Office of the Circuit Executive 
U.S. Court of Appeals for the Ninth Circuit     


                
Case Name: ADLER V REPUBLIC OF NIGERIA 9855460          
Case Number:    Date Filed:     
98-55456        05/17/00        
                


FOR PUBLICATION


UNITED STATES COURT OF APPEALS


FOR THE NINTH CIRCUIT


JAMES E. ADLER, aka Jaime Adler;
EL SURTIDOR DEL HOGAR, S.A.DE
C.V., a Mexican Corporation,
Plaintiffs-Appellees-
Cross-Appellants,


v.


THE FEDERAL REPUBLIC OF NIGERIA,
a Sovereign State; CENTRAL
BANKOF NIGERIA; PAUL OGWUMA,
aka Paul Oguma; NIGERIAN
NATIONAL PETROLEUM CORPORATION,
No. 98-55456
Defendants-Appellants-
98-55460
Cross-Appellees,
D.C. No.
and
CV-94-00779-IEG
CHIEF ABBA GANNA HEN GEORGE;
OPINION
C. ODIBO, BALLA PETERS; STANLEY
EKE; SOLOMON DANIELS; CLEMENT
VICTOR ODOZI, CHIEF JOHN OLISA
A. AHMED; MAJOR USMAN DAVID
PASCAL UZO; UKPO AKPAN; CHIKE
OKONKWO; ALHAJI JUBRIL
ABDULLAHI; ANDREW AYOMANU;
EDMUND ODAFE; MALLAM
ABUBAKAR; A. AHMED; PASCAL
UZO,
Defendants-Defendants-
Appellees.


Appeal from the United States District Court
for the Southern District of California
Irma E. Gonzalez, District Judge, Presiding


5207



Argued and Submitted
November 2, 1999--Pasadena, California


Filed May 17, 2000


Before: Harry Pregerson, John T. Noonan, and
Diarmuid F. O'Scannlain, Circuit Judges.


Opinion by Judge Pregerson;
Dissent by Judge Noonan


_________________________________________________________________




COUNSEL


Richard E. McCarthy, Solomon, Ward, Seidenwurm & Smith,
San Diego, California, for the plaintiffs-appellees-cross-
appellants.


David H. Fromm, Chalos & Brown, New York, New York,
attorneys for the defendants-appellants-cross-appellees.


_________________________________________________________________


OPINION


PREGERSON, Circuit Judge:


At the center of this case is an illegal contract between
plaintiff James Adler and various Nigerian individuals,
including at least one government official, to convert Nigerian
government funds for their personal use. The individual Nige-
rian defendants proposed the agreement to Adler, but did not
perform their side of the bargain. Adler did perform, and now
seeks to recover over five million dollars he paid to further
the illegal contract and to bribe Nigerian government offi-
cials. The issue before this court is whether this criminal
activity falls within the "commercial activity " exception to the
Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C.
S 1330 et seq. The district court held that the defendants were
not immune from suit, but applied the unclean hands doctrine
to bar Adler from recovering. Defendants appeal and plain-
tiffs cross-appeal. We have jurisdiction under 28 U.S.C.
S 1291, and we affirm. We hold that an illegal contract consti-
tutes commercial activity under the FSIA. We also affirm the


5212



district court's factual findings, and its application of the
clean hands defense to bar Adler's recovery.


I


Plaintiffs in this case are James E. Adler and El Surtidor del
Hogar, S.A. de C.V. ("El Surtidor"). Adler is a United States
citizen who resides in California and is president and control-
ling shareholder of El Surtidor. El Surtidor is a Mexican cor-
poration with its principal place of business in Tijuana,
Mexico. Defendants are the Federal Republic of Nigeria, the
Central Bank of Nigeria ("CBN"), and seventeen Nigerian
officials.


The events in this case began in August 1992 when Adler
received a letter signed by Chief Abba Ganna. The letter pro-
posed a "business transaction" between Adler, Ganna and the
Chief Accountant of the Nigerian National Petroleum Corpo-
ration ("NNPC"). Ganna explained the transaction as follows:


[D]uring the last civilian regime here in Nigeria, the
elected members of the ruling party used their posi-
tions and formulated companies and awarded them-
selves contracts which were fantastically over-
invoiced in various government ministries.


On the overthrow of the regime by the present mili-
tary government, an enquiry was set to this. Findings
and recommendations were made to the government
who has given its blessing for the payment of these
contracts half/fully executed. You can now see that
there is a good deal for these government officials
presently in office hence the ousted notable party
stalwarts can not come forward for some of the
claims.


Ganna requested that Adler send (1) four signed and stamped
copies of El Surtidor letterhead and pro forma invoices; and


5213



(2) the number to a foreign bank account where 130 million
dollars could be deposited. In addition, Adler would be
responsible for purchasing first-class airplane tickets for
Nigerian officials to travel to Mexico to collect their share of
the money. In exchange for providing these services, Adler
would earn a forty percent commission. The remaining sixty
percent of the stolen funds would be divided between "mis-
cellaneous expenses" (ten percent) and "the government offi-
cials" (fifty percent). As requested, Adler sent the letterhead,
invoices, and the number of a bank account in the Grand Cay-
man Islands.


In September 1992, Adler traveled to Nigeria and was per-
mitted to enter the country with a document from the Federal
Ministry of Internal Affairs in lieu of a visa. He visited the
home of the Minister of Finance and an office of the CBN
where he met with various individuals who identified them-
selves as Nigerian government officials. Among these "offi-
cials" was John Olisa, Deputy Governor of the CBN. Olisa
showed Adler a bank draft for sixty million dollars made out
to El Surtidor and Jaime Adler, and presented Adler with a
contract which Adler signed without reading. Olisa told Adler
that he would give him a copy of the contract after Adler
deposited funds to cover the difference in the exchange rate
between the U.S. dollar and the Nigerian nira ("shortfall
deposit funds"). Adler was led to believe that the Nigerian
government had assigned to El Surtidor rights under a con-
tract between the NNPC and Strabarg Company, another for-
eign company, for the computerization of Nigerian oil fields.


Beginning with Olisa's request for the shortfall deposit
funds, individuals, whom Adler believed to be officials of the
Nigerian government, repeatedly requested payments from
Adler. They described these payments variously as shortfall
deposit funds, taxes, processing fees, confirmation fees, sur-
charges, legal fees, travel expenses, and gratification. Almost
every time that someone requested a payment from Adler, that
individual told Adler that as soon as he made that payment,


5214



the sixty million dollars would be deposited into his account.
Adler continued making payments to Nigerian officials even
after he filed this lawsuit. These payments totaled $5,180,000.


In May 1993, Adler hired a Nigerian lawyer to prepare an
affidavit declaring that El Surtidor and Strabarg were sister
companies. Adler was told that it was necessary to submit the
false affidavit to a Nigerian court in order to obtain the prom-
ised funds.


Between August 1992 and July 1994, Adler corresponded,
by mail and by telephone, with a variety of individuals who
represented themselves as officials of the Nigerian govern-
ment. In addition, Adler made two more trips to Nigeria prior
to filing this lawsuit. In December 1992, he visited Olisa's
residence. On the April 1994 trip, Adler met with Paul
Ogwuma, Governor of the CBN.


In November 1993, Adler borrowed $450,000 from Banca
Serafin to pay a stamp duty tax. As a condition of the loan,
Banca Serafin conducted due diligence and required Adler to
change the routing instructions for the sixty million dollars
from his Grand Cayman Islands' bank account to Banca Sera-
fin's New York bank account. On Adler's authorization, a
Banca Serafin official directed Dr. Clement Odozi, another
Deputy Governor of the CBN, to send the sixty million dol-
lars to New York.


In February 1994, Adler hired former Congressmen Mer-
vyn Dymally and Jim Bates to assist him in collecting the
sixty million dollars. Dymally traveled to Nigeria, investi-
gated the situation, and reported to Adler that the agreement
was a "scam." Even after receiving this report, Adler contin-
ued to make payments requested by the Nigerian officials.


In May 1994, Adler filed this suit in district court, naming
as defendants the Federal Republic of Nigeria, the CBN, the


5215



NNPC,1 and seventeen Nigerian officials.2 Adler alleged
claims for fraud, conspiracy to commit fraud, and negligence,
among others. Defendants moved to dismiss on the basis of
the FSIA, but the district court denied their motion. This court
affirmed, holding that the commercial activity exception to
the FSIA applied because the contract between the NNPC and
Strabarg, along with the assignment to El Surtidor, constituted
commercial activity, and that Nigeria's contractual obligation
to make payment to Adler in New York was a direct effect in
the United States. See Adler v. Federal Republic of Nigeria,
107 F.3d 720 (9th Cir. 1997).


The case proceeded to trial. After an eight day bench trial,
the district court found, among other things, that (1) no con-
tract existed between the NNPC and Strabarg and therefore,
the NNPC could not have assigned Strabarg's rights to El Sur-
tidor; (2) the Ganna letter involved criminal activity on its
face and Adler knowingly and intentionally participated in
that activity; (3) Adler believed that he was dealing with
Nigerian government officials and that the scheme was sanc-
tioned by the Nigerian government; (4) Adler paid bribes
totaling 2.11 million dollars to Nigerian officials in violation
of California bribery law, Cal. Penal Code S 7(6), and the For-
eign Corrupt Practices Act, 15 U.S.C. S 78dd2; (5) Adler,
through Banca Serafin, instructed the Nigerian officials to
deposit the funds in New York; (6) at least one official of the
Nigerian government, CBN Governor Paul Ogwuma, partici-
pated as a co-conspirator in the fraud against Adler; and (7)
the Nigerian government permitted other co-conspirators to
use the CBN offices to further the fraud. On these facts, the
district court decided that the unclean hands doctrine barred
Adler from recovering the money he paid to Nigerian govern-
ment officials.3 The district court also revisited the sovereign
_________________________________________________________________
1 The district court dismissed the NNPC after plaintiffs rested their case.
2 Of the seventeen named officials, only Paul Ogwuma, Governor of the
CBN, was served and answered the complaint.
3 The district court made factual findings pertaining to the defendants'
acts of fraud, but apparently did not decide whether the defendants actu-
ally committed any of the torts alleged.


5216



immunity question and reaffirmed that the commercial activ-
ity exception applied.


II


[1] We begin with the question of jurisdiction which is a
question of law that we review de novo. See In re estate of
Ferdinand Marcos Human Rights Litigation, 94 F.3d 539,
543 (9th Cir. 1996). The FSIA "provides the sole basis for
obtaining jurisdiction over a foreign state in the courts of this
country." Argentine Republic v. Amerada Hess Shipping Co.,
488 U.S. 428, 443 (1989). Under the FSIA, a foreign state is
presumptively immune from suit in federal court unless one
of the exceptions to the statute applies. See 28 U.S.C. S 1604.
There is no dispute here that the Federal Republic of Nigeria,
the CBN, and Ogwuma fall within the FSIA's definition of a
foreign state. See 28 U.S.C. S 1603(a) ("A `foreign state' . . .
includes . . . an agency or instrumentality of a foreign state.");
Chuidian v. Philippine Nat'l Bank, 912 F.2d 1095, 1106-06
(9th Cir. 1990) (holding that government officials fall within
the definition of an "agency or instrumentality " of a foreign
state). The only issue in dispute is whether the FSIA's com-
mercial activity exception applies to the facts of this case.4


[2] The commercial activity exception to the FSIA denies
foreign states immunity from suit in three circumstances:


A foreign state shall not be immune from the juris-
diction of courts of the United States . . . in any case
. . . in which the action is based [1] upon a commer-
cial activity carried on in the United States by the
foreign state; or [2] upon an act performed in the
United States in connection with a commercial activ-
ity of the foreign state elsewhere; or [3] upon an act
_________________________________________________________________
4 Our decision in Adler is not law of the case because that decision was
issued before the district court found that the Strabarg contract and
assign-
ment were fictitious.


5217



outside the territory of the United States in connec-
tion with a commercial activity of the foreign state
elsewhere and that act causes a direct effect in the
United States.


28 U.S.C. S 1605(a)(2) (emphasis added). The third clause is
at issue here because this suit is based on the defendants' acts
of fraud, conspiracy, and negligence which occurred outside
of the United States. Defendants contend that the FSIA's
commercial activity exception does not apply because (1)
their acts were not "in connection with a commercial activi-
ty"; and (2) their acts did not have a direct effect in the United
States.5 We disagree.


A


[3] The FSIA defines "commercial activity" as "a regular
course of commercial conduct or a particular commercial
transaction or act." 28 U.S.C. S 1603(e). It also instructs that
"[t]he commercial character of an activity shall be determined
by reference to the nature of the course of conduct or particu-
_________________________________________________________________
5 An additional requirement for the commercial activity exception to
apply was set out in Phaneuf v. Rep. of Indonesia, 106 F.3d 302 (9th Cir.
1997). In Phaneuf, we held that a agent must act with actual authority in
order to bind a sovereign under the commercial activity exception. Id. at
308. Neither party contends that Phaneuf is applicable to this case. Indeed,
the thrust of defendants' argument is that the district court erred in
finding
that Ogwuma participated in the fraud, not that Ogwuma did so without
authorization from the government.


In any event, Phaneuf's rule does not defeat federal jurisdiction over
this case. The district court found, not only that Ogwuma, Governor of the
CBN, participated as a co-conspirator in the fraud, but also that the Nige-
rian government permitted other conspirators to use the CBN offices to
further the fraud. "Once the plaintiff offers evidence that an FSIA excep-
tion to immunity applies, the party claiming immunity bears the burden of
proving by a preponderance of the evidence that the exception does not
apply." Joseph v. Office of Consulate General of Nigeria, 830 F.2d 1018,
1021 (9th Cir. 1987). Defendants have not sustained their burden of prov-
ing that Ogwuma and others acted without actual authority.


5218



lar transaction or act, rather than by reference to its purpose."
Id. The agreement between Adler and the Nigerian officials
was a commercial transaction. The Nigerian officials con-
tracted for Adler's services: they offered Adler a commission
if he would provide them with stamped letterhead, invoices
and a bank account to which they could transfer money. Adler
accepted their offer. A contract for services is plainly com-
mercial in nature. The fact that the contract was for an illegal
purpose, and therefore was unenforceable, does nothing to
destroy its commercial nature. See Saudi Arabia v. Nelson,
507 U.S. 349, 366 (1993) (White, J., concurring) (stating that
torture of plaintiff by police was not commercial activity, but
torture of plaintiff by government hired thugs would be com-
mercial activity); Braka v. Multibanco Comermex, S.A., 589
F.Supp. 802, 805 (S.D.N.Y. 1984) (holding that the sale of
unregistered securities is commercial activity under the FSIA).6


[4] Not all criminal activity falls within the FSIA's com-
mercial activity exception. That proposition is well-
established by decisions of this court and others. See
Berkovitz v. Islamic Republic of Iran, 735 F.2d 329, 331 (9th
Cir. 1983) (finding that murder is not commercial in nature);
see also MCI Telecommunications Corp. v. Alhadhood , 82
F.3d 658, 664 (5th Cir. 1996) (finding that making unautho-
rized telephone calls is not commercial activity); Cicippio v.
Islamic Republic of Iran, 30 F.3d 164, 167-68 (D.C. Cir.
1994) (holding that kidnaping is not commercial activity);
Letelier v. Republic of Chile, 748 F.2d 790, 797 (2d 1984)
(holding that assassination is not commercial activity). Our
decision today does not conflict with that case law. Each of
_________________________________________________________________
6 The dissent disagrees with our characterization of the agreement
between Adler and the Nigerian officials as a contract for services, and
contends that an agreement that is illegal either in nature or in purpose is
not a commercial agreement. Neither the plain meaning of the term com-
mercial, nor the sources cited by the dissent provide support for that prop-
osition. See BLACK'S LAW DICTIONARY 263(7th ed. 1999) (defining
"commerce" as "[t]he exchange of goods and services, esp. on a large
scale involving transportation between cities, states, and nations").


5219



those cases involved illegal activity devoid of any commercial
component. What this case involves, and what drives our
decision in this case, is the district court's finding that Adler
and the Nigerian officials made a contract for illegal activity.7


[5] The Supreme Court's decision Republic of Argentina v.
Weltover, 504 U.S. 607, 612 (1992), also supports our conclu-
sion that an illegal contract is commercial activity. That case
involved the question whether the Argentine government
acted "in connection with commercial activity " when it refi-
nanced bonds in order to stabilize the national currency. The
Court held that "when a foreign government acts, not as a reg-
ulator of a market, but in the manner of a private player
within it, the foreign sovereign's actions are `commercial'
within the meaning of the FSIA." Id. at 614. It further
explained that "the question is not whether the foreign gov-
ernment is acting with a profit motive or instead with the aim
of fulfilling uniquely sovereign objectives. Rather, the issue
is whether the particular actions that the foreign state per-
forms (whatever the motive behind them) are the type of
actions by which a private party engages in `trade and traffic
or commerce.' " Id. (quoting BLACK'S LAW DICTIONARY 270
(6th ed. 1990)).


[6] The agreement to convert Nigerian government funds
satisfies the Weltover definition of commercial activity. When
the Nigerian officials offered Adler a commission for partici-
pating in the scheme, they did nothing that a private party
could not do. Indeed, Nigeria continues to argue that private
individuals, not its officials, carried out the scam. Put simply,
there is nothing uniquely governmental about perpetrating a
scam.
_________________________________________________________________
7 Defendants attempt to obfuscate the issue by repeatedly declaring that
the district court found that no contract existed. The district court found
that there was no contract between the NNPC and Strabarg, but it also
found that there was an illegal contract between Adler and the government
officials to convert government funds.


5220



B


[7] Having concluded that this suit is based on acts "in con-
nection with a commercial activity," we turn to the second
question: whether the defendants' acts caused a direct effect
in the United States. "[A]n effect is `direct' if it follows as an
immediate consequence of the defendant's activity. " Wel-
tover, 504 U.S. at 618 (internal quotation marks omitted). In
adopting the "immediate consequences" rule, the Supreme
Court rejected the more onerous "substantial and foreseeable"
test employed by many circuits. See id. Following Weltover,
this court reaffirmed the rule that a direct effect requires that
" `legally significant acts giving rise to the claim occurred' "
in the United States. Adler, 107 F.3d at 727 (quoting United
World Trade v. Mangyshlakneft Oil Production Ass'n , 33
F.3d 1232, 1239 (10th Cir. 1994)).


[8] We have little trouble identifying a direct effect in the
United States caused by the defendants' acts. Adler used the
United States mails and telephones to commit bribery in vio-
lation of the FCPA as an "immediate consequence " of the
defendants' acts. The defendants asked Adler for bribe pay-
ments, and persuaded Adler to pay them by telling him that
sixty million dollars would be deposited in his bank account
if he did so. Therefore, Adler's payment of bribes was an
immediate consequence of the defendants' fraudulent acts.
Adler's acts of bribery are legally significant with respect to
the tort claims because Adler seeks to recover the money he
paid in bribes.8
_________________________________________________________________
8 The district court identified two other effects in the United States: (1)
Adler instructed the CBN to deposit the funds in a New York bank
account; and (2) Adler hired former United States congressmen to investi-
gate the Nigerian scheme. Because we find that Adler's violation of the
FCPA satisfies the "direct effect" prong, we do not decide whether the
second and third effects identified by the district court are also direct
effects.


5221



III


On appeal, defendants ask us to reverse several of the dis-
trict court's factual findings. Specifically, defendants chal-
lenge the following findings of fact: (1) Adler met CBN
Governor Paul Ogwuma and Ogwuma was a co-conspirator in
the conspiracy to defraud Adler; (2) Ogwuma sent Adler let-
ters requesting payments; (3) Adler paid Ogwuma $50,000;
(4) Adler met the Nigerian Minister of Finance at the Minis-
ter's home; (5) Adler met John Olisa and Olisa is a Deputy
Governor of the CBN; (6) Adler received a Revenue Collec-
tor's Receipt showing payment of $300,000; (7) the Nigerian
government required a shortfall payment of $570,000; (8)
Adler paid various fees and taxes to the Nigerian government;
(9) Brigadier Ball Peters was Unit Commander for the Presi-
dential Task Force on Trade Malpractices of CBN; and (10)
Dr. Clement Odozi was the Deputy Governor of the CBN.


We review a district court's factual findings for clear error.
See Fed. R. Civ. P. 52(a); Adler, 107 F.3d at 729. "We accept
the lower court's findings of fact unless upon review we are
left with the definite and firm conviction that a mistake has
been committed." United States v. Doe, 155 F.3d 1070, 1074
(9th Cir. 1998) (en banc). We may not reject the district
court's "account of the evidence [if it] is plausible in light of
the record viewed in its entirety." Id. Here, the district court's
factual findings present a plausible account of the evidence,
and therefore defendants' challenge fails to satisfy the clear
error standard.


IV


[9] On cross-appeal, Adler argues that the district court
erred in applying the unclean hands doctrine. The unclean
hands doctrine "closes the doors of a court of equity to one
tainted with inequitableness or bad faith relative to the matter
in which he seeks relief, however improper may have been
the behavior of the defendant." Precision Inst. Mfg. Co. v.


5222



Automative Maintenance Machine Co., 324 U.S. 806, 814
(1945). Under this doctrine, plaintiffs seeking equitable relief
must have "acted fairly and without fraud or deceit as to the
controversy in issue." Ellenburg v. Brockway, Inc., 763 F.2d
1091, 1097 (9th Cir. 1985) (citing Johnson v. Yellow Cab
Transit Co., 321 U.S. 383, 387 (1944); Keystone Driller Co.
v. General Excavator Co., 290 U.S. 240, 245 (1933)). The
district court decided that Adler dirtied his hands by intention-
ally attempting to aid and abet the Nigerian officials' scheme
to steal from the government treasury and by paying bribes.


Under California law, we review the district courts decision
to apply the unclean hands doctrine for an abuse of discretion.
See Health Maintenance Network v. Blue Cross of Southern
California, 202 Cal. App.3d 1043 (1988). A district court
"abuse[s] its discretion if it base[s ] its ruling on an erroneous
view of the law or on a clearly erroneous assessment of the
evidence." Cooter & Gel v. Hartmarx Corp., 496 U.S. 384,
405 (1990); see also United States v. Washington , 98 F.3d
1159, 1162 (9th Cir. 1996).


In deciding whether Adler's unclean hands barred relief,
the district court applied the correct legal standard. In Califor-
nia, the unclean hands doctrine applies not only to equitable
claims, but also to legal ones. See Jacobs v. Universal Devel-
opment Corp., 53 Cal. App.4th 692, 699 (1997). The court
examined, as California law requires, the nature of the mis-
conduct at issue and the misconduct's equitable impact on the
relationship between the parties and the injuries claimed. See
Unilogic v. Burroughs, 10 Cal. App.4th 612, 619-20 (1992)
(citing Blain v. Doctor's Co., 222 Cal. App.3d 1048, 1060
(1990)).


Nevertheless, Adler puts forth a variety of arguments in an
attempt to persuade this court that inequity results from the
district court's exercise of discretion. He asserts that he and
the Nigerian officials are not equally at fault; that the Nigerian
officials will be unjustly enriched if they do not return the


5223



funds to Adler; and that this court should grant Adler a rem-
edy because, by doing so, it will discourage Nigerian officials
from perpetrating such schemes in the future. Whatever the
merits of these arguments, the district court did not abuse its
discretion in reaching the opposite conclusion.


[10] First, it is not clear that Adler is any less blameworthy
than the Nigerian officials. The Nigerian officials proposed
the criminal scheme, but Adler voluntarily participated it. And
while the Nigerian officials successfully defrauded Adler of
over five million dollars, Adler attempted to steal sixty mil-
lion dollars from the Nigerian government. Second, the fact
that the defendants will receive a windfall is not an absolute
bar to the unclean hands defense. See Wallace v. Opinham, 73
Cal. App.2d 25, 26 (1946) (applying the unclean hands rule
in a fraud action in which the parties engaged in illegal gam-
bling and the defendant used marked cards). Finally, it is not
clear that justice would be served by compelling the Nigerian
government to return the money to Adler. Making a judicial
remedy available when the bribe fails to accomplish the
intended result would reduce the risk inherent in paying
bribes, and encourage individuals such as Adler. In short,
public policy favors discouraging frauds such as the one per-
petrated on Adler, but it also favors discouraging individuals
such as Adler from voluntarily participating in such schemes
and paying bribes to bring them to fruition.


Finally, Adler relies heavily on two cases, neither of which
are analogous to the case before us. In the first case, R. D.
Reeder Lathing Co. v. Cypress Ins. Co, 3 Cal. App.3d 995
(1970), the California Court of Appeals held that the plaintiff
could bring an action for fraud based on an illegal contract.
See id. at 999. That case differs in important respects: the
plaintiff did not know the underlying contract was illegal
when he entered into it, and the defendant had far superior
knowledge about the relevant law. See id. Here, the district
court found that the deal proposed in Chief Ganna's letter was
criminal on its face. The second case, Crosstalk Productions,


5224



Inc. v. Jacobson, 65 Cal. App.4th 631 (1998), involved pay-
ments by plaintiffs to safeguard their rights in a legal contract.
Rejecting the unclean hands defense, the court held that pay-
ments made by the plaintiffs were the result of economic
duress and thus were extortionate payments, not bribes. See
id. at 640-41. In the instant case, the district court specifically
found that the Adler knew the contract was illegal, and that
Adler paid illegal bribes.


V


We hold that the district court properly exercised jurisdic-
tion over this case; the district court's factual findings are not
clearly erroneous; and the district court did not abuse its dis-
cretion in applying the unclean hands defense to bar Adler's
recovery.


AFFIRMED.


_________________________________________________________________


NOONAN, Circuit Judge:


The majority opinion opens with the declaration."At the
center of this case is an illegal contract between plaintiff
James Adler and various Nigerian individuals including at
least one government official, to convert Nigerian government
funds for their personal use." At the very center of this case,
therefore, is a contract criminal in nature and purpose, which
the majority for unexplained reasons contends constitutes
commercial activity.


This case has no place in our courts. It began with a mis-
taken allegation of a fact conferring federal jurisdiction, a
mistake that led to an opinion of this court properly assuming
on a motion to dismiss that the allegation was true. On
remand to the district court for trial, the mistake was laid bare.


5225



The factual allegation conferring jurisdiction was not true.
Foundation for federal jurisdiction disappeared.


Nonetheless the trial continued because of the plaintiff's
contention that he had engaged in a criminal conspiracy with
officials of the Nigerian government. Jurisdiction does not
exist on the foundation of this contention. A criminal conspir-
acy in violation of the laws of Nigeria and of the United
States does not constitute commercial activity by Nigeria.
Only commercial activity by Nigeria provides an exception to
the immunity of this foreign state from the jurisdiction of our
courts, 28 U.S.C. S 1605. As no commercial activity was con-
ducted here, no jurisdiction exists or existed to try this case,
28 U.S.C. S 1330(c).


The Original Mistake. On July 1, 1996, the plaintiff filed
his first amended complaint alleging that "the Nigerian
National Petroleum Corporation [the NNPC], a quasi-
governmental agency wholly owned and controlled by the
Federal Republic of Nigeria, entered into a contract with a
foreign corporation known as Strabarg & Company, Ltd., a
company registered under the Nigerian Companies Act,
1968." The complaint went on to state that the plaintiff had
accepted assignment of proceeds due under this contract to
computerize oil fields in Kaduna. Nigeria and the Nigerian
officials moved to dismiss on the grounds of sovereign immu-
nity. On appeal, we said: "The district court ruled that Nigeria
engaged in commercial activity by entering into an agreement
for the assignment of a contract in exchange for consideration.
We agree." Adler v. The Federal Republic of Nigeria, 107
F.3d 720, 725 (9th Cir. 1997). The case returned to the district
court for trial.


After trial, the district court found "that no contract existed
between Adler and the NNPC. Additionally, it is undisputed
that no contract existed between the NNPC and Strabarg to
computerize the oil fields in Kaduna. In fact, no oil fields
exist in Kaduna. Because no contract existed between the


5226



NNPC and Strabarg, no assignment of any contract could be
made to Adler."


The commercial activity alleged in the complaint and
accepted as commercial activity by us was thus found to be
a fiction. Not only had no assignment been made but no con-
tract to be assigned had existed, and the subject of the con-
tract, oil fields to be computerized, did not exist. The facts on
which jurisdiction had been based were now stamped as
wholly bogus.


The Plaintiff's Criminal Activity. The district court further
found after trial that "the evidence establishes that Adler
intended to aid and abet Nigeria officials to pay themselves
kickbacks." Adler was asking the court's help to recover
monies paid by him "to further criminal activity. " "From
August 1992, until the time that this lawsuit was filed, Adler
knowingly and intentionally engaged in illegal conduct to
obtain money to which he and his company were not enti-
tled." Throughout the period in question, "Adler engaged in
numerous acts of bribery." Even after the law suit was filed,
"Adler made another $50,000 payment to obtain the proceeds
to which he was not entitled."


After making these findings, the court concluded:


The Court finds that Adler violated the Foreign
Corrupt Practices Act, 15 U.S.C. S 78dd2 (1997)
. . . . Adler traveled in interstate commerce and used
instrumentalities of interstate commerce to make
gifts and payments to foreign officials or persons he
believed were foreign officials for the purpose of
influencing their decisions to assist him in obtaining
or returning business.


To prove his case, the plaintiff had proved himself to have
been a criminal. Unashamedly, he had sought the help of a
federal court to recover the promised share of his criminal


5227



endeavors. The district court resisted this desperate undertak-
ing.


Criminal Activity Is Not Commercial Activity. Repulsing
the attempt to make a federal court an accessory to crime, the
district court nonetheless held that it retained jurisdiction
because this activity was commercial. The opinion on appeal
accepts this conclusion. It is a conclusion contrary to the con-
trolling statute, to relevant precedent, and to common sense.


The basic fraud, notorious in Nigeria for its practice by
skilled confidence men, is known to the Nigerian police as a
"419", because it is a violation of the Criminal Code Act of
Nigeria, Chapter 77, S 419 (1990). A common kind of fraud,
it involves no commerce and no activity of the government.
To the extent, if any, that real governmental officials played
a part in this "419", they were not only violating the anti-
fraud law but various other provisions of the criminal code,
including S 98 (corruption); S 103 (false claims by officials);
S 104 (abuse of office); and S 422 (conspiracy to defraud the
public).


The majority rests its holding of jurisdiction on the letter
from Chief Abba Ganna (a wholly fictitious person) to Adler
offering Adler 40% of $130 million from contracts "fantasti-
cally over-invoiced" by unnamed government officials. The
letter was on the letterhead of something called "Benzil (Nig.)
Ltd." and is referred to by the district court as "the Benzil let-
ter."


The majority reasons that the activity was commercial
because a contract was made between the plaintiff and the
persons he supposed were Nigerian officials. The majority
declares: "A contract for services is plainly commercial in
nature. The fact that the contract was for an illegal purpose,
and therefore unenforceable, does nothing to destroy its com-
mercial nature." This analysis seems to suppose that any con-
tract for any service is "plainly commercial in nature." But


5228



when a would-be murderer hires a hit man and furnishes his
agent money and a gun, neither the consideration he gives nor
the services he receives are commercial. Adler was not being
offered $52 million in exchange for blank letterheads and his
signature. He was offered this tempting amount for his ser-
vices in aiding a moneylaundering operation. To say he was
paid for the documents alone would be like saying the hit man
was paid for the bullets he used. The services contract was a
criminal instrument, proposing fraud by Adler to be compen-
sated by criminal profits.


The majority attempts to distinguish an illegal contract
from "a contract with an illegal purpose." This exercise in
hairsplitting ignores the actual finding of fact by the district
court: "The Court finds that, on its face, the Benzil letter
(Exhibit 1) involves criminal activity and Adler participated
in that criminal activity." Not only was the purpose of the
contract found by the district court to be criminal, so was its
nature found by the district court to be illegal: an attempt by
an "obligor under a contract to assign the obligee's rights to
a third party" and "to convert funds belonging to the Nigerian
government" to the use of Adler and his co-conspirators. It is
intrinsically alien to the marketplace to contract to defraud a
government. The nature of the contract was criminal and
therefore its nature was not commercial. See Weltover, 504
U.S. at 614. A contract of this kind is intrinsically evil or, in
the traditional Latin phrase, malum in se.


Hornlook law is that a contract is illegal if it either has an
illegal purpose or was based on an illegal consideration. Wit-
kin, Summary of Cal. Law (9th ed. 1987) Contracts S 441; 6A
Corbin on Contracts S 1378 (1993). The contract with Chief
Abba Ganna had an illegal purpose and was based on an ille-
gal consideration. The alleged purpose of the contract was to
moneylaunder cash fraudulently obtained at the expense of
the government. The consideration offered was a portion of
these criminal proceeds. Hornbook law maintains that a con-
tract like this contract against good morals is malum in se. See


5229



Witkin, Summary of Cal. Law (1987) ContractsS 441. A con-
tract which is malum in se is alien to the market.


A contract to commit murder does not become commercial
activity because the hit man contracts with a payor for his ser-
vices. See Letelier v. Republic of Chile, 748 F.2d 790, 797 (2d
Cir. 1984). An agreement as to the ransom between kidnap-
pers and the parents of a kidnapped child does not become
commercial activity because a contract for services is thereby
entered into by the kidnappers. See Cicippio v. Islamic Repub-
lic of Iran, 30 F.3d 164, 168 (D.C. Cir. 1994). A contract to
evade the laws of Nigeria by furnishing false documents to
deceive the government of Nigeria does not become commer-
cial activity because there is a contract for the criminal ser-
vices of the agent of the fraud; a fortiori, no commercial
activity exists when the payment for the services is to be
criminally-acquired and criminally-transported loot.


In the decided cases, the victim of a kidnapping could not
sue in federal court the nation arranging the kidnapping
because the kidnapping is not commercial activity; the victim
of a murder plot could not sue federally the nation contracting
for the murder, because murder is not commercial activity.
We have discovered no case where the criminal himself had
the effrontery to sue alleged accomplices asserting that the
crimes in which he had participated were commercial activity.


It is an insult to every honest trader or businessman to sup-
pose that a cunning criminal scheme, if initiated by a contract,
is commercial activity.


It is an insult to any foreign country, and in this instance
to Nigeria, to maintain that a contract proposing a fraud on the
government of Nigeria is commercial activity being carried on
by the government. The government is not in business to
defraud itself. Corruption is not commerce.


The opinion quotes from Republic of Argentina v. Wel-
tover, 504 U.S. 607, 614 (1992): "when a foreign government


5230



acts, not as a regulator of a market, but in a manner of a pri-
vate player within it, the foreign sovereign's actions are `com-
mercial' within the meaning of the FSIA." The opinion then
declares: "The agreement to convert Nigerian government
funds satisfies the Weltover definition of commercial activity"
-- as if a government scheming to defraud itself was acting
"in the manner of a private player!" When the Supreme Court
contrasted private players with regulators it did not sweep all
racketeers under the role of private players; the distinction
drawn was merely between government as regulator and gov-
ernment as manger of its own finances. The Supreme Court
reiterated that to have jurisdiction the acts must be "the type
of actions by which a private party engages in `trade and traf-
fic or commerce'." Id.


The opinion takes out of context a dictum in Justice
White's concurrence in Nelson, 507 U.S. at 369. Justice
White opined hypothetically that governmental thugs per-
forming torture in connection with the commercial operation
of a hospital could make the government liable; it was the
connection with the Saudi government's commercial activity
that brought the commercial exception into play. See Cicip-
pio, 30 F.3d at 168. There is nothing in the opinion of the
court in Nelson that justifies the majority here in stretching for
a dictum from a hypothetical in a concurrence.


The definition of a criminal conspiracy is an agreement to
violate a law. Every conspiracy depends on this kind of con-
tract. That a contract is made is evidence not of commercial
dealing but of crime. Congress cannot have meant to make
conspiracy a type of commerce for foreign governments to
engage in.


The Contract Was Void. A corollary of the criminal nature
of the contract is that it was void in California where the offer
was accepted. Smith v. Bach, 183 Cal. 259, 262, 191 Pac. 14
(1920); R.M. Sherman Co. v. W.R. Thomson, Inc. , 191 Cal.
App.3d 559, 563 (1987); Witkin, Summary of Cal. Law (9th


5231



ed. 1987) Contracts S 441. A void contract cannot be sued
upon. It is a nullity. A nullity cannot qualify under the FSIA
requirement of "a regular course of commercial conduct or a
particular commercial transaction or act." 28 U.S.C.
S 1603(d). Engaging in an act that is legally nothing is not
engaging in commerce. For this reason, too, no federal juris-
diction exists.


As no commercial activity was engaged in by Nigeria, there
is no occasion to consider the statutory phrase "in connection
with commercial activity." Before that phrase can kick in,
some commercial activity must be identified. Here there is
only fraud and conspiracy and bribery from the plaintiff's first
involvement up to and after this lawsuit was filed in federal
court.


Conclusion. In summary, the contract at the center of the
crux is a contract made with a fictitious person, Chief Abba
Ganna, never shown to have been an official of the Nigerian
government and indeed never shown to have existed. The
contract was criminal in nature and criminal in purpose. It
was void under California law. On this fragile foundation the
majority has found jurisdiction over a sovereign state pre-
sumptively immune from suit in our courts.


The district court threw out the plaintiff's case because of
his unclean hands. This court is ready to affirm this result. But
a further cleansing of the courthouse is needed. If the truth
had been known, we had no jurisdiction on the first appeal.
As the truth has come out at trial, we have no jurisdiction
now, nor had the district court. This disgraceful effort to make
us parties to a criminal conspiracy should never have dark-
ened our doors. It is time to expunge it wholly.