South-Western Legal Studies in Business

Executive Convicted of Bribery May Sue Attorney for Improper Advice
Description Appeals court held that a company executive, who was convicted of violating the Foreign Corrupt Practices Act by violating a foreign official, could maintain a malpractice action against an attorney who allegedly advised the executive that a certain payment would not violate the Act when in fact it did.
Topic International Law
Key Words Foreign Corrupt Practices Act; Liability; Legal Advice
C A S E   S U M M A R Y
Facts Saybolt was a company headquartered in the Netherlands with operations around the world. Its Panama subsidiary, seeking to buy property for an office, told its parent office, Saybolt North America (SNA), headquartered in New York, that they could obtain the property only if they paid a $50,000 bribe to a Panamanian government official. Schreiber, a lawyer, was a member of the SNA board and provided legal advice. He is alleged to have advised SNA that it would not violate U.S. law if payment was made from the Netherlands rather than the U.S. The payment was sent to Panama from an account in the Netherlands. The U.S. government prosecuted SNA for violating the Foreign Corrupt Practices Act. The former CEO of SNA, Mead, was sentenced to four months in prison and fined $20,000. Mead sued Schreiber for malpractice for his advice about how to make the payment without violating the law. The district court dismissed the case. Mead appealed.
Decision

Vacated and remanded. The fact that SNA and Mead were found guilty of a criminal violation of the FCPA does not eliminate the possibility of a malpractice suit against Schreiber in a civil suit as they are separate legal matters. The suit against SNA was distinct from the suit against Mead, so the fact that SNA did not participate in the suit against Schreiber is not relevant; Mead has the right to pursue such litigation. The fact that SNA was found to have violated the law does not mean that it knew it was violating the law if it relied on advice of counsel.

Citation Saybolt v. Schreiber, --- F.3d --- (2003 WL 1904531, 2nd Cir., 2003)

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