The extraterritorial reach of statutes seeking to prohibit unscrupulous financial practices has been debated and watched as both entities and individuals seek to determine the scope of the United States’ government’s ability to prosecute fraudulent conduct that is primarily based outside of the United States. In a pending action in the Eastern District of New York, one of the criminally charged defendants, Jean Boustani, sought to dismiss charges filed against him by arguing that none of the conduct alleged in the pending money laundering and securities and wire fraud charges against him involved transactions or acts that occurred in the United States. (United States v. Boustani et al., No. 1:18-cr-00681, Eastern District of New York).
The Court’s decision on Boustani’s motion to dismiss the indictment has not yet been made, but the pending decision has already generated interest as it will provide much-needed clarity as to the potential liability faced by foreign actors for engaging in allegedly fraudulent financial schemes in violation of certain United States’ laws.
The action against Boustani arises from an alleged criminal scheme based in Mozambique that involves purported culpable conduct on the part of state actors, business executives, and investment bankers. In December 2018, the United States Attorney’s Office and the Department of Justice filed charges against former Mozambican government officials and business executives for an alleged fraudulent scheme by which defendants borrowed in excess of $2 billion worth in loans and, then, allegedly siphoned off $200 million in order to make bribes to Mozambican government officials and kickbacks to themselves.
The loans were allegedly secured by state-owned entities to fund maritime projects that the United States’ government alleges never actually came to fruition in any material manner. Instead, defendants allegedly secured such loans through investment banks between 2013 and 2016 by making material misrepresentations, including as to the use of the loan proceeds and Mozambique’s ability and intention to pay back the investors, in order to enrich themselves at the expense of Mozambique and the duped investors.
With respect to a nexus to the United States, the government’s indictment, which was bolstered and refiled just days before the hearing on Boustani’s motion, states, among other things, that defendants “relied on the U.S. financial system, by, among other things, seeking and securing investors and potential investors physically present in the United States” and that the investors funding the loans did so “using New York City-based bank accounts.”
Boustani, a citizen and resident of Lebanon, Antigua and Barbuda, is alleged to have been a key player in coordinating the more than $200 million in bribe and kickback payments to Mozambican government officials and investment bankers to facilitate the issuance of the loans. Boustani has been charged with three counts of conspiracy for his part in the alleged scheme that the government argues involved wire fraud, securities fraud, and money laundering. With respect to each of these charges, Boustani asserts that the requisite connection to the United States is lacking.
Boustani argues that the wire fraud conspiracy charges must be dismissed because the statute prohibiting such conduct does not reach extraterritorially and Second Circuit binding precedent has held that such a charge can only be brought in the United States if the agreement to commit wire fraud occurred on United States’ soil. In countering this claim, the government states that Boustani fails to cite any supporting case law and ignores the fact that U.S. wires were used for the subject loans.
In seeking dismissal of the money laundering conspiracy count, Boustani similarly argues that none of the alleged money laundering conduct occurred, even in part, in the United States. Though some of the interbank transactions were cleared through U.S. correspondent banking accounts, Boustani asserts that such transactions do not provide a link to the United States sufficient to justify the application of the money laundering statute to a non-U.S. citizen. The government’s response focuses on the alleged plain language of the money laundering conspiracy statute which seeks to provide redress where, as allegedly here, the conspiracy at issue seeks to move funds in and out of the United States.
Lastly, Boustani’s arguments seeking dismissal of the securities fraud conspiracy count centers on the alleged lack of a domestic securities transaction. Here, again, the United States government highlights the fact that $2 billion in loan proceeds passed through bank accounts in New York and that at least some of the allegedly duped investors were based in the United States.
It is unclear when the Court will issue its decision, which may offer clarity on the extraterritorial reach of certain federal criminal statutes. In grappling with how to interpret the relevant statutes and facts in this particular instance, the Court will likely opine on what types of alleged acts or transactions may be sufficient to allow for the extraterritorial application of the securities fraud, wire fraud, and money laundering statutes.
The Court’s decision will prove to be informative for entities and individuals that conduct business outside the United States but may have some connection to this forum. It will help provide guidance in answering the frequently posed question: what nexus to the United States is necessary to establish jurisdiction?
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