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Second Circuit Cuts Back on the Extraterritorial Reach of the FCPA in Hoskins Decision

On August 12, 2022, the Second Circuit upheld the acquittal of former Alstom S.A. (“Alstom”) executive Lawrence Hoskins on Foreign Corrupt Practices Act (“FCPA”) charges, finding that he was not an agent of Alstom’s U.S. subsidiary, Alstom Power, Inc. (“API”).  The decision curtails United States’ prosecutors ability to reach extraterritorial actors for FCPA violations.

The FCPA prohibits the payment of bribes to foreign officials in order to assist with obtaining or retaining a business advantage. The statute applies to publicly traded companies and domestic concerns, as well as their officers, directors, employees, stockholders, and agents. While the statute covers activities that occur within the U.S., the FCPA also has extraterritorial reach, meaning that its provisions can apply to prohibited conduct that occurs outside of the U.S. so long as there is a sufficient U.S. nexus.

In 2013, the Department of Justice (“DOJ”) charged Hoskins with violating the FCPA. Hoskins is a U.K. citizen who was employed by a U.K. subsidiary of the France-based company Alstom. The DOJ found that Alstom’s U.S. subsidiary, API, had bribed government officials in Indonesia in order to obtain a $118 million building contract. The DOJ argued that Hoskins was guilty of violating the FCPA as he had approval authority over the hiring of the sham consultants who executed the bribery scheme. In response, Hoskins argued that he was not subject to the provisions of the FCPA, as he did fall within one of the clearly enumerated subjects established by the statute. Namely, Hoskins was not a U.S. citizen, was not employed by a U.S. company, and did not enter the territory of the U.S. at any point during his employment with Alstom. 

In 2015, the district court judge issued a ruling finding that, under the FCPA, foreign defendants such as Hoskins can only be convicted of conspiracy to violate the FCPA if they are proven to be agents of a domestic concern. Prosecutors brought an interlocutory appeal following this decision, and, in 2018, the Second Circuit issued a ruling affirming the district court’s finding. The Second Circuit stated that foreign nationals cannot be subject to criminal liability for aiding or abetting or conspiring to violate the FCPA if the prohibited conduct occurred outside of the U.S. and if the conduct is not sufficiently tied to a U.S. entity. The Second Circuit stated that the FCPA “clearly dictates that foreign nationals may only violate the [FCPA] outside of the United States if they are agents, employees, officers, directors, or shareholders of an American issuer or domestic concern.” The Second Circuit’s ruling meant that for DOJ to convict Hoskins of FCPA violations, they would have to prove at trial that Hoskins acted as an agent of a domestic concern.

Next, in response to the Second Circuit’s decision, DOJ retried Hoskins under a new FCPA theory, arguing that Hoskins was an agent of the Connecticut-based API. After Hoskins was convicted by the jury, the trial judge granted his motion for acquittal of his FCPA counts on the grounds that the government had failed to sufficiently prove that Hoskins was an agent of a domestic concern. The judge stated that “the evidence adduced at trial cannot support the conclusion that Mr. Hoskins acted subject to API’s control such that Mr. Hoskins was an agent of API.”

In their August 12 decision, the Second Circuit affirmed the district court’s finding. The Second Circuit noted that a principal’s accountability for the actions of an agent depends on their ability to select and control the agent and terminate the agency relationship. The agent is generally also able to bind principals to certain legal commitments. In this case, there was not enough evidence to find an explicit or implied agency relationship between Hoskins and API. The court noted that the executives at API who oversaw the scheme lacked control over Hoskins. They did not hire Hoskins, did not have the authority to fire him, and did not set or control his compensation. There was also no evidence that Hoskins could enter into any agreements on API’s behalf. Hoskins role in identifying consultants who then became agents of API did not mean he was an agent of the company.

The Second Circuit’s decision in Hoskins poses a setback for the DOJ, as it effectively limits the DOJ’s ability to prosecute foreign defendants employed by foreign companies acting abroad for FCPA violations. However, this setback is somewhat limited. Federal prosecutors can still use other statutes, including the money laundering statutes, to charge foreign nationals such as Hoskins who are involved in bribery schemes. 

Tags

fcpa, bribery, doj

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