Even if you are not a professional golf fan (and most certainly if you are), you may have heard that there is a new golf league called LIV Golf.
As described on its website, LIV’s “new eight event series will take place from June – October 2022 across North America, Europe, Middle East, and Asia. It is an opportunity to reinvigorate golf through a structure that adds value to the entire sport while helping to bring new audiences to the game through a cutting-edge entertainment product.”
LIV Golf is financed by the Saudi Arabian Public Investment Fund (“PIF”), one of the largest sovereign wealth funds in the world, Because of this, as well as certain recent events in Saudi Arabia, LIV Golf has generated a substantial amount of controversy even though PIF also has made substantial investments in many companies including Cummins, FedEx, Pinterest, Uber, Visa and Walmart. (See here for PIF’s most recent Form 13F filing with the SEC).
Controversy aside, the question arises whether golfing legend Greg Norman (pictured – the CEO of LIV Golf Investments) as well as others associated with LIV are Saudi “foreign officials” under the Foreign Corrupt Practices Act given how that key element of the FCPA’s anti-bribery provisions has been interpreted by the DOJ and SEC.
It seems odd to even contemplate the question as the FCPA’s legislative history is clear that Congress had in mind bona fide, traditional government officials such as Presidents and Prime Ministers when enacting the FCPA approximately 45 years ago.
There is no doubt that the enforcement agencies would consider PIF to be an instrumentality of the Saudi Arabian government.
For instance, in the 2020 Goldman Sachs FCPA enforcement action, the DOJ alleged:
“1Malaysia Development Berhad (“1MDB”) was a strategic investment and development company wholly owned by the Government of Malaysia through its Ministry of Finance (“MOF”). It was formed in or about 2009 to pursue investment and development projects for the economic benefit of Malaysia and its people, primarily relying on debt to fund these projects. 1MDB was overseen by senior Malaysian government officials, was controlled by the Government of Malaysia and performed a function on behalf of Malaysia. During the relevant time period, 1MDB was an “instrumentality” of a foreign government, as that term is used in the FCPA.”
International Petroleum Investment Company (“IPIC”) was an investment fund wholly owned by the Government of Abu Dhabi. It was established by the Government of Abu Dhabi and was overseen by senior Abu Dhabi government officials, was controlled by the Government of Abu Dhabi and performed a government function on behalf of Abu Dhabi. During the relevant time period, IPIC was an “instrumentality” of a foreign government, as that term is used in the FCPA.”
Aabar Investments PJS (“Aabar”) was a private joint stock company incorporated under the laws of Abu Dhabi, and a subsidiary of IPIC. During the relevant time period, Aabar was an “instrumentality” of a foreign government, as that term is used in the FCPA.”
Even though the 11th Circuit’s Esquenazi “foreign official” decision was flawed in many respects (see here), in the decision (the only appellate court decision to ever substantively address the FCPA’s “foreign official” element) the court stated:
An “instrumentality” under … the FCPA is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own. Certainly, what constitutes control and what constitutes a function the government treats as its own are fact-bound questions. It would be unwise and likely impossible to exhaustively answer them in the abstract. Because we only have this case before us, we do not purport to list all of the factors that might prove relevant to deciding whether an entity is an instrumentality of a foreign government. For today, we provide a list of some factors that may be relevant to deciding the issue.
To decide if the government “controls” an entity, courts and juries should look to the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; and the length of time these indicia have existed.
We then turn to the second element relevant to deciding if an entity is an instrumentality of a foreign government under the FCPA — deciding if the entity performs a function the government treats as its own. Courts and juries should examine whether the entity has a monopoly over the function it exists to carry out; whether the government subsidizes the costs associated with the entity providing services; whether the entity provides services to the public at large in the foreign country; and whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.”
Returning to the question headlining this post, LIV Golf is financed by the PIF. Does this make employees of LIV Golf – including executives such as Norman – Saudi “foreign officials”?
Does the PIF – and by extension the Saudi government as per the enforcement theory – have the “ability to hire and fire [LIV] principals”?
Does “the public [and the Saudi government] generally perceive [LIV] the entity to be performing a government function”?
All interesting questions to ponder given the dubious interpretation currently given to the FCPA’s “foreign official” element.