Globalization and the federal prosecution of white collar crime.

AuthorPodgor, Ellen S.
PositionTwelfth Survey of White Collar Crime
  1. INTRODUCTION

    Legal literature on the federalization of criminal law has grown significantly in the last two years.(1) Noteworthy in this discussion are references to increases in the number of federal crimes,(2) the number of federal prosecutors,(3) and the number of criminal actions in federal courts.(4) This scholarship often reflects upon federal prosecution of what were traditionally considered state and local offenses.(5) Although United States v. Lopez(6) provides a landmark case for the halting of federal criminal jurisdiction's extension into the province of local criminal activities,(7) the federal prosecution of state and local activities remains a matter of concern.(8)

    There is, however, another aspect to the increase in federal criminal jurisdiction that is omitted from most of the recent discussions on federalization. This is the increase(9) and anticipated growth(10) in federal investigations and prosecutions involving international activities.(11) Unlike the expansion of federal power into areas traditionally considered state and local activities, the government's entry into the realm of international activity does not present overlapping jurisdictional concerns within the United States.

    This Essay focuses on the "international flavor"(12) that is developing in the prosecution of white collar crime.(13) The discussion is limited to prosecutions by the United States, as opposed to white collar offenses that may be prosecuted by foreign entities.(14)

    This Essay considers two approaches that allow for an expansion of federal white collar prosecutions involving international activities.(15) First, one finds legislative language that provides a clear indication that extraterritoriality is intended to be covered by the statute. In this regard, one sees the enactment of specific statutes with a direct international focus,(16) and statutes that are not directly addressing international criminality, but instead incorporate extraterritoriality provisions within the statute.(17) Although this first approach is premised upon legislative action that expressly provides for extraterritoriality, judicial interpretation may be necessary to ascertain the scope of the extraterritoriality provision.

    In the second approach, one finds judicial interpretation of criminal statutes permitting an international component.(18) In this second grouping, the statute does not directly address extraterritoriality, which leaves courts to discern whether the silence was intended as a prohibition of external application.

    In addition to congressional and judicial acceptance of these prosecutions, procedural expediency also impacts the increase in ability to prosecute white collar crimes that have an international perspective.(19) Equally influential is the executive role in these prosecutions. The prosecutorial prerogative can, of course, be impacted by legislation and court precedent.

    Whether the statute provides for extraterritoriality or is silent on the subject, in allowing an external application, it is also necessary that the conduct fall within the legitimate scope of U.S. jurisdiction.(20) Although there are five bases for jurisdiction accepted in international law, the United States has been more limited in its acceptance of principles of international jurisdiction.(21) Where Congress has formally addressed extraterritoriality in the statute or focused the entire statute on international activities, courts will often bypass an examination of the jurisdiction's legitimacy under principles of international law. Questions relating to the propriety of U.S. jurisdiction under international principles are most often seen in cases where courts are attempting to discern whether the congressional intent was to provide for an extraterritorial application.(22)

    An array of issues accompanies the prosecution of white collar crime with an "international flavor."(23) This Essay considers a sampling of the jurisdictional questions that have arisen as a result of white collar criminal activity exceeding the borders of the United States.(24) Ambiguity in statutes, as well as insignificant case law often provide little guidance in resolving these issues.

    Congressional consideration of the international implications to federal criminal statutes is needed.(25) Substantive issues that arise as a result of alleged criminal activity transcending the borders of the United States must be resolved. This is particularly true with respect to white collar crime because the global economy facilitates both criminal activity and its prosecution.(26) Equally important iS the necessity to place restraints on the type of white collar international activities that will be subject to U.S. federal prosecution.

  2. INCORPORATING EXTRATERRITORIALITY INTO WHITE COLLAR OFFENSES BY DIRECT LEGISLATIVE ACTION

    1. Statutes Directly Focused on International Activities

      Where Congress explicitly enacts a statute with the intent to control conduct occurring outside its borders, the decision to focus on international activity is clear. In the white collar area, several criminal statutes fall within this realm.(27) Perhaps the most noteworthy is the Foreign Corrupt Practices Act.(28)

      The Foreign Corrupt Practices ACt, enacted in 1977, prohibits certain foreign trade practices by issuers(29) and domestic concerns.(30) The Act Contains both accounting and anti-bribery provisions.(31) Watergate's exposure of major corporations bribing of foreign officials served as the impetus for the passage of the Act.(32) The Foreign Corrupt Practices Act was intended to curtail these huge payments being made by U.S. companies to foreign officials.(33) The Act has been criticized on occasion by the business community, which argues that the Act places U.S. businesses at a competitive disadvantage in the international business market.(34) The United States is the "only major economy that has laws barring companies from paying bribes abroad."(35) Although such bribery may be technically illegal in a foreign jurisdiction, in some countries it is accepted as a common practice.(36)

      The Act was amended in 1988, resolving certain ambiguities in the statute and in some instances limiting the conduct that the statute could reach.(37) Payments made as part of "routine governmental action"(38) now focus on the "purpose or nature of the payment" as opposed to the "status of recipient."(39) The amendments offer an affirmative defense when the payment is lawful under the laws of the foreign official's country and when the payments are "bona fide expenditures."(40) The amendments also eliminate a "has reason to know" standard in the statute, requiring that the acts be committed "knowingly."(41) Willful blindness, however, will not serve as an excuse.(42)

      In United States v. Castle,(43) the Fifth Circuit Court of Appeals stated that Congress deliberately excluded foreign officials who accept bribes from the Act's imposition of criminality.(44) Although international law permits this extension, Congress was "equally aware of, and actively considered, the `inherent jurisdictional, enforcement, and diplomatic difficulties' raised by the application of the bill to non-citizens of the United States."(45) In Castle, the court held that prosecutors could not circumvent Congress' omission of foreign officials from the statute, by charging foreign officials under the general conspiracy statute(46) with conspiring to violate the Foreign Corrupt Practices Act.(47)

      When Congress drafts a statute specifically focused on international activities, it is likely that there has been congressional reflection on the international ramifications of the criminal application. The enactment of the Foreign Corrupt Practices Act demonstrates a clear intent on the part of Congress to transcend the borders of the United States with regard to specific conduct. Congress has, however, tailored the statute to encompass limited conduct and individuals. In Castle, the court noted that "[m]ost likely Congress made this choice because U.S. businesses were perceived to be the aggressors, and the efforts expended in resolving the diplomatic, jurisdictional, and enforcement difficulties that would arise upon the prosecution of foreign officials was not worth the minimal deterrent value of such prosecutions."(48)

    2. Extraterritoriality Provisions

      Statutes with specific provisions of extraterritoriality also leave no doubt of Congress' intent to reach outside the borders of the United States.(49) Because the statute itself is focused on activities both within and outside of the United States, the conduct and individuals to whom the statute applies usually remain constant. Unlike a statute specifically focused on international activities, such as the Foreign Corrupt Practices Act, a statute with an extraterritoriality provision is seldom specifically tailored to address the concern of unchecked prosecutorial discretion in the international sphere.(50) Prosecutors are left to apply the generic provisions of the statute without examination of the international implications of the prosecution.(51)

      In the context of white collar crime, there exists an array of statutes with extraterritorial provisions.(52) These statutes encompass a spectrum from specific to broad provisions that permit extraterritoriality. Extraterritorial provisions can also be found in procedural statutes.(53)

      A statute may include extraterritoriality with respect to a specific aspect of the statute. For example, the central perjury statute(54) provides that "[t]his section is applicable whether the statement or subscription is made within or without the United States."(55) A statute may specifically limit the scope of criminality by delineating individuals that can serve as a basis for extraterritoriality. For example, the "Prohibitions With Respect to Biological Weapons" statute provides that "[t]here is extraterritorial Federal jurisdiction over an offense under this...

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