A word of free advice: if you’re going to try to bribe legislators to create a special zone to attract at best suspicious investment, don’t do it as an officer of a non-governmental organisation you formed in the U.S.
The story coming from the Marshall Islands has all the elements of a great spy movie: jet-setting culprits in an exotic paradise wheeling and dealing their way into the eye of a geopolitical storm before getting caught and seeing their flimsy would-be empire crumble, at least for now.
As Cary Yan and Gina Zhou, naturalised Marshallese citizens, arrived in New York and stepped, handcuffed, off a plane arriving from Thailand, the U.S attorney for the Southern District Court of New York unsealed a 24- page indictment charging the pair with violating the Foreign Corrupt Practices Act (FCPA).
The alleged crime dates back several years when the defendants proposed creating a special zone on a coral atoll where fallout from nuclear testing a generation ago drove out almost everyone.
RASAR, the Rongelap Atoll Special Administrative Region, also known as the Rongelap Atoll Special Economic Zone or Digital Special Economic Zone, officially sought to improve the economy. The zone was touted to attract foreign investment through relaxed taxation, immigration and foreign investment rules similar to the special status that Hong Kong currently exercises under the laws of China, and reminiscent of the special economic zones born almost 40 years ago that allowed places like Shanghai to dabble in capitalism.
It probably goes without saying that the expected origin of such investment would be China, and that the economic benefits would perhaps be of lesser importance than giving Beijing a foothold in the Marshall Islands, a stone’s throw from the U.S. military missile and GPS centers on Kwajalein.
Creating RASAR required that the Marshall Islands’ parliament, the Nitijela, pass legislation. So, per the allegations, the pair began to bribe unnamed officials, presumably members of the Nitijela, with interest-free loans, travel to New York and Hong Kong, and the like to ensure passage of the legislation to create the RASAR. This was facilitated through an NGO incorporated in New York.
At various times, the pair held positions as officers of the NGO, which, in fact, held itself as being of “special consultative status” to the United Nations Department of Economic and Social Affairs.
Blocking the way was then-president Hilda Heine, who refused to back the bill, saying it was unconstitutional. It prompted a vote of no-confidence, which she survived, only to be voted out of office in the next election. Ms. Heine has since called the affair a “black eye” on the nation and called for further investigation into the unnamed officials, who are not defendants in the matter.
While the intrigue is obvious – attempting to carve out a Chinese enclave in the middle of the Pacific to undercut Taiwan’s ties with the Marshall Islands and undermine the U.S security umbrella in the region, perhaps even threatening the existence of the Compacts of Free Association – the criminal charges are more mechanical, if not mundane, than the adrenalin rush from statecraft and espionage.
The FCPA criminalises any act, including a conspiracy or other effort, to pay or promise to pay anything of value to a foreign official with the corrupt intent and purpose of influencing that official to act in his or her official capacity and thus obtain some sort of business advantage.
The U.S Department of Justice has asserted that the act occurred on U.S soil, thus conferring jurisdiction: the defendants acted through an organization incorporated in New York, and the indictment alleges that the defendants planned and executed the offending transactions in New York.
The FCPA is a long-arm statute; it allows the U.S to exercise jurisdiction beyond its borders. FCPA prosecutions have come about due to the simple fact that a business is incorporated in the U.S, or a parent company owns a U.S subsidiary. FCPA’s long arm can extend even longer. The U.S can and has exercised jurisdiction by messages being sent through U.S. servers, or from money routed through a U.S bank, even when the selected currency was U.S dollars.
Which brings us back to Hilda Heine’s desire for the unnamed officials, who are not defendants in the criminal case, to face scrutiny for their part in RASAR. The FCPA targets the briber, not the bribee. Those accepting bribes normally fall outside of FCPA’s zone, but may be charged with other crimes, such as money laundering— diverting proceeds of a crime to a legitimate purpose (like robbing banks to fund a legitimate charity’s operations) or fraud.
Even if a U.S prosecutor can’t charge a non-American official under the FCPA, the nation that the person calls home—in this case the Marshall Islands—can.
In regions where the rule of law is marked by hierarchical deference and less than thorough courts and prosecutors, local prosecution sometimes means no prosecution.
The story is just beginning. We’ll see how much global geo-political strategy unfolds in a New York courtroom, and how wide the FCPA’s footprint can be.
Gabriel McCoard is an attorney who previously worked in Palau and Chuuk State.
The opinions expressed in this article are those of the authors and do not necessarily reflect the opinions of this publication.