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U.S. v. Kay: Once More To The Courts

On January 10, 2008, the United States Court of Appeals for the Fifth Circuit denied a petition for rehearing en banc from David Kay and Douglas Murphy. Kay and Murphy, executives of American Rice, Inc., were indicted in 2002 for bribing Haitian officials in violation of the Foreign Corrupt Practices Act. The U.S. District Court in Houston dismissed the indictments, finding that the FCPA did not apply to their conduct -- i.e., paying bribes to reduce their company's taxes.

In 2004, the Fifth Circuit Court of Appeals held that the bribes alleged in the indictment could fall within the scope of the FCPA and remanded. At trial, Kay and Murphy were convicted of violating the FCPA. Kay was sentenced to 37 months in prison and Murphy to 63 months. They appealed, and in October 2007 the Fifth Circuit affirmed their convictions. They then filed a petition for rehearing en banc. With the Fifth Circuit's denial of the petition for rehearing, their convictions stand.

Kay and Murphy argued in their petition for rehearing that the trial court gave incorrect jury instructions. The question before the en banc panel (Higginbotham, Barksdale and Clement) was whether an FCPA conviction must be supported by evidence that the defendants knew about the existence and prohibitions of the FCPA, or whether they could be convicted on the basis of their general knowledge that their actions violated U.S. law?

The Fifth Circuit said no specific knowledge about the FCPA is needed to support a conviction under the statute. All that the government needs to prove to satisfy the "knowing" element of an FCPA offense is that the defendants understood that their actions were illegal. Thus a general jury instruction that does not require specific knowledge about the FCPA was adequate with respect to the "knowing" element of the FCPA charges. On that basis -- and after reviewing some of the arguments about the evidence adduced at the trial -- the appellate court denied Kay and Murphy's petition for a rehearing.

The Fifth Circuit said:

"The jury instructions on corrupt intent, looking to the instructions as a whole and the closing arguments of counsel, show that the jury did not believe that Defendants could be convicted if they did not know that they were doing something unlawful. The jury's question to the judge confirms this, indicating that the jury was unsure of whether Defendants knew that they were violating the FCPA specifically, not the law in general. The jury asked, 'Can lack of knowledge of the FCPA be considered an accident or mistake?'

"The defense understandably focuses on the differences underlying the gradations of intent and suggests that the opinion has offered the instruction here as satisfying both general intent and specific intent. To be clear, we return to first principles. That is, this case was tried on the basis that the Government had to prove that the Defendants knew that their actions violated the law, although they did not need to prove that they were aware of the specific provisions of the FCPA. Set in the context of trial, including the closing arguments of counsel, there was no uncertainty in the instructions regarding the Government's burden to prove that Defendants knew that their conduct was illegal. [Kay's lawyer] argued forcefully and eloquently that his client could never have known the detail of the FCPA. The Government, while responding that they need not prove the specifics of the FCPA, made clear that it had to prove that Defendants knew that their conduct was illegal."

View prior posts about David Kay and Douglas Murphy here.

View United States v. Kay, Nos. 05-20604 (5th. Cir., 2008) in the Public Library of Law (registration required) here.

Full post as published by The FCPA Blog on February 27, 2008 (boomark / email).