Overview
In late December, the United States Court of Appeals for the Second Circuit affirmed the conviction of Chi Ping Patrick Ho on seven counts alleging multiple FCPA and money laundering (and related conspiracy) violations.[1] The decision is notable for its construction of various FCPA provisions, and further demonstrates the expansive jurisdictional reach of anti-money laundering laws to dollar-denominated transfers.
Ho, a citizen of Hong Kong, served as an officer and director of the Hong Kong-based non-governmental organization China Energy Fund Committee (CEFC-NGO), which was funded by Shanghai-based energy conglomerate China CEFC Energy Company Limited (CEFC).[2] Ho also served as an officer and director of a CEFC-affiliated US non-profit (US NGO), funded by CEFC NGO.[3]
Ho’s conviction, for which he was sentenced to 36 months imprisonment and a US$400,000 fine,[4] stemmed from two alleged bribery schemes involving (1) an attempted US$2 million cash delivery to the President of Chad (which was purportedly rejected by the President) and (2) a US$500,000 wire transfer to a charity associated with the foreign minister of Uganda.[5] Notably, the US dollar-denominated wire originated from a bank in Hong Kong, which was transmitted through its operating unit in the United States as a correspondent to another bank in New York, which in turn was acting as a correspondent for a beneficiary bank in Uganda for final credit to an ultimate beneficiary NGO. Both acts were allegedly made for the benefit of CEFC’s commercial interests in Africa.[6]
On appeal, Ho challenged his 2018 conviction on a number of grounds.[7]
His primary FCPA-related conspiracy challenges concerned 1) whether the government had presented sufficient evidence that Ho had acted on behalf of a “domestic concern” in violation of § 78dd-2,[8] and 2) whether his indictment was defective because it charged Ho under two FCPA provisions that Ho contended were “mutually exclusive” -- § 78dd-2 (the anti-bribery provision applicable to “domestic concerns” and their agents) and § 78dd-3 (the anti-bribery provision applicable to “any person other than […] a domestic concern.)”[9] The Second Circuit rejected both theories.
As to the first, the court noted that the “domestic concern” need not, under the statute, “be the ultimate object of the assistance.” [10] The statute prohibits bribery to “assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.”[11] The court held that the statute’s reference to “any person” meant that the Government could meet that requirement by showing that the object of Ho’s bribe was to direct business to an entity other than the “domestic concern.”[12] The court determined that there was sufficient evidence to demonstrate that the US NGO “operated as an arm of CEFC NGO” and that Ho had, acting in his capacity as an officer and director of a domestic concern (US NGO), paid a bribe to assist CEFC’s business interests.[13]
The court similarly rejected Ho’s second argument that §§ 78dd-2 and 78dd-3 are mutually exclusive. Although the language of § 78dd-3 applies to “any person other than…a domestic concern (as defined in section 78dd–2 of this title),” the court found that there is “no indication that the provisions are mutually exclusive, or that both sections would not cover a director, like Ho, who acts on behalf of both a domestic concern … and on behalf of a person other than a domestic concern.”[14]
Ho also raised arguments against his money laundering conspiracy conviction, which the court also rejected. First, Ho challenged whether a violation of § 78dd-3 was sufficient to establish the specified unlawful activity (SUA) required for his money laundering charge.[15] Ho’s argument hinged on the fact that § 78dd-3 was added to the FCPA in 1998[16] after that statute had been added to the list of SUAs under 18 U.S.C. § 1956(c)(7)(D), and therefore the money laundering statute did not specifically reference § 78dd-3.[17] The court found Ho’s interpretation unpersuasive, holding “that § 1956(a) ‘plainly signals Congress's intent to incorporate the full range’ of felony violations under the FCPA.”[18] The court rejected Ho’s arguments under the reference canon of statutory construction[19] because the term “specified unlawful activity” is defined in § 1956(c)(7) to include “any felony violation of the Foreign Corrupt Practices Act.” 18 U.S.C.§ 1956(c)(7)(D) (emphasis added). Thus, the court held that a violation of § 78dd-3 is a SUA under § 1956(a).
Second, Ho challenged whether a wire transfer involving US correspondent accounts met the plain statutory language of a transfer coming “to” or “from” the United States.[20] He alleged that the transfer from Hong Kong to Uganda was a “single, continuing transaction” that merely went “through” the United States.[21] In other words, Ho argued that the wire was in effect one from Hong Kong to Uganda, and simply took advantage of unaffiliated US-based correspondent accounts to conduct a dollar-denominated transaction. The court rejected this construction, noting that the language cited by the appellant is found in a “venue” provision, and that the specific provision further states that “any portion of the transaction may be charged in any district in which the transaction takes place.”[22] Citing Second Circuit precedent, and distinguishing cases cited by Ho,[23] the court held that the process of crediting and debiting through US correspondent accounts met the statutory requirements because a transfer (including by solely electronic means) is comprised of distinct transactions to and from the US-based intermediary bank.[24] Thus, the court held that transfers from one foreign bank to another outside the United States, and solely moving through correspondent banks in the United States, is sufficient. As such, at least in the Second Circuit, it appears that an offshore wire transaction denominated in US dollars that is a SUA under the FCPA can sustain a money laundering conviction under § 1956(a)(2)(A).
The decision – from a unanimous panel – illustrates the parallel exposure certain actors may face under the FCPA’s distinct but overlapping anti-bribery provisions. It also further underscores the jurisdictional reach US authorities attach to dollar denominated transfers – even those originating and concluding outside the United States – under criminal US money laundering statutes.
[1] United States v. Ho, No. 19-761, 2020 WL 7702576 (2d Cir. Dec. 29, 2020). [2] Id. at *1-2. [3] Id. [4] United States v. Ho, No. 1:17-CR-00779-LAP, 2019 WL 9042917 (S.D.N.Y. Mar. 27, 2019). [5] Id. at *2-3 [6] Id. at *2. [7] In addition to rejecting the FCPA and money laundering arguments detailed below, the court also held that the District Court had not abused its discretion with respect to various evidentiary rulings, including, for example, the admission of certain out of court statements and text messages regarding the transfers. Id. at *11-12. [8] The court construed 15 U.S.C. § 78dd-2(a) as follows: “15 U.S.C. § 78dd-2 prohibits an officer or director of a ‘domestic concern’ from offering or paying bribes to a foreign official to gain ‘any improper advantage,’ ‘in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.’” United States v. Ho, 2020 WL 7702576, at *4. [9] Id. at *4. [10] Id. at *5. [11] 15 U.S.C. § 78dd–2(a) (emphasis added). [12] Id. at *5, *17. In support of this finding, the court quotes, among other cases, United States v. Ng Lap Seng: “[The FCPA] prohibits bribery designed to obtain, retain, or direct business not only for or to the briber, but for or to ‘any person’.” 934 F.3d 110, 145 (2d Cir. 2019) (original emphases). [13] Id. [14] Id. at *16. The Court also found unpersuasive Ho’s related argument that the “indictment was facially inconsistent as to material allegations” because the Grand Jury had determined him to be a “domestic concern”. Id. at *14. [15] Id. at *4, *6-7. [16] The FCPA was added to § 1956(c)(7)(D) by way of the International Anti-Bribery and Fair Competition Act of 1998, see Pub.L. 95-213, Title I, § 104A, as added Pub..L. 105-366, § 4, Nov. 10, 1998, 112 Stat. 3306. [17] Id. at *6-7. [18] Id. at *7 (quoting New York ex rel. New York State Office of Children & Family Servs. v. U.S. Dep't of Health & Human Servs., 556 F.3d 90, 92 (2d Cir. 2009). [19] Under the reference canon, “[w]hen a statute refers to a general subject, the statute adopts the law on that subject as it exists whenever a question under the statute arises.” Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 769 (2019); see also United States v. Kinzler, 55 F.3d 70, 72 (2d Cir. 1995). [20] See 18 U.S.C. § 1956(a)(2). [21] Id. at *9. [22] Id. at *10. [23] Cf. United States v. Harris, 79 F.3d 223 (2d Cir. 1996); United States v. Dinero Express, Inc., 313 F.3d 803 (2d Cir. 2002), and United States v. Moloney, 287 F.3d 236 (2d Cir. 2002). [24] Id. at *9-10. In support of this proposition the Court relied upon United States v. Daccarett, 6 F.3d 37, 54 (2d Cir. 1993). It also cited cases interpreting Congressional intent behind the money laundering statute to cover electronic funds transfers like the transfer in Ho. See United States v. Prevezon Holdings, Ltd., 251 F. Supp. 3d 684, 694 (S.D.N.Y. 2017); United States v. All Assets Held at Bank Julius, 251 F. Supp. 3d 82, 94 (D.D.C. 2017).
[1] United States v. Ho, No. 19-761, 2020 WL 7702576 (2d Cir. Dec. 29, 2020). [2] Id. at *1-2. [3] Id. [4] United States v. Ho, No. 1:17-CR-00779-LAP, 2019 WL 9042917 (S.D.N.Y. Mar. 27, 2019). [5] Id. at *2-3 [6] Id. at *2. [7] In addition to rejecting the FCPA and money laundering arguments detailed below, the court also held that the District Court had not abused its discretion with respect to various evidentiary rulings, including, for example, the admission of certain out of court statements and text messages regarding the transfers. Id. at *11-12. [8] The court construed 15 U.S.C. § 78dd-2(a) as follows: “15 U.S.C. § 78dd-2 prohibits an officer or director of a ‘domestic concern’ from offering or paying bribes to a foreign official to gain ‘any improper advantage,’ ‘in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.’” United States v. Ho, 2020 WL 7702576, at *4. [9] Id. at *4. [10] Id. at *5. [11] 15 U.S.C. § 78dd–2(a) (emphasis added). [12] Id. at *5, *17. In support of this finding, the court quotes, among other cases, United States v. Ng Lap Seng: “[The FCPA] prohibits bribery designed to obtain, retain, or direct business not only for or to the briber, but for or to ‘any person’.” 934 F.3d 110, 145 (2d Cir. 2019) (original emphases). [13] Id. [14] Id. at *16. The Court also found unpersuasive Ho’s related argument that the “indictment was facially inconsistent as to material allegations” because the Grand Jury had determined him to be a “domestic concern”. Id. at *14. [15] Id. at *4, *6-7. [16] The FCPA was added to § 1956(c)(7)(D) by way of the International Anti-Bribery and Fair Competition Act of 1998, see Pub.L. 95-213, Title I, § 104A, as added Pub..L. 105-366, § 4, Nov. 10, 1998, 112 Stat. 3306. [17] Id. at *6-7. [18] Id. at *7 (quoting New York ex rel. New York State Office of Children & Family Servs. v. U.S. Dep't of Health & Human Servs., 556 F.3d 90, 92 (2d Cir. 2009). [19] Under the reference canon, “[w]hen a statute refers to a general subject, the statute adopts the law on that subject as it exists whenever a question under the statute arises.” Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 769 (2019); see also United States v. Kinzler, 55 F.3d 70, 72 (2d Cir. 1995). [20] See 18 U.S.C. § 1956(a)(2). [21] Id. at *9. [22] Id. at *10. [23] Cf. United States v. Harris, 79 F.3d 223 (2d Cir. 1996); United States v. Dinero Express, Inc., 313 F.3d 803 (2d Cir. 2002), and United States v. Moloney, 287 F.3d 236 (2d Cir. 2002). [24] Id. at *9-10. In support of this proposition the Court relied upon United States v. Daccarett, 6 F.3d 37, 54 (2d Cir. 1993). It also cited cases interpreting Congressional intent behind the money laundering statute to cover electronic funds transfers like the transfer in Ho. See United States v. Prevezon Holdings, Ltd., 251 F. Supp. 3d 684, 694 (S.D.N.Y. 2017); United States v. All Assets Held at Bank Julius, 251 F. Supp. 3d 82, 94 (D.D.C. 2017).
