United States: 11th Circuit Confirms That Bribes Paid To Employees Of State-Owned Or Controlled Companies Violate The U.S. Foreign Corrupt Practices Act

The anti-bribery provisions of the U.S. Foreign Corrupt Practices Act ("FCPA") prohibit payments to "foreign officials" (i.e., non-U.S. government officials), which includes employees of a foreign government or an "instrumentality" of a foreign government. On May 16, 2014, in a widely-anticipated decision, the Eleventh Circuit largely adopted the government's longstanding position that a state-owned enterprise (in this case, a telecommunications company) may be such an "instrumentality" and consequently, corrupt payments to employees of such an enterprise were illegal bribes under the FCPA. This case is the first significant appellate decision to define who is a "foreign official" for purposes of FCPA liability, and makes clear that employees of a range of state-owned or controlled companies can be "foreign officials" so long as the company is both controlled by the state and performs a function that the state in question views as governmental. The decision provides some guidance as to both of these questions, but unsurprisingly leaves much to a case-by-case (and country specific) factual analysis of the relationship between the government and the statelinked entity.

In the case, United States v. Joel Esquenazi, the defendants were convicted of bribing officials of Telecommunications D'Haiti, S.A.M. ("Haiti Teleco").1 At trial, the U.S. Department of Justice ("DOJ") introduced evidence that the company had a monopoly on telecommunications services, it was 97% owned by Haiti's national bank, it had significant tax advantages, the government appointed all board members and its top officer, employees of Haiti Teleco had disclosed their assets under an anticorruption law, and the company was eventually privatized after the events in question.2 Under these facts, the court had little trouble concluding that Haiti Teleco was an instrumentality of a foreign government, and therefore that bribes paid to Haiti Teleco employees violated the FCPA. Ultimately, the court affirmed the convictions and sentences of the defendants, including the lead defendant, Joel Esquenazi, who received a 15-year sentence – the longest jail term ever imposed in an FCPA case.3

In doing so, the court drew a distinction between companies set up and run by governments to serve a public function and those in which the government was, in effect, a mere investor. Specifically, the court described an "instrumentality" as an entity that (i) is "controlled by a foreign government," and (ii) "performs a function the controlling government treats as its own."4 Whether a particular entity satisfied these characteristics were "fact-bound questions," for which the court provided a nonexclusive list of common-sense factors.5 For example, factors relevant to the question of government control include:

  • Whether the government formally designates the entity as a state company;
  • Whether the government has a majority interest in the entity;
  • The government's ability to hire and fire the entity's principals;
  • The extent to which the entity's profits go directly to the government;
  • The extent to which the government funds the entity if it loses money; and
  • How long these indicia have existed.6

Likewise, factors relevant to whether "the government treats [the company's function] as its own," include:

  • Whether the entity is a monopoly;
  • Whether the government subsidizes the entity;
  • Whether the entity provides services to the public at large; and
  • Whether the public and the government perceive the entity to be performing a governmental function.7

Notwithstanding the guidance from the court, this latter question is the more difficult one to answer, and the court acknowledged that the criteria are not rigid and depend on the foreign state's own view of what may constitute a state function.8 The definition is thus to some extent a subjective one evaluated from the perspective of the foreign state. Telephone service is a familiar example (a private function in the United States but a public function in many countries), but the application of the analysis to state-linked companies engaged in commercial activity will remain a fluid, fact-based determination, and potentially uncertain, particularly in countries where some sectors of the economy that may not generally be considered state functions have few entirely private competitors.9

The actual question before the Eleventh Circuit – whether Haiti Teleco was in fact such an instrumentality – was fairly straightforward, given the overwhelming evidence of government control and the public character of telephone service in the Haitian context.10 While the court attempted to provide a framework for analyzing future claims that state-linked companies are "instrumentalities" of the state, that framework is quite general and leaves significant room for uncertainty regarding the treatment of such companies, particularly where they are engaged in commercial activities. The prudent approach is, of course, to treat any company that may be state-controlled as a potential "instrumentality" of the state falling within the scope of the FCPA, but more difficult questions (for example, whether state-linked industrial companies competing in international markets or with multiple other state-linked companies are "instrumentalities") will have to await future cases.


1 United States v. Joel Esquenazi and Carlos Rodriguez, No. 11-15331-C (11th Cir. May 16, 2014).

2 Id. at 3-5.

3 Press Release, U.S. Department of Justice, Executive Sentenced to 15 Years in Prison for Scheme to Bribe Officials at State-Owned Telecommunications Company in Haiti (October 25, 2011), available at http://www.justice.gov/opa/pr/2011/October/11-crm-1407.html .

4 Id. at 20.

5 Id. at 21-23.

6 Id. at 21.

7 Id. at 22-23.

8 Id.; see also id., p. 20.

9 The Esquenazi factors for defining "instrumentality" are similar but not identical to the factors cited in the two lower courts that addressed this issue. Those two courts themselves used similar but not identical factors to define "instrumentality" and they also generally supported the government's position that state-owned or controlled companies are "instrumentalities." See United States v. Carson, No. SACR 09-00077-JVS, 2011 WL 5101701, at *3- 4 (C.D.C.A. May 18, 2011) (order denying defendant's motion to dismiss); United States v. Lindsey, 783 F. Supp. 2d 1108, 1115(C.D.C.A. 2011) (ordering denying defendant's motion to dismiss).

10 The court also concluded that the defendants had the requisite knowledge that bribe payments were ultimately going to an instrumentality of the government. Evidence established that defendants knew Haiti Teleco had a state-sanctioned telecommunications monopoly, represented in both written and oral communications that the company was a "government-owned entity" and "instrumentality of the Haitian government," and attempted to obtain political-risk insurance, which is only available to parties contracting with foreign governments. See Esquenazi, No. 11-15331-C, at 34-35.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions