Parties
The defendants were American citizen David Kay, who was the vice president for marketing of American Rice and Douglas Murphy, who was also an American citizen and president of ARI. The plaintiff was the United States Department of Justice.
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Facts
American Rice Inc was an American corporation that focused on exporting rice to Haiti. Kay, who was the vice president at the time, was indicted for violating the Foreign Corrupt Practices Act. He was indicted on charges of making illegal payments to customs officials in Haiti in order to bribe them into being complicit with accepting documents that gave a faulty listing of the rice being imported. The document stated less amounts of rice being exported so that the company would pay less taxes. Kay then filed a motion to the court to dismiss the indictment on the basis that the state had failed to state his offense. He contended that the payments that had been made to the officials in order to reduce taxes, were not payments with the intent of retaining business as was clearly stipulated in the FCPA as terms for conviction. Kay’s motion was granted, and the United States appealed by arguing that the FCPA applied to any payments that were made indirectly to help in retaining or obtaining business.
Procedure
The United States brought an appeal to the court in response to the dismissal of the court on charges to Mr. Kay. The district court dismissed the indictment by reasoning that the FCPA did not apply to the conduct of the defendants. The United States argued that the allegations of bribery actually fell in the scope of the FCPA and therefore, the defendant could be convicted and remanded. Therefore, Kay and Murphy were convicted on all 12 counts. They then appealed, but their convictions were affirmed in the Court of Appeal.
Issue
The principle issue that was at the center of the dispute was whether, beyond reasonable doubt, the conduct of the defendants in connection with alleged bribery to Haitian officials warranted remanding according to FCPA. Specifically, their action of paying Haitian officials to understate duties and taxes on rice exported to Haiti was a sufficient reason to qualify as an offense under the FCPA. The question of sufficiency required the plaintiffs and the court to construe the statute.
Explain the applicable law
The laws that applied, in this case, were International legal environment of business. The United States Foreign Corrupt Practices Act of 1977 (FCPA) and the Convention on Combating Bribery of Foreign Officials in International Business Transactions. The legality of international law on foreign soil had to be applied in this context to determine the sufficiency of the allegations presented before the court.
Holding
In the appeal, the closing remarks of the counsel in the defendant’s case were that there was no uncertainty in the government’s responsibility on the burden of proof to ascertain that the defendants knew their actions were illegal. The argument was that the defendants had no way of knowing the specifications of the FCPA. The government also failed to specify the sections of FCPA and therefore did not prove that the defendants knew that their conduct was illegal. The petition for rehearing was denied.
Reasoning
Justice Wiener reasoned that the sufficiency of the factual allegations was lacking and that the causal relationship between substantial evasion of tax and retaining business in Haiti did not exist. The district court reasoned that the alleged bribes could not be covered in the FCPA and therefore, the court could not establish the business nexus element.
- Kubasek, Brennan, and Brown. (2012). The Legal Environment of Business: A Critical Thinking Approach. Pearson. Pp 232-252
- Kay, D. (2007). United States v Kay- Fifth Circuit of Court of Appeals.
