1. Why is it important to the court’s analysis that Antoine set up a sham company and consulting agreements?

2. If Esquenazi had not known about the bribes, would he still be guilty under the FCPA?

3. This case was controversial because it was the first time that an appellate court had interpreted the term “foreign official” in the FCPA so broadly. Critics contend that the court inserted its own broad definition instead of using the more narrow definition intended by Congress. Did the court go too far? If Congress had meant to include public/private partnerships in the definition of a foreign official, wouldn’t they  have added it into the statute? Is this good public policy?

Esquenazi was a co-owner/ president of Terra Telecommunications Corp. (Terra), a Florida company that purchased phone time from foreign vendors and resold the minutes to customers in the United States. One of Terra’s main vendors was Telecommunications D’Haiti, S.A.M. (Teleco). In 2001 Terra contracted to buy minutes from Teleco directly. At that time, Teleco’s Director General was Patrick Joseph (appointed by then-President Jean-Bertrand Aristide), and its Director of International Relations was Robert Antoine. In October 2001, Terra contacted Teleco about $400,000 in past due accounts. According to testimony at trial, Antoine agreed to reduce Terra’s future bills to Teleco in exchange for receiving from Terra 50 percent of what the company saved. Antoine suggested that Terra disguise the payments by making them to sham companies, which Terra ultimately did. According to Terra employees, Esquenazi was fully aware of the arrangement and shared details of the deal in a meeting with executive management. The following month, Terra began funneling personal payments to Antoine using the subterfuge of sham consulting agreements. All told, while Antoine remained at Teleco, Terra paid him and his associates approximately $822,000. During that time, Terra’s bills were reduced by over $2 million.

Soon after, the U.S. Internal Revenue Service (IRS) began to investigate Terra and its relationship with vendors, including Terra. As part of the investigation, Esquenazi admitted he had bribed Teleco officials. The government charged Esquenazi and other Terra officials with several counts of violating the Foreign Corrupt Practices Act (FCPA). Esquenazi pleaded not guilty, proceeded to trial, and was found guilty on all counts. On appeal, Esquenazi argued that his conviction should be reversed because the FCPA did not apply to the Terra-Teleco payments since they were paid directly to Teleco officials. Esquenazi claimed that Teleco officials did not meet the FCPA definition for “foreign official.” The government countered that Haiti Teleco was an “instrumentality” of the Haitian government and therefore Terra’s acts of bribery were prohibited by the FCPA.

The U.S. Court of Appeals for the 11th Circuit affirmed Esquenazi’s conviction. The court rejected Esquenazi’s narrow definition of foreign official. Instead, the court adopted the fact-based approach looking to questions such as who runs the company, who appoints the management, where the company’s profits come from, and the extent to which the government is involved in day-to-day decisions. The court cited evidence that 97 percent of the ownership of Teleco was held by the Haitian government and that Teleco was considered a defacto government entity because the Haitian government invests in the enterprise, appoints the board of directors, hires and fires the principals, and exercises a monopoly function.

“From Teleco’s creation, Haiti granted the company a monopoly over telecommunications service and gave it various tax advantages. Beginning in early 1970s, and through the years [Esquenazi was] involved, Haiti’s national bank owned 97 percent of Teleco. The company’s Director General was chosen by the Haitian President with the consent of the Haitian Prime Minister and the ministers of public works and economic finance. And the Haitian President appointed all of Teleco’s board members. The government’s expert testified that Teleco belonged ‘totally to the state’ and ‘was considered . . . a public entity.’ Although the expert also testified that ‘[t]here was no specific law that . . . decided that at the beginning that Teleco is a public entity,’ he maintained that ‘government, officials, everyone consider[ed] Teleco as a public administration.’ Construed in the light most favorable to the jury’s verdict, that evidence was sufficient to show Teleco was con-trolled by the Haitian government and performed a function Haiti treated as its own, namely, nationalized telecommunication services.”