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In a ruling that could embolden federal anti-corruption prosecutors, the U.S. Court of Appeals for the Second Circuit has ruled that it’s not necessary to meet the heightened standard of proving that a bribe was paid in exchange for an “official act” in Foreign Corrupt Practices Act cases.

The decision in U.S. v. Ng Lap Seng is a clear win for the Justice Department and marks the first time that a circuit court has applied the official act rule, which the U.S. Supreme Court established in McDonnell v. U.S., to the FCPA. 

“People on the defense side of FCPA cases have long felt that the agencies have taken a tremendously extensive view of their jurisdiction to prosecute FCPA and types of conduct that are violative of the FCPA—and this does nothing to rein that in,” said Emily Westridge Black, a partner at Haynes and Boone in Austin, Texas, and Dallas, who specializes in FCPA litigation. 

She added, “We can expect that this will not curb and will likely increase enforcement action.” 

Black also saw the decision as a signal of things to come, describing it as the “tip of the iceberg in terms of people testing the FCPA.” Since the Justice Department launched the FCPA pilot program in 2016, prosecutors have focused more on individual accountability. And whereas companies tend to settle FCPA cases because they have so much to lose, individuals are more inclined to take their chances at trial, which has led to more challenges to the scope of the FCPA. 

“On the one hand, we’re seeing extensive prosecutions, but we’ll also see people making these interesting defense arguments that have been percolating in the defense community for a while,” Black said. “Looking forward, we’ll have a much better sense of the true scope of the FCPA five to 10 years from now.” 

The defendant in the case, Ng Lap Seng, a wealthy Chinese real estate developer, was convicted of paying bribes and gratuities to United Nations officials in violation of the FCPA. On appeal, he argued, in part, that the trial judge had erred in failing to instruct the jury on the McDonnell standard.

But the Second Circuit held that McDonnell doesn’t apply to the FCPA or Section 666, a law that addresses bribery that involves federal funds, because both laws have a more expansive definition of bribery. 

“The way I read McDonnell, it wouldn’t apply on its face to the FCPA,” said Jason Jones, a partner in King & Spalding’s special matters and government investigations practice in Washington, D.C. “The Second Circuit seems to me to have gotten it right.” 

Jones noted the decision also clarified the “FCPA clearly requires a quid pro quo,” meaning that proving a defendant offered or provided payment, even for a corrupt purpose, isn’t enough by itself to satisfy the statute. 

“It’s just that the quo is a lot broader under the FCPA,” he added. “I think it’s good clarity, but I don’t think it would be a surprise to most prosecutors.” 

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