White Collar Litigation Update – November 2021

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Second Circuit Arms Foreign National Defendants with a Powerful Tool for Challenging Extraterritorial Prosecutions by the United States

Over the past several years, U.S. prosecutors have become increasingly aggressive in charging foreign nationals for conduct occurring outside of the United States.  When such cases are brought, prosecutors have repeatedly argued that foreign defendants who fail to voluntarily surrender to the United States and remain abroad are “fugitives”—regardless of whether they ever previously set foot in the U.S., and even if their home country decided, pursuant to local law, to decline extradition. Courts have then applied the “fugitive disentitlement doctrine” to preclude such defendants from later challenging the charges against them.  Foreign national defendants have thus faced a Hobson’s choice: either forego their own legal system’s protections, leave their lives, families, and jobs to risk pre-trial detention in the U.S., and fight the charges here, or else remain at home and have the stigma of criminal indictment and “fugitive” status hanging over them indefinitely.  

The Second Circuit Court of Appeals’ recent decision in U.S. v. Bescond, 2021 WL 3412115 (2d Cir. 2021), however, appears to level the playing field, holding that a foreign national who (a) remains in his or her home country where the alleged criminal conduct occurred, and (b) does so “without concealment or evasion” does not meet the definition of “fugitive” and cannot be disentitled under the doctrine.  This is a significant decision that will enable foreign nationals facing criminal prosecution in the United States to challenge the charges under certain circumstances without putting their liberty at risk, and it may serve as an important check on the expanding extraterritorial reach of U.S. criminal law.

The Case Against Bescond

Muriel Bescond is a French citizen living in France, who worked at the French bank Société Générale as head of the treasury desk.  In 2017, U.S. prosecutors in the Eastern District of New York indicted Bescond and charged her with four counts of transmitting false, misleading, and knowingly inaccurate commodities reports in violation of the Commodity Exchange Act (the “CEA”), and one count of conspiracy to do the same.  Specifically, the indictment alleged that between May 2010 and October 2011, Bescond participated in a scheme to manipulate the U.S. Dollar London Interbank Offered Rate, more commonly known as LIBOR.    

Bescond was in France at all times during the alleged criminal scheme, and she remained in Paris, where she lived and worked, following the indictment.  France does not extradite its citizens, and Ms. Bescond did not otherwise submit to the Court’s jurisdiction.  Through counsel, she moved to dismiss the charges against her on several grounds, including that the indictment violated Fifth Amendment due process because it failed to allege a sufficient nexus with the United States and that it charged an impermissible extraterritorial application of the CEA.

Because Bescond did not voluntarily travel to the United States to face the charges, the district court deemed her a fugitive and exercised its discretion to apply the fugitive disentitlement doctrine, declining to reach the merits of her motions.  Bescond appealed.  

The Second Circuit’s Decision Regarding Fugitive Disentitlement

On appeal, the Second Circuit split from the Sixth and Eleventh Circuits and ruled that a fugitive disentitlement order is immediately appealable under the collateral order doctrine.  Turning to the substance of the fugitive disentitlement analysis, the Court first noted that the “ordinary meaning of the term ‘fugitive’ does not describe Bescond,” because fugitivity implies an effort to distance oneself from the United States or to frustrate arrest, and Bescond had taken no such action.  It then concluded that Bescond was not a fugitive under either of the categories that existed at common law:  (1) she was not a traditional fugitive (i.e., one who flees from the jurisdiction of the court where the crime was committed or departs from her usual place of abode and conceals herself), as Bescond had neither fled nor concealed herself; and (2) nor was she a constructive-flight fugitive (i.e., a person who commits a crime while in the United States, but is outside of the country when she learns of the charges and refuses to return in order to avoid prosecution), as she did not commit the alleged crime in the United States and was not staying away to avoid prosecution.  Rather, “she merely remains at home, as her home country permits her to do.”

After determining that Bescond was not a fugitive, the Second Circuit went a step further and held that even if she was, the district court abused its discretion in applying the disentitlement doctrine “given her innocent residence as a foreign citizen abroad, given the nature of the charged offense and her remoteness from the alleged harm that it caused, given her line of work, and given her nonfrivolous challenge to the extraterritoriality of the criminal statute.”  The Court reversed and remanded to the district court to consider the merits of Bescond’s motions to dismiss.  

Key Takeaways

The full impact of the Second Circuit’s decision remains to be seen, as a number of questions regarding the scope of the Court’s ruling remain unanswered—for example, whether the Court’s reasoning is limited to individual defendants or could also extend to foreign companies and organizations, and how the fugitivity test will play out in different factual circumstances (e.g., a foreign national defendant who owns property in the United States; a defendant charged with a more serious or violent offense; etc.).  It is also unclear whether other Circuits will adopt the Second Circuit’s reasoning and issue similar rulings.  What is clear, however, is that the Bescond decision is a victory for foreign nationals facing prosecution in the United States for conduct abroad, as it limits the scope of the fugitive disentitlement doctrine and opens the door to more forceful challenges to the extraterritorial application of U.S. criminal law.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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