On August 24, 2018, the U.S. Court of Appeals for the Second Circuit ("Second Circuit"), in U.S. v. Hoskins, affirmed a lower Court's ruling that the Foreign Corrupt Practices Act ("FCPA") does not apply to non-resident foreign nationals unless they were either physically present in the United States or acting as agents of a U.S. entity when they committed their crimes. After a thorough review of the legislative history of the FCPA and its 1998 amendments, the Second Circuit held that the "FCPA does not impose liability on a foreign national who is not an agent, employee, officer, director, or shareholder of an American issuer or domestic concern – unless that person commits a crime within the territory of the United States."
The defendant, Lawrence Hoskins, is a retired executive of French power giant Alstom, S.A., whose U.S. subsidiary and four of its officers, as well as Mr. Hoskins, were accused of funneling bribes to the Indonesian government in order to obtain a $118 million contract to build a power plant in Indonesia. Mr. Hoskins was based in France and, from there, was responsible for hiring and overseeing the consultants who were the conduits for the illegal payments. However, he never came to the United States and did not commit any acts in furtherance of the crime in the United States.
Mr. Hoskins moved to dismiss the indictment, arguing that his supervisory role was not sufficient to make him an agent of the American subsidiary whose conduct was at issue and that, as a foreign national who was never in the United States, his conduct fell outside the extraterritorial reach of the FCPA. In response, the government filed a new indictment charging the defendant as an agent of the U.S. company and also as a co-conspirator and accessory to the U.S. individuals who paid the bribes.
The defendant moved to dismiss again and the U.S. District Court for the District of Connecticut ("District Court") rejected the government's attempt to end-run the defendant's lack of connection to the crimes and his status as a foreign national by charging him as a co-conspirator and accessory to those whose conduct fell within the reach of the FCPA. The District Court held that a defendant who could not be held liable as a principal under the FCPA could not be a co-conspirator or an accessory to those who were liable, and dismissed the conspiracy and aiding and abetting charges. The government, in a rare procedural maneuver, appealed the dismissal of the conspiracy and aiding and abetting theories of liability.
The Second Circuit agreed with the District Court, and affirmed the District Court's holding that the FCPA does not reach non-resident foreign nationals who are not employees, officers or agents of a U.S. company, unless that foreign national commits criminal acts as part of the bribery scheme while in the United States. The Second Circuit went on to hold that, despite the broad extraterritorial reach of the FCPA, Congressional intent was clear that the law did not reach every foreign national who participated in a bribery scheme. It characterized Congress as having legislated with "surgical precision" in limiting the jurisdictional reach of the statute, and specifically excluded from punishment those foreign nationals who did not act within the United States and who were not officers, employees or agents of an American company that facilitated foreign bribes. However, notwithstanding the Second Circuit's important comments about the limitations of the FCPA's extraterritorial reach, the Second Circuit permitted the government to attempt to prove at trial that Mr. Hoskins was an agent for the American subsidiary that is liable as a principal.
Commentary / Jodi Avergun
This case is one of the rare FCPA prosecutions to be tested in court. The Second Circuit's decision is of limited solace to the defendant Hoskins, who still faces a trial as an agent of an American company that is liable for FCPA violations. However, the holding is significant to FCPA practitioners. The Second Circuit called into question one of the hallmarks of the government's FCPA policy and practice – namely, that a foreign-based individual may be liable under the FCPA for taking part in a conspiracy even if the individual cannot be charged with a substantive violation of the law. Indeed, the government's Resource Guide to the U.S. Foreign Corrupt Practices Act explicitly provides that "individuals and companies, including foreign nationals and companies, may also be liable for conspiring to violate the FCPA – i.e., for agreeing to commit an FCPA violation – even if they are not, or could not be, independently charged with a substantive FCPA violation." As a result of Hoskins, though, it looks like the government will have to revise its broad assertion of liability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.