Case 4-6 United States v. Blondek, Tull, Castle, and Lowry

1. Case 4-6 United States v. Blondek, Tull, Castle, and Lowry CSA 6470 International Legal Framework By Frank C.L. Huang

2. 2 Foreign Corrupt Practices Act (FCPA) Passed in 1977 was a result of A combination of the large illegal corporate contribution to President�s Nixon�s reelection campaigns The discovery of Lockheed bribery of senior Japanese officials to obtain aircraft orders The election of deeply religious President, Jimmy Carter

3. 3 FCPA Provision The Act makes it unlawful for a U.S. issuer of securities required to be registered with the SEC or any person acting for such issuer including shareholders, or any person acting personally or on behalf of a domestic entity, to bribe a foreign public official, a foreign political party, or political candidate for the purpose of inducing such person to do or omit doing any act or decision in his/her performance of any lawful duty or to induce such person to use such influence to assist the U.S. person to obtain or retain business with the foreign government entity.

4. 4 Persons Covered by the Act Prohibited foreign trade practices by �issuer� Any issuer of securities within the jurisdiction of the SEC, any person required to file reports under the Act, as well as any officer, director, employee, or agent of such issuer or stockholder acting on behalf of the issuer. Prohibited foreign trade practices by �domestic concern� Refers to any U.S. person (citizen, national, resident) and business entity with a principal place of business within the U.S. or organized in any U.S. territory, possession, or commonwealth.

5. 5 Judicial Body SEC Department of Justice United States District Court for the Northern District of Texas

6. 6 Defendants John Blondek and Vernon R. Tull were employees of Eagle Bus Mfg. Co. Manufacture and sale of buses A subsidiary of Greyhound Lines Inc., A Texas corporation and an issuer George V. Morton The Canadian agent of Eagle Donald Castle and Darrell W. Lowry The president and vice president of the Saskatchewan Transportation Co.

7. 7 Facts In order to assure the acceptance of a bid for the sale of buses to the Saskatchewan province, Blondek and Tull paid $50,000 to Castle and Lowry through Morton to secure the deal.

8. 8 Payment Amount of the value: Canadian $50,000, equal to 2% of the price of 11 business Amount of business related to the payment: US$ 2.77 million Intermediary: Morton, the Canadian agent of Eagle, used a Canadian corporation (owned and controlled by Morton) to help conceal the bribe The foreign official: Castle, the president, and Lowry, the vice president of the Saskatchewan Transportation Co. (a Canadian Crown corporation.

9. 9 Legal Issue Four defendants were charged with a single count of conspiracy to violate the FCPA�s anti-bribery law.

10. 10 Issue Decided The court dismissed the count as to Castle and Lowry (the foreign officials) on the basis of that the FCPA excludes from prosecution foreign officials who receive bribes.

11. 11 Rational Where foreign officials, whom the government concedes it cannot prosecute under the FCPA itself, may be prosecuted under the general conspiracy statue for conspiring to violate the Act? Precedent case law � Gebardi v. United States, The Mann Act v. general conspiracy statute A similar case that the Supreme Court confronted. In that case, a woman who agreed to be transported by her lover across state lines to engage in sexual intercourse. The government knew they could charge her for violating the Mann Act, so instead they wanted to charge her under the general conspiracy statute for violating the Act. Congress distinguished that although the Act prohibited the transportation of women across border for immoral purpose, but did not criminalize the conduct of the woman being transported which means the Act did not make the woman�s consent a crime. In other words, the woman�s agreement to participate was immune from any kind of prosecution, including prosecution for conspiring to violate the Mann Act under the general conspiracy statute. It is important to remember that Congress intended that these persons would be covered by the Act itself, without resort to the conspiracy statute even though none of Congress�s reasons have anything to do with the foreign officials. A similar case that the Supreme Court confronted. In that case, a woman who agreed to be transported by her lover across state lines to engage in sexual intercourse. The government knew they could charge her for violating the Mann Act, so instead they wanted to charge her under the general conspiracy statute for violating the Act. Congress distinguished that although the Act prohibited the transportation of women across border for immoral purpose, but did not criminalize the conduct of the woman being transported which means the Act did not make the woman�s consent a crime. In other words, the woman�s agreement to participate was immune from any kind of prosecution, including prosecution for conspiring to violate the Mann Act under the general conspiracy statute. It is important to remember that Congress intended that these persons would be covered by the Act itself, without resort to the conspiracy statute even though none of Congress�s reasons have anything to do with the foreign officials.

12. 12 Rational Cont�d Reasonable explanations: why foreign officials were exempt from prosecution? Diplomatic, jurisdictional, and enforcement difficulties Many foreign nations already have anti-bribery law �Grease Payment� might not be illegal in some countries US business were perceived to be the aggressors, the efforts expended in resolving the diplomatic, jurisdictional, and enforcement difficulties are simply not worth it. Many foreign nations already had law that prohibited the receipt of a bribe by an official. Actually in this case, the Royal Canadian Mounted Police have investigated the case even before any rest by US officials. The Canadian government will accomplish prosecution and punishment. �Grease payment� might be illegal in US or in some developed countries, but in some, especially in developing countries, it is truly a �reasonable expenditure� to assure or speed the proper performance of a foreign official�s duty to carry out or execute a contract. In fact, the Act was later amended to permit an affirmative defense on the grounds that the payment was legal in the country in which it was made. US business were perceived to be the aggressors, the efforts expended in resolving the diplomatic, jurisdictional, and enforcement difficulties are simply not worth it. Many foreign nations already had law that prohibited the receipt of a bribe by an official. Actually in this case, the Royal Canadian Mounted Police have investigated the case even before any rest by US officials. The Canadian government will accomplish prosecution and punishment. �Grease payment� might be illegal in US or in some developed countries, but in some, especially in developing countries, it is truly a �reasonable expenditure� to assure or speed the proper performance of a foreign official�s duty to carry out or execute a contract. In fact, the Act was later amended to permit an affirmative defense on the grounds that the payment was legal in the country in which it was made.

13. 13 Relevancy Without a doubt, Bribery is illegal, is unethical, but sometimes it is a tool, an efficient way to do business in foreign countries. Choose the right person and be more skilled at hiding bribes Since the passage of the FCPA of 1977, numerous debates were raised. This debate continued in Congress and the press and in both public and academic arenas. Corporations seen this as added burdens and expenses of increased accounting and auditing, the vague definitions of corrupt practices, and the dual enforcement responsibilities given to the SEC and Justice Department. Though some corporations did change their ethics codes and their sales and marketing practices It is difficult to determine whether the FCPA has made American corporations more ethical or more cautious. Since the passage of the FCPA of 1977, numerous debates were raised. This debate continued in Congress and the press and in both public and academic arenas. Corporations seen this as added burdens and expenses of increased accounting and auditing, the vague definitions of corrupt practices, and the dual enforcement responsibilities given to the SEC and Justice Department. Though some corporations did change their ethics codes and their sales and marketing practices It is difficult to determine whether the FCPA has made American corporations more ethical or more cautious.