Recent media reports – which would be even more sensational if we weren’t getting so desensitized to Trump-related scandals – indicate that prior to Trump’s inauguration, his son-in-law and senior advisor Jared Kushner had private meetings with Russian government officials, including both Ambassador Sergey Kislyak and Sergey Gorkov, the head of a Russian state-owned bank (and a close associate of Vladamir Putin). We still don’t know (and may never know) the precise contents of the meeting, but based on circumstantial evidence, several of the media reports discuss speculations Kushner and his Russian government contacts discussed the possibility of extending financing to business ventures owned by Kushner or his family (including, most notably, a financially struggling office building at 666 Fifth Avenue in Manhattan), if Kushner would help to persuade his father-in-law, the President-Elect of the United States, to lift the sanctions that the U.S. had imposed on Russia for its military intervention in Ukraine.
Again, we don’t yet know whether this is true. But let’s suppose for a moment that some version of that story is approximately correct: that during conversations with Russian government officials, Jared Kushner proposed or endorsed the idea that he would try to persuade his father-in-law to lift the Russia sanctions, and that Kushner did so because he believed (or was told) that if he did, a Russian state-owned development bank would provide valuable financing for his family’s business.
If that’s what occurred, then even nothing further came of these discussions, then there’s a very good argument that Jared Kushner committed a criminal violation of the Foreign Corrupt Practices Act (FCPA). Though there’s been quite a bit of discussion in the reports so far about various federal laws that Kushner may or may not have been broken in connection with these meetings (such as the little-used Logan Act, which prohibits private citizens from interfering with U.S. diplomacy). But I haven’t seem much discussion of the FCPA angle. So even though it might still seem unrealistic to imagine that FCPA charges will be brought, let me elaborate a bit on why I think there’s a plausible case for an FCPA violation here, if the evidence supports the characterization of the meetings sketched above:
The relevant provision of the FCPA is codified at 15 U.S.C. § 78dd-2. That section makes it illegal for any U.S. citizen (or other “domestic concern”) to make use of “any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to any foreign official for purposes of influencing any act or decision of such foreign official in his official capacity … in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.” Let’s walk through the main elements of this offense one at a time:
- Jared Kushner is clearly a U.S. citizen (and therefore a “domestic concern” within the meaning of the statute).
- Sergey Kislyak and Sergey Gorkov are both indubitably foreign officials. Kislyak is an ambassador, so that’s a no-brainer. Gorkov is the head of a state-owned development bank, which is clearly considered as an arm of the Russian government. (That is, it’s not just an ordinary commercial bank that happens to be state-owned.) Under the Department of Justice’s interpretation, as well as the interpretation from the only appeals court to consider the matter, that bank is easily classified as an instrumentality of the Russian government, making Gorkov a foreign official for FCPA purposes.
- The “use of the means or instrumentalities of interstate commerce” prong might initially seem to pose a possible difficulty, but as long as someone sent an email or made a phone call when setting up the meetings, or crossed a state line to get to the meeting location, that jurisdictional element is likely satisfied.
- What about the requirement that Kushner have offered “anything of value” to these foreign officials? That’s the key statutory term in terms of the alleged bribe, because there are no allegations that Kushner offered any material benefits. The suspicion, which we’re for the moment assuming to be true, is that he offered or promised to use his influence with his father-in-law to get the Russian sanctions lifted. Would that use of influence count as “anything of value”? Here the law and practice is less settled, but I think it would and should. Although the issue hasn’t been tested in court, we know from numerous prior settlements and the DOJ’s official guidance that “anything of value” is capacious, including acts that do not entail direct material benefits to the government officials. As long as the government officials in question value the offer sufficiently that it can influence their decision-making, the offer counts as “anything of value.”
- Note that the statute does not require that Kushner actually followed through on his offer to try to persuade Trump to lift the sanctions, much less that he actually succeeded. Even if he were lying through his teeth to the Russians, and had no intention of ever actually trying to convince Trump relax the Russia sanctions, there would still be an FCPA violation if he offered or promised to do so.
- That said, if the Russian parties had proposed the deal — if they said they would help with the loans if Kushner would help with the sanctions — but Kushner demurred (or said he’d think about it or suggested that they continue to pursue that possibility in future discussions), then there likely wouldn’t be an FCPA violation. If I go to a foreign country and offer a government official $100K in exchange for a business license, there’s an FCPA violation (whether or not the official accepts). If I go to a foreign country and a government official tells me I can only have a license if I pay her $100K, then I haven’t violated the FCPA unless and until I say yes (whether or not I actually hand over the money). So even if evidence comes out that a loans-for-sanctions-relief deal was discussed, Kushner could always defend on the grounds that the Russians proposed it but he himself never made an offer or promise. It would be an evidentiary issue, as well as an issue of credibility.
- A violation of this FCPA provision also requires that the offer was made in order to influence a decision of the foreign official, in order to realize a business benefit. If the facts are as we’re assuming, that element is also easily satisfied, as the allegation is that Kushner offered or promised to influence U.S. sanctions policy so that the Russian state-owned bank would extend loans to his family’s businesses.
- Note that the FCPA, unlike domestic U.S. federal bribery statutes, does not require a quid pro quo. That is, a violation does not appear to require that the Russian government officials expressly agreed that they would provide the loans if Kushner secured the relaxation of sanctions (or attempted to do so). All that the statute requires on this point is that Kushner made the offer or promise for the purpose of influencing the Russian government officials. Of course, most cases in which the government alleges, and the defendant acknowledges, a violation of this provision do involve a quid pro quo of some kind. But as I read the statute, this is not a requirement. So long as a prosecutor can prove that Kushner made an offer or promise in the hopes that it would influence these officials to give his family businesses loans, there would be a violation (assuming the other elements of the offense were satisfied), even if the Russians never promised to extend the loans if Kushner came through for them.
- Much has been made (especially by Kushner and his representatives) of the fact that Kushner has divested from his family businesses. Many are skeptical of the true extent of the divestment, especially considering the fact that most of the businesses are still controlled by Kushner’s immediate family members. But even if we put that aside, it doesn’t matter if Kushner has fully divested from his businesses, because although the an FCPA violation requires the bribe be offered in order secure a business advantage, it does not require that this business be for the bribe-payer him-, her-, or itself. Rather, the statute explicitly states that there can be a violation if a party offers something of value to a foreign official (1) in order to obtain or retain business OR (2) to direct business to any (other) person. In other words, if Kushner offered something of value to Russian officials so that they would extend loans to some completely unrelated party (whom Kushner, for some reason, wanted to help), there would still be an FCPA violation. That the party to whom business was allegedly directed is a business owned by Kushner’s own family makes everything much more suspicious. But that connection is not essential for there to be an FCPA violation.
- Finally, there would only be a violation of the FCPA anti-bribery provision violation if Kushner made the offer or promise “corruptly,” and (under a separate statutory provision dealing with penalties) there would only be a criminal violation if Kushner’s conduct was “willful.” The meaning of these terms is not entirely clear, but “corruptly” is usually interpreted to mean that the offer was made for an improper purpose, and willfulness typically requires that the defendant knew that his or her conduct was wrong and did it anyway (though it usually doesn’t require specific knowledge of the laws, or even necessarily that the conduct was illegal). Certainly lots of the circumstantial evidence here, especially the fact that Kushner and his representatives have repeatedly given accounts of the meeting that differ from what we’re assuming in this post is the correct account, would suggest that the conduct was both corrupt and willful. And the conduct itself – offering to influence U.S. foreign policy in exchange for private business benefits – is so tawdry that I have little doubt that most prosecutors, judges, and jurors would not hesitate to find the “corrupt” and “willful” elements satisfied if the rest of the factual allegations were proven.
Again, we don’t yet know what the facts are. But if it is indeed true that Kushner offered to use his influence to persuade Trump to lift the Russia sanctions, and that he did so in order to influence the Russians to provide loans to Kushner’s family businesses (or any other businesses), then there was likely a violation of the FCPA’s anti-bribery prohibition.
That doesn’t mean that a prosecution, let alone a conviction, is terribly likely. But it’s much more likely now than it was last month, thanks to the appointment of Special Counsel Robert Mueller, whose broad mandate includes any matters that arose or may arise from the investigation into contacts between the Russian government and individuals associated with Donald Trump’s presidential campaign.
Mr. Mueller certainly doesn’t need amateurs like me telling him what he should investigate or charge. If there’s something to the idea that Kushner violated the FCPA, then I suspect Mueller will find it; if his investigation ultimately doesn’t raise FCPA concerns, it’s likely because the evidence just wasn’t there, or the legal analysis I laid out above is flawed. But since all those of us on the outside looking in can do is speculate, and because I haven’t yet seen any discussion of the FCPA angle on the Kushner-Russia reports, I figured I’d throw this out there as grist for discussion.
There is a flaw in your analysis. Even accepting as true everything in the media reports, the “thing of value” (lifting the Russian sanctions) was a “thing of value” to the Russian government, not to the individual “foreign officials.” As stated in the DOJ/SEC issued FCPA Guidance ““The FCPA prohibits payments to foreign officials, not to foreign government.” In other words, “the FCPA prohibits [things of value] to foreign officials, not to foreign government.” For this reason, nearly all of the Iraq Oil for Food enforcement actions were charged as FCPA books and records and internal controls cases, not as violations of the FCPA’s anti-bribery provisions.
Ah, very good point! I’ll need to reflect on that a bit more, but on a first pass I believe you’re right. One would need to show that the government officials would benefit personally from the offer to lift the sanctions, not that it would be a benefit to the Russian government, with the officials only “benefiting” in their capacity as representatives of that government.
Quite possibly you’re right that this is simply a fatal flaw, and in my focus on the other pieces of the FCPA analysis I just missed this crucial point. But let me reflect on it further and see if there’s still a potential violation here.
Thanks for the close reading and the good catch.
A further reflection on your astute criticism: I think the reason that I missed this problem has to do with the way that I was thinking about the “anything of value” prong of the FCPA, and how this fits with the notion that the benefit must be offered or promised to the foreign official (not the foreign government). Here’s the thought:
According to the US government’s interpretation of “anything of value” (which I’ll assume for a moment is correct, though I know you or others might disagree), an FCPA defendant offers or gives “something of value” to a foreign official if the defendant does or offers to do something that the foreign official values, even if it is intangible, and even if the direct material benefit is to a third party. So, under the government’s interpretation, a defendant offers something of value to a foreign official if the defendant offers to make a donation to an official’s favorite charity. Presumably, the “anything of value” prong would also be satisfied if the defendant offered to persuade someone else to make a donation to the official’s favorite charity. Or if the defendant offered to persuade someone else to make a policy change that would benefit the foreign official’s favorite charity.
That was the line of thinking that led me to conclude (perhaps wrongly) that there might be an FCPA violation here — just substitute “government” for “favorite charity” in the last sentence of the previous paragraph. But as you correctly point out, the US government’s official position is also that the FCPA prohibits payments to foreign officials, not to foreign governments. How do we square those two things? What if a foreign official would “value” the conferral of a policy benefit on her government in the same way that she would “Value” a donation to her favorite charity? Again, I need to think about this a bit more, but you’ve convinced me that my original post was far too confident in asserting that if the facts are as alleged/suspected, there’s an FCPA violation.
You are welcome.
You cite the charitable donation cases (presumably Schering Plough and Nu Skin Enterprises) and perhaps are thinking of the internship and hiring practice enforcement action. For starters, both Schering Plough and Nu Skin only concerned books and records and internal controls findings by the SEC. The internship and hiring practice cases (as to U.S. actors) were only SEC cases and the SEC does not have jurisdiction over “domestic concerns.” Moreover, the internship and hiring practice cases were not subjected to one ounce of judicial scrutiny and even in those cases the government did find (as stated in the BNY Mellon Corp. action) that the foreign official “derived significant personal value in being able to confer this benefit on their family members.”
Professor Mike Koehler
Yes, you’re correct that I was thinking of the charitable donation cases, and also the hiring practice cases. And of course you’re right that the former were technically books and records cases, and that the latter (as well as some of the former) were SEC cases and so didn’t involve domestic concerns. But those facts don’t strike me as that important, because the SEC/DOJ guidance has made clear that they think that these things would count as “anything of value” under the anti-bribery provisions, and the language of the issuer and domestic concerns provisions (78dd-1 and 78dd-2) is identical on this point, and so would presumptively receive an identical interpretations. So those technical details do not strike me as helpful in reconciling the government’s guidance on these two issues.
Now of course your larger point is also true and important; The government’s theory that these other sorts of conduct (donating to an official’s favorite charity, hiring an official’s relative, etc.) _can_ count as “anything of value” for purposes of the anti-bribery provisions has never been tested in court. There are a few conclusions we might draw from that fact, coupled with the tension that our exchange has helped me to see more clearly:
First, one might say (and I suspect you would) that this tension, if it does exist, shows that the government’s expansive understanding of “anything of value” is untenable. If that interpretation were correct, the argument might go, then a donation directly to the official’s government could count (if the official psychologically or emotionally valued the benefit conferred on her government)–but we know that a payment to a foreign government _cannot_ count as a bribe under the FCPA. (We know because the government itself has told us so.) Therefore, an act that a foreign official values, but which does not confer any tangible benefit on her directly, other than psychological or emotional gratification, can’t be something “of value” within the meaning of the FCPA.
Alternatively, we could draw the exact opposite conclusion: That the US government’s previously stated position that a benefit conferred on a foreign government can _never_ count as something “of value” to a foreign official (personally) is actually inconsistent with the government’s (correct) understanding of “anything of value” as broad enough to encompass anything that induces a government official to wrongfully abuse her position for the advantage of the party conferring the benefit. And there’s nothing wrong with that seemingly broad conclusion, because the parade-of-absurd-results that might start to leap to mind is ruled out by other limitations in the statute (such as the requirement that the payment be made “corruptly”). After all, the idea that a payment to a foreign government can never count as an FCPA bribe does not, to my knowledge, have any basis in explicit statutory text. So maybe the government should abandon that position.
Finally, it’s possible that this tension is reconcilable (and could be reconciled by a court, if it got the case) through other means — presumably by drawing some distinction, or suggesting that the language of the statute implicitly excludes payments to foreign officials.
Thanks again for your cogent criticism of my original analysis, and for this follow-up, which has helped me to see more clearly a more general tension in the government’s interpretation of the FCPA.
And one more thought: I don’t know what Sergey Gorkov’s compensation arrangement looks like, but let’s suppose his personal compensation is affected by the profitability/performance of Vnesheconombank (the state-owned development bank that he chairs). According to news reports, Vnesheconombank has been hit hard by the sanctions. If that’s accurate, and Gorkov’s compensation is indeed tied to the bank’s performance, then Gorkov would stand to profit personally and directly if the sanctions were lifted. Would that, in your view, create sufficient grounds for an FCPA prosecution (or at least eliminate the specific problem you identified in your original comment)?
I would imagine that there are many, many individuals who might benefit financially by a lifting of Russian sanctions. I don’t really see what you describe as unique to that individual, whereas in the donation and internship hiring actions (specific charges and viability issues aside) the thing of value was unique to the foreign official and or his/her children
Very true, but Vnesheconombank doesn’t stand to benefit simply because it’s a Russian institution, and the Russian economy has been generally hurt by the sanctions. Vnesheconombank is itself one of the institutions targeted by the sanctions (or at least that’s my understanding). That’s why it seemed to me that there would be a sufficiently close nexus.
More generally, while it’s true that there are many institutions that would benefit from lifting the sanctions, but I’m not sure why that would matter. Lots of people would presumably benefit if I gave a $1 million donation to a local charity, but if I do it because one particular person–a foreign official–wants me to, then at least according to the US government, there’s a violation. Or perhaps the more apt analogy might be: Suppose I want to do business in country X, and an official in country X says I’ll only let you have a permit if you give $100 to everyone in my town, including me. An FCPA violation, no? Even though lots of people benefit?
That said, I understand and to some extent share (though cannot quite articulate a justification for) the intuition that a benefit that is conferred broadly on a whole society doesn’t count, even if a public official demands it as the price for getting business. But that’s why I gestured in the direction of the idea that at least one of Kushner’s interlocutors had a much more direct, personal, financial interest in the lifting of sanctions, rather than wanting the sanctions lifted (only) because of the general benefit to his government and his country.
Great back and forth that should be of value to practitioners (and perhaps enforcement personnel) when faced with complex fact patterns in future cases — as opposed to the obviously quite hypothetical set of facts Matthew presented.
Pingback: This Week in FCPA-Episode 55, the Covfefe Edition - Compliance ReportCompliance Report