December 30, 2020

Second Circuit affirms FCPA conviction of Patrick Ho

On December 29, 2020, the US Court of Appeals for the Second Circuit affirmed the conviction and sentence of Chi Ping Patrick Ho for conspiring to violate the FCPA, violating the anti-bribery provisions of the FCPA, and violating 18 USC § 1956, a money laundering statute.

Ho appealed his conviction on the grounds that (1) there was insufficient evidence to support his convictions under 15 USC §78dd-2 (an FCPA anti-bribery provision), (2) the indictment contained “material contradictions and charged Ho under mutually exclusive sections of the FCPA,” (3) a violation of 15 USC § 78dd-3 is not a specified unlawful activity under the money laundering statute, (4) the money laundering statute does not apply to transactions that merely involve US correspondent bank transfers, and (5) the district court abused its discretion in admitting certain evidence at trial.  The Second Circuit rejected these challenges and affirmed the conviction in its entirety.

As stated in the Second Circuit Court’s opinion, the evidence at trial demonstrated that Ho was the secretary-general of China Energy Fund Committee (“CEFC HK”), a non-governmental organization based in Hong Kong.  CEFC HK funded a non-profit U.S. entity, China Energy Fund Committee (USA) Inc. (“CEFC US”), which was incorporated in Virginia.  Ho was also an officer and director of CEFC US.  As stated in the opinion, Ho engaged in two bribery schemes, the “Chad scheme” and the “Uganda scheme.”  As part of the Chad scheme, Ho attempted to pay $2 million to the president of Chad in order to obtain business related to Chad’s oilfields for China CEFC Energy Company Limited, a Shanghai-based oil and gas conglomerate that funded CEFC HK.  With respect to the Uganda scheme, according to the opinion, the Foreign Minister of Uganda solicited a bribe from Ho.  At the direction of the Foreign Minister, Ho wired $500,000 to a charity designated by the Minister.

In support of Ho’s claim of insufficient evidence to convict him of violating § 78dd-2, he argued that the DOJ had failed to establish he was acting to benefit a domestic concern.  Ho argued that, at most, the DOJ had established Ho was acting to benefit China CEFC Energy Company Limited and/or CEFC HK.  Because a domestic concern was not intended to benefit from his actions, Ho stated he could not violate § 78dd-2.  The Court, however, noted that the statutory text does not require that the improper payments be for the benefit of the domestic concern.  Rather, the statute states that a violation occurs if the payment is made “in order to assist such domestic concern in obtaining . . . business for . . . any person.” (emphasis in the opinion).   The Court then found that the jury could have concluded that Ho, acting as an officer and director of CEFC US, sought to obtain business for CEFC Energy Company Limited.

With respect to Ho’s argument that the indictment contained mutually inconsistent charges, Ho stated that because § 78dd-2 applies to domestic concerns and their officers, directors, employees, and agents, while § 78dd-3 explicitly excludes domestic concerns or any officer, director, employee, or agent of a domestic concern, he could not violate both § 78dd-2 and § 78dd-3.  The Court, however, held that an individual could fit into both provisions.  Ho did so here because he acted as a director and officer of a domestic concern (CEFC US) and acted as an agent of an entity that was not a domestic concern (China CEFC Energy Company Limited).

As for Ho’s challenges to the money laundering convictions, Ho argued that § 78dd-3 is not a specified unlawful activity because when Congress updated the money laundering statute in 1992 to include the FCPA as a specified unlawful activity, § 78dd-3 did not exist (it would become law in 1998).  Ho invoked the “reference cannon” that states that where a statute references a general subject that reference is dynamic, but where a statute references another statute, that should be understood to refer to the statute as it existed at the time of the adoption of the referring law.  The Court disagreed with Ho’s argument, holding that where the language of a statute is clear, there is no need to rely on reference cannons.  Since the money laundering statute defines as a specified unlawful activity “any felony violation” of the FCPA, the Court held that the plain meaning was that § 78dd-3 was a specified unlawful activity.

Ho also argued that his payment of $500,000 to the Ugandan charity did not violate the money laundering statute.  Ho did not dispute that the $500,000 went from HSBC Hong Kong to HSBC US to Deutsche Bank in New York to Stanbic Bank in Uganda.  Rather, he stated that such a money flow did not violate the money laundering statute because the funds did not go “to” or “from” the US but rather went “through” the US.  The Court concluded that the statute’s elements were met because the wire, in order to go from Hong Kong to Uganda, went from Hong Kong to the US and from the US to Uganda.

Lastly, the Court found no abuse of discretion on the part of the trial court in its admission of various statements and text messages into evidence.  The Second Circuit found that the statements were admissible as admissions by Ho and hence did not need to be excluded as hearsay, and that the text messages were prior consistent statements, and hence could be admitted by the trial court.

Opinion | Judgment