REBECCA R. PALLMEYER, United States District Judge.
Defendants Dmitry Firtash and Andras Knopp were indicted in 2013 on charges
At the heart of this case is the proposed sale of titanium sponge to an American company headquartered in Chicago. Titanium is an abundant element present in a variety of minerals, including ilmenite,
In connection with the Project, Defendants Firtash and Knopp allegedly worked with at least four co-conspirators: Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam, and K.V.P. Ramachandra Rao. (Id. at 1, 5). All four are named as co-defendants and remain at large. (Id. at 1.) Firtash is alleged to have been the leader of this group. (Id. at 5, 6-7.) In this capacity, he is alleged to have met with Indian public officials to discuss the Project, authorized the payment of bribes to Indian public officials, and directed subordinates, including Knopp, to carry out the logistics of paying those bribes. (Id. at 6-7.) Knopp, too, is alleged to have "occupied a supervisory role." (Id.) He allegedly met with Indian public officials and directed the activities of co-conspirators. (Id.) Additionally, Knopp is alleged to have met personally
Much of the relevant conduct is alleged to have taken place abroad, although several allegations against Firtash, Knopp, and their purported co-conspirators involve the United States. For example, several co-conspirators allegedly attended meetings with representatives of Company A, which is incorporated in Delaware and has its principal executive offices in Chicago, Illinois. (Id. at 2.). Two of these meetings, purportedly attended by Gevorgyan, allegedly took place in Seattle, Washington. (Id. at 17.) Another named co-conspirator, Lal, allegedly traveled interstate at least five times in June, July, and August 2009. (Id. at 17-18.) The alleged purpose of one of these trips, from Greensboro, North Carolina to Flushing, New York on July 14, 2009, was to solicit the participation of another company ("Company D") in the Project. Additionally, an unidentified co-conspirator allegedly used a cellphone located in Chicago, Illinois to discuss that conspirator's activities related to the project and "direct future activity." (Id. at 19.) Finally, United States financial institutions were allegedly utilized to transfer several million dollars of bribe payments before they reached Indian public officials. (Id. at 6.)
On June 30, 2013, the government filed a five-count indictment against the six alleged conspirators, including Firtash and Knopp. (Indictment [2] at 1.)
Count One charges a conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(d). (Id. at 1-19.) It alleges that the six alleged conspirators, acting as a criminal enterprise, conspired to engage in racketeering activity. (Id. at 5-11.) Specifically, the Indictment charges that in planning to bribe Indian public officials, the enterprise conspired to engage in acts that would violate two federal statutes: the Money Laundering Control Act (the "MLCA"), 18 U.S.C. § 1956, which criminalizes the laundering of monetary instruments, and the Travel Act, 18 U.S.C. § 1952, which criminalizes travel from one state to another to promote or facilitate unlawful activity. (Id. at 10-11.)
Count Two charges a conspiracy to violate the MLCA that relates to the same conduct, and Counts Three and Four charge conspiracy and aiding and abetting Travel Act violations.
Count Five charges Firtash, Knopp, Gevorgyan, Lal, and Sunderalingam with conspiracy and with aiding and abetting a violation of the Foreign Corrupt Practices Act (the "FCPA"), 15 U.S.C. §§ 78dd-2(a) and 78dd-3(a), which criminalizes the payment of money by a "domestic concern" to a "foreign official" for the purpose of influencing an official act. (Id. at 24-27.) It alleges that Lal, a permanent resident of the United States, was a "domestic concern" within the meaning of the FCPA,
Notably, the Indictment does not allege that Firtash or Knopp were ever physically present in the United States, either in connection with or unrelated to the Project. The government has since alleged that it has evidence showing Knopp took an act to further the conspiracy while he was physically present in the United States, although it has not specified what this act was. (See Gov't's Resp. [40] at 79 n.40; Gov't's 2nd Supp. Resp. [70] at 2.)
Neither Firtash, Knopp, nor any other Defendant has appeared before this court since the filing of the Indictment.
On March 12, 2014, Firtash was arrested in Vienna by Austrian law enforcement on request of the United States. (Gov't's Resp. [40] at 5.) He was released on bond several days later, but barred from leaving Austria. (Id.) The United States thereafter submitted a request to the Republic of Austria to extradite Firtash, which was denied by the Vienna Regional Court for Criminal Matters on April 30, 2015. (Id. at 6.) The Austrian government appealed this decision to the Vienna Higher Regional Court, which reversed the decision of the lower court on February 21, 2017, ordering Firtash be extradited to the United States. (Id. at 6.)
Firtash submitted a writ to the Austrian Supreme Court requesting a "retrial."
During the course of all of these proceedings, on May 9, 2017, Firtash filed a motion in this court to dismiss the Indictment. (Firtash MTD [24].) On May 15, 2017, Knopp joined Firtash's motion.
Defendants first argue that the court lacks venue over the charges in the Indictment.
Applying the substantial contacts approach to cases of criminal conspiracy, the Seventh Circuit has recognized several different adequate bases for venue. The "traditional rule" for such cases is that venue is proper in "any district in which an overt act of the conspiracy occurred," even if there is no evidence that the defendant ever entered that district or that the conspiracy was formed there. United States v. Ochoa, 229 F.3d 631, 636-37 (7th Cir. 2000) (citing United States v. Rodriguez-Moreno, 526 U.S. 275, 281-82, 119 S.Ct. 1239, 143 L.Ed.2d 388 (1999)).
Where a defendant challenges venue, the government bears the burden of proving venue is proper for each count charged. United States v. Tingle, 183 F.3d 719, 726-27 (7th Cir. 1999). In doing so, it may rely only on the allegations in the Indictment, accepting all the alleged facts as true. United States v. Clark, 728 F.3d 622, 623 (7th Cir. 2013); see also United States v. Bohle, 445 F.2d 54, 59 (7th Cir. 1971) ("An Indictment alleges proper venue when it alleges facts which, if proven, would sustain venue."), overruled on other grounds by United States v. Lawson, 653 F.2d 299 (7th Cir. 1981).
The government has met that generous test. Because the Seventh Circuit recognizes venue in cases of criminal conspiracy where the illegal activity was "intended to have an effect" in the district, United States v. Muhammad, 502 F.3d 646, 655 (7th Cir. 2007) (emphasis omitted) (quoting United States v. Frederick, 835 F.2nd 1211, 1215 (7th Cir. 1987)), the Indictment here need only allege that the charged conspiracy was intended to have an effect
Defendants urge that the court consider an additional "foreseeability" requirement, arguing that the Indictment does not allege that it was foreseeable to Defendants "that a coconspirator was ever in the Northern District of Illinois or that a cell phone was used there." (Firtash MTD [24] at 7.) They cite a concurring opinion from Andrews v. United States, in which Judge Cudahy wrote that "[i]t would seem ... to violate basic concepts of criminal responsibility and due process to deem a crime committed at places unknown to the defendant, places the very existence of which he may not have had any reason to suspect." 817 F.2d 1277, 1282 (7th Cir. 1987).
This argument fails for multiple reasons. First, Judge Cudahy's concurrence was expressly not the holding of the Seventh Circuit, as he acknowledged himself that he "would go further" in setting venue requirements than the other two judges of the panel. Andrews, 817 F.2d at 1281. Moreover, the application of such a test would not necessarily preclude a finding of venue in this case. Surely, Firtash and Knopp's alleged participation in the conspiracy —which included receiving status reports from subordinates—suffices to suggest that they were aware that the object of the conspiracy was to sell titanium products to Company A, and that Company A had its principal executive offices in Chicago, Illinois. (Indictment [2] at 8.) These facts, if true, would give both Firtash and Knopp "reason to suspect" that they may be called to this district to account. Andrews, 817 F.2d at 1282.
Accordingly, Defendants' venue objection is overruled.
Defendants next ask the court to dismiss Count One of the Indictment—which charges Defendants with participation in a RICO conspiracy, in violation of 18 U.S.C. § 1962—on the ground that it impermissibly targets extraterritorial conduct. Defendants argue that § 1962 only applies to the racketeering activity of a foreign enterprise acting abroad if the enterprise causes a significant effect on U.S. commerce, and contend that the Indictment should be dismissed because it "does not set forth sufficient facts to establish" such an effect. (Firtash MTD [24] at 10.) Defendants further argue that the RICO predicate statutes upon which Count One is based are not, themselves, applicable extraterritorially in this case, and therefore cannot sustain an extraterritorial application of RICO.
In assessing this argument, the court notes the limited purpose indictments are intended to serve: "inform[ing] the defendant of the nature of the accusation against him." Russell v. United States, 369 U.S. 749, 767, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962). Unlike civil complaints, which
"Because a court's `use[ ] [of] its supervisory power to dismiss an indictment... directly encroaches upon the fundamental role of the grand jury,' dismissal is granted only in unusual circumstances." United States v. Ballestas, 795 F.3d 138, 148 (D.C. Cir. 2015) (quoting Whitehouse v. U.S. Dist. Court, 53 F.3d 1349, 1360 (1st Cir. 1995)). On a motion to dismiss, courts review indictments "on a practical basis and in their entirety, rather than in a hypertechnical manner," United States v. Cox, 536 F.3d 723, 726 (7th Cir. 2008) (quoting United States v. Harvey, 484 F.3d 453, 456 (7th Cir. 2007)), and assume all facts asserted therein to be true. See Boyce Motor Lines v. United States, 342 U.S. 337, 343 n.16, 72 S.Ct. 329, 96 S.Ct. 367 (1952).
When a defendant moves to dismiss an indictment as impermissibly extraterritorial, this practice of deferring to the province of the grand jury must be reconciled with the longstanding principle that "in general, `United States law governs domestically but does not rule the world.'" RJR Nabisco, Inc. v. European Cmty., ___ U.S. ___, 136 S.Ct. 2090, 2100, 195 L.Ed.2d 476 (2016) (quoting Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 454, 127 S.Ct. 1746, 167 L.Ed.2d 737 (2007)). The D.C. Circuit's opinion in United States v. Ballestas illustrates this. Ballestas, a Colombian citizen, was indicted under the Maritime Drug Law Enforcement Act (the "MDLEA"), 46 U.S.C. §§ 7503(a), 70506(b), which criminalizes "conspiring to distribute drugs `on board ... a vessel subject to the jurisdiction of the United States'...." Ballestas, 795 F.3d at 142 (quoting 46 U.S.C. §§ 7503(a), 70506(b)). The indictment alleged that the relevant vessel was "subject to the jurisdiction of the United States"—meeting a statutory requirement for extraterritorial application of the MDLEA—but did not allege facts substantiating this claim. See Indictment at 2, No. 1:11-cr-00050-RWR (D.D.C. Feb. 23, 2011). Indeed, the indictment alleged few specific facts at all, consisting of little more than the defendants' names and the statutory language of the MDLEA. Id. at 1-3.
Ballestas moved to dismiss the indictment arguing, inter alia, "that the MDLEA's conspiracy provision did not extend extraterritorially to reach individuals (like Ballestas) who never came `on board' [a vessel subject to the jurisdiction of the United States]." Id. (quoting 46 U.S.C. § 70503(a)); see also Defendant's Reply to Government's Response to Motion to Dismiss the Indictment, No. 1:11-cr-00050-RWR (D.D.C. Oct. 26, 2012). Without an evidentiary hearing, the district court denied Ballestas' motion, concluding "that the conspiracy provision of the MDLEA applied extraterritorially to Ballestas' actions in Colombia." Ballestas, 795 F.3d at 142-43, 148. In reaching this conclusion,
As Ballestas illustrates, a pre-trial motion to dismiss an indictment is not a means through which to dispute the government's allegations or demand the presentation of all relevant facts. Although the government may only charge extraterritorial conduct that falls within the purview of a statute, an indictment is not necessarily rendered insufficient for lack of factual allegations conclusively demonstrating the requisite connection. And where there is a credible disagreement over what conduct the government is criminally charging, or whether that conduct falls within the extraterritorial scope of a statute, it is not impermissible for the court to reach beyond the indictment to factual allegations in the government's pleadings. With these principles in mind, the court turns to the substance of Defendants' arguments on extraterritoriality.
The Supreme Court addressed the extraterritoriality of RICO's substantive provisions, §§ 1962(a)-(c), in RJR Nabisco, Inc. v. European Community, ___ U.S. ___, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016). In that case, the European Community brought a civil RICO action against RJR Nabisco, a New York-based cigarette manufacturer, alleging that RJR engaged in racketeering activity—including money laundering, material support to foreign terrorist organizations, mail fraud, wire fraud, and violations of the Travel Act—in its dealings with drug traffickers and money launders in South American and Russia. Id. at 2098-99, 2105. The district court, finding that the only racketeering alleged in the complaint occurred outside the United States, and holding that RICO has no extraterritorial application, dismissed the civil RICO claims. Id. at 2099. The Second Circuit reversed and reinstated the claims, concluding that Congress manifested an intent for certain RICO predicates to apply extraterritorially, and finding that allegations contained in the complaint fell within their purview. Id. On certiorari to the Supreme Court, RJR Nabisco argued that RICO had no extraterritorial application, reaching neither foreign enterprises nor foreign injuries. See Brief for Petitioners at 24-56, RJR Nabisco, Inc. v. European Community, 136 S.Ct. 2090 (2016), (No. 15-138, 2016 WL 891331).
The Court further stressed that, under its holding, not every foreign enterprise would qualify for prosecution under RICO; RICO's substantive provisions by their own terms require proof of an enterprise that is "engaged in, or the activities of which affect, interstate or foreign commerce." Id. at 2105 (quoting 18 U.S.C. §§ 1962(a)-(c)). The Court thus cautioned that a foreign RICO enterprise "must engage in, or affect in some significant way, commerce directly involving the United States." Id. at 2105. It continued, "Enterprises whose activities lack that anchor to U.S. commerce cannot sustain a RICO violation." Id.
Significantly, the Court expressly confined this analysis to RICO's substantive provisions. The Court voiced the possibility that § 1962(d), the RICO section at issue in this case, "should be treated differently from the provision (§ 1962(a), (b), or (c)) that a defendant allegedly conspired to violate," but the Court did not flesh out this possibility. Id. at 2103. Instead, it "assumed without deciding that § 1962(d)'s extraterritoriality tracks that of the provision underlying the alleged conspiracy." Id.
Defendants now ask this court to extend RJR Nabisco's holding beyond RICO's substantive provisions to its conspiracy provision, § 1962(d). Defendants first contend that the RJR Nabisco Court's comment on the effect of its holding on foreign enterprises—that for such an enterprise to fall within RICO's purview, it "must engage in, or affect in some significant way, commerce directly involving the United States"—applies without modification to RICO conspiracy cases. Defendants therefore argue that the Indictment is insufficient in that it "does not set forth sufficient facts to establish an enterprise significantly affecting United States commerce." (Firtash MTD at 9-10.) But this appears to be an overstatement of the Court's holding in RJR Nabisco; as discussed above, the Court there explicitly reserved judgment on the extraterritorial application of § 1962(d). Indeed, the segment of the opinion to which Defendants refer is a discussion of RICO's substantive provisions, §§ 1962(a)-(c), which expressly "require[ ] proof of an enterprise that is `engaged in, or the activities of which affect, interstate or foreign commerce.'" Id. at 2105 (quoting 18 U.S.C. 1962(a)-(c)). No such language appears in § 1962(d), which criminalizes conspiracy to violate one of the substantive provisions, and thus only requires proof "[t]hat the activities of [the enterprise] would affect interstate commerce." PATTERN CRIMINAL JURY INSTRUCTIONS OF THE SEVENTH CIRCUIT 549 (2017) (emphasis added).
In essence, Defendants are arguing that § 1962(d) should cease to be read as a conspiracy statute when applied extraterritorially, and instead should be interpreted
Additionally, Defendants' contention that the facts alleged in the Indictment are not sufficient to establish the necessary connection to United States commerce misstates the standard to which indictments are held upon a motion to dismiss. "A motion to dismiss is not intended to be a `summary trial of the evidence.' Such a motion is directed only to the validity of the indictment or the information, and it tests only whether an offense has been sufficiently charged." United States v. Yasak, 884 F.2d 996, 1001 (7th Cir. 1989) (quoting United States v. Winer, 323 F.Supp. 604, 605 (E.D. Pa. 1971)). As laid out above, indictments are generally sufficient so long as they set out the elements, apprise defendants of the nature of the charge, and allow defendants to raise the charge as a bar against further prosecutions for the same offense.
The indictment here does so: it "sets out" the effect-on-commerce element of the RICO charge and provides "adequate notice of the nature of the charge" sufficient to enable Defendants to prepare a defense. It exhaustively lays out the nature of the grand jury's finding that Defendants were members of a "criminal organization" that "was engaged in, and the activities of which affected, interstate commerce." (Indictment [2] at 5.) It alleges that this criminal organization used "facilities of interstate and foreign commerce to coordinate, plan, facilitate, and promote the bribery of Indian public officials," and that its members "travel[ed] in interstate and foreign commerce to further the goals of the criminal enterprise." (Id. at 6.) And it details that this enterprise allegedly conspired to illegally obtain and then sell five to twelve million pounds of titanium sponge to a company headquartered in the United States. (Id. at 3.) To the extent Defendants dispute the government's ability to prove their case, that is a matter for trial, not a basis for dismissal.
Citing RJR Nabisco's central holding— that RICO's substantive provisions may only be applied extraterritorially where the predicate statutes reach a defendant's extraterritorial conduct—Defendants further argue that the RICO charge must be dismissed because neither of the predicates cited in the indictment apply extraterritorially in this case. Specifically, Defendants argue that the relevant conduct is strictly extraterritorial and not indictable under either the MLCA or the Travel Act.
The Seventh Circuit has held, however, that indictments charging RICO conspiracy need not even list predicate acts, stressing that the "outer boundary" of what is sufficient would be, for instance, a "mere allegation of `various acts of bribery.'" United States v. Glecier, 923 F.2d 496, 501 (7th Cir. 1991). Based on Glecier, the government contends that Defendants' point
The Money Laundering Control Act, 18 U.S.C. § 1956, criminalizes the transportation, a conspiracy to transport, or any attempt to transport money to or from the United States "with the intent to promote the carrying on of specified unlawful activity." Id. at §§ 1956(a)(2)(A), 1956(h). "[U]nlawful activity" in this context expressly includes "bribery of a [foreign] public official, or the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official" so long as the transaction occurs "in whole or in part in the United States." Id. at § 1956(c)(7)(B)(iv). By statute, the MLCA may be applied extraterritorially where, "in the case of a non-United States citizen, the conduct occurs in part in the United States" and "the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000." Id. at § 1956(f); see also RJR Nabisco, 136 S. Ct. at 2099 (accepting the Second Circuit's conclusion that the MLCA applies extraterritorially). Because neither Firtash nor Knopp is a United States citizen, both parties acknowledge that extraterritorial application of the MLCA requires that the relevant conduct occur "in whole or in part in the United States." (Gov't's Resp. [40] at 54-55 (quoting 18 U.S.C. § 1956(c)(7)(B)(iv))); (Def. Reply at 19.)
"Congress enacted the [MLCA] `to criminalize the use of United States financial institutions as clearinghouses for criminal money laundering and conversion into United States currency.'" United States v. All Assets Held at Bank Julius, 251 F.Supp.3d 82, 93 (D.D.C. 2017) [hereinafter "All Assets II"] (quoting United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 571 F.Supp.2d 1 (D.D.C. 2008) [hereinafter "All Assets I"] and citing S. Rep. 99-433, at 2 (1986)), reconsideration granted on other grounds sub nom. United States v. All Assets Held at Bank Julius, Baer & Co., Ltd., 315 F.Supp.3d 90 (D.D.C. 2018) [hereinafter "All Assets III"]. Courts in other districts
The Indictment charges that Defendants "conspired ... to transport, transmit, and transfer a monetary instrument and funds" (1) from a foreign country to New York, and (2) from New York and California "to and through a place outside
In challenging this conclusion, Defendants cite a February 16, 2017 letter from the prosecutors (the "USAO") to the Republic of Austria Federal Ministry of Justice, in which the government presented it its basis for asserting jurisdiction in the United States. As Defendants read that letter, the government asserts extraterritorial jurisdiction based solely on the transfer of funds from a foreign country to another foreign country through a correspondent bank in the United States. (Firtash MTD [24] at 11-12.) Defendants argue that such transactions do not amount to conduct occurring within the United States under Section 1956(f), and therefore that the MLCA does not reach Defendants' conduct. (Id.)
But this argument does not support dismissal of the Indictment at this stage, where the court reviews the Indictment on a practical basis and in its entirety, accepting all allegations as true. Because the Indictment does not specify that the government's proof is limited to correspondent bank transactions—and, indeed, the government has proffered that its proof is not so limited—Defendants are effectively challenging the government's ability to prove its case. Such merit-based arguments, even when intermeshed with jurisdictional questions, should be determined at trial. Cf. United States v. Alfonso, 143 F.3d 772, 777 (2d Cir. 1998) (quoting United States v. Ayarza-Garcia, 819 F.2d 1043, 1048 (11th Cir. 1987)) ("[W]hen a question of federal subject matter jurisdiction is intermeshed with questions going to the merits, the issue should be determined at trial.... This is clearly the case when the jurisdictional requirement is also a substantive element of the offense charged."). The court therefore declines to dismiss the RICO charge on this basis.
The Travel Act, 18 U.S.C. § 1952, criminalizes "travel[ ] in interstate or foreign commerce ... with intent to ... promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of unlawful activity," when the traveler "thereafter performs or attempts to perform" that activity. 18 U.S.C. § 1952(a)(1), (A). The federal aiding and abetting statute, moreover, provides that "[w]hoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal." 19 U.S.C. § 2. The Travel Act does not have extraterritorial reach. See RJR Nabisco, 136 S. Ct. at 2105. However, in RJR Nabisco, the Supreme Court held that "[i]f the conduct relevant to [a non-extraterritorial] statute's focus occurred in the United States, then the case involves a permissible domestic application even if
The Indictment sets out the elements of a domestic Travel Act violation, charging that on two occasions—once on July 5, 2009, and again on August 16, 2009—Defendants "traveled and caused another person to travel in interstate commerce from Chicago, Illinois, to Greensboro, North Carolina, with intent to promote, manage, carry on, and facilitate the promotion, management, establishment, and carrying on of an unlawful activity, namely, violation of [the MLCA]; and thereafter, the defendants did perform, cause to be performed and did aid and abet the performance of acts to promote manage, establish, and carry on and facilitate the promotion, management, establishment, and carrying on of said unlawful activity." (Indictment [2] at 22.)
Defendants contend that these allegations are insufficient because "[n]one of the travel listed in the Indictment is relevant to the Travel Act's focus," which, they argue, should be "the alleged conduct of non-U.S. companies and foreign nationals bribing Indian officials in India for a project to be undertaken in India." (Firtash MTD [24] at 15.) Specifically, Defendants claim that because Defendant Lal lived in North Carolina, his travel there in 2009 was "incidental to any other purpose he may have had." (Id. at 17.) They further assert that any travel done to meet with Company A was "not intended to advance and did not advance an illegal purpose." (Id. at 18.) These claims cannot be inferred from the text of the Indictment, and indeed directly contradict the Indictment's allegation that the relevant travel was in fact carried out with intent to promote unlawful activity.
The crux of Defendants' argument appears to be that if the Indictment does not defeat the possibility that the government's evidence will ultimately be insufficient for a conviction, then dismissal is appropriate. This is not the standard to which Indictments are held. The allegations in the Indictment, presumed to be true, sufficiently set out the elements of domestic Travel Act violations. Defendants' motion to dismiss the RICO charge as impermissibly extraterritorial is denied.
Defendants further argue that Count Two, which alleges a conspiracy to violate the MLCA, and Counts Three and Four, which allege violations of the Travel Act, should be dismissed. This section of Defendants' brief simply restates the arguments made to dismiss the RICO charge, and can be disposed of on the same grounds. For the reasons discussed above, the Indictment is sufficient as to all three counts.
Defendants next argue that the court should dismiss Count Five. Count Five alleges that Defendants conspired, in violation of the federal aider and abettor statute, 18 U.S.C. § 2, and the federal conspiracy statute, id. at § 371, to violate the Foreign Corrupt Practices Act (the "FCPA"), 15 U.S.C. §§ 78dd-2(a) and 78dd-3(a). Pertinently, § 78dd-2(a) applies only to domestic concerns
Defendants dispute that the government has set out all the elements of these charges. According to Defendants, although the indictment charges only secondary liability under Sections 2 and 371, it must nevertheless also allege that Defendants each belong to the class of individuals capable of committing a substantive FCPA violation. Because the Indictment does not charge that either Firtash or Knopp is the agent of a domestic concern or a qualified foreign national, accepting Defendants' argument would necessarily imply that the Indictment fails to set out an essential element of the offense.
Two doctrines are relevant to Defendants' argument: limits to secondary liability imposed by the common law, see generally Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 S.Ct. 206 (1932), and the presumption against extraterritorial application of statutes, see generally RJR Nabisco, Inc. v. European Community, ___ U.S. ___, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016). It is well-established that "[a] conspirator need not agree to commit the substantive offense—or even be capable of committing it—in order to be convicted." Ocasio v. United States, ___ U.S. ___, 136 S.Ct. 1423, 1426, 194 L.Ed.2d 520 (2016). Interpreting the legislative history of the FCPA, however, the Second Circuit recently held that even when charged via the federal conspiracy or complicity statutes, "foreign nationals may only violate the [FCPA] outside the United States if they are agents, employees, officers, directors, or shareholders of an American issuer or domestic concern." United States v. Hoskins, 902 F.3d 69, 97 (2d Cir. 2018). Hoskins would thus require an additional element be alleged in any indictment for conspiracy or complicity where the substantive offense is (or would have been) an FCPA violation: that the defendant is the agent of a domestic concern or a qualified foreign national.
No such allegation is included in Count Five of the indictment for Firtash or Knopp; the government does not dispute this fact. The government observes, however, that controlling Seventh Circuit case law declines to impose the requirement recognized in Hoskins. The government is correct. Indeed, although the Seventh Circuit has not yet ruled on this precise question, its disagreement with the Second Circuit's approach in Hoskins is evident from a pair of existing cases discussing exceptions to secondary liability: United States v. Amen, 831 F.2d 373 (2d Cir. 1987) and United States v. Pino-Perez, 870 F.2d 1230 (7th Cir. 1989).
In Amen, the Second Circuit considered the use of secondary liability to convict a defendant under the "Continuing criminal enterprise" statute, 12 U.S.C. § 848, also known as the federal "kingpin" statute. 831 F.2d at 381. The kingpin statute, "designed to reach the `top brass' in the drug rings," sets out heightened criminal penalties for commission of certain felonies "in concert with five or more other persons with respect
The Second Circuit approached this problem by analyzing legislative history to determine whether Congress had intended for the kingpin statute to be covered by the already-existing aider and abettor and conspiracy laws. Amen, 831 F.2d at 381-82. The panel's analysis uncovered "no mention of aiders and abettors," and it thus determined that "the purpose of making [the kingpin statute] a new offense ... was not to catch in [its] net those who aided and abetted the supervisors' activities." Id. at 382. Absent evidence that Congress's purpose in passing the substantive criminal statute was for secondary liability to apply, the Second Circuit refused to draw the conclusion that it did. Id. at 381 (holding that to be convicted under the kingpin statute, "one must meet all the requirements for a conviction under [the kingpin statute]"); id. at 381 ("[O]ne cannot incur liability for aiding and abetting [a person who violates the kingpin statute]."). The Second Circuit thus vacated Paradiso's convictions for conspiracy and for aiding and abetting Abbamonte's violation of the kingpin statute. Id. at 383.
Two years later, in United States v. Pino-Perez, the Seventh Circuit considered the same question, en banc, although only with regard to the federal aider and abettor statute.
The Seventh Circuit held, therefore, that exclusions to the aider and abettor statute may only be derived from statutory text, and are limited to three circumstances. First, where "a `crime is so defined that participation by another is necessary to its commission,' that other participant is not an aider and abettor." Id. at 1231 (quoting United States v. Southard, 700 F.2d 1, 20 (1st Cir. 1983)). Second, where a participant is also "the victim of the crime," that participant may not be an aider and abettor.
The Seventh Circuit also noted an apparent tension between the Second Circuit's approach and Supreme Court precedent. In Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 S.Ct. 206 (1932), the Supreme Court held that the Mann Act, 18. U.S.C. § 397, which criminalized "the transportation [of] any woman or girl for the purpose of prostitution ... or for any other immoral purpose," could not be used to punish a woman being transported. Gebardi, 287 U.S. at 112, 53 S.Ct. 35. In reaching this conclusion, the Gebardi Court set two notable standards from which the Second Circuit appears to depart in Amen. For example, whereas the Amen court based its holding on the absence of evidence demonstrating an intent to create secondary liability, Gebardi directs that "to create an exemption from the ordinary rules of accessorial liability" there must be a showing of "an affirmative legislative policy." Pino-Perez, 870 F.2d at 1234 (first quoting United States v. Falletta, 523 F.2d 1198, 1200 (5th Cir. 1975), then quoting Gebardi, 287 U.S. at 123, 53 S.Ct. 35 (emphasis added)). Moreover, whereas Amen focuses heavily on legislative history, Gebardi (like Pino-Perez) infers legislative intent only from the text of the statute. See Gebardi, 287 U.S. at 123, 53 S.Ct. 35 ("[W]e perceive in the failure of the Mann Act to condemn the woman's participation in those transportations which are effected with her mere consent, evidence of an affirmative legislative policy to leave her acquiescence unpunished."). These variances informed the Seventh Circuit's departure from Amen and, as discussed below, those issues continue with Hoskins.
United States v. Hoskins follows closely in the footsteps of Amen and, with it, the reasoning rejected by the Seventh Circuit in Pino-Perez. There, the Second Circuit considered whether Hoskins, a foreign national, could be convicted under conspiracy or complicity theory for violating the FCPA, even if he belonged to none of the categories of persons expressly targeted by the FCPA.
By its own terms, the Hoskins opinion "focuse[d] on two cases": Gebardi and Amen. Hoskins, 902 F.3d at 78. Consistent with Gebardi, the Second Circuit's analysis
Moreover, Pino-Perez lists only three circumstances in which "an inference can confidently be drawn that Congress in enacting a criminal statute meant to protect a class of accomplices from being charged as aiders and abettors." Pino-Perez, 870 F.2d at 1234. None describe the facts here. Neither Firtash nor Knopp can fairly be described as victims of the alleged crimes, nor are they members of a group the FCPA was designed to protect. And while they were certainly alleged to be involved in the alleged crimes, their participation as co-conspirators was not definitionally "essential" to the statute's violation.
Defendants correctly note that Pino-Perez did not deal with issues of extraterritoriality, and that the presumption against extraterritoriality arguably undermines assumptions on which Pino-Perez was based. The Pino-Perez court noted that "once that determination [that someone is an aider and abettor] is made, liability is automatic by virtue of section 2(a)," but that may not always be true where the defendant's actions are extraterritorial and the underlying statute has no extraterritorial application. Pino-Perez, 870 F.2d at 1234. RJR Nabisco did not address extraterritorial limits for conspiracy claims, but appears to acknowledge that legislative history can constrain a statute's extraterritorial application. Absent binding precedent on this issue, however, this court is unwilling to disregard clear guidance from the Seventh Circuit on this subject. For these reasons, Defendants' motion to dismiss Count Five is denied.
Finally, Defendants Knopp and Firtash assert that their prosecution in the United States violates the Fifth Amendment's Due Process Clause. (Firtash MTD [24] at 1-2; Knopp MTD [30] at 11.) They argue that their contacts with the United States are so tenuous that prosecution here violates their constitutional rights. The parties debate whether the Defendants, who are aliens not present in the United States, and who are not detained by the United States, are entitled to due process protections at all. The court need not decide this issue here, however, as it concludes that prosecution of Firtash and Knopp in the United States does not violate the Fifth Amendment's Due Process Clause.
Section 402 of the Restatement recounts the principles of international law that limit a state's ability to reach conduct outside of its own borders. Section 402 of the Restatement provides that:
Any single ground under § 402 is sufficient to support jurisdiction in accordance with the Due Process Clause. United States v. Kashamu, 15 F.Supp.3d 854, 867 (N.D. Ill. 2014). But Defendants Knopp and Firtash claim that the Indictment violates their due process rights under each relevant sub-section—they argue that their activity did not take place in the United States, it did not have a substantial effect on the United States, and it was not intended to have a substantial effect on the United States. They additionally assert that the conduct did not affect the security interests of the United States. The court finds none of the arguments compelling.
Further, the Indictment lists millions of dollars of alleged bribe money that went to, from, or through the United States. (Id. at 11-16; id. at Schedule A.
These acts are sufficient to subject the Defendants to prosecution in the United States in accordance with the requirements of due process. While there is little case law discussing § 402(1)(a), cases discussing jurisdiction and extraterritoriality generally support this conclusion. In Leija-Sanchez, the Seventh Circuit reversed the dismissal of an indictment of a defendant who, from the United States, "arrang[ed] and pa[id] for the murder" of a business competitor in Mexico. 602 F.3d at 798, 800. "[S]ome of the acts (planning and payment) occurred in the United States, one (the killing) occurred abroad; and the objective (reduced competition for Leija-Sanchez'
In contrast, the district court in United States v. Sidorenko, 102 F.Supp.3d 1124 (N.D. Cal. 2015) found that prosecution in the U.S. violated defendants' due process rights. The United States there charged three defendants with a host of charges arising out of a scheme in which two non-U.S. citizens living in Dubai bribed an employee of a Canada-based U.N. agency. The bribe was intended to benefit a "Ukrainian conglomerate of companies," id. at 1126, and the only connection to the United States was that the United States made monetary contributions to the U.N. agency. The court explained that "[a]ll of this conduct occurred outside of the United States between three defendants who are not United States citizens, who never worked in the United States, and whose use of wires did not reach or pass through the United States." Id. at 1127. In the case before the court, as in Leija-Sanchez, and unlike Sidorenko, substantial conspiratorial activity took place in the United States, even if the bribes themselves were aimed at foreign officials, and the bribery money allegedly flowed through United States financial institutions.
The court recognizes that, unlike the defendant in Leija-Sanchez, Defendants Knopp and Firtash may not have personally been in the United States during the conspiracy.
Id. at 359. Unlike Columba-Colella, the indictment here does charge the Defendants with a conspiracy that took place, in
The Defendants make several counterarguments. First, they list types of activity that did not occur in the United States: no meetings with Indian officials took place in the United States, none of the project's mining operations took place in the United States, and the government makes no allegations that "the titanium sponge meant for sale to Company A was improperly priced based on the alleged bribery scheme." (Dfs.' Joint Reply [47] at 38.) That many events did not happen in the United States does not alter the fact that a substantial part of the conspiratorial activity did take place in the United States. Defendants also argue that Mr. Lal's enterprise-related activity in the United States was "incidental[ ] because he resided there," and that it should therefore not be considered "substantial criminal activity in the United States."
Though the court need not reach this ground, this prosecution also satisfies the Fifth Amendment's due process requirements under Restatement § 402(1)(c)—providing for laws that proscribe conduct outside of a nation's territory when that conduct "has or is intended to have substantial effect within its territory." This is also called the objective territorial theory of international law. Hijazi, 845 F. Supp. 2d at 883. The government alleges that "[i]n or around February 2007, Company A entered into a memorandum of agreement with Ostchem Holding AG, by and through Bothli Trade AG," a company over which Firtash exercised control. (Indictment [2] at 3.) "The agreement specified that the parties would work towards entering a supply agreement whereby Bothli Trade AG would supply 5,000,000 to 12,000,000 pounds of titanium sponge to Company A on an annual basis. The titanium sponge to be supplied to Company A was to be derived from the project" in India. (Id.) Members of the conspiracy also allegedly met with officers of Company A in the U.S. multiple times; travelled to, from, and within the United States; gave orders and directions from within the United States; and transferred money to, from, and through the United States. These efforts to introduce a product, derived from the illegal bribery of foreign
The Defendants claim that, because the agreement with Company A never resulted in an actual purchase, it is insufficient to constitute conduct that had or was intended to have a substantial effect in the United States. Again, the court disagrees. Section 402(1)(c) only requires that behavior be intended to have a substantial effect within the United States. Defendants also argue that if their "minor incidental `connections' to the United States could serve as the basis of jurisdiction, almost any business transaction could, rendering ... the presumption against United States jurisdiction voice by the Supreme Court in Microsoft [v. AT & T Corp., 550 U.S. 437, 127 S.Ct. 1746, 167 L.Ed.2d 737 (2007)] meaningless." (Firtash MTD [25] at 28.) See Microsoft, 550 U.S. at 454-55, 127 S.Ct. 1746, 167 L.Ed.2d 737 (2007) ("The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.") (emphasis added). The court disagrees with Defendants' characterization of their connections to the U.S. as minor and incidental. Further, Microsoft, a patent dispute, focuses specifically on interpreting the extraterritoriality of the Patent Act and not on due process. In that case the defendant AT&T claimed, and Microsoft conceded, that a portion of code in Microsoft's operating system software had "the potential to infringe" a patent held by AT&T. Microsoft, 550 U.S. at 441, 127 S.Ct. 1746. Microsoft's software was being loaded onto new computers abroad by a foreign manufacturer from a Microsoft "master disk or electronic transmission dispatched by Microsoft from the United States." Id. at 442, 127 S.Ct. 1746. The Supreme Court acknowledged the "traditional understanding that our patent law operates only domestically and does not extend to foreign activities." Id. at 455, 127 S.Ct. 1746 (citation and internal quotation marks and modifications omitted). The only potential exception to that rule is Section 271(f) of the Patent Act, which provides that patent infringement occurs when "one supplies ... from the United States for combination abroad, a patented invention's components." Id. at 441, 127 S.Ct. 1746 (internal quotation marks omitted). The Court found that the Microsoft code, when sent from the United States, did not constitute a "`component' amenable to `combination,'" and that therefore Section 271(f) was not violated. Id. at 449, 127 S.Ct. 1746. Thus, the Microsoft court focused specifically on the extraterritorial application of U.S. patent law, without any mention of due process concerns. Here, the court found above that the pertinent criminal statutes apply extraterritorially, and nothing in Microsoft convinces the court that the Defendants' contacts are so minimal that their prosecution in the United States would violate the Due Process Clause.
The Defendants also cite several cases that analyze jurisdiction and due process under the sufficient nexus test instead of under international law principles. For example, in United States v. Perlaza, 439 F.3d 1149 (9th Cir. 2006), the Ninth Circuit concluded that the United States had no jurisdiction over a criminal prosecution arising out of the seizure of 1,964 kilograms
Defendants attempt to liken their case to those where the court has found jurisdiction lacking. In Abelesz v. OTP Bank, 692 F.3d 638 (7th Cir. 2012), for example, survivors of the Holocaust and their next of kin filed a civil suit against two Hungarian banks for their role in the expropriation of Hungarian Jews' property. The circuit court, conducting the civil jurisdictional analysis required by due process, the Seventh Circuit concluded that "Plaintiffs' claims do not arise out of any business contacts these defendants have with the United States, so specific personal jurisdiction does not apply here." Id. at 651. The court further found that it lacked general jurisdiction because the defendant banks' "contacts with the United States simply do not come close to meeting the `essentially at home' standard needed to exercise general jurisdiction over a foreign defendant." Id. at 653. See id. at 654 (noting that "the constitution requirement for general jurisdiction [ ] is `considerably more stringent' than that required for specific jurisdiction") (quoting Purdue Research Foundation v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 787 (7th Cir. 2003)). Those contacts included that both banks had account holders with U.S. mailing addresses; both had "correspondent banking and contractual relationships with U.S. banks and other companies"; both had personnel that had "traveled to the United States on business trips"; and one of the banks advertised in "U.S. publications and in media that targets part of the U.S. audience." Id. at 656. However, the court there did not consider these contacts to be "so continuous and systematic as to render [defendants] essentially at home in the forum." Id. (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011)). Here, however, the court finds that the Defendants' conduct has had a substantial effect in the U.S., rendering jurisdiction over the case constitutional.
Finally, the Defendants attempt to distinguish this prosecution from others in which courts have exercised jurisdiction. They point out that the In re Hijazi defendant's fraudulent agreements with a U.S. Army subcontractor "were intended to
Ultimately, the court finds that the Defendants' conspiracy was intended to have a substantial effect in the United States. This further supports the court's assertion of jurisdiction over Defendants without violating the Due Process Clause.
Even if a court has jurisdiction pursuant to a principle of international law laid out in Restatement § 402, a state is prohibited from exercising that jurisdiction when it would be unreasonable. Restatement § 403(1). Reasonability "is determined by evaluating all relevant factors," including, but not limited to:
Restatement § 403(2). Defendants claim that their prosecution is unreasonable under these factors, and that the court's exercise of jurisdiction over them therefore violates their right to due process. This argument, too, fails. As discussed above, Defendants' alleged activity was intended to have a substantial effect within the United States. The facts establishing jurisdiction under §§ 402(1)(a) and (c) similarly establish a link between Defendants and the United States sufficient to render jurisdiction reasonable.
Defendants make their most lengthy reasonability argument under § 403(2)(g), arguing that "India, not the United States" has an interest in regulating the alleged conduct. (Firtash MTD [24] at 34.) India very well may have a significant interest in the alleged criminal activity in this case. But that interest does not require the conclusion that the United States must stand
In United States v. Lloyds TSB Bank PLC, 639 F.Supp.2d 314 (S.D.N.Y. 2009), the U.S. government brought a civil action against Lloyds Bank, seeking a civil penalty for Lloyds' alleged violation of the Money Laundering Control Act ("MCLA"). Lloyds was "organized and existing under the laws of the United Kingdom of Great Britain and Northern Ireland" and maintained a branch in Geneva, Switzerland. Id. at 315. The bank had allegedly "made it possible, and in many instances easy, for" an alleged money launderer named Lycourgos Kyprianou "to launder the proceeds of his criminal and fraudulent conduct through Lloyds' accounts." Id. at 315. Kyprianou also "maintained or controlled accounts at the Bank's Geneva branch." Id. The district court held that it lacked extraterritorial jurisdiction over the bank under the MCLA because the government's civil complaint failed to allege facts necessary to tie the defendant bank to the underlying conspiracy, which was the only hook for subject matter jurisdiction. Id. at 319, 323-24 ("[T]his Court lacks subject matter jurisdiction over Lloyds TSB, which is not named as a participant in the underlying fraud conspiracy in the United States, and whose conduct consisted exclusively of transfers between its branch in Geneva, Switzerland and other European banks."). Unlike Lloyds, the government here has alleged facts that tie Firtash and Knopp to the activity of a criminal enterprise with substantial activity in the United States.
Briefly ruling in the alternative, the Lloyds court also noted Restatement "§ 403(3)(g)" (presumably an erroneous reference to § 403(2)(g)). See Lloyds, 639 F. Supp. 2d at 325 (noting "that one of the Restatement factors is `the extent to which another state may have an interest in regulating the activity'"). Citing that provision, the court determined that, in any case, "Switzerland's interest in regulating the conduct of banks within its borders, particularly where the bank is a leading financial services provider in the country, is great," and, therefore, that an exercise of jurisdiction by the court would be unreasonable. Id. (noting, in footnote 6, the foreign relations implications of such a prosecution) (citing LaSala v. TSB Bank, PLC, 514 F.Supp.2d 447, 465 (S.D.N.Y. 2007) (conducting a "last place" analysis to determine a choice of law issue in a civil case)). This court disagrees that the indictment of Firtash and Knopp would be similarly unreasonable, given that the alleged criminal enterprise's activity took place, in substantial part, in the United States and was intended to have a substantial effect in the United States.
Finally, Defendants cite United States v. Javino, 960 F.2d 1137 (2d Cir. 1992) in support of their reasonability argument. There, an indictment charged the defendant with provisions of the National Firearms Act (NFA) criminalizing the "receipt and possession of a destructive device `made' in violation of the Act." Id. at 1142 (citing 26 U.S.C. §§ 5822, 5861(c)). Defendant Javino was charged with possession of a bomb; following his conviction, he contended that the government failed to prove the bomb was made in the United States. Javino, 960 F.2d at 1141. The court
Ultimately, the prosecution of Defendants Knopp and Firtash in the United States is not unreasonable under any combination of § 403(2) factors and does not violate any of their rights to due process granted by the United States Constitution.
For the reasons stated herein, Defendants' motions to dismiss [24, 30] are denied.
Other circuits have approached the question through a lens of international law. See, for example, United States v. Cardales, 168 F.3d 548, 553 (1st Cir. 1999) (rejecting the sufficient nexus test, and instead looking to "principles of international law" to determine if due process had been satisfied in a prosecution under the Maritime Drug Law Enforcement Act). This court finds that the Seventh Circuit has indicated its support for the latter approach through its opinion in In re Hijazi, 589 F.3d at 412.
