Unfortunately, courts rarely limit DOJ’s reach in these types of cases.
However, in a recent case from the Northern District of California, the court dismissed all of the charges of conspiracy, bribery, and honest services fraud against three defendants. The alleged wrongdoing took place overseas and the defendants were not U.S. citizens or residents.
The judge not only dismissed the case, but he ridiculed the government for bringing the case at all and invited the government’s attorneys to appeal his ruling that the charges violated the well-settled presumption against the extraterritorial reach of U.S. laws.
The Alleged Conspiracy, Bribery, and Fraud
The government’s case focused on perceived corruption at the International Civil Aviation Organization (ICAO). The ICAO is a United Nations Specialized Agency that standardizes passports from country to country and ensures they meet certain security specifications. These standards help guide businesses that design and manufacture passports and other identification documents.
According to the government’s allegations, defendant Mauricio Siciliano used his position as an ICAO executive to leverage bribes out of a company called EDAPS Consortium.
EDAPS is a Ukrainian conglomerate that produces secure identification documents, ranging from passports to bankcards. ICAO support would enable a company like EDAPS to do more business and secure higher-level contracts.
At the time of the alleged conspiracy, defendant Yuri Sidorenko headed EDAPS and Sidorenko’s nephew, defendant Alex Vassiliev, sat on the company’s board.
According to the government, the three defendants entered into an arrangement where Mr. Siciliano collected a monthly fee of several thousand dollars from the other two. In return, Mr. Siciliano allegedly provided EDAPS business support and gave the conglomerate help navigating ICAO bureaucracy.
Links to the United States?
This all sounds very compelling. But there’s one problem: none of it happened in the United States.
- None of the payments were made in the United States. Instead, the purported payments were made in person or wired to one of Mr. Siciliano’s bank accounts in Switzerland.
- None of the defendants are U.S. citizens or residents. Mr. Siciliano is a citizen of Canada and lived in Montreal. Mr. Sidorenko and Mr. Vassiliev were both citizens of Ukraine and St. Kitts and Nevis, and reside in Dubai.
- None of the companies and organizations allegedly involved in the scheme was a domestic corporation.
You would think the government might hesitate to bring a case with these facts.
Extraterritoriality of U.S. Laws
As a general rule, U.S. statutes do not apply extraterritorially. This means that they cannot be used to regulate (or punish) conduct outside of the United States. This is a long-standing rule, dating back to at least 1808:
[T]he legislation of every country is territorial; that beyond its own territory, it can only affect its own subjects or citizens.
Rose v. Himely, 8 U.S. (4 Cranch.) 241, 279 (1808) (Marshall, C.J.). In 2010, the Supreme Court decided Morrison v. National Australia Bank Ltd. Morrison made explicit the rule that Congress must expressly state that a statute may be applied extraterritorially in order for it to have that effect. It held:
When a statute gives no clear indication of an extraterritorial application, it has none.
The Motion to Dismiss (and Government Response)
The defendants argued that the plain language of the bribery and wire fraud statutes did not say that they applied extraterritorially. Because the conduct occurred overseas, they contended, the charges should be dismissed.
The government made two arguments in support of bringing the charges in the Northern District of California.
First, it argues (somewhat half-heartedly) that the email during the conspiracy was routed through the United States. According to the prosecution, some of the emails were sent from a Gmail email account. By necessity, these emails would have to pass through Google’s servers in Mountain View, California.
This argument ignores the fact that the emails were neither sent to or from a user in the United States. Kind of an important fact, huh?
Second, the government argued that U.S. government funds make up approximately a quarter of ICAO’s annual budget. The government seemed to assert it had the power to prosecute foreign nationals for working for a foreign company so long as the company accepted U.S. funds, even if their conduct had nothing to do with the U.S. funds.
This argument ignores….well, the near-complete lack of case law in support of it. Judge Breyer did not take kindly to this argument either.
The transcript of the motions hearing is a fun read for any defense counsel. After hearing some argument from the government (and nothing from the defense), the judge congratulated the USAO:
So my first reaction in reading this indictment is that your office is to be congratulated because, apparently, you have reduced crime in the Northern District of California, and indeed in the United States of America, to such a point that you are using resources of your office to go after criminal activity that occurs in foreign countries and for that — that’s a rather interesting concept that, apparently, you thought this is a good use of assets and resources of the United States Attorney’s Office for the Northern District of California.
It gets better. The judge was simply gobsmacked that the government was taking the position that it could use the wire fraud statute to prosecute crime anywhere in the world:
So if there is ever, ever a policy interest of the United States of America in anything a foreign country — that occurs in a foreign country, the United States Attorney’s Office for the Northern District of California will vindicate the way the laws apply — the honest services law applies. You’re going to wipe out bribery and honest services throughout the world. I want to congratulate you for that.
And I never in my life, in 50 years of criminal practice, seen a more misguided prosecution as the one that you’ve brought. I just don’t even get it. I don’t get it, how you can — how you can use resources of the United States Attorney’s Office to prosecute some foreign nationals involved in a foreign company, engaged in conduct which was foreign, on doing things that weren’t directly related to the contribution of the United States to that entity.
Judge Breyer asked if Main Justice had approved the prosecution. The government responded, no, only office approval was required.
Finally, the judge dismissed the case and invited the government to appeal it immediately.
He was incredulous at the reach of what the government was contending:
There are really no limits to your argument. There are just no limits. I don’t understand where you really draw the line.
So if you give – your argument is, you give a dollar to some foreign entity, you can then prosecute people who engage — who are involved with that foreign entity even though there are — even though they do it all abroad and do it in connection with something else. They don’t take the dollar. Something else. You say: Well, we can prosecute them for honest services. How do you actually — do you really think this is going to fly anywhere?
He closed by reprimanding the entire USAO for the Northern District:
And you please put in the comment that I actually think this is a serious waste of scarce resources. If you’re not addressing crime in the Northern District of California, you’re not doing your job. And I think this — I think this prosecution is really a — brings into serious question the manner in which decisions are made by the United States Attorney for the Northern District of California.
Congratulations to the defendants (wherever they may be).