United States Court of Appeals Affirms Sentence of Defendant in EBRD-Related FCPA Prosecution

On November 8, the United States Court of Appeals for the Third Circuit affirmed the sentence of Dmitrij Harder, who had pleaded guilty in 2016 to two counts of violating the Foreign Corrupt Practices Act (FCPA).  At the time of his guilty plea, Harder, the former owner and president of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. (the Chestnut Group), admitted that between 2007 and 2009, he engaged in a scheme to pay approximately $3.5 million in bribes to an official of the European Bank for Reconstruction and Development (EBRD), to corruptly influence the official’s actions on applications for EBRD financing submitted by the Chestnut Group’s clients and to influence the official to direct business to the Chestnut Group.

Prior to Harder’s sentence, the Probation Office in the United States District Court for the Eastern District of Pennsylvania calculated an advisory range, under the United States Sentencing Guidelines, of 87-108 months’ imprisonment.  At the sentencing hearing, government prosecutors moved for a downward departure, pursuant to section 5K1.1 of the Sentencing Guidelines, in recognition of Harder’s cooperation and testimony during a related corruption trial in England that secured convictions against his former clients. The district court granted the government’s request for downward departure, which resulted in a Guidelines range of 57-71 months’ imprisonment.

Harder sought, but did not receive, an additional downward departure on three grounds that he advanced: (1) the proposed sentence was substantially greater than the average sentence for individual FCPA defendants; (2) “the bribes that he paid did not result in a loss to any victim; and (3) the two projects for which he corruptly sought financing proved successful and highly beneficial to the Eastern Siberia region.”  At sentencing, even after Harder’s counsel “continued to argue that Harder’s actions were less culpable due to the allegedly positive outcome,” the district court remained unpersuaded and sentenced Harder to 60 months’ incarceration (a sentence within the Guidelines range) and approximately $2 million in financial penalties.

On appeal, Harder alleged two procedural errors:

  1. Mitigation: Harder argued that the district court denied him a fundamentally fair sentencing hearing when it refused to hear or consider counsel’s argument in mitigation of offense severity. On this issue, the Third Circuit panel noted that “the record clearly reflects that the district court afforded meaningful consideration to Harder’s mitigation argument,” which it indicated is all that a sentencing court must give to a defendant’s sentencing arguments. It concluded that “the district court did not err by declining to grant Harder’s downward variance on the grounds that his conduct was allegedly less harmful than that of other FCPA defendants.”
  2. Unwarranted Disparity: Harder argued that the district court refused to comply with the statutory obligation to avoid unwarranted sentencing disparities.  On this issue, the panel rejected Harder’s argument, stating that “Harder does not challenge the calculation of his Guidelines range but simply objects to the district court’s refusal to grant a downward variance.”

Note: The decision in this case is not included among published Third Circuit opinions, probably because Harder’s issues on appeal were neither issues of first impression nor arguments that the court considered meritorious enough to warrant detailed analysis.  Three observations are still in order.

First, it should be noted that the sentencing court gave Harder credit for cooperation with the authorities (in the form of a downward departure) due to his testimony in a non-U.S. judicial proceeding.  The language of Guidelines section 5K1.1 states that a federal court may grant a departure from a Guidelines sentence “[u]pon motion of the government stating that the defendant has provided substantial assistance in the investigation or prosecution of another person who has committed an offense.”  Although it might seem that this basis for departure would pertain only to U.S. investigations and prosecutions, neither the text nor the Guidelines commentary thereon contain any limiting language to that effect.

The fact that the government was willing to file a section 5K1.1 motion for Harder’s assistance in a foreign trial indicates that the Justice Department is willing to construe section 5K1.1 expansively, at least in cases where the defendant may be able to render substantial assistance in a foreign prosecution.  It is noteworthy that in its successful prosecution of the EBRD banker whom Harder bribed, Andrey Ryjenko, the United Kingdom Crown Prosecution Service did not mention Harder by name, but credited “effective cross-border partnerships between a number of jurisdictions, including the United States” for making Ryjenko’s conviction possible.

Second, Harden’s argument regarding unwarranted disparity in FCPA sentencings was critically deficient in two respects.  One is the failure to raise the additional issue that the Third Circuit had identified: i.e., challenging the sentencing court’s calculation of the Guidelines range as well as raising the variance issue.  There is no guarantee that the Third Circuit would have found any greater merit in that additional issue, but its absence from the appeal clearly played a role in the panel’s reasoning.

The other is that Harder might have had greater success with his argument had he been able to show significant disparities between his sentence and the sentences of other co-defendants in the case.  Unfortunately for Harder, there were apparently only two other people prosecuted in connection with the bribery, and both were prosecuted in the United Kingdom.  The banker whom Harder bribed, Ryjenko, was sentenced after his London trial in June 2017 to six years’ imprisonment, and Ryjenko’s sister, Tatyana Sanderson, had been declared unfit to stand trial but pleaded guilty to laundering Ryjenko’s bribe payments through accounts in her name and received a suspended sentence of two years’ imprisonment in September 2018.   While reference to those facts would have taken the Third Circuit well outside the record of Harder’s appeal, it might have provided a further basis for the Third Circuit to conclude that Harder had not been the victim of unwarranted disparity in his sentence.

Third, it seems plain that Harder should never have raised the argument, at sentencing or on appeal, that he should be given favorable consideration for a further variance because his bribery of Ryjenko made people in Eastern Siberia more prosperous.  Apart from the fact that the FCPA contains no “bribery creates positive externalities” defense, on a more fundamental level courts are unlikely ever to reward a defendant for criminal conduct that arguably benefited third parties who did not participate in the crime itself.  A defendant who robs Peter to pay Paul should not be able to claim that he deserves leniency because Paul was genuinely deserving of and benefited from the money.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s