## Facts

- American Rice, Inc. (ARI), a publicly held Texas corporation, exported rice to Haiti through its Haitian subsidiary, Rice Corporation of Haiti (RCH).
- ARI executives David Kay (Vice President for Caribbean Operations) and Douglas Murphy (President) arranged payments to Haitian officials to reduce or avoid customs duties and taxes on imported rice.
- The scheme included: purchasing duty-free import “franchises” intended for charities; obtaining a “service corporation” designation to avoid certain taxes; underreporting imports and paying officials to accept the underreporting; and paying officials to resolve problems caused by the underreporting.
- Kay disclosed the conduct to ARI’s counsel; an SEC investigation followed, leading to criminal prosecution.
- The district court initially dismissed the indictment, concluding the FCPA did not reach bribes aimed at reducing duties and taxes; the Fifth Circuit reversed and remanded in an earlier appeal.
- After remand, a jury convicted Kay and Murphy of FCPA violations; Kay was also convicted of obstruction of justice.
- Defendants appealed their convictions and sentences, raising statutory, constitutional, instructional, evidentiary, and sentencing challenges.

## Issues

1. Whether applying the FCPA to bribes intended to reduce foreign customs duties and taxes violated due process for lack of fair notice or constituted an unforeseeable judicial expansion of criminal liability.
2. Whether the FCPA was unconstitutionally vague as applied, or required a narrower construction under the rule of lenity.
3. Whether the jury instructions correctly stated the FCPA’s “corruptly” and “willfully” mens rea requirements, including whether willfulness required knowledge of the specific FCPA provision.
4. Whether the indictment adequately alleged essential elements, including willfulness and use of interstate commerce.
5. Whether challenged evidentiary rulings (including exclusion of Haitian tax receipts) and references to Kay’s refusal to answer certain SEC questions required reversal.
6. Whether Murphy’s sentence was improperly enhanced for abuse of a position of trust under the Sentencing Guidelines.

## Decision

- The Fifth Circuit affirmed the convictions and sentences.
- The court held that bribes to reduce customs duties and taxes can fall within the FCPA’s “obtain or retain business” element when intended to improve competitiveness or profitability in a way tied to obtaining or keeping business.
- The court rejected due process/fair-notice and vagueness challenges, concluding the statute provided sufficient notice as applied.
- The court declined to apply the rule of lenity because the statute, structure, and legislative history did not present grievous ambiguity after proper interpretation.
- The court upheld the jury instructions on “corruptly” and “willfully,” concluding the government did not need to prove defendants knew the specific FCPA text, only that they knew their conduct was unlawful.
- The court found the indictment sufficient and found no reversible evidentiary or Fifth Amendment error arising from the challenged trial rulings.
- The court upheld Murphy’s abuse-of-trust enhancement, finding his corporate role facilitated commission of the offenses.

## Legal Principles

- The FCPA’s “obtain or retain business” requirement may be satisfied by bribes that reduce foreign taxes or customs duties when the purpose is to obtain or keep business by improving the payer’s competitive or profit position.
- Due process fair-notice limits on criminal statutes are not violated where statutory text, interpreted in light of context and legislative history, gives adequate warning that the charged conduct is criminal.
- The rule of lenity applies only when, after ordinary interpretive tools are used, a grievous ambiguity remains.
- Under the FCPA, “willfully” does not require proof that the defendant knew the precise statute or provision violated; it is enough that the defendant knew the conduct was unlawful.
- An indictment is assessed by practical standards and is sufficient when it alleges the essential elements and provides adequate notice, including the interstate-commerce nexus when required.
- A position-of-trust enhancement applies when the defendant’s role of authority and discretion materially facilitates commission or concealment of the offense.

## Conclusion

The Fifth Circuit upheld FCPA convictions for bribery designed to reduce Haitian customs duties and taxes, holding that such payments can satisfy the “obtain or retain business” element when intended to secure business advantages, and it rejected defendants’ constitutional, instructional, evidentiary, and sentencing challenges.


United States v. Kay, 513 F.3d 432 (5th Cir. 2007)