## Facts

- James H. Giffen, a U.S. citizen and executive of Mercator Corporation, was charged with offenses arising from oil and gas business dealings involving Kazakhstan.
- A superseding indictment alleged that, between 1995 and 1999, Giffen arranged over $78 million in unlawful payments to senior Kazakh officials to secure business for Mercator.
- The alleged conduct involved complex transactions and use of international financial channels to conceal payments.
- The indictment also alleged that profits from the Kazakhstan business were used to direct unreported compensation to a Mobil executive, a Mercator employee, and Giffen.
- Giffen asserted that certain conduct was authorized by Kazakh officials and that adjudicating the case would require a U.S. court to pass on Kazakhstan’s sovereign acts.
- Portions of certain mail and wire fraud counts alleged a scheme to deprive the citizens of Kazakhstan of the “honest services” of their public officials under 18 U.S.C. § 1346.
- Giffen moved to dismiss Counts 1–59 under the act of state doctrine and to dismiss the foreign “honest services” portions of Counts 15–23.

## Issues

1. Whether the act of state doctrine barred prosecution of Counts 1–59 because the alleged conduct was intertwined with Kazakhstan’s official decisions and policies.
2. Whether 18 U.S.C. § 1346 supports mail and wire fraud charges based on depriving foreign citizens of the honest services of foreign government officials, where duties arise under foreign law.

## Decision

- The court denied the motion to dismiss Counts 1–59 on act of state grounds.
- The court granted the motion to dismiss the portions of Counts 15–23 premised on depriving Kazakh citizens of the honest services of Kazakh officials under § 1346.
- The ruling left the remaining charged theories and counts intact, aside from the excised foreign honest-services theory.

## Legal Principles

- The act of state doctrine is limited to preventing U.S. courts from invalidating or judging a foreign sovereign’s official acts within its own territory; it does not automatically shield alleged bribery, money laundering, or other commercial/criminal conduct tied to foreign officials.
- A prosecution may proceed where adjudication does not require declaring invalid any official act of a foreign sovereign, even if the facts involve foreign government actors.
- Section 1346 was construed as restoring pre-existing domestic “intangible rights” doctrine rather than creating a broad, novel theory reaching foreign officials’ duties to foreign citizens.
- Applying § 1346 to alleged breaches of duty defined by foreign law and practice, without clear statutory direction or settled precedent, raises vagueness concerns because it fails to provide clear notice of what conduct is prohibited.
- International comity concerns counsel against interpreting § 1346 to police a foreign government’s internal official duties absent explicit congressional authorization.

## Conclusion

The court allowed the FCPA-related and associated fraud and laundering prosecution to proceed because the act of state doctrine did not require dismissal, but it struck the mail and wire fraud theory that relied on § 1346 to criminalize alleged deprivation of “honest services” owed by Kazakh officials to Kazakh citizens, finding that application unsupported by established precedent and impermissibly vague in a foreign-law setting.


United States v. Giffen, 326 F. Supp. 2d 497 (S.D.N.Y. 2004)