On June 22, 2020, the Second Circuit Court of Appeals upheld the jury conviction of two former officials of the Federation Internationale de Football Association (FIFA) —the international sports organization based in Zurich, Switzerland—for committing multiple counts of conspiracy to commit honest services wire fraud. United States v. Napout, Case No. 18-2750, (2d Cir. 2020). Defendants, two Paraguayan employees of a Paraguayan company, were convicted by a jury in the United States District Court for the Eastern District of New York for their involvement in an alleged scheme to sell broadcasting and marketing rights to FIFA games in exchange for kickbacks transmitted through U.S. bank accounts and wires. And on appeal, the Second Circuit held that the government permissibly applied the honest services wire fraud statute, 18 U.S.C. § 1346, rejecting defendants’ claim that it was an impermissible extraterritorial overreach.
The Second Circuit observed that a presumption against extraterritorial applications of statutes exists unless the unambiguous statutory text states otherwise. And in this case, the Second Circuit did not find the statute allowed for extraterritorial application. But it nevertheless rejected defendants’ challenge, concluding that the case involved a domestic application of the statute. Reasoning that honest services wire fraud under Section 1346 is a particular species of wire fraud, the Second Circuit rejected defendants’ argument that the deprivation of honest services through a fiduciary breach was the only focus of Section 1346 and that therefore the only relevant question is where the services were provided. Instead, the Court held that the use of wires in carrying out the fraudulent conduct was essential (and not incidental) to the offense described. And applied here, because defendants used U.S.-based bank accounts and wires to receive the majority of the $3.3 million in bribes, and the “use of wires in the United States therefore was integral to the transmission of the bribes in issue,” the Court held that the application of Section 1346 to defendants’ conduct was permissible.
The Second Circuit also explained that the fact that defendants were convicted of conspiracy to commit honest services fraud, rather than a substantive count of honest services fraud, was irrelevant to the analysis. As they had observed previously in the closely watched case of United States v. Hoskins, 902 F.3d 69, 96 (2d Cir. 2018), “generally, the extraterritorial reach of an ancillary offense [such as] . . . conspiracy is coterminous with that of the underlying criminal statute.'"
The Second Circuit’s holding highlights a frequently litigated and controversial issue that extends beyond merely honest services fraud, particularly into the Foreign Corrupt Practices Act (FCPA) context. At times, the Department of Justice and Securities and Exchange Commission have pushed the envelope further than had been done in this case, for example relying on sending an e-mail using U.S.-based servers, sending a text message, or sending a wire transfer to or from a U.S. bank, to satisfy jurisdictional requirements. FCPA Resources Guide (2012). And thus, this opinion breaks relatively little new ground. Still, the decision will likely further strengthen the government’s resolve to pursue foreign activity whenever illicit funds flow through the United States.
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United States v. Napout