To the surprise of absolutely no one, former Corsa Coal executive Charles ‘Hunter’ Hobson was found guilty last week for FCPA violations. As most readers of this blog know, I am a recovering trial lawyer. I almost always represented corporations as defense counsel during my trial lawyer career. In the trial lawyer world, there are four recognized defenses to any claim, which are known as the “Dog Bite Defenses”. They are:
- My dog didn’t bite you.
- Even if my dog did bite you, it’s because you provoked him.
- Even if my dog did bite you, you really aren’t injured.
- My dog didn’t bite you because I don’t have a dog.
The fourth version of the Dog Bite defense is certainly an ‘all-in’ move. You had either (1) better be right or (2) have some big kahunas to make that argument to a jury with a straight face.
Defense No. 1 – Hobson did not pay or direct anyone to pay.
Hobson’s attorneys said the government was overreaching by charging Hobson with FCPA violations on several grounds. His lawyer argued that Hobson did not know, pay, or direct Nassar to bribe anyone. “Mr. Hobson never saw Ahmed the broker pay any money to anyone,” his attorney told the jury in the opening. Further, Hobson never hired Ahmed, the broker, and claimed that Mr. Hobson never paid him. Corsa hired Ahmed, the broker; Corsa paid Ahmed, the broker; and Corsa approved Ahmed’s commissions, not Mr. Hobson.
Defense No. 2- Social custom in Egypt says it’s OK to pay a bribe.
Attorneys for Hobson tried to undermine the government’s expert witness by pointing to opinions he had given that bribery was not only not illegal in Egypt but actually socially acceptable. They confronted Mohamed Arafa, an adjunct professor focusing on comparative law at Cornell University, with law review articles he had previously written, where he said that corruption was “commonly accepted and had become the ‘social law’” in Egypt. The Professor distinguished the expert opinion on Egyptian law that he offered at trial and “his prior, scholarly opinions on whether people adhered to that law in modern Egypt. Santoni quoted him saying, “I’m not here to talk about that; I’m here to talk about the law,” Arafa said. ” … Saying something like that does not make the act legal.””
Defense No. 3- His bosses approved it.
Here, Hobson tried to argue that once Nassar was paid his commission, which was due and owing, it was not up to Hobson what Nassar did with it, nor was it “Corsa’s money” any longer. Hobson’s attorney also said that “Mr. Hobson never saw Ahmed, the broker, pay any money to anyone,” Price said. “Mr. Hobson never hired Ahmed the broker, Mr. Hobson never paid Ahmed the broker. Corsa hired Ahmed the broker, Corsa paid Ahmed the broker, and Corsa approved Ahmed’s commissions, not Mr. Hobson.” His counsel also said that Hobson had been tasked with opening up new foreign markets for Corsa. Having never dealt in Egypt before, he spoke with employees of a company that had recently merged with Corsa and had done business there, who connected him with Nassar.
Defense No. 4-Ahmed wasn’t a government official.
Here was the truly all-in defense (I don’t own a dog). It was that Ahmed was not a government official or did not work at an instrumentality of the Egyptian government. In his cross-examination of cooperating witness Frederick Cushmore, Jr., who worked for Hobson, his defense counsel questioned Cushmore about any indications he had that Al Nasr was affiliated with the Egyptian government. Obviously, trying to take the entire case out of an FCPA criminal action by alleging that one of the elements of an FCPA was not present. The issue is that payments are being directed to a government official or to someone at a government-affiliated company. But Cushmore said it was “industry knowledge” and pointed to a 2017 email from Hobson that said both the shipping company and Al Nasr were “Egyptian-owned companies”. Counsel then questioned whether Hobson really meant that to indicate “owned by the Egyptian government.”
Two prosecution witnesses eviscerated Hobson’s defense. The first was Frederick Cushmore Jr., who pled guilty to conspiring to violate the FCPA. He agreed to testify against Hobson, said their emails and WhatsApp messages talked about people at Al Nasr Co. for Coke and Chemicals being “taken care of” by keeping Corsa’s agent, Ahmed Nassar, paid high commissions for the sales he brought in, implying that Nassar’s higher-than-normal pay was being passed on as bribes to Al Nasr officials.
According to Matthew Santoni reporting in Law360, “Cushmore read a November 2016 email from Hobson, then a vice president of sales at the Somerset County, Pennsylvania-based coal mining company, that said there were “a few the agent has to take care of” during an early discussion of Nassar’s proposed commission payments. “I took that as people at Al Nasr who would be receiving bribes… I was shocked at how open the discussion was,” Cushmore, whom prosecutors said held various international sales positions with Corsa Coal. “I simply said, I suspected… ‘What’s he doing with all that money?’ Mr. Hobson said, ‘What do you think he’s doing with all that money?'””
The second was Mohamed Arafa, an adjunct professor focusing on comparative law at Cornell University. He made clear, in no uncertain terms, that bribery of government officials was illegal under Egyptian law, not a matter of social custom. The defense had no rebuttal for either witness’s testimony.
Although the trial lasted over one week, the jury was out for less than one day before finding the defendant guilty. The sentencing date has not been set.
Join us tomorrow, where we look at the lessons a compliance professional can draw from the Hobson trial.
Resources:
Articles by Matthew Santoni in Law360
Coal Exec Knew Egyptian Broker Paid Bribes, Jury Told
Coal Exec’s Co-Worker Says Emails Hinted At Egypt Bribes
Egypt’s ‘Social Law’ Doesn’t Endorse Bribery, Jury Told
Coal Exec Used ‘Mr.. Yen’ To Talk Kickbacks, FBI Testifies
