Case 8:09-cr-00077-JVS Document 352

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Kimberly A. Dunne (SBN 142721) kdunne@sidley.com SIDLEY AUSTIN LLP 555 W. Fifth Street, Suite 4000 Los Angeles, CA 90013-1010 Phone: 213 896-6000, Fax: 213 896-6600 Attorneys for Defendant, HONG CARSON Nicola T. Hanna (SBN 130694) nhanna@gibsondunn.com GIBSON DUNN & CRUTCHER LLP 3161 Michelson Drive, Suite 1200 Irvine, CA 92612 Phone: 949 451-3800, Fax: 949 451-4220 Attorneys for Defendant, STUART CARSON Thomas H. Bienert, Jr. (SBN 135311) tbienert@bmkattorneys.com BIENERT, MILLER & KATZMAN, PLC 903 Calle Amanecer, Suite 350 San Clemente, California 92673 Phone: 949 369-3700, Fax: 949 369-3701 Attorneys for Defendant, PAUL COSGROVE David W. Wiechert (SBN 94607) dwiechert@aol.com LAW OFFICES OF DAVID W. WIECHERT 115 Avenida Miramar San Clemente, CA 92672 Phone: 949 361-2822, Fax: 949 496-6753 Attorneys for Defendant, DAVID EDMONDS

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION UNITED STATES OF AMERICA Plaintiff, v. STUART CARSON, HONG CARSON, a/k/a “Rose Carson,” PAUL COSGROVE, DAVID EDMUNDS, FLAVIO RICOTTI, and HAN YONG KIM, Defendants. CASE NO. SA CR-09-0077-JVS EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON IN SUPPORT OF GOVERNMENT’S OPPOSITION TO DEFENDANTS’ AMENDED MOTION TO DISMISS COUNTS ONE THROUGH TEN OF THE INDICTMENT OR, IN THE ALTERNATIVE, FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON THE MOTION

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TO THE HONORABLE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD: Defendants Stuart Carson, Hong “Rose” Carson, Paul Cosgrove and David Edmonds (“Defendants”) hereby apply ex parte to strike the Declaration of Clifton M. Johnson, which the Government submits in support of its Opposition to Defendants’ Amended Motion to Dismiss Counts One Through Ten of the Indictment (the “Opposition,” Doc. No. 332). In the alternative, Defendants apply for an order requiring that Mr. Johnson appear at the May 9, 2011 hearing on Defendants’ motion to dismiss. Counsel for Paul Cosgrove and Hong Carson notified the Government of this Application and the relief sought, and inquired whether the Government is going to make Mr. Johnson available to testify at the hearing on May 9, 2011. On May 2, 2011, the Government informed Counsel for Defendant Cosgrove that it would not agree to strike Mr. Johnson’s declaration, and would inquire whether the government is going to make Mr. Johnson available. As of the time of this filing, the Government has not confirmed the Government’s position with defense counsel. See Declaration of Andrew J. Dunbar (“Dunbar Decl.”) ¶ 7. Accordingly, pursuant to this Court’s “Procedures and Schedules,” the Government’s Opposition to this ex parte application “must be filed not later than 24 hours” after this ex parte application is served. This Application is based on the attached Memorandum of Points and Authorities, the declaration of Andrew J. Dunbar, the Court’s entire file in this case, and any additional evidence or argument offered at the hearing on this matter.

DATED: May 2, 2011

Respectfully submitted, SIDLEY AUSTIN LLP By: S/Kimberly A. Dunne Kimberly A. Dunne Attorneys for Defendant HONG CARSON

EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON THE MOTION

Case 8:09-cr-00077-JVS Document 352

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GIBSON, DUNN & CRUTCHER LLP S/Nicola T. Hanna Nicola T. Hanna Attorneys for Defendant STUART CARSON BIENERT, MILLER & KATZMAN PLC S/Thomas H. Bienert, Jr. Thomas H. Bienert, Jr. Attorneys for Defendant PAUL COSGROVE

LAW OFFICES OF DAVID W. WIECHERT S/David W. Wiechert David W. Wiechert Attorneys for Defendant DAVID EDMONDS

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EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON THE MOTION

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MEMORANDUM OF POINTS AND AUTHORITIES Defendants hereby apply ex parte to strike the declaration of Clifton M. Johnson, which the Government submits in support of its Opposition to Defendants’ Amended Motion to Dismiss Counts One Through Ten of the Indictment (“Johnson Decl.,” Doc. No. 333). The Government attached the declaration to provide this Court with an opinion on the impact of the Court’s interpretation of the Foreign Corrupt Practices Act (“FCPA”) on the United States’ relations with the international community. Johnson Decl. ¶ 7. Specifically, Mr. Johnson states that the term “foreign public official” in the Organization for Economic Co-operation and Development (“OECD”) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”) includes employees of state-owned entities and that construing the FCPA in a way that is noncompliant with the Convention would have “serious consequences” to U.S. foreign policy. Id. at ¶¶ 3-4, 7. In reaching his conclusion, Mr. Johnson discusses the United States’ role in negotiating the Convention’s provisions and the United States’ interpretation of them, and the United States’ efforts to conform its domestic legislation to the requirements of the Convention. Id. at ¶¶ 2 (history of the United States’ negotiation of the Convention), 3 (text of the Convention), 4 (text of selected Commentaries to the Convention), 5 (United States’ interpretation of its obligations under the Convention), 6 (history of United States’ assertions relating to the Convention), 7 (argument on the foreign policy impact of interpreting the FCPA inconsistently with the Convention). The Government attempts to use Mr. Johnson’s declaration as a means to introduce into evidence inadmissible hearsay, unqualified expert testimony, and wholly irrelevant information. For these reasons, Defendants request that the Court strike Mr. Johnson’s declaration or, in the alternative, order Mr. Johnson to appear at the hearing on Defendants’ motion to dismiss.1 Notably, the Government offers this declaration just one month after Johnson’s identical declaration was stricken by the court in United States v. Aguilar. Dunbar Decl., Exh. A (Johnson Declaration); Id., Exh. B (Order Granting Application to
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EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON THE MOTION

Case 8:09-cr-00077-JVS Document 352

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I.

Mr. Johnson’s Declaration Is Inadmissible A. Mr. Johnson’s Declaration Is Based On Inadmissible Hearsay

Declarations are required to “be made on personal knowledge [and] set out facts that would be admissible in evidence.” Fed. R. Civ. Proc. 56(c)(4); Local Rule Civ. Proc. 7-7 (“Declarations shall contain only factual, evidentiary matter and shall conform as far as possible to the requirements of F.R.Civ.P. 56(c)(4).”); Local Rule Crim. Proc. 57-1. Mr. Johnson’s declaration should be stricken because it is based largely on inadmissible hearsay. See Fed. R. Evid. 801 (defining “hearsay” as an out of court statement offered to prove the truth of the matter asserted). For example, Mr. Johnson offers the statements of “the United States,” and at least one United States official, regarding the United States’ interpretation of the Convention, its compliance with the Convention’s provisions, and its motivation in entering into the Convention. Johnson Decl. ¶¶ 2, 5, 6. None of these statements falls within an exception to the hearsay rule. See Fed. R. Evid. 803. Mr. Johnson’s declaration should therefore be stricken. B. Mr. Johnson’s Declaration Offers Inadmissible Expert Testimony

Mr. Johnson’s declaration should also be stricken because it includes improper alleged expert testimony regarding the Convention, the FCPA, and the foreign policy impact should the Court adopt an interpretation of the FCPA that is inconsistent with the Government’s present view. In order for Mr. Johnson to offer his opinions on these subjects, he must be “qualified as an expert” and his opinions must be reliable and “based upon sufficient facts or data.” Fed. R. Evid. 702. Neither of these requirements are met. The Government has made no effort to qualify Mr. Johnson as an expert on the issues he is addressing, beyond stating his title and that he is “familiar with international anti-corruption law and practice.” Moreover, the Government has failed Strike). The same declaration is also the subject of a pending motion to strike in United States v. O’Shea. Id., Exh. C (Johnson Declaration); Id., Exh. D (Motion). 2
EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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to sufficiently identify the facts or data upon which Mr. Johnson relied in reaching a number of his conclusions. See Johnson Decl. ¶ 2-7. Mr. Johnson’s declaration fails to satisfy the requirements for expert testimony and should be stricken. II. Mr. Johnson’s Testimony Is Irrelevant To These Proceedings And Should Be Stricken In addition to striking the declaration because it contains inadmissible hearsay and unqualified expert opinions, the Court should strike Mr. Johnson’s declaration because the information he provides is irrelevant. Mr. Johnson’s declaration is purportedly being offered to aid the Court in determining whether Defendants’ interpretation of the FCPA complies with the Convention. Opposition 32:15-20. The Government contends this information is relevant because, pursuant to the Charming Betsy doctrine, “an act of Congress ought never to be construed to violate the law of nations if any other possible construction remains.” Opposition 28:23-25 (emphasis added). 2 But the opinion of one employee of the Department of State, or even of the Department of State as a whole, regarding the terms of the Convention and what the treaty required of the United States, as well as the meaning of the FCPA, has no bearing on the matter before the Court. Evidence is relevant if it aids the trier of fact in making a factual determination. Fed. R. Evid. 401 (“‘Relevant evidence’ means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable.”). Determinations regarding the proper interpretation of the law, including treaty provisions, are not factual in nature. Rather these determinations are legal matters within the exclusive jurisdiction of the courts. Wang v. Masaitis, 416 F.3d 992, 998 (9th Cir. 2005) (holding that the judicial branch, rather than Congress
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The Government misstates the principles outlined in Murray v. The Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 2 L. Ed. 208 (1804). Charming Betsy is “not an inviolable rule of general application, but a principle of interpretation that bears on a limited range of cases.” Serra v. Lappin, 600 F.3d 1191, 1198 (9th Cir. 2010). As discussed in Defendants’ reply, this is not such a case. 3
EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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or the President, was endowed with the duty of interpreting constitutional provisions (citing Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L. Ed. 60 (1803))); United States v. Washington, 774 F.2d 1470, 1481 (9th Cir. 1985) (“Treaty interpretation is the province of the courts”); Hopson v. Kreps, 622 F.2d 1375, 1380 (9th Cir. 1980) (endorsing the government’s observation that “[i]t is the role of the judiciary to interpret international treaties”). Mr. Johnson’s declaration is not relevant for any purpose, but especially to determining the consistency of the FCPA and the Convention, because this is a purely legal determination that should be unaffected by any of the factual matters addressed by Mr. Johnson’s declaration (e.g. the United States’ motivations in enacting the Convention, the positions it has taken with respect to the Convention’s terms, its efforts to amend the FCPA, or the alleged foreign policy ramifications of noncompliance). See Johnson Decl. ¶¶ 2-7. Similarly, Mr. Johnson’s opinion that “the United States would be out of compliance with… [the] Convention” if the Court adopts Defendants’ interpretation of the term ‘foreign official’ constitutes an impermissible legal conclusion and should be stricken. Opposition 32:18-19; See Plush Lounge Las Vegas LLC v. Hotspur Resorts Nevada Inc., 371 Fed. Appx. 719, 720 (9th Cir. 2010) (striking expert declaration that “presented legal conclusions”); Wang, 416 F.3d at 998. Mr. Johnson’s declaration is therefore irrelevant, as it does nothing to aid the court in resolving the relevant issue raised by the Government’s argument regarding the Charming Betsy doctrine: whether by law the FCPA must be interpreted identically with the Convention. Mr. Johnson’s testimony about the foreign policy implications associated with not extending the FCPA to employees of state-owned entities is similarly irrelevant (and misplaced). Contrary to Mr. Johnson’s suggestion, the United States has never entirely adopted the requirements of the Convention. For example, the United States excepts all facilitation payments, while the Convention criminalizes all but “small” facilitation payments. See Hanna Decl. (Doc. No. 307), Exh. G (OECD’s Phase II 4
EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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Report on the U.S.) at ¶ 114 (“The language in the FCPA, which excludes from the definition of bribery those payments which are necessary to facilitate the performance of routine administrative actions, is not limited to ‘small’ facilitation payments as in the Convention”).3 Moreover, while Mr. Johnson asserts that if the FCPA excludes payments to employees of state-owned enterprises the United States will be noncompliant with the Convention, the Government has suggested there is at least one alternative theory for prosecution of Defendants’ alleged conduct via the Travel Act. Mr. Johnson’s prediction that there will be serious consequences to United States foreign policy if the Court decides in favor of Defendants is also belied by the fact that United States enforcement of the FCPA was minimal for over five years after it adopted the Convention and no serious harm was done to United States’ relations with its neighbors. Indeed, none of the Convention signatories have prosecuted foreign bribery as aggressively as the United States. Dunbar Decl., Exh. E (OECD ANNUAL REPORT 2010) at 17 (noting that 24 of 38 signatories have never sanctioned an individual or company for violating foreign bribery laws). Even if the signatories had any concerns, Congress can quickly remedy the situation by amending the FCPA if that is its desire. Finally, despite Mr. Johnson’s assertions otherwise, the alleged detrimental effects of excluding payments to employees of state-owned enterprises are likely to be minimal because, as pointed out by Special Agent Smith, there are antibribery provisions in many countries that apply to domestic commercial bribery involving state owned-corporations that can be used to combat excesses by foreign corporations. See Smith Declaration (Doc. No. 334) ¶ 7 (discussing the Chinese Criminal Code provisions criminalizing payments to employees of state-owned and privately-owned enterprises).

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Facilitation payments are those payments intended “to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.” 15 U.S.C. § 78dd-1(b). 5
EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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4

Mr. Johnson’s declaration also should not be relied upon to the extent it offers excerpts from the text of the Convention. The full text of the Convention is already before the Court. See Koehler Decl. (Doc. No. 305), Exh. 85 (OECD Convention). Indeed, Mr. Johnson fails to identify all the relevant provisions of the Convention in his declaration. For example, Mr. Johnson discusses Commentary 14 to the Convention (which defines ‘public enterprises’), Johnson Decl. ¶ 4, but fails to mention Commentary 15’s exception for enterprises that “operate[] on a normal commercial basis in the relevant market” (which is an exception that is especially relevant to Defendants’ position in this matter). Koehler Decl. (Doc. No. 305), Exh. 85 (OECD Convention) [hereinafter “OECD Convention”], Commentaries ¶ 15. Mr. Johnson also fails to mention Article 5 of the Convention, which grants countries leeway in determining the rules and principles governing prosecutions of the acts covered under the Convention. See Koehler Decl. (Doc. No. 305), Exh. 85 (OECD Convention), Article 5 (“Investigation and prosecution of bribery of a foreign public official shall be subject to the applicable rules and principles of each Party.”). He similarly ignores the fact that the United States has made clear its position that political and economic considerations should not influence prosecutive decisions under the FCPA. McCormick Decl. (Doc. No. 335), Exh. E (U.S. Response to OECD Questions Concerning Phase I) ¶ 5.2 (“FCPA prosecution decisions are based on the merits of the case, not political or economic considerations”).4 Finally, he omits any discussion of the provisions of the Convention and the FCPA addressing facilitation payments, which as discussed above, are relevant to demonstrating that the FCPA has never criminalized all the conduct covered by the Convention. See OECD Convention, Article 1 (establishing criminal liability for payments to foreign public officials); OECD Convention, Commentaries ¶ 9 (excepting “small facilitation To the extent Mr. Johnson’s declaration asserts that foreign policy considerations are relevant to determining whether to prosecute payments to employees of state-owned entities, it directly contravenes this provision. 6
EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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payments”); 15 U.S.C. § 78dd-1(b) (excepting all facilitation payments). Given Mr. Johnson’s incomplete description of the Convention, the Court should not rely on his declaration for its terms. III. If Mr. Johnson’s Declaration Is Accepted Into Evidence, Mr. Johnson Should Be Required To Appear Even though the Government submitted Mr. Johnson’s declaration and urges this Court to rely on his testimony to deny the Motion to Dismiss, the Government has not informed Defendants if Mr. Johnson will be available for cross-examination. See Dunbar Decl. ¶ 7. If the Court accepts Mr. Johnson’s declaration into evidence, Defendants request that the Court order that Mr. Johnson appear for cross-examination at the hearing on Defendants’ Motion to Dismiss. See Local Rule Civ. Proc. 7-6 (“[T]he Court may, in its discretion, require or allow oral examination of any declarant or any other witness.”); Local Rule Crim. Proc. 57-1.

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EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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IV.

Conclusion For the reasons set forth above, Defendants respectfully request that the Court

grant Defendants’ Application to Strike the Declaration of Clifton M. Johnson.

DATED: May 2, 2011

Respectfully submitted, SIDLEY AUSTIN LLP By: S/Kimberly A. Dunne Kimberly A. Dunne Attorneys for Defendant HONG CARSON

GIBSON, DUNN & CRUTCHER LLP By: S/Nicola T. Hanna Nicola T. Hanna Attorneys for Defendant STUART CARSON BIENERT, MILLER, WEITZEL & KATZMAN PLC By: S/Thomas H. Bienert, Jr. Thomas H. Bienert, Jr. Attorneys for Defendant PAUL COSGROVE

LAW OFFICES OF DAVID W. WIECHERT By: S/David W. Wiechert David W. Wiechert Attorneys for Defendant DAVID EDMONDS

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EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON OR FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION

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LA1 2075192

CERTIFICATE OF SERVICE I hereby certify that on May 2, 2011, I electronically filed the foregoing EX PARTE APPLICATION TO STRIKE DECLARATION OF CLIFTON M. JOHNSON IN SUPPORT OF GOVERNMENT’S OPPOSITION TO DEFENDANTS’ AMENDED MOTION TO DISMISS COUNTS ONE THROUGH TEN OF THE INDICTMENT OR, IN THE ALTERNATIVE, FOR AN ORDER REQUIRING MR. JOHNSON TO APPEAR AT THE HEARING ON DEFENDANTS’ MOTION with the Clerk of the Court by using the CM/ECF system, which will send a notice of electronic filing to the following: Andrew Gentin — andrew.gentin@usdoj.gov Douglas F. McCormick — USACAC.SACriminal@usdoj.gov, doug.mccormick@usdoj.gov Hank Bond Walther — hank.walther@usdoj.gov Charles G. LaBella — charles.labella@usdoj.gov Kimberly A. Dunne — kdunne@sidley.com David W. Wiechert — dwiechert@aol.com Thomas H. Bienert, Jr. — tbienert@ bmkattorneys.com Kenneth M. Miller — kmiller@bmkattorneys.com Teresa C. Alarcon — talarcon@ bmkattorneys.com Marc S. Harris — mharris@scheperkim.com, vkirkland@scheperkim.com Jean M. Nelson — jnelson@scheperkim.com

/s/Andrew J. Dunbar Andrew J. Dunbar

PROOF OF SERVICE

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