By Jesse Weiner and Shuying Lin
On June 22, 2020, the United States Court of Appeals for the Second Circuit affirmed the conspiracy to commit “honest services” wire fraud convictions of two former officials of the global football organization, the Fédération Internationale de Football Association, popularly known as FIFA.
FIFA is a Switzerland-based entity whose mission is to promote football (i.e., American “soccer”) by hosting and organizing international football games, among which, the most popular one is known as the World Cup.
This case stems from an indictment first brought in 2015 in the Eastern District of New York, as part of the U.S. government’s efforts to contain rampant corruption within the global football organization. The U.S. government claimed that the corruption within FIFA dated back to the 1980s.
The case was jointly investigated by the United States Internal Revenue Service (IRS), the United States Federal Bureau of Investigation (FBI), and the United States Attorneys’ Office for the Eastern District of New York, and charges were brought after five years of investigation. The case proceeded to trial in 2017, and after conviction in 2018 prison sentences of between four and nine years were meted out.
Juan Ángel Napout and José Maria Marin, citizens of Paraguay and Brazil, respectively, are the defendants in this case. According to the indictment, the defendants, who are former heads of the regional FIFA affiliates, allegedly received corrupt payments in exchange of securing deals and contracts for sports media and marketing companies and lined their own pockets. As such, they are accused of violating their duty of “honest services” owed to FIFA and the regional affiliates that they worked for. It is argued that they owed such duty of “honest services” to the above-named organizations because the internal code of ethics of FIFA and the regional affiliates provide that the organization officials owe a fiduciary duty to the organization, and they should not accept bribes.
Under the federal wire fraud statute, those who use U.S. wire services to engage in a scheme to deprive another of “honest services” may be found to have committed “honest services” wire fraud. In the FIFA case, the former officials allegedly received bribes through wire transfers from U.S. banks. Notably, Mr. Napout and Mr. Marin’s conduct would not be deemed illegal under the laws in either of their home countries.
On appeal, defendants made two challenges to their convictions. First, they contend that the “honest services” wire fraud statute only punishes fraudulent activities inside the U.S., and their conduct occurred mostly in South America. Second, they argue that the statute may not criminalize a breach of fiduciary duty that a foreign employee owes to his or her foreign employer. Both arguments were rejected by the Second Circuit. In reaching its conclusion, the court found there was no extraterritorial application of the federal wire fraud statute at all.
Key takeaways
In the FIFA case, the alleged criminal activities were committed by foreign defendants. Napout and Marin, who are citizens of countries in South America, allegedly received bribes from South American companies in exchange for favoring those who paid bribes to them in South America, and yet their conduct was punishable under U.S. law mostly because the corrupt payments flowed through U.S. banking systems. This case is another example of how the U.S. government might exercise jurisdiction over foreign citizens whose alleged misconduct takes place largely in another country.
This case also shows that the more well-known Foreign Corrupt Practices Act (FCPA) is not the only law that the U.S. government may look to in their efforts to crack down on corruption overseas. However, unlike FCPA whose focus is on official corruption, the “honest services” wire fraud statute targets commercial bribery among private actors. As the FIFA case indicates, foreign employees may be criminally charged under U.S. laws for breaching their fiduciary duties to their foreign employers, even when the alleged criminal conduct occurred largely in foreign countries and the underlying conduct is legal in those countries.