Texas Court Dismisses an Overseas Bribery and Money Laundering Indictment for Lack of Jurisdiction Over Extraterritorial Acts

Federal prosecutions of non-American individual defendants under the Foreign Corrupt Practices Act (FCPA) or the Money Laundering Control Act (MLCA) for acts committed overseas often raise two different questions: Do the respective criminal laws apply to the defendant in question? And separately, what are the procedures to contest whether this is so? The Department of Justice (DOJ) consistently maintains that such laws apply broadly to several flexibly defined categories of non-US citizens or residents, and that whether the defendant fits in a specific category is a factual matter that can only be resolved at trial. A recent decision in the U.S. District Court for the Southern District of Texas provides a startling new answer to both questions: The applicability of the criminal laws to the defendant is a legal (or “jurisdictional”) issue, and this issue can be raised prior to trial under Rule 12(b) of the Federal Rules of Criminal Procedure (F. R. Crim. P.), even by a defendant who has not physically appeared in court. The court also concluded that a specific category of potential defendants often used by the DOJ—“agents of a domestic concern”—is far less broad than the government contends, and that the DOJ’s more flexible interpretation would render the provision unconstitutionally vague. On this basis, U.S. District Court Judge Kenneth M. Hoyt dismissed an indictment as to one defendant “for lack of jurisdiction.” The decision is being appealed by the DOJ to the U.S. Court of Appeals for the Fifth Circuit.

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In United States v. Rafoi-Bleuler et al., 4:17-cr-00514 (S.D. Tex.), a superseding indictment charged six individual defendants with a sprawling bribery and money laundering scheme concerning vendor contracts issued by Petroleos de Venezuela S.A. (PDVSA) and its affiliates. Several of the defendants, employees of PDVSA or another state-owned enterprise, were alleged to be “foreign officials” within the meaning of the FCPA and to have solicited bribes and kickbacks from potential vendors. Other companies and individuals were alleged to have bribed these officials while maintaining a U.S. citizenship, residence, or presence, thereby qualifying as “domestic concerns.” Defendant Daisy Rafoi-Bleuler (Rafoi) was alleged to be a citizen of Switzerland who ran a financial investment entity there; there is no allegation that she committed any element of her alleged offense other than in Switzerland. Her alleged role was essentially to launder the illicit payments made by the others.