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Criminal Resource Manual

1128. 18 U.S.C. § 1831 Element Four—The Defendant Acted With the Intent to Benefit a Foreign Government, Foreign Instrumentality, or Foreign Agent

The second mental state requirement of § 1831 is that the defendant knew that the offense would "benefit" a "foreign government, foreign instrumentality, or foreign agent." The term "foreign instrumentality" means: any agency, bureau, component, institution, association, or any legal, commercial, or business organization, firm, or entity that is substantially owned, controlled, sponsored, commanded, managed, or dominated by a foreign government. 18 U.S.C. § 1839(2). The term "foreign agent" means: any officer, employee, proxy, servant, delegate, or representative of a foreign government. 18 U.S.C. § 1839(1). Thus, the government must show that the defendant knew or had a firm belief that misappropriation would benefit a foreign entity. When this "entity" is not, per se, a government entity (e.g., a business), there must be evidence of foreign government sponsorship or "coordinated intelligence activity." 142 Cong. Rec. S12201, S12212 (daily ed. Oct. 2, 1996)

The legislative history of the EEA indicates that "benefit" is to be interpreted broadly and is not limited to an economic benefit, but includes a "reputational, strategic, or tactical benefit." H.R. Rep. No. 788, 104th Cong., 2d Sess. (1996).

The requirement that the benefit accrue to a foreign government, instrumentality or agent should be very carefully analyzed. In order to establish that the defendant intended to benefit a "foreign instrumentality," the government must show that the entity was "substantially owned, controlled, sponsored, commanded, managed or dominated by a foreign government." 18 U.S.C. § 1839(1). The EEA does not define "substantially," but its use suggests that the prosecution does not have to prove complete ownership, control, sponsorship, command, management or domination. The legislative history states:

substantial in this context, means material or significant, not technical or tenuous. We do not mean for the test of substantial control to be mechanistic or mathematical. The simple fact that the majority of the stock of a company is owned by a foreign government will not suffice under this definition, nor for that matter will the fact that a foreign government only owns 10 percent of a company exempt it from scrutiny. Rather the pertinent inquiry is whether the activities of the company are, from a practical and substantive standpoint, foreign government directed.

142 Cong. Rec. S12201, S12212 (daily ed. Oct. 2, 1996).

Thus, § 1831 does not apply where a foreign corporation misappropriates the trade secret and there is no evidence of sponsorship or "coordinated intelligence activity" by a foreign government. Id. at S12213. In such an instance, however, the foreign corporation could still be properly charged under § 1832.

[cited in USAM 9-59.100]