Advisors at your service 24/7

Facebook
Twitter
WhizzAcademics.com

Calculate Price

Get a 10 % discount on an order above $ 100
Use the following coupon code :
Whizz15

Case Analysis Format

  1. Citation & Date:

United States of America v. David Kay & Douglas Murphy; Nos. 05-20604; Date decided – October 24, 2007

 

  1. Court:

United States Court of Appeals for the Fifth Circuit

 

  1. Parties:

Plaintiff-Appellee – United States of America; Defendants-Appellants – David Kay; Douglas Murphy

 

  1. Facts:

American Rice, Inc. is a publicly traded company based in Houston that exports rice to various parts of the world. During the 1990’s, it exported rice to Haiti, which was riddled with political chaos and corruption, through Rice Corporation of Haiti. During this time, Douglas Murphy was ARI’s President and David Kay was its Vice President for Caribbean Operations. Haiti levied both duties and taxes on rice importers, and Kay and Murphy paid Haitian officials to reduce duties and taxes on their rice. In 1999, when ARI retained a Houston law firm to represent it in a civil suit, Kay voluntarily proclaimed that he had paid off Haitian officials during that time. He admitted to purchasing from government officials licenses, called “franchisees”, permitting charities to import food without duty, paying for a “service corporation” designation for RCH, which allowed the company to avoid paying sales and income taxes by claiming that it didn’t actually own the products it was importing, underreporting imports to reduce duties and taxes and paying officials to accept the underreporting, and paying officials to resolve another tax issue. These lawyers informed ARI’s directors, who self-reported these activities to government regulators. Kay and Murphy were prosecuted for violating the Foreign Corrupt Practices Act.

 

  1. Legal Issue(s):

There are several legal issues at hand in this case. The main issue being presented is whether the action of paying foreign government officials for reducing customs duties and taxes, by Kay and Murphy, fall under the scope of the FCPA.   A subset of this legal issue is whether Kay and Murphy were given fair notice that their conduct was illegal, and whether proceeding to trial with the late arriving clarification of the Act violated their due process rights. Also, it has to be proven that the Defendants both corruptly and willfully violated the FCPA, in order to obtain a criminal conviction. There is also the issue of whether the jury convicted based on a defective indictment that omitted the element of willfulness. Another issue is whether the false documents, or any other money or documents, were sent through interstate commerce “in furtherance” of the actual bribes. Another legal issue that strictly applies to Douglas Murphy is his obstruction of justice charge. Also, it has to be determined whether it was proper to refuse to present the tax receipts on the grounds of inadequate authentication. There is also an issue of whether there was a Fifth Amendment involved in the case. The final legal issue at hand is whether his increase sentencing for an abuse of trust is legal under the Federal Sentencing Guidelines.

 

  1. Positions:

The Defendants, along with the district court in 2002 conclude that “payments to foreign government officials made for the purpose of reducing customs duties and taxes do not fall under the scope of ‘obtaining or retaining business pursuant to the text of the FCPA.” The Plaintiff argues that the bribes that were paid to the foreign officials do fall under the scope of the FCPA, but it still has to be shown that bribery was intended to produce an effect of assisting in obtaining or retaining business.

The Defendants argue that the statue failed to give fair notice that their conduct was illegal and that proceeding to trial with the late arriving clarification of the Act violated their due process rights. The Plaintiff argued that it meets the requirement of the four Lanier tests, and that the Defendants have failed to prove that they were not provided fair notice.

The Defendants argue that the district court failed to adequately instruct the jury on the element of willfulness and thus gave improper instructions as to mens rea. The Plaintiff argues that that Court indicated that “corruptly” was an element of the offense, and that the court also instructed them on the definition of “knowingly,” thus incorporating the willfulness element into its instructions.

Also along with the element of willfulness, the Defendants argue that in addition to improperly instructing the jury on willfulness, that they allowed the jury to convict based on a defective indictment that omitted the element of willfulness. The Plaintiff argues that an indictment is sufficient if it alleges every element of the crime charged in a way that gives the accused opportunity to prepare his defense and allow them to invoke the double jeopardy clause in any subsequent proceeding.

The Defendants also asserted that the indictment insufficiently alleged that they “made use of the mails or any means of 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 foreign officials. The Plaintiff argued that the false documents transported by interstate means were transported “in furtherance” of bribes, accurately tracked the interstate commerce element of the FCPA.

Douglas Murphy, the Defendant, argues that the district court abused its discretion by refusing to give a requested good-faith jury instruction on this count. The Plaintiff argues no abuse of discretion because Murphy’s instruction was substantially covered by the actual charge.

The Defendants also argue that the district court erred in refusing to admit certified tax receipts on the grounds of inadequate authentication. The Plaintiff and Courts argue that the documents admission on the basis that the documents were certified by the brother of the co-conspirator in the case, that there was not sufficient time to test the evidence.

The Defendant Kay refused to testify regarding the payments, after learning that his actions were unlawful. The Plaintiff deemed that entirely preventing government questioning related to Kay’s disclosures and silence would have prevented the Government from sufficiently responding to Kay’s testimony.

The Defendant Douglas Murphy argues that the decision to increase his sentence by two levels for an abuse of trust under the Federal Sentencing Guidelines. The Plaintiff argues that Murphy “significantly facilitated the commission” of the FCPA offense and his increase was correct under the Sentencing Guidelines.

 

Holding:

The Court ruled that “bribes paid to foreign officials in consideration for unlawful evasion of customs duties and sales taxes could fall within the purview of the FCPA’s prescription,” but it still must be shown that the bribery was intended to produce an effect through tax savings, that would assist in obtaining or retaining business. With regards to fair notice, under all four Lanier tests, the Defendants failed to show that the FCPA, and the district court’s application of it, failed to provide them fair notice. With respect to willfulness, the Court decided that the Defendants acted corruptly, with an “unlawful end or result,” and committed intentional and knowing acts with a bad motive, which sufficiently captured the definition of willfulness that is followed. The Court agreed with the Plaintiff that the indictment’s language sufficiently placed Defendants on notice of each element of the crime charged and allowed them to prepare an effective defense. The Court also ruled that the indictment was sufficient with respect to the interstate commerce element of the FCPA, as the Defendants were placed on notice as to the crime charged and allowed them to present an effective defense. The Court also decided, with respect to Douglas Murphy and the Fifth Amendment, that the charge was sufficient without Murphy’s requested instruction. With respect to refusing to admit the tax receipts, the Court ruled that district court did not abuse its discretion in excluding the evidence and, even if it had, Defendants have failed to demonstrate that the court’s exclusion of the documents affected their substantial rights by changing the outcome of the case. The Court also ruled that, with respect to Kay, that there was no Fifth Amendment violation. Finally, the Court ruled that there was no error in applying the enhancement for abuse of a trust position to Murphy’s sentence.

 

Rationale:

The main legal issue in this case is whether or not Kay and Murphy’s actions fall under the scope of the FCPA. The Court ruled that “bribes paid to foreign officials in consideration for unlawful evasion of customs duties and sales taxes could fall within the purview of the FCPA’s proscription.” The rationale behind this discussion is discussed throughout the case, within all of the issues that are involved in whether or not the actions by the Defendants are appropriate under the FCPA.

The Defendants moved to dismiss the case because it failed to give them fair notice that their conduct was illegal and that it violated their due process rights. The appropriate standards of fair notice are provided from the Lanier case, which addressed four standards that pertain to this case: 1) enforcement of a vague statute, 2) the rule of lenity, 3) retroactive application of a “novel” interpretation of a statute, and 4) whether the statute, “standing alone or as construed,” made the law reasonably clear when the criminal conduct occurred. The Court defines a vague statute as one which forbids or requires the doing of an act in terms so vague that men of common intelligence must guess at its meaning and differ at its application. A man of common intelligence would have understood that ARI, in bribing foreign officials, was close to a defined line of illegality. With regards to the rule of lenity, it “ensures fair warning by so resolving ambiguity in a criminal statute as to apply it only to conduct clearly covered.” The rule only applies in situations of ambiguity more extreme than this case, where, a court can make no more than a guess as to what Congress intended. In this case, the court did not expand the scope of the FCPA or create a new and independent principle of law. The FCPA’s terms of illegality did not extend the Act out beyond its terms. The final Lanier test looks at “whether the statute, either standing alone or as construed, made it reasonably clear at the relevant time that the defendant’s conduct was criminal.” The FCPA was as clear in the 1990’s when the Defendant’s relevant conduct occurred, as it is today. Therefore, under all four Lanier tests, the Defendants have failed to show that the FCPA failed to provide them with fair notice.

The Court must prove that Defendants both willfully and corruptly violated the FCPA in order to obtain a criminal conviction. The court’s instructions to the jury indicated that “corruptly” was an element of the offense and defined a corrupt act as one that is done “voluntarily and intentionally, and with a bad purpose or evil motive of accomplishing either an unlawful end or result, or a lawful end or result by some unlawful method or means.” The court also instructed them on the definition of “knowingly”, also incorporating the willfulness factor, as one done “voluntarily and intentionally, not because of accident or mistake.” The court does not define “willfully,” and therefore this case looks at three levels of interpretation in order to make it clearer. This first interpretation is that committing an act, and having knowledge of that act, is criminal willfulness, provided that the actions fell within the category of actions defined as illegal under that applicable statue. The second level of criminal willfulness requires the Defendant to have known that their actions were in some way unlawful. The strictest level of interpretation of criminal willfulness is that the defendant knew the terms of the statue and that he was violating the statute. The court’s instructions captured the first two levels of interpretation, but failed with regards to the third and strictest. The Court found that the first two were sufficient in this case. Thus, the district court’s jury instructions adequately conveyed the willfulness required for a conviction.

With regard to the element of a defective indictment that omitted the element of willfulness, the indictment will be sufficient if it “alleges every element of the crime charged and in such a way as to enable the accused to prepare his defense and to allow the accused to invoke the double jeopardy clause in any subsequent proceeding.” Even though the term “willful” was omitted, the language of the indictment describes the exact type of conduct required for finding willfulness. The FCPA doesn’t define willfulness, so the common law definition suffices.   The court has found that an indictment alleging that the defendant “corruptly did endeavor” sufficiently charges an intentional act, which is interchangeable with the word willful. Therefore, the indictment’s language sufficiently placed Defendant’s on notice of each element of the crime charged and allowed them to prepare and effective defense.

The Defendant’s argued that the Court failed to allege or prove that the false documents, or any other money or documents, were sent through interstate commerce in furtherance of the actual bribes. ARI used the false documents to calculate the bribes, sending the documents through interstate commerce “in furtherance” of the bribes. The indictment, by alleging that the false documents transported by interstate were means transported “in furtherance” of bribes, accurately tracked the interstate commerce element of the FCPA. The Defendants were placed on notice as to the crime charged and allowed them to present an effective defense.

Douglas Murphy withheld several documents referring to payments of Haitian officials, and during testimony, denied knowledge to payment to custom officials or for the falsification of shipping documents. He was charged with obstruction of justice. The charge was sufficient without Murphy’s requested instruction. The instruction given was to find that Murphy knowingly and dishonestly lied to the SEC. In the case of Arthur Anderson, the district court shed away from the pattern instruction, removing the word “dishonestly,” and also much of the good-faith defense. Because they followed the patterned instruction, there was no danger under the charge because Murphy could have been convicted without a corrupt intent.

The court refused to admit tax receipts, which would have allegedly showed that the Defendants later engaged in reconciliations with the Haitian government where they substantially paid their taxes owed. The Government objected to their admission because the documents were being certified by one of the co-conspirators in the case, and that they did not have sufficient time to test the documents, and finally that they were originally stated with “Received from Murphy,” not from the individual who later certified the documents. The authentication issues were of particular concern because of the case’s dealing with false documentation. The Defendants were also unable to locate the originals of the documents or explain why they were unavailable. Also, the Defendants admittingly underreported the quantities of rice and made bribes to continue this false reporting, so the fact they paid some of the taxes back is irrelevant.

Kay, after voluntarily revealing ARI’s conduct to company counsel, invoked his Fifth Amendment rights by refusing to testify regarding the payments. The district court was proper in recognizing that Kay had a right to silence, but wished to invoke the positive interference of his disclosures by testifying about his disclosures. There was no Fifth Amendment violation.

Under the Federal Sentencing Guidelines, a defendant commits an abuse of trust by “abusing a position of public or private trust, or using a special skill, in a manner that significantly facilitates the commission or concealment of the offense…” The abuse of test standard is read as a two part test, asking 1) whether the defendant occupies a position of trust and 2) whether the defendant abused her position in a manner that significantly facilitated the commission or concealment of the offense. Murphy met this test, and thus occupied a position of trust. By occupying a position of trust, he maintained a position superior to that of all other individuals with a similarly ability to commit or conceal offenses.   By authorizing employees to pay bribes to Haitian officials, he “significantly facilitated the commission” of the FCPA offense.

Get a 10 % discount on an order above $ 100
Use the following coupon code :
Whizz15

Category: Sample Questions