Source: https://www.scribd.com/document/57966637/Carson-Travel-Act-Motion-to-Dismiss
Timestamp: 2017-06-29 01:47:23
Document Index: 137173387

Matched Legal Cases: ['§ 78', '§ 78', '§ 10', '§ 1343', '§ 1346', '§ 1952', '§ 2000', '§ 641', '§ 641', 'art 16', '§ 1952', '§ 1952', '§ 78', '§ 78', '§ 78', '§ 2000', '§ 1952', '§ 1343', '§ 1952', '§ 1346', '§1952', 'art: 24', '§ 10']

Carson - Travel Act Motion to Dismiss | Fraud | Conspiracy (Criminal)
Carson - Travel Act Motion to DismissUploaded by Mike KoehlerRelated InterestsFraudConspiracy (Criminal)Common LawCriminal LawPoliticsRating and Stats0.0 (0)Document ActionsDownloadShare or Embed DocumentEmbedView MoreCopyright: Attribution Non-Commercial (BY-NC)Download as PDF, TXT or read online from ScribdFlag for inappropriate contentCase 8:09-cr-00077-JVS Document 376Filed 06/13/11 Page 1 of 38 Page ID #:6321
1 Thomas H. Bienert, Jr. (SBN 135311) tbienert@bmkattorneys.com 2 Ariana Seldman Hawbecker (SBN 190506) ahawbecker@bmkattorneys.com 3 903 Calle Amanecer, Suite 350
Kenneth M. Miller (SBN 151874) kmiller@bmkattorneys.com BIENERT, MILLER & KATZMAN, PLC San Clemente, California 92673
4 Phone: 949 369-3700, Fax: 949 369-3701 5
Attorneys for Defendant, PAUL COSGROVE Nicola T. Hanna (SBN 130694) nhanna@gibsondunn.com 3161 Michelson Drive, Suite 1200 Phone: 949 451-3800, Fax: 949 451-4220 SIDLEY AUSTIN LLP
6 GIBSON DUNN & CRUTCHER LLP 7 Irvine, CA 92612
8 Attorneys for Defendant, STUART CARSON 9 Kimberly A. Dunne (SBN 142721) kdunne@sidley.com 10 555 W. Fifth Street, Suite 4000 11 Phone: 213 896-6000, Fax: 213 896-6600 12
Attorneys for Defendant, HONG CARSON David W. Wiechert (SBN 94607) dwiechert@aol.com 115 Avenida Miramar Phone: 949 361-2822, Fax: 949 496-6753
13 LAW OFFICES OF DAVID W. WIECHERT 14 San Clemente, CA 92672
15 Attorneys for Defendant, DAVID EDMONDS 16 17 18 19 20 UNITED STATES OF AMERICA 21 22
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION CASE NO. SA CR-09-0077-JVS DEFENDANTS’ NOTICE OF MOTION AND MOTION TO DISMISS COUNTS ONE, ELEVEN, TWELVE AND FOURTEEN OF THE INDICTMENT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF Date: August 12, 2011 Time: 1:30 p.m. Ctrm: 10C [Hon. James V. Selna]
23 STUART CARSON, et al., 24 25 26 27 28
Case 8:09-cr-00077-JVS Document 376
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TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on August 12, 2011 at 1:30 p.m., in the
3 courtroom of the Honorable James V. Selna, or as soon thereafter as this matter 4 may be heard, defendants Paul Cosgrove, Stuart Carson, Hong Carson and David 5 Edmonds (“Defendants”) will and hereby do move this Court for an order 6 dismissing Counts One, Eleven, Twelve and Fourteen of the Indictment. 7
The basis for Defendants’ Motion is that Counts Eleven, Twelve and
8 Fourteen (the “Travel Act Counts”) fail to state an offense. First, while the Travel 9 Act applies domestically, the Travel Act Counts allege foreign commercial bribery. 10 Because the Travel Act does not apply extraterritorially to the alleged facts, the 11 Indictment fails to state an offense. Moreover, because the Travel Act does not 12 cover the conduct at issue, there can be no conspiracy to violate the Travel Act. 13 Accordingly, the conspiracy count (Count One) must also be dismissed to the 14 extent it alleges a conspiracy to violate the Travel Act. 15
Second, the conduct alleged in the Indictment does not implicate the
16 California commercial bribery statute, the alleged predicate for the Travel Act 17 Counts. The applicability of the California commercial bribery statute is an 18 essential element of a Travel Act violation, so Counts Eleven, Twelve and 19 Fourteen fail to state an offense, and Count One must be dismissed to the extent it 20 alleges a conspiracy to violate the Travel Act. 21
Third, to the extent the Travel Act and the California commercial bribery
22 statute are deemed to apply to the alleged foreign bribery, the statutes are 23 unconstitutionally vague and their application to Defendants violates due process. 24 Defendants had no fair notice that the Travel Act or California commercial bribery 25 statute would reach the conduct alleged in the Indictment. Thus, again Counts 26 Eleven, Twelve and Fourteen fail to state an offense, and Count One must also be 27 dismissed to the extent it alleges a conspiracy to violate the Travel Act. 28 2
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Fourth, the substantive Travel Act counts fail to allege an essential element
2 of the Travel Act – namely, an act following the alleged travel or use of interstate 3 facilities in furtherance of the promotion of the California commercial bribery. 4 Likewise, Counts Twelve and Fourteen fail to allege the jurisdictional element of 5 “travel or use of a facility in interstate or foreign commerce.” Therefore, the 6 Travel Act Counts fail to state an offense. 7
Fifth, because the defective Travel Act Counts infect the entire conspiracy This Motion is based on this Notice of Motion, the Memorandum of Points
8 count, Count One must be dismissed in its entirety. 9
10 and Authorities filed in support thereof, the Declaration of Ariana Seldman 11 Hawbecker, the Indictment, the Bill of Particulars (“BOP”), and on such other and 12 further argument and evidence as may be presented to the Court at the hearing of 13 this matter. 14 DATED: June 13, 2011 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Respectfully submitted, BIENERT, MILLER, & KATZMAN PLC By: /S/Kenneth M. Miller___________________ Kenneth M. Miller Attorneys for Defendant PAUL COSGROVE GIBSON, DUNN & CRUTCHER LLP By:
/S/Nicola T. Hanna_____________________ Nicola T. Hanna Attorneys for Defendant STUART CARSON SIDLEY AUSTIN LLP
/S/Kimberly A. Dunne__________________ Kimberly A. Dunne Attorneys for Defendant HONG CARSON
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LAW OFFICES OF DAVID W. WIECHERT By: /S/David W. Wiechert___________________ David W. Wiechert Attorneys for Defendant DAVID EDMONDS
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TABLE OF CONTENTS INTRODUCTION …………………………………...……….……………....1 LEGAL STANDARD ………………………………………………………..2 PERTINENT INDICTMENT ALLEGATIONS …………………………......3 THE ALLEGED FOREIGN COMMERCIAL BRIBERY DOES NOT STATE AN OFFENSE UNDER THE TRAVEL ACT ……………………...5 A. The Travel Act Has No Extraterritorial Application ..............................5 1. 2. 3. 4. 5. B. C. D. The Presumption Against Extraterritoriality Applies To The Travel Act ……………………………………................5 The Travel Act’s Legislative History Does Not Reflect A “Clear Indication” That The Statute Applies Extraterritorially ………………………………….........7 The Subsequent Enactment Of The FCPA Provides A Clear Inference That The Travel Act Was Not Intended To Apply Extraterritorially …………………………...9 The Indictment Impermissibly Asserts Extraterritorial Application Of The Travel Act ……………….12 Bowman Does Not Permit Extraterritorial Application Of The Travel Act ……………………………….17
2 TABLE OF AUTHORITIES ………………………………………………………iii 3 I. 4 II. 5 III. 6 IV. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i
The Indictment Does Not State A Travel Act Offense Because The Alleged Conduct Does Not Violate California’s Commercial Bribery Statute ………………………………………….18 Alternatively, Application Of The Travel Act And PC 641.3 To Defendants’ Foreign Conduct Is Unconstitutionally Vague And Violates Due Process ……………………………………………20 Assuming, Arguendo, That The Travel Act Applies To The Foreign Commercial Bribery Alleged, The Travel Act Counts Still Fail To Allege Essential Elements ……………..……….21 1. 2. The Indictment Fails To Allege An Act In Furtherance Of Bribery After The Alleged Use Of Interstate Or Foreign Commerce …………………………..21 The Indictment Fails To Adequately Allege The Jurisdictional Element Of “Travel Or Use Of a Facility In Interstate Or Foreign Commerce” For Counts Twelve And Fourteen …………………………………………23
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1 2 V. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Count One (Conspiracy) Must be Dismissed In Its Entirety ………...24
CONCLUSION ……………………………………………………………..25
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1 2 Cases:
3 Carney v. United States th 4 5
163 F.2d 784 (9 Cir. 1947) ………………………………………………...25
E.E.O.C. v. Arabian Amer. Oil Co. 499 U.S. 244 (1991) ………………………………………………….6, 12, 16 529 U.S. 120 (2000) ………………………………………………...........9, 10
6 FDA v. Brown & Williamson Tobacco Corp. 7 8
Kolender v. Lawson 461 U.S. 352 (1983) ………………………………………………………...20 130 S. Ct. 2869 (2010) …………………………………………………passim
9 Morrison v. Nat’l Australia Bank Ltd. 10 11
Newmarket Corp. v. Innospec, Inc. 2011 WL 1988073 (E.D. Va. May 20, 2011) ………………………………...7 304 F. Supp. 2d 570 (S.D.N.Y. 2004) ………………………………………..7
12 Norex Petroleum Ltd. v. Acces Indus., Inc. 13 14
Norex Petroleum Ltd. v. Acces Indus., Inc. 631 F.3d 29 (2d Cir. 2010) …………………………………………6, 7,13, 16 544 U.S. 349 (2005) …………………………………………………….13, 14
15 Pasquantino v. United States 16 17
Perrin v. United States 444 U.S. 37 (1979) ………………………………………………………….19 401 U.S. 808 (1971) …………………………………………………… 8, 17
18 Rewis v. United States 19 20
Russell v. United States 369 U.S. 749 (1962) ………………………………………………………...22 415 U.S. 566 (1974) ………………………………………………………...21
21 Smith v. Goguen 22 23
Strassheim v. Daily 221 U.S. 280 (1911) ………………………………………………………...19 686 F.2d 772 (9 Cir. 1982) ………………………………………………...19
24 United States v. Bertman th 25 26
United States v. Borenth 278 F.3d 911 (9 Cir. 2002) ………………………………………………….3 260 U.S. 94 (1922) ……………………………………………………...17, 18
27 United States v. Bowman 28
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1 United States v. Camiel 2 3
689 F.2d 31 (3d Cir. 1982) ………………………………………………….25
United State. v. Covington 395 U.S. 57 (1969) …………………………………………………………...3 92 U.S. 542 (1875) ………………………………………………………….22
4 United States v. Cruikshank 5 6
United States v. D’Alessio 822 F. Supp. 1134 (D.N.J. 1993) ……………………………………………25 523 U.S. 517 (1998) ………………………………………………………...10
7 United States v. Estate of Romani 8 9
United States v. Fausto 484 U.S. 439 (1988) ………………………………………………………...10 966 F. Supp. 90 (D. Mass. 1997)…………………………………………….19
10 United States v. Ferber 11 12
United States v. Galardith 476 F.2d. 1072 (9 Cir. 1973) ………………………………………………25 333 F.3d 750 (7 Cir. 2003) ………………………………………………...20
13 United States v. Genova th 14 15
United States v. Giffen 326 F. Supp. 2d 497 (S.D.N.Y. 2004) …………………………………..15, 21 374 U.S. 612 (1953) ………………………………………………………...20
16 United States v. Harriss 17 18
United States v. Hathaway 534 F.2d 386 (1st Cir. 1976) ………………………………………………...17 2010 WL 4718613 (E.D. Cal. 2010) .…………………………………...16, 17
19 United States v. Jack 20 21
United States v. Lanier 520 U.S. 259 (1997) ………………………………………………………...20 359 F.3d 194 (3d Cir. 2004) ………………………………………………...19
22 United States v. Lee 23 24
United States v. Lopez-Vanegas 493 F.3d 1305 (11th Cir. 2007) …..………………………………………….16 27 F.3d 137 (5 Cir. 1994) ………………………………………………….24
25 United States v. Montford th 26 27 28
United States v. Noriega 746 F. Supp. 1506 (S.D. Fl. 1990) ………………………………………….12
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1 United States v. Panarella 2 3
277 F.3d 678 (3d Cir. 2002) ………………………………………………….3
United States v. Philips Morris U.S.A., Inc. 2011 WL 1113270 (D.D.C. Mar. 28, 2011) …………….....……………16, 18 650 F.2d 1133 (9 Cir. 1981) ……………………………………………9, 25
4 United States v. Tavelman th 5 6
United States v. Thordarson 646 F.2d 1323 (9th Cir. 1981) ………………………………………………...9 837 F.2d 1281 (5th Cir. 1988) ……………………………………………….19
7 United States v. Tonry 8 9
United States v. Weingarten 632 F.3d 60 (2d Cir. 2011) ………………………………………………….24 327 F.2d 1081 (10th Cir. 2003) ……………………………………………….9
10 United States v. Welch 11 12
United States v. Winslow 962 F.2d 845 (9th Cir. 1992) ………………………………………………...22 149 F.3d 46 (1 Cir. 1998) …………………………………………………19
13 United States v. Woodward st 14 15
United States v. Zemater 501 F.2d 540 (7th Cir. 1974) ………………………………………………...22
16 Statutes: 17 15 U.S.C. § 78dd-1 .................................................................................................... 11 18 15 U.S.C. § 78dd-2 .................................................................................................... 11 19 18 U.S.C. § 10 ............................................................................................................ 24 20 18 U.S.C. § 1343........................................................................................................ 13 21 18 U.S.C. § 1346........................................................................................................ 15 22 18 U.S.C. § 1952................................................................................................. passim 23 42 U.S.C. §§ 2000e, et seq. ....................................................................................... 12 24 Cal. Penal Code § 641.3 ..................................................................................... passim 25 Rules: 26 Fed. R. Crim. P. 7(c) .................................................................................................. 21 27 Fed. R. Crim. P. 12(b).................................................................................................. 2 28 Fed. R. Crim. P. 12(d).................................................................................................. 3 v
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1 Other Authorities: 2 Travel Act, S. Rep. No. 87-644 (1961) ....................................................................... 8 3 Travel Act, H.R. Rep. No. 87-966 (1961) ................................................................... 8 4 Ninth Cir. Model Criminal Jury Ins. 8.144 ............................................................... 22 5 Kenneth A. Cutshaw, et. al.. Corporate Counsel’s Guide to Doing 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vi
Business in China (3rd Ed. 2009)...................................................................... 9
Leonard B. Sand et al., Modern Federal Jury Instructions 50A-8 (2005) ................ 24
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MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION Defendants Stuart Carson, Hong Carson, Paul Cosgrove and David Edmonds
4 (Defendants) move to dismiss Counts One, Eleven, Twelve and Fourteen of the 5 Indictment for failure to state an offense. Counts Eleven, Twelve and Fourteen (the 6 “Travel Act Counts”) charge substantive violations of the Travel Act against 7 Cosgrove and Edmonds. Count One charges a conspiracy to violate the Travel Act 8 and the Foreign Corrupt Practices Act (“FCPA”) against all Defendants. 9
The Travel Act Counts are based on alleged bribes to employees of private
10 companies located in China (Counts Eleven and Twelve) and Russia (Count 11 Fourteen). As the Indictment alleges illicit payments to the employees of overseas 12 companies, for the sale of valves used in overseas construction projects,1 the 13 government must rely on the extraterritorial application of the Travel Act. Since the 14 Travel Act does not apply extraterritorially, Counts Eleven, Twelve and Fourteen do 15 not state an offense. Count One (conspiracy) must also be dismissed to the extent it 16 alleges a conspiracy to violate the Travel Act, as the Travel Act does not reach the 17 charged conduct. 18
In Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869, 2878 (2010), the
19 Supreme Court explained that unless Congress has clearly indicated that a statute 20 applies extraterritorially, it does not. The Travel Act criminalizes “bribery . . . in 21 violation of the law of the state in which committed,” i.e., domestic bribery. Travel 22 Act application to the foreign bribery alleged in this case violates Morrison’s 23 presumption against the extraterritoriality of United States (“U.S.”) laws. 24
While the face of the Travel Act, considered with Morrison’s presumption
25 against extraterritoriality, shows that the Travel Act has no foreign application, the 26
27 outside the U.S. 28
In most cases, the valves were actually manufactured by CCI’s foreign affiliates
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1 statute’s legislative history confirms it. Consideration of the Travel Act in 2 conjunction with the subsequently enacted FCPA also demonstrates that Congress 3 did not intend that the Travel Act extend to foreign bribery. 4
Further, the Travel Act Counts are predicated upon California’s commercial
5 bribery statute, Cal. Penal Code § 641.3 (“PC 641.3”), so the applicability of that 6 statute to Defendants’ conduct is essential to the government’s case. PC 641.3 has 7 never been applied to foreign commercial bribery and its legislative history shows its 8 foreign application was never considered. 9
Application of the Travel Act and PC 641.3 would also be unconstitutionally
10 vague. Defendants had no notice that either the Travel Act or PC 641.3 would reach 11 the alleged conduct. The government’s recent application of this fifty-year old 12 statute against foreign commercial bribery, in the face of strong skepticism that it 13 even applies, shows the enforcement of this statute is arbitrary. 14
Additionally, the Travel Act allegations are simply defective. The Travel Act
15 prohibits travel or the use of a facility in interstate or foreign commerce with the 16 intent to promote unlawful activity (i.e., state-law bribery), followed by an act to 17 promote the bribery. But the Travel Act Counts fail to allege the essential element 18 of an act following the travel or use of a facility in interstate commerce to promote 19 the alleged bribery. So too, Counts Twelve and Fourteen fail to adequately allege 20 the jurisdictional element of travel or use of a facility in interstate or foreign 21 commerce. Because the Travel Act Counts omit necessary elements, they fail. 22
Finally, the Court cannot guess whether the Grand Jury would have even
23 indicted Defendants for conspiracy had it known that the Travel Act did not apply to 24 Defendants’ alleged conduct. Because the defective Travel Act allegations infect the 25 entire conspiracy count, Count One must be dismissed in its entirety. 26 II. 27
LEGAL STANDARD A pretrial motion may raise any defense “that the court can determine without
28 a trial of the general issue.” Fed. R. Crim. P. 12(b). A defense can be considered 2
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1 pretrial when trial “would be of no assistance in determining [its] validity.” United 2 States v. Covington, 395 U.S. 57, 60 (1969). “The court must decide every pretrial 3 motion before trial unless it finds good cause to defer a ruling.” Fed. R. Crim. P. 4 12(d). 5
In ruling on a pretrial motion to dismiss an indictment for failure to state an
6 offense, “the court must accept the truth of the allegations in the indictment in 7 analyzing whether a cognizable offense has been charged. The indictment either 8 states an offense or it doesn’t.” United States v. Boren, 278 F.3d 911, 914 (9th Cir. 9 2002) (internal citations omitted). Importantly, even if an indictment alleges each 10 offense element , it nonetheless fails when “the specific facts alleged . . . fall beyond 11 the scope of the relevant criminal statute, as a matter of statutory interpretation.” 12 United States v. Panarella, 277 F.3d 678, 685 (3d Cir. 2002). 13 III. 14
PERTINENT INDICTMENT ALLEGATIONS The Indictment alleges that: Control Components, Inc.’s (“CCI”) was a
15 Delaware corporation headquartered in Rancho Santa Margarita, California; Stuart 16 Carson was a U.S. citizen and CEO of CCI from 1989 through 2005; Cosgrove was 17 a U.S. citizen, Executive Vice President of CCI from 2002 through 2007 and Head 18 of CCI’s Sales Department from 1992 through 2007; Hong “Rose” Carson was a 19 U.S. citizen and Manager of CCI’s Sales in China and Taiwan from 1995 through 20 2000, and Director of Sales in China and Taiwan from 2000 through 2007; and, 21 Edmonds was a U.S. citizen and Vice President of CCI’s Customer Service 22 Department from 2000 through 2007. Indictment (Ind.) at ¶¶ 3-7. The Indictment 23 alleges that Defendants “caused CCI employees and agents to make corrupt 24 payments to officers and employees of private companies abroad” – namely, China 25 and Russia, (Ind. ¶¶ 4-11, 35) and committed specified overt acts in the Central 26 District of California and elsewhere. Ind. ¶ 31. But the overt acts underlying the 27 Travel Act Counts allege only limited conduct by the Defendants or their alleged co28 conspirators in the U.S., let alone in the Central District. 3
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Overt Acts 46-47 (related to Count Eleven) concern the sale of CCI valves in
2 China. They allege Edmonds approved and caused a wire payment from a CCI 3 account in California to China for a project in China. Ind. ¶ 31 at 24. The alleged 4 recipients were “Fujian Pacific FIC(s)” (see BOP No. 25), employees of “a private 5 company in China.” Ind., Overt Act 46. Other than sending money from California, 6 Count Eleven and the related overt acts do not allege any domestic conduct. 7
Overt Acts 48-49 (related to Count Twelve), also concern the sale of CCI
8 valves in China and allege Edmonds’ approval of a payment from Sweden to China 9 for a project in China. Id. Again, the alleged recipients were “Fujian Pacific FICs” 10 (see BOP No. 28), employees of a private Chinese company. Ind., Overt Act 48. 11 There are no allegations of any domestic conduct. 12
Overt Acts 53-55 (related to Count Fourteen) concern the sale of CCI valves
13 to a Russian company for a project in India. They allege that Cosgrove approved 14 and caused wires from Sweden to New York, and Sweden to Latvia.2 The alleged 15 recipient was “Vladamir Batenko” (see BOP No. 116), an employee of “a private 16 company headquartered in Moscow Russia.” Ind., Overt Act 53. Other than the 17 incorrect allegation that money was sent from abroad to a New York account, there 18 are no allegations of domestic conduct underlying Count Fourteen. 19
Overt Act 58 alleges that Stuart Carson traveled from California to Hawaii to
20 make a corrupt payment to an employee of a San Francisco based private “Company 21 2” to secure “future” business. (But this allegation is not made in connection with a 22 substantive Travel Act count.) 23
The other two paragraphs relating to the Travel Act, paragraphs 16(B) and 35,
24 refer generally to travel and use of facilities in interstate and foreign commerce. 25 Paragraph 19 generally alleges that Defendants “participated in and arrange[d] for 26
27 New York, Overt Act 55 (and the discovery) show that this payment actually went 28
While Count Fourteen alleges that a $136,583.98 payment went from Sweden to
from Sweden to Latvia.
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1 overseas holidays to places such as Disneyland and Las Vegas for officers and 2 employees of state-owned and private customers under the guise of training and 3 inspection trips.” Ind. ¶ 19; see also Ind. ¶¶ 22-23. It does not identify these private 4 employees or if they were involved in transactions at issue.3 5 IV. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
THE ALLEGED FOREIGN COMMERCIAL BRIBERY DOES NOT STATE AN OFFENSE UNDER THE TRAVEL ACT A. The Travel Act Has No Extraterritorial Application 1. The Presumption Against Extraterritoriality Applies To The Travel Act
The Supreme Court recently made clear that domestic laws should not be applied extraterritorially unless Congress clearly denotes foreign application. Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869, 2878 (2010). Morrison involved a suit by foreign citizens, under Section 10(b) of the Securities Exchange Act of 1934, against a Florida company for fraudulent conduct in the U.S. The fraud allegedly impacted the price of an Australian company’s shares on foreign exchanges. Id. at 2876-77 and 2844. In upholding dismissal of the action for failure to state a claim, the Court held: (1) the question was not whether the district court had jurisdiction over the claim, but whether Section 10(b) reached the conduct at issue (“a merits question”), id. at 2877; (2) Section 10(b) does not reach extraterritorial conduct because Congress gave no clear indication that it does, id. at 2883; (3) whether a statute is improperly being applied extraterritorially turns on the statute’s “focus” and the “focus” of Section 10(b) is fraud on domestic exchanges; therefore, (4) Section 10(b) does not reach fraud on a foreign exchange, even when there is significant domestic conduct to further the fraud. Id. at 2884.
The government’s case is based upon the alleged bribery of foreign employees. With the exception of Overt Act 58 and Transaction 30 (which involves the same 27 “Company 2”), none of the companies identified in the Indictment - or the BOP identify employees of domestic companies as alleged bribe recipients.
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Congress usually legislates with respect to domestic, not foreign matters. Id.
2 at 2877. Thus, “unless there is the affirmative intention of the Congress clearly 3 expressed” to give a statute extraterritorial effect, “we must presume it is primarily 4 concerned with domestic conditions.” Id. “Rather than guess anew in each case, we 5 apply the presumption [against extraterritoriality] in all cases, preserving a stable 6 background against which Congress can legislate with predictable effects.” Id. at 7 2881. Succinctly put, “[w]hen a statute gives no clear indication of an 8 extraterritorial application, it has none.” Id. at 2877-78 (internal citations omitted). 9
The Travel Act proscribes travel in interstate or foreign commerce, or use of
10 the facilities of such commerce, with the intent to promote certain unlawful activity 11 (e.g., state-law bribery), and thereafter to perform an act to promote or facilitate that 12 activity. 18 U.S.C. § 1952(a)(3) and (b)(2). The Travel Act’s reference to foreign 13 commerce does not render its application extraterritorial. Id. at 2878. “If we were to 14 permit possible, or even plausible, interpretations of [commerce] language . . . to 15 override the presumption against extraterritorial application, there would be little left 16 of the presumption.” E.E.O.C. v. Arabian Amer. Oil Co. (“Aramco”), 499 U.S. 244, 17 253 (1991) (superseded by statute on other grounds). “[W]e have repeatedly held 18 that even statutes that contain broad language in their definitions of ‘commerce’ that 19 expressly refer to ‘foreign commerce’ do not apply abroad.” Morrison, 130 S.Ct. . 20 at 2882-2883 (citing Aramco, 499 U.S. at 253). 21
The Second Circuit applied Morrison in Norex Petroleum Ltd. v. Access
22 Industries, 631 F.3d 29, 31 (2d Cir. 2010), and held that RICO does not apply 23 extraterritorially. The Norex plaintiff, a foreign company wholly owned by a 24 California corporation, brought a civil RICO action alleging that foreign and 25 American defendants conspired to take “control of Yugraneft, a Russian oil 26 company, illegally obtaining much of Norex’s ownership of Yugraneft and reducing 27 it from the controlling majority shareholder to a powerless minority shareholder.” 28 Id. The trial court held that the domestic conduct alleged was sufficient to state a 6
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1 claim. Norex Petroleum Ltd. v. Access Indus., Inc., 304 F. Supp. 2d 570, 572 2 (S.D.N.Y. 2004) vacated and remanded, 416 F.3d 146 (2d Cir. 2005). 3
The Second Circuit reversed and held that the alleged domestic conduct failed
4 to state a RICO offense and RICO has no extraterritorial application. First, although 5 RICO applies to “any enterprise which is engaged in, or that activities of which 6 affect, interstate or foreign commerce,” Morrison forecloses reliance on this 7 language as a basis for extraterritorial reach. “[W]e have repeatedly held that even 8 statutes that contain ‘broad language in [the statute’s] definitions of commerce’ do 9 not apply abroad.” Norex, 631 F.3d at 33 (quoting Morrison, 130 S.Ct. at 2882). 10 Second, the fact that RICO’s predicate acts possess an extraterritorial reach, does not 11 mean RICO itself possesses an extraterritorial reach. Rather, Morrison held that the 12 “presumption against extraterritoriality operates to limit that provision to its terms.” 13 Id. (quoting Morrison at 2882-83). Third, simply alleging significant domestic 14 conduct is not a panacea. “[I]t is a rare case of prohibited extraterritorial application 15 that lacks all contact with the territory of the United States.” Id. (quoting Morrison 16 at 2884); see also Newmarket Corp. v. Innospec, Inc., No. 3:10CV503, 2011 WL 17 1988073, *1 at *4 (E.D. Va. May 20, 2011) (Robinson-Patman Act does not apply 18 extraterritorially to bribes of officials in Iraq and Indonesia). 19
The Travel Act’s text plainly demonstrates its domestic focus. See 18 U.S.C.
20 § 1952(b)(2) (“unlawful conduct” means “extortion, bribery, or arson in violation of 21 the laws of the State in which committed or of the United States”) (emphasis added). 22 The Travel Act was not intended to punish foreign bribery. 23 24 25 26 27 28
The Travel Act’s Legislative History Does Not Reflect A “Clear Indication” That The Statute Applies Extraterritorially
The legislative history of the 1961 Travel Act demonstrates that Congress did not intend it to have extraterritorial reach but rather passed the bill to assist states in enforcing their laws against organized crime who used state boundaries to avoid
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1 prosecution. Attorney General Robert F. Kennedy testified before the Senate 2 Judiciary Committee , “[t]he target clearly is organized crime. . . . [O]nly the 3 Federal Government can shut off the funds which permit the top men of organized 4 crime to live far from the scene and, therefore, remain immune from local officials.” 5 S. Rep. No. 87-644, at 3 (1961). 6
Similarly, the House Report endorsing the Travel Act stated that the Act “will
7 assist local law enforcement by denying interstate facilities to individuals engaged in 8 illegal gambling, liquor, narcotics or prostitution business enterprises.” H.R. Rep. 9 No. 87-966 (1961), reprinted in 1961 U.S.C.C.A.N. 2664, 2665. The Report later 10 discussed the “need for the assistance of the Federal Government in view of the fact 11 that [state] law enforcement authorities are limited and hindered by the interstate 12 nature of these activities.” Id. 13
That the primacy of the conduct targeted by the Travel Act is domestic was
14 recognized by the Supreme Court in Rewis v. United States, 401 U.S. 808, 811 15 (1971). The “[l]egislative history of the Act . . . reveal[s] that Section 1952 was 16 aimed primarily at organized crime and, more specifically, at persons who reside in 17 one State while operating or managing illegal activities located in another.” Id. 18 Because of the Travel Act’s domestic focus, one commentator observed: 19 20 21 22 23 24 25 26 27 28
The validity of [Travel Act] charges [for foreign commercial bribery] may be questioned. The legislative histories of the FCPA and the Travel Act show no evidence that Congress intended to make foreign commercial bribes a federal crime; indeed, quite the opposite. The legislative histories of many state bribery statutes similarly fail to disclose any intention to reach bribery in other countries that has, at best, a limited nexus to the state. Travel Act charges predicated on bribery laws of those states thus require overlooking the intentions of both Congress and the state legislature. In the half century that the Travel Act has been in effect, moreover, only one federal court has upheld criminal
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charges for foreign commercial bribery under that Travel Act, and that court’s decision is a doubtful precedent.
3 Kenneth A. Cutshaw, et. al., Corporate Counsel’s Guide to Doing Business in China 4 (3rd Ed. 2009) (Ch. 13 written by Patrick M. Norton) (“Norton Chapter”), Ex. 2 to 5 Decl. of Special Agent Brian Smith In Support of Government’s Opposition to 6 Amended Motion to Dismiss FCPA Counts (Doc. No. 334-1) at 390, attached to the 7 Declaration of Ariana Seldman Hawbecker (“Hawbecker Dec.”), Ex. 2.4 8
While the Travel Act’s coverage is not limited to the activities of organized
9 crime, United States v. Thordarson, 646 F.2d 1323, 1328 n.10 (9th Cir. 1981), the 10 Travel Act’s purpose of assisting state law enforcement in combating organized 11 crime in the U.S. demonstrates that Congress did not intend for the Act to cover 12 foreign commercial bribery. 13 14 15 16 17 18 19 20 21 22 23 24 25 26
The Subsequent Enactment Of The FCPA Provides A Clear Inference That The Travel Act Was Not Intended To Apply Extraterritorially
Congress specifically addressed the issue of foreign bribery with the 1977 FCPA. The Supreme Court has acknowledged that “the meaning of one statute may be affected by other Acts, particularly where Congress has spoken subsequently and more specifically to the topic at hand.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000). In Brown & Williamson, the Supreme Court held that the Food, Drug, and Cosmetic Act (“FDCA”) did not give the Food and Drug Administration (“FDA”) the authority to regulate tobacco products. Id. at 161. The Court found that while certain readings of the FDCA might suggest that cigarettes are “drugs” or “devices” subject to the FDA’s regulatory authority, subsequent
The case cited by Norton as “doubtful precedent” is United States v. Welch, 327 F.2d 1081 (10th Cir. 2003). Welch involved alleged bribes to Olympic officials for 27 the purpose of securing the Winter Games in Salt Lake City and did not actually address the extraterritorial application of the Travel Act.
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1 legislation directly addressing tobacco’s effects on public health demonstrated that 2 Congress did not intend to grant the FDA the authority to regulate tobacco products. 3 Id. at 143-59. 4 5 6 7 8 9 10 11 12 13 14 15
At the time a statute is enacted, it may have a range of plausible meanings. Over time, however, subsequent acts can shape or focus those meanings. The “classic judicial task of reconciling many laws enacted over time, and getting them to ‘make sense’ in combination, necessarily assumes that the implications of a statute may be altered by the implications of a later statute.” United States v. Fausto, 484 U.S. [439, 453 (1988)]. This is particularly so where the scope of the earlier statute is broad but the subsequent statutes more specifically address the topic at hand. As we recognized recently in United States v. Estate of Romani, “a specific policy embodied in a later federal statute should control our construction of the [earlier] statute, even though it has not been expressly amended. 523 U.S. at 530-31 (1998).”
16 Id. at 143. Under the government’s theory, the Travel Act is so broad that it would 17 reach every transaction currently alleged as an FCPA violation. Conversely, the 18 FCPA is specifically limited to bribery of foreign public officials. As in Brown & 19 Williamson, the narrowly tailored FCPA should shape any interpretation of the 20 supposedly limitless Travel Act. A comparison of both statutes demonstrates that 21 Congress did not intend the Travel Act to apply to foreign conduct. 22
First, if the Travel Act is applied to foreign bribery, then the Travel Act and
23 the FCPA actually conflict. The Indictment seeks to apply PC 641.3 through the 24 Travel Act. PC 641.3 prohibits all corrupt offers and payments to corporate 25 employees “in return for [the employee’s] using or agreeing to use his or her 26 position for the benefit” of the payor. But the FCPA excepts from its coverage 27 payments made to secure “routine government action,” e.g., phone service, power 28 and water supply, loading and unloading cargo, and protecting perishable products. 10
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1 15 U.S.C. § 78dd-1(b). The same payments that are excepted from the FCPA could 2 violate the Travel Act because neither the Travel Act nor PC 641.3 exclude such 3 payments from their coverage. This conflict suggests that Congress did not 4 understand the Travel Act to apply to foreign bribery. 5
Second, because the FCPA provides an affirmative defense for conduct that
6 was legal under foreign written law, 15 U.S.C. § 78dd-1(c), Congress obviously 7 considered its possible conflicts with foreign law. Congress did no such thing for 8 the Travel Act. “The probability of incompatibility with the applicable laws of the 9 other countries is so obvious that if Congress intended such foreign application, ‘it 10 would have addressed the subject of conflicts with foreign laws and procedures.’” 11 Morrison, 130 S.Ct. at 2885. 12
Third, the FCPA expressly provides for its extraterritorial application. See 15
13 U.S.C. §§ 78dd-1(g)(1) and 78dd-2(i)(1). Congress thus showed that it “knows how 14 to give a statute explicit extraterritorial effect.” Id. at 2883 n.8. The fact Congress 15 did not do this with the Travel Act is telling. 16
Fourth, in passing the FCPA, Congress considered its impact on U.S. foreign
17 policy. See Declaration of Professor Michael J. Koehler in Support of Motion to 18 Dismiss FCPA Counts (Doc. No. 305), ¶¶ 140, 222, 243 and Exhibits 29, 43 & 46. 19 Conversely, nothing in the Travel Act’s legislative history reflects that Congress 20 considered such issues. 21
In passing the FCPA to address foreign bribery, Congress understood that it
22 was acting on a clean slate. See, e.g., Koehler Dec., ¶ 102 (Congress aware of 23 “[v]arious classes of recipients” of alleged improper payments, “including but not 24 limited to government officials, commission agents and consultants paying 25 company, and recipients of commercial bribery,” yet Congress only outlawed 26 corrupt payments to foreign officials ), ¶226 (committee aware “that the [FCPA 27 Senate] bill would not reach all corrupt overseas payments”), ¶ 247 (same for house 28 bill). In fact, the defense has unearthed no case where the Travel Act was applied to 11
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1 foreign bribery prior to passage of the FCPA. The FCPA was thus intended to 2 occupy the field of foreign bribery. Congress never considered (let alone intended) 3 the Travel Act to have extraterritorial application.5 4 5 6
The Indictment Impermissibly Asserts Extraterritorial Application Of The Travel Act
The Morrison Court looked to a statute’s “focus” to determine its reach. The
7 Court followed the approach it outlined in EEOC v. Arabian American Oil Co. 8 (Aramco), 499 U.S. 244 (1991). Aramco involved a U.S. citizen hired in Houston, 9 Texas, by Aramco, a Delaware corporation. After a year, he went to work for 10 Aramco in Saudi Arabia. He was fired four years later and sued Aramco under Title 11 VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2000e-17, alleging 12 discrimination. Id. at 247. The Court upheld the dismissal of the action, finding 13 that “neither that territorial event [Plaintiff’s hiring] nor that relationship [Plaintiff 14 was American and Aramco was a Delaware corporation] was the ‘focus’ of 15 Congressional concern, but rather domestic employment.” Morrison, 130 S.Ct. at 16 2884 (citing Aramco, 499 U.S. at 255). 17
The Morrison Court reasoned that “[a]pplying the same mode of analysis
18 here, we think that the focus of the [1934 Securities and] Exchange Act is not upon 19 the place where the deception originated, but upon purchases and sales of securities 20 in the United States.” Id. Accordingly, addressing fraud occurring in the U.S. that 21 impacted a foreign exchange would have required extraterritorial application of 22 Section 10(b). Morrison, 130 S.Ct. at 2877-2884. 23
Likewise, the Travel Act punishes the use of interstate or foreign commerce,
24 to promote an unlawful activity (here, “bribery . . . in violation of the laws of the 25
26 Noriega, 746 F.Supp. 1506 (S.D. FL. 1990), (i) ignored the presumption against 27 the Travel Act (addressing narcotics offenses), and (iii) primarily relied on the 28
The only case to hold that the Travel Act applies extraterritorially, United States v.
extraterritorial application of federal statutes, (ii) concerned a different provision of “effects” test rejected by Morrison. Id. at 1516-1519.
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1 state in which committed”), followed by an act to promote that unlawful activity. 2 18 U.S.C. § 1952(a)(3) and (b)(2). The focus of the crime is bribery, committed in 3 one of the United States, in violation of that state’s law, i.e., domestic conduct. 4 Protecting foreign employers from the misdeeds of its foreign employees abroad, or 5 protecting foreign employers from the misdeeds of American companies doing 6 business abroad, is not the Travel Act’s “focus.” Otherwise, it would not require 7 that the alleged bribery be a “violation of the laws of the state in which committed.” 8
The Indictment generally alleges that Defendants acted “in the Central District
9 of California and elsewhere” and “caused” the “use of the mail” and “facility[ies] in 10 interstate and foreign commerce.” Ind. ¶ 16. But, “[s]imply alleging that some 11 domestic conduct occurred cannot support a claim of domestic application.” Norex, 12 631 F.3d at 33. “It is a rare case of prohibited extraterritorial application that lacks 13 all contact with the territory of the United States” and “the presumption against 14 extraterritorial application would be a craven watchdog indeed if it retreated to its 15 kennel whenever some domestic activity is involved in the case.” Morrison, 130 S. 16 Ct. at 2884. 17
The Morrison Court’s approach to the question of when a statute is being
18 applied extraterritorially is further elucidated by its treatment of Pasquantino v. 19 United States, 544 U.S. 349 (2005). Pasquantino upheld the application of the wire 20 fraud statute, 18 U.S.C. § 1343, to defendants who “ordered liquor over the phone 21 from a store in Maryland with the intent to smuggle it into Canada and deprive the 22 Canadian government of revenue.” Morrison at 2887 (citing Pasquantino, 544 U.S. 23 at 353, 371). 24 25 26 27 28
Section 1343 prohibits “any scheme or artifice to defraud,”-fraud simpliciter, without any requirement that it be “in connection with” any particular transaction or event. The Pasquantino Court said that the petitioners’ “offense was complete the moment they executed the scheme inside the United States,” and that it was “[t]his domestic
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element of petitioners’ conduct [that] the Government is punishing.” Section 10(b), by contrast, punishes not all acts of deception, but only such acts “in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered.” Not deception alone, but deception with respect to certain purchases or sales is necessary for a violation of the statute. The Morrison Court’s treatment of Pasquantino is instructive. First,
7 Morrison, 130 S.Ct. at 2887. 8
9 Morrison’s presumption against extraterritoriality applies to criminal statutes 10 (otherwise the Court would have simply deemed Pasquantino irrelevant). Second, 11 simple domestic fraud (as alleged in Pasquantino) is punishable in the U.S., even if 12 its effects are felt abroad, because the crime is complete upon the hatching of the 13 scheme (followed by a wire communication in furtherance of the scheme). 14
Here, the Indictment does not allege simple fraud, it alleges a Travel Act
15 offense predicated on PC 641.3. Thus, the government must prove, inter alia: (1) 16 travel or the use of a facility in interstate or foreign commerce; (2) with the intent to 17 violate PC 641.3 in California; followed by, (3) an act to promote the PC 641.3 18 violation. 18 U.S.C. § 1952(a)(3) and (b)(2). PC 641.3, in turn, criminalizes corrupt 19 offers and payments to corporate employees “in return for [the employee’s] using or 20 agreeing to use his or her position for the benefit” of the payor, without the 21 employer’s consent. Essentially, PC 641.3 criminalizes honest services fraud. 22
Unlike Pasquantino, this is not “fraud simpliciter.” To paraphrase the
23 Morrison Court, the Travel Act allegations charge a crime “in connection with [a] 24 particular transaction or event,” i.e., use of a wire with the intent to deprive a foreign 25 corporation of the undivided loyalty of its employees.6 This case is controlled by 26 27 28
A Travel Act violation requires proof of additional facts that show the government is alleging more than simple fraud: travel or use of commerce facilities; with an
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1 Morrison because in both cases a crime is alleged in connection with a specific harm 2 --in Morrison it was fraud on a securities exchange, here it is fraud on a corporate 3 employer. In both cases the specific harm necessarily occurred overseas. But in 4 both cases the charging statute envisioned that the specific harm would occur in the 5 U.S. Thus, here as in Morrison, the charging statute is improperly being applied 6 extraterritorially. 7
Morrison is a sea change--four circuit courts, including the Ninth, had
8 incorrectly held that the 1934 Exchange Act applied extraterritorially. Morrison, 9 130 S.Ct. at 2880. But even pre-Morrison cases have found the government 10 overreached in applying U.S. law to foreign conduct. Most notable is United States 11 v. Giffen, 326 F.Supp.2d 497 (S.D.N.Y. 2004), where the government charged the 12 defendant with making unlawful payments to the former Prime Minister and Oil 13 Minister of the Republic of Kazakhstan in violation of the FCPA, mail and wire 14 fraud statutes, and other federal laws. The government alleged that the defendant 15 violated 18 U.S.C. § 1346 (honest services fraud) by depriving the citizens of 16 Kazakhstan of the honest services of their government officials. Id. at 499, 504. But 17 the court concluded that in enacting Section 1346, Congress did not permit the 18 prosecution of U.S. citizens for depriving foreign nationals of the honest services of 19 their own government officials. Id. at 506. “There is no reason to think that 20 Congress sought to grant carte blanche to federal prosecutors, judges and juries to 21 define ‘honest services’ from case to case for themselves.” Id. at 505 (citation 22 omitted). 23
As in Giffen, the government is stretching the Travel Act to protect foreign
24 companies. But there is no precedent for applying U.S. law to protect foreign 25 26 27 intent to commit bribery in California and in violation of California law; and, a 28
subsequent act to promote the bribery.
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1 corporations from foreign commercial bribery. Cf. Morrison, 130 S.Ct. at 2874; 2 Aramco, 499 U.S. at 255-56. 3
Likewise, in United States v. Lopez-Vanegas, 493 F.3d 1305 (11th Cir. 2007),
4 the defendants were convicted of conspiring to possess with the intent to distribute 5 cocaine. Id. at 1307. The evidence showed several meetings in Florida relating to 6 the transport of cocaine from Venezuela to France. Id. at 1308-10. The appellate 7 court vacated the convictions, reasoning “Congress has not stated its intent to reach 8 discussions held in the United States in furtherance of a conspiracy to possess 9 controlled substances outside the territorial jurisdiction of the United States, with the 10 intent to distribute those controlled substances outside of the territorial jurisdiction 11 of the United States.” Id. at 1313 (emphasis in original). 12
Here, the Indictment alleges a scheme to bribe foreign citizens, employed by
13 foreign companies, in connection with the sale of valves overseas, for foreign 14 construction projects. The domestic conduct alleged is even less than that alleged in 15 Lopez-Vanegas. But isolated domestic conduct cannot support the charged 16 violations of the Travel Act. See Philip Morris USA, Inc., No. 99-2496, 2011 WL 17 1113270, *1 at *5 (D.D.C. Mar. 28, 2011) (holding that isolated domestic conduct – 18 that the defendant’s scientists and officials attending meetings with other defendants 19 in the U.S. – was not the basis for its RICO liability and did not permit RICO to 20 apply to what is essentially foreign activity); Norex, 631 F.3d at 31 (holding that 21 conduct alleged in the U.S. – that the defendants were U.S. citizens, conducted 22 domestic business and directed the conspiracy from the U.S. – was insufficient to 23 state a civil RICO offense). 24
Importantly, these objections apply to both the substantive Travel Act counts
25 and Count One (conspiracy). “There can be no violation of § [371] if the object of 26 the conspiracy is not a violation of the substantive offense.” Lopez-Vanegas, 493 27 F.3d at 1312; see also United States v. Jack, 2010 WL 4718613, *12 (E.D. Cal. 28 2010) (“If the object of the conspiracy is not a violation due to the lack of domestic 16
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1 conduct or extraterritorial application of the statute at issue, there can be no criminal 2 conspiracy.”). 3
The Travel Act must be narrowly construed. See Rewis, 401 at 811-12
4 (rejecting a broad interpretation of the Travel Act); United States v. Hathaway, 534 5 F.2d 386, 397 n.10 (“In contrast to the broad interpretation given to the Hobbs Act, 6 the Supreme Court has indicated that the Travel Act is to be read in a narrower and 7 more restricted fashion.”). Any ambiguity concerning the scope of the Travel Act 8 should be resolved in favor of lenity. Rewis, 401 U.S. at 812. Although it is clear 9 that the Travel Act does not reach the conduct alleged, these canons of construction 10 further support the point. Accordingly, Counts Eleven, Twelve and Fourteen, and 11 Count One to the extent it alleges a conspiracy to violate the Travel Act, must be 12 dismissed. 13 14 15
Bowman Does Not Permit Extraterritorial Application Of The Travel Act
In United States v. Bowman, 260 U.S. 94, 98 (1922), the Court recognized that
16 where a crime is committed (i.e., the “locus”) is key: the crime must be committed 17 within the “territorial jurisdiction of the government where it may properly exercise 18 it.” But this rule does not apply to criminal statutes that are not “logically 19 dependent upon their locality for the government’s jurisdiction, but are enacted 20 because of the right of the government to defend itself against obstruction, or 21 fraud wherever perpetrated, especially if committed by its own citizens, officers, or 22 agents.” Id. at 98 (emphasis added). 23
Bowman involved a conspiracy to defraud the government-owned
24 “Emergency Fleet Corporation,” which operated vessels on the high seas and in 25 foreign ports. Id. at 101. The criminal statute at issue was amended to cover fraud 26 against such government owned corporations. “We cannot suppose that when 27 Congress enacted the statute or amended it, it did not have in mind that a wide field 28 for such frauds upon the government was in private and public vessels of the United 17
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1 States on the high seas and in foreign ports.” Id. Similar statutes involve: a 2 “consul” who knowingly certifies a false invoice; “forging or altering ship’s papers”; 3 “enticing desertions from the naval service”; “bribing a United States officer of the 4 civil, military, or naval service”; “willfully doing . . . any act relating to . . . 5 disposition of property captured as prize”; and, theft of military or naval ordinance, 6 arms, ammunition or clothing. Id. at 98-100. In each case, the law involved 7 protected the government from harm that would naturally occur at sea or abroad. 8
It is unclear whether Bowman survives Morrison; regardless, it is inapplicable.
9 The Travel Act was not intended to protect the federal government, but to aid state 10 law enforcement. And the alleged foreign commercial bribery would not have 11 directly victimize the U.S., but private, foreign companies. Further, the crime 12 charged must be “illegal in the state in which committed,” so the government’s 13 jurisdiction would be “logically dependent upon” where the crime was allegedly 14 committed. Accordingly, Bowman is not applicable. Cf. Philip Morris USA, Inc., 15 2011 WL 1113270 at *1, n. 6 (“As the Defendants' criminal enterprise does not 16 implicate ‘the right of the government to defend itself,’ Bowman poses no obstacle 17 to the proper application of Morrison here.”) (internal citation omitted). 18 19 20 21 22 23 24 25 26 27 28
The Indictment Does Not State A Travel Act Offense Because The Alleged Conduct Does Not Violate California’s Commercial Bribery Statute
“When the unlawful activity charged in the indictment is the violation of state law, the commission of or the intent to commit such a violation is an element of the federal offense.” United States v. Bertman, 686 F.2d 772, 774 (9th Cir. 1982). As part of a Travel Act charge, the government must prove that defendant “has or could have violated the underlying state law”. Id. But PC 641.3 has never been used to criminally prosecute foreign commercial bribery. Nothing in the legislative history of PC 641.3 suggests application to commercial bribery of an employee of a foreign company in exchange for a foreign
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1 sale. See Hawbecker Dec., ¶¶ 4-6. Rather, PC 641.3 is focused on protecting 2 employers domiciled in California and California consumers. Id. 3
States have the power to enforce their laws against out-of-state conduct where
4 the defendant intentionally causes harm within the state. Strassheim v. Daily, 221 5 U.S. 280, 284 (1911). But California could not have been harmed by the offering of 6 bribes to foreign employees of foreign companies in exchange for sales abroad. Cf. 7 United States v. Perrin, 444 U.S. 37, 40 (1979) (upholding Travel Act convictions 8 premised on use of facilities in interstate commerce to promote a commercial bribery 9 scheme in violation of the laws of Louisiana by offering money to an employee of a 10 Louisiana-based company in exchange for his misappropriation of confidential 11 information); United States v. Lee, 359 F.3d 194, 206 (3d Cir. 2004) (upholding 12 Travel Act convictions predicated on New Jersey commercial bribery statute where 13 bribes paid to officials of International Boxing Federation headquartered in New 14 Jersey caused the IBF to alter its boxing ratings resulting in consequences within 15 that state); United States v. Woodward, 149 F.3d 46, 67 (1st Cir. 1998) (Travel Act 16 conviction predicated on Massachusetts gratuity statute appropriate where defendant, 17 an elected Massachusetts official, accepted gratuities from a company doing 18 business in Massachusetts to influence legislation in that state). Perrin, Lee, and 19 Woodward established harm to residents of the state from which the Travel Act state 20 bribery predicate was drawn. That is not the case here. 21
Courts have recognized that the Travel Act is not violated where, as here, a
22 Travel Act charge is predicated on a state law violation, but the state itself does not 23 intend its criminal laws to reach the charged conduct. In United States v. Ferber, 24 966 F. Supp. 90 (D. Mass. 1997), the court dismissed several Travel Act counts 25 predicated on the Massachusetts gratuity statute. The court reasoned that because 26 Massachusetts had never criminally prosecuted the predicate offense, it could not 27 serve as a predicate for the Travel Act. Id. at 106. The court noted that “it would be 28 contrary to the [Travel Act’s] purpose for the federal government to attempt to aid 19
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1 Massachusetts in the enforcement of a law which Massachusetts has chosen not to 2 enforce.” Id.; see also United States v. Tonry, 837 F.2d 1281 (5th Cir. 1988) 3 (Louisiana commercial bribery statute does not reach bribery of non-Louisiana 4 public officials so defendant not guilty of violating Travel Act for bribing chairman 5 of Indian tribe). 6
Because there is no indication that California could or would prosecute the
7 foreign commercial bribery alleged, the Travel Act Counts do not state an offense. 8 See United States v. Genova, 333 F.3d 750, 759 (7th Cir. 2003) (overturning RICO 9 conviction where government conceded that no Illinois decision supported its view 10 that defendant’s conduct fell within that state’s bribery statute). 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20
Alternatively, Application Of The Travel Act And PC 641.3 To Defendants’ Foreign Conduct Is Unconstitutionally Vague And Violates Due Process
“The void-for-vagueness doctrine requires that a penal statute define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement.” Kolender v. Lawson, 461 U.S. 352, 357 (1983). “The constitutional requirement of definiteness is violated by a criminal statute that fails to give a person of ordinary intelligence fair notice that his conduct is forbidden by the statute.” United States v. Harriss, 347 U.S. 612, 617 (1953). “[D]ue process bars courts from applying a novel construction of a criminal statute to conduct that neither the statute nor any prior judicial decision has fairly disclosed to be within its scope.” United States v. Lanier, 520 U.S. 259, 266-67 (1997); see also Smith v. Goguen, 415 U.S. 566, 577-78 (1974) (due process violated where a statute does not have an “ascertainable standard for inclusion and exclusion”). “The underlying principle is that no man shall be held criminally responsible for conduct which he could not reasonably understand to be proscribed.” Harriss, 347 U.S. at 617.
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As applied, the Travel Act and PC 641.3 are unconstitutionally vague.
2 Nothing in the text or legislative history of the Travel Act or PC 641.3 suggests that 3 the statutes reach the conduct alleged here. Nor is there case law that would give 4 such notice. 5
Likewise, application of the Travel Act is an arbitrary enforcement of the law.
6 The government recently ramped up application of this fifty-year-old statute to 7 foreign commercial bribery. See Norton Chapter, Ex. 2 to Hawbecker Dec. The 8 government is pressing this interpretation despite grave doubts as to the Travel Act’s 9 applicability to foreign commercial bribery, and the applicability of the state law 10 predicates upon which the government relies. Id. The government’s ability to pick 11 up, dust off and apply old statutes to new and unforeseen situations demonstrates 12 arbitrary enforcement. 13
Accordingly, as applied to Defendants, the Travel Act and PC 641.3 are
14 unconstitutionally vague. See Giffen, 326 F.Supp.2d at 506 (holding that the 15 government’s application of the honest services theory to the defendant’s alleged 16 scheme to bribe foreign officials was unconstitutionally vague because the wire 17 fraud statute and its legislative history do not mention bribery of foreign officials 18 and there are no published decisions addressing the honest services theory the 19 government espoused in the case). 20 21 22 23 24 25
Assuming, Arguendo, That The Travel Act Applies To The Foreign Commercial Bribery Alleged, The Travel Act Counts Still Fail To Allege Essential Elements 1. The Indictment Fails To Allege An Act In Furtherance Of Bribery After The Alleged Use Of Interstate Or Foreign Commerce
Federal Rule of Criminal Procedure 7(c) requires that an indictment contain a
26 “plain, concise and definite written statement of the essential facts constituting the 27 offense charged.” “An indictment which tracks the offense in the words of the 28 statute is sufficient if those words fully, directly, and expressly set forth all the 21
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1 elements necessary to constitute the offense intended to be proved.” United States v. 2 Tavelman, 650 F.2d 1133, 1137 (9th Cir. 1981) (indictments containing dates of 3 alleged criminal violations, statutes, and brief descriptions were sufficient). But, 4 “[i]t is an elementary principle of criminal pleading, that where the definition of an 5 offence, whether it be at common law or by statute, includes generic terms, it is not 6 sufficient that the indictment shall charge the offence in the same generic terms as in 7 the definition, but it must state the species — it must descend to particulars.” 8 Russell v. United States, 369 U.S. 749, 765 (1962) (quoting United States v. 9 Cruikshank, 92 U.S. 542, 558 (1875)) (internal quotation marks omitted). 10
A Travel Act violation requires, at a minimum, that a defendant: (1) travel or
11 use a facility in interstate or foreign commerce (2) with the intent to promote, 12 manage, establish, or carry on California commercial bribery and (3) thereafter 13 perform or attempt to perform an act in furtherance of the bribery. United States v. 14 Winslow, 962 F.2d 845, 852 (9th Cir. 1992); see also Ninth Cir. Model Criminal 15 Jury Ins. 8.144. 16
The Travel Act requires the government to prove travel or use of a facility in
17 interstate or foreign commerce followed by a subsequent event. 18 U.S.C. §1952(a). 18 The Travel Act is not violated where the only alleged conduct is travel or use of the 19 facility in interstate commerce. See United States v. Zemater, 501 F.2d 540, 544-45 20 (7th Cir. 1974) (defendants’ Travel Act convictions overturned because unlawful 21 activities performed prior to defendants’ travel). 22
Paragraph 35 of the Indictment, which enumerates the substantive Travel Act On the dates set forth below, in the Central District of California and elsewhere, defendants COSGROVE, EDMONDS, and RICOTTI did travel in interstate and foreign commerce and use and cause to be used, and aided, abetted, and cause other to make use of, the mail and any facility in interstate and foreign commerce as described below, with the
23 Counts, alleges in relevant part: 24 25 26 27 28
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intent to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of an unlawful activity, that is, commercial bribery in violation of California Penal Code Section 641.3, and thereafter performed and attempted to perform and cause the performance of an act to promote, manage, establish and carry on, and to facilitate the promotion, management, establishment and carrying on of such unlawful activity as follows… Count 11: Count 12: Count 14: Wire transfer of approximately $10,000 from California to China Wire transfer of approximately $69,420 from Sweden to China Wire transfer of approximately $136,584.98 from Sweden to New York [rather, Latvia. See footnote 2]. The “as described below” and “as follows” language highlighted above make
12 Ind. ¶35 (emphasis added). 13
14 clear that the government is alleging that the wire transfers identified in the Travel 15 Act Counts are the alleged bases for both the first and third elements of the charged 16 Travel Act offenses. That is, for each Travel Act count, a single wire is alleged to be 17 both (1) the use of a facility in interstate or foreign commerce to carry out the 18 California commercial bribery violation and (2) an act in furtherance of such bribery. 19 No other acts, including travel, are alleged. Because the Indictment does not allege 20 any act done to further the alleged bribery following the use of a facility in interstate 21 or foreign commerce, the Travel Act Counts fail. 22 23 24 25 26 27 28
The Indictment Fails To Adequately Allege The Jurisdictional Element Of “Travel Or Use Of A Facility In Interstate Or Foreign Commerce” For Counts Twelve And Fourteen
Counts Twelve and Fourteen fail to show “travel or use of a facility in interstate or foreign commerce” as required for Travel Act jurisdiction. “When a federally created crime involves an area traditionally left to the domain of the states, the jurisdictional authority of the United States becomes a crucial part of the proof. It
Filed 06/13/11 Page 34 of 38 Page ID #:6354
1 has been uniformly held that the basis for federal jurisdiction is an essential element 2 of the offense. Hence, a violation of the Travel Act [] requires travel in interstate or 3 foreign commerce or use of a facility in interstate or foreign commerce.” United 4 States v. Montford, 27 F.3d 137, 138 (5th Cir. 1994) (internal citations omitted). 5
Section 10 of Title 18 defines “foreign commerce” as “commerce with a foreign
6 country” and requires an act between the U.S. and a foreign country. See United 7 States v. Weingarten, 632 F.3d 60, 70 (2d. Cir. 2011) (when defining “foreign 8 commerce” for the purpose of statutory provisions subject to § 10’s general definition, 9 the common interpretation generally limits such commerce to that involving some 10 nexus to the United States.”) (citing Leonard B. Sand et al., Modern Federal Jury 11 Instructions 50A-8 (2005) (“The term [] ‘foreign commerce’ means commerce . . . 12 between the United States and a foreign country.”) (emphasis in original). 13
For Count Twelve, the Indictment alleges a single wire transfer from Sweden
14 to China as the travel or use of interstate or foreign commerce underlying that count. 15 Ind. ¶ 35. For Count Fourteen, the Indictment alleges a single wire transfer from 16 Sweden to Latvia. Id. Because the wire transfers in Counts Twelve and Fourteen are 17 each between two foreign countries, they do not state the requisite jurisdictional 18 element of “travel or use of interstate or foreign commerce”. See Weingarten, 632 19 F.3d at 69 (“one does not travel in foreign commerce simply by traveling between 20 foreign countries, absent some territorial nexus to the United States.”) (internal 21 quotations omitted); Montford, 27 F.3d at 139 (“cruise to nowhere” departing from a 22 Mississippi port, where the vessel has no contact with a foreign country or waters 23 within the jurisdiction of a foreign country, and where no such contact is intended, 24 does not involve foreign commerce under the Travel Act). Accordingly, Counts 25 Twelve and Fourteen fail to state an offense and must be dismissed. 26 27 28 24
Count One (Conspiracy) Must Be Dismissed In Its Entirety
Count One must be dismissed to the extent it alleges a conspiracy to violate
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1 the Travel Act because the Travel Act Counts are legally defective. See United 2 States v. Galardi, 476 F.2d 1072, 1079 (9th Cir. 1973) (“It should require no citation 3 of authority to say that a person cannot conspire to commit a crime against the 4 United States when the facts reveal there could be no violation of the statute under 5 which the conspiracy is charged.”). Additionally, because the defective Travel Act 6 allegations infect the entire conspiracy count, Count One must be dismissed in its 7 entirety. A court may identify the flaws in the indictment, but correcting the flaws is 8 beyond the court’s power; the court “can neither act for a grand jury, nor speculate 9 whether a grand jury would have indicted the named defendants had it realized that 10 the indictment as written was overbroad.” United States v. Camiel, 689 F.2d 31, 39 11 (3d Cir. 1982); see also Carney v. United States, 163 F.2d 784, 790 (9th Cir. 1947) 12 (“neither the trial court nor this court can speculate on the intent of the grand jury”). 13 Where, as here, there is a reasonable possibility that the inclusion of an improper 14 rule of law infected a count in an indictment, the Court must dismiss the count in its 15 entirety. See, e.g., United States v. D’Alessio, 822 F.Supp. 1134, 1145-46 (D.N.J. 16 1993). 17 V. 18
CONCLUSION For the reasons set forth above, Defendants respectfully request that the Court Respectfully submitted, BIENERT, MILLER, & KATZMAN PLC By: /S/Kenneth M. Miller___________________ Kenneth M. Miller Attorneys for Defendant PAUL COSGROVE
19 dismiss Counts One, Eleven, Twelve and Fourteen . 20 DATED: June 13, 2011 21 22 23 24 25 26 27 28 25
Filed 06/13/11 Page 36 of 38 Page ID #:6356
GIBSON, DUNN & CRUTCHER LLP By:
/S/Kimberly A. Dunne___________________ Kimberly A. Dunne Attorneys for Defendant HONG CARSON LAW OFFICES OF DAVID W. WIECHERT
/S/David W. Wiechert___________________ David W. Wiechert Attorneys for Defendant DAVID EDMONDS
Filed 06/13/11 Page 37 of 38 Page ID #:6357
CERTIFICATE OF SERVICE I, Janine Philips, declare, That I am a citizen of the United States and am a resident or employed in
4 Orange County, California; that my business address is 903 Calle Amanecer, San 5 above-entitled action. 6
Clemente, California 92673; that I am over the age of 18 and not a party to the
That I am employed by a member of the United States District Court for the Central District of California and at whose direction I caused service of: 7 DEFENDANTS’ NOTICE OF MOTION AND MOTION TO DISMISS COUNTS ONE, ELEVEN, TWELVE AND FOURTEEN OF THE 8 INDICTMENT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF; DECLARATION OF ARIANA SELDMAN 9 HAWBECKER on the interested parties as follows:
X_ BY ELECTRONIC MAIL: by electronically filing the foregoing with the Clerk of the District Court using its ECF System pursuant to the Electronic 11 Case Filing provision of the United States District Court General Order and the EGovernment Act of 2002, which electronically notifies said parties in this case:
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 27
AUSA Douglas F. McCormick USACAC.SACriminal@usdoj.gov doug.mccormick@usdoj.gov AUSA Hank Bond Walther hank.walther@usdoj.gov AUSA Andrew Gentin andrew.gentin@usdoj.gov nathaniel.edmonds@usdoj.gov charles.labella@usdoj.gov via electronic mail Kimberly A. Dunne, Esq. kdunne@sidley.com Andrew Dunbar, Esq. adunbar@sidley.com Alexis Miller, Esq. alexis.miller@sidley.com via electronic mail Steven A. Fredley sfredley@wiltshiregrannis.com podonnell@wiltshiregrannis.com via electronic mail
Jean M. Nelson jnelson@scheperkim.com via electronic mail
Nicola T. Hanna, Esq. nhanna@gibsondunn.com Eric Raines, Esq. ERaines@gibsondunn.com David Burns, Esq. dburns@gibsondunn.com via electronic mail David W. Wiechert, Esq. dwiechert@aol.com via electronic mail
Filed 06/13/11 Page 38 of 38 Page ID #:6358
Laura Kassner Christa lchrista@christalaw.com via electronic mail
Christian A. Jordan cajordan23@hotmail.com via electronic mail
This certificate was executed on June 13, 2011, at San Clemente, California. I certify under penalty of perjury that the foregoing is true and correct. S/Janine Philips_____ Janine Philips
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