Should the United States Be the Global Financial Policeman? International Extradition of White-Collar Defendants
The United States needs to consider carefully whether its treaty advantages and broad jurisdictional statutes should be aggressively used to bring foreign defendants to the United States when the American interest is limited and when other countries may have a greater interest in applying their own statutes, and their own penalty structures.
By Eric Lewis
Extradition agreements date from the early days of formal legal systems. The first known agreement originated as part of a peace treaty between an Egyptian Pharaoh and a Hittite King. Such agreements reflected the reality that criminal codes and legal systems generally operated territorially and that criminal defendants had both an incentive and ability to evade responsibility with their feet—by fleeing to another jurisdiction, where they could not be tried.
The Jay Treaty of 1794 was the first treaty arrangement governing extradition between Great Britain and its recently liberated colony across the Atlantic. It contained concepts that are central to extradition today, including requirements that extradition requests be based on law rather than foreign policy considerations or politics. Subsequent treaties delineated recognized common law crimes like murder, arson, piracy, armed robbery and the like, with a clear act requirement that could be pinpointed in time and place.
As the ability of prospective defendants to move rapidly and over great distances has increased, governments have entered into numerous treaty arrangements with far-flung states. But the scope and range of criminal activity has also greatly expanded and with that expansion, the United States has sought broader rights to extradite with respect to more offenses, while being somewhat reluctant to accord similar rights to other nations under treaty.
Extradition was simple when a defendant murdered or robbed someone and then scurried across the border. But financial crime today is nearly always multi-jurisdictional and presence is often virtual rather than corporeal. Capital and information flow across borders with the click of a mouse. Investors often review or hear presentations simultaneously in multiple countries. The alleged wrongdoer may come into the United States on a very limited basis or on Zoom. Indeed, the only connection with the United States may be that payments or receipts were made in dollars that flowed instantaneously through the U.S. banking system, even if the allegedly fraudulent conduct all took place elsewhere.
Among the most frequently invoked treaty is that between the United States and the U.K. The current treaty dates from 2003 and it has been the source of continuing controversy. Recently in the U.K. Parliament, the leader of the Opposition and the Prime Minister reached rare agreement on the issue of imbalance in treaty rights. Labor Leader Corbyn stated “this lopsided treaty means the United States can request extradition in circumstances that Britain cannot.” Prime Minister Boris Johnson responded, “To be frank, I think the right honorable Gentleman has a point in his characterization of our extradition arrangements with the United States.” Among the complaints about imbalance are that the U.K. is required to meet a higher evidentiary threshold—the U.K. must provide a “reasonable basis to believe” that the person sought committed the offense; the United States need only submit the warrant and the charging document based on probably cause—to obtain extradition. The U.K. has far less discretion to refuse U.S. requests extradition, under the U.K. enabling legislation, than the United States has in analogous circumstances.
For white-collar defendants, the critical issue is whether the United States is entitled to ask the United Kingdom or another country to exercise its sovereignty to send a defendant to the United States when the connection to the United States is limited and other jurisdictions have an obviously greater interest in the conduct at issue. It is one thing to prosecute based upon limited US connections when the defendant is found within the territory of the United States. It is quite different to invoke sovereign treaty rights to force extradition of a defendant with limited connection to the United States who has been detained in another country–often the country of his residence—and insist that such a person, usually foreign, stand trial before a US jury. As a U.K. Parliamentary Select Committee summarized the frustration of countries faced with these demands: “[the United States] has the power to reach out around the world and – provided there is a very, very tenuous connection with the United States – generally has the power to prosecute.”
Thus, for example, the ‘NatWest Three,’ British nationals, executives of a British company, accused of defrauding a British company in connection with the Enron scandal, demanded to be tried in Britain. The U.K. court held that the enabling legislation for the U.S.-U.K. Treaty did not provide discretion to refuse extradition on the basis that the proper venue was the United Kingdom unless there was a human rights basis for challenge. Possibly in response, in 2013, the U.K. introduced a “forum” bar amendment, allowing extradition to be refused where a substantial measure of the requested person’s relevant activity was performed in the U.K.; and extradition would be contrary to the interests of justice. The U.S. Embassy complained “the introduction of the “forum provision” is neither necessary nor justified.”
The forum bar has not, however, proved to be a significant limitation and the United States has continued to be active in requesting extradition of white-collar defendants from the U.K. and elsewhere, including, most recently, Mike Lynch, the CEO of Autonomy, who was alleged to have made improper disclosures in connection with Hewlett Packard’s disastrous acquisition of Autonomy. The British Serious Fraud Office conducted an investigation and declined to prosecute; Lynch was then charged with conspiracy, securities fraud and wire fraud in California based upon the same issue of false representations in the acquisition.
Lynch’s legal team argued that under the forum bar, the U.K. was the more appropriate forum for prosecution. Counsel for Lynch denounced the United States as an “overweening international police force.” An influential Member of Parliament highlighted Lynch’s case, claiming that “the American judicial system operated to favor American business” and that “the United States is going after white-collar businessmen and seeking to be the judge, jury and executioner for global commercial deals.”
The same concern for white-collar defendants has not generally been expressed for non-U.K. nationals detained in London. Arif Naqvi is a Pakistani national who ran the Abraaj group, the largest emerging markets hedge fund in the world, from headquarters in Dubai. He had investors all over the world. After a serious liquidity squeeze, the fund was placed into liquidation; he was then charged with racketeering in New York and arrested in London pending extradition. His connection to the United States was far more limited than to other jurisdictions, but the court declined to apply the forum bar. The court declined to look at the alleged course of conduct “in the round,” which had a strong U.K. nexus, but only looked at conduct alleged in the U.S. indictment which, not surprisingly, focused on U.S.-based conduct and largely ignored extraterritorial acts. This allows the United States as requesting party to define the ambit of relevant activity, which will rarely permit a successful assertion of the forum bar in an international fraud case.
The concerns expressed in foreign extradition proceedings about the risks to foreign white-collar defendants are real. Because such defendants do not have “community ties,” they are often denied bail as flight risks and held under harsh conditions in federal jails like the MCC and MRC. In complex white-collar cases, counsel will need to review extensive documentation and conduct a complex investigation, leading to years-long delays until trial, during which the client sits in jail, which greatly complicates attorney-client preparation of a defense.
White-collar sentences in the United States are far longer in the United States than elsewhere in the world and there is no parole in the federal system. White-collar defendants are often charged under racketeering or other statutes originally intended to address organized crime, with sentencing lengths following accordingly. Foreign defendants are generally not eligible for halfway house placements near the end of their sentence. While wealthy defendants should not be treated differently than poor ones, there is no good reason that foreign white-collar defendants should be treated worse than domestic defendants in terms of pre-trial detention, case preparation or sentencing options.
Even more important, the United States needs to consider carefully whether its treaty advantages and broad jurisdictional statutes should be aggressively used to bring foreign defendants to the United States when the American interest is limited and when other countries may have a greater interest in applying their own statutes, and their own penalty structures. Is it fair to ship someone with negligible ties to the United States, whose business conduct in their own business culture has a tangential, perhaps unforeseen consequence in the United States, to face trial in an unfamiliar place and system, with penalties and confinement conditions that would be inconceivable in their home jurisdiction? The United States has great leverage and power, but other countries are showing increasing concern about being strong-armed to extradite. Perhaps that concern about turning over their own nationals as well as others to a criminal justice regime that causes genuine human rights concerns may spur the United States to get its own house in order.
Eric Lewis is senior partner of Lewis Baach Kaufmann Middlemiss and advises and testifies as an expert in international extradition matters, including most recently in the Julian Assange extradition.
Reprinted with permission from the March 26, 2021 edition of the New York Law Journal © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or firstname.lastname@example.org.