery Law,” Law 360 (Dec. 8, 2014); Carolyn Cohn and Kristin Ridley, “SFO Nails Its First Convictions Under New Bribery Laws,” Reuters (Dec. 8, 2014).

Though these first convictions are of individuals, not a corporation, and are related to a “good old fashioned boiler room fraud scheme,” not the “exotic” bribery of a foreign official by a “corporate fat cat[] … in the City of London,” Barry Vitou and Richard Kovalevsky Q.C., “Christmas Comes Early: SFO Scores 1st Bribery Act Convictions, at thebriberyact.com, they are seen as an important step forward in demonstrating the SFO’s ability to police the Bribery Act, which has been called “one of the world’s toughest anti-corruption laws.” Cohn and Ridley, supra.

Indeed, though US companies are rightly focused on ensuring compliance with the Foreign Corrupt Practices Act (“FCPA”), the Bribery Act has even wider application – and implications – of which companies must be aware if they conduct part of their business in the UK. For example:

  • Though Section 6 of the Bribery Act mirrors the FCPA in that it prohibits bribing a public official, unlike the FCPA:
    • there is no requirement for a “corrupt” or “improper” intent;
    • there is no exemption for facilitation payments (i.e., payments to a foreign official to expedite or secure the performance of a routine, on-discretionary government action); and
    • there is no defense for promotional expenses.
  • Further, unlike the FCPA, the Bribery Act reaches exchanges with private businesses and nongovernmental entities. Section 1 of the Act prohibits active bribery (i.e., the giving of a bribe) to any person (not just a foreign public official) to induce them to act “improperly,” and Section 2 prohibits passive bribery (i.e., the receipt of a bribe). (These were the sections under which West and Stone were convicted.)
  • Additionally, while a company may be vicariously liable for acts of its employees or agents under the FCPA, under Section 7 of the Bribery Act, a UK company or a company doing business in the UK may be held strictly liable for “failure to prevent bribery.” A “failure to prevent bribery” occurs when a company fails to institute “adequate procedures” to prevent “associated persons” from engaging in active bribery (i.e., Sections 1 and 6 of the Act) or passive bribery (Section 2).
    • It should also be noted that the head of the SFO, David Green, is seeking an amendment which would expand the breadth of Section 7, imposing strict liability on corporations for not only failing to prevent bribery, but also for failing to prevent “acts of financial crime by its employees.”
  • Under the FCPA an individual faces up to 5 years’ imprisonment and a $250,000 fine, and companies face fines of up to $2 million, per violation. In contrast, an individual convicted of a Bribery Act offense faces up to 10 years’ imprisonment, an unlimited fine and confiscation of assets. (West and Stone were sentenced to 4 years and 6 years, respectively, for their Bribery Act offenses.)

It remains to be seen whether the SFO will charge or successfully prosecute a company for violation of the Bribery Act. Despite this, it remains imperative for companies to have a proper understanding of bribery and corruption issues and laws, and how they can take steps to prevent themselves from being subject to such investigations.

Companies with questions regarding the FCPA, the Bribery Act, the OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and/or other related legislation, or seeking guidance in drafting or instituting anti-bribery compliance programs should contact a member of MMWR’s White Collar and Government Investigations practice group.