District Court Judge Highlights FCPA’s Limits

Überblick


A recent US District Court for the District of Connecticut decision reveals the practical limits of the Foreign Corrupt Practices Act (FCPA) in cases involving foreign nationals, foreign conduct and complex multinational organizations. The court overturned a jury’s conviction of British national Lawrence Hoskins for violations of the FCPA, holdng that the DOJ failed to prove that Hoskins was an “agent“ of his company’s US subsidiary, as required by a previous US Court of Appeals for the Second Circuit ruling in the same case.

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On February 26, 2020, the US District Court for the District of Connecticut overturned a jury’s conviction of British national Lawrence Hoskins for violations of the Foreign Corrupt Practices Act (FCPA). The court held that the US Department of Justice (DOJ) failed to prove that Hoskins was an “agent“ of his company’s US subsidiary, as required by a previous US Court of Appeals for the Second Circuit ruling in the same case. The court’s decision reveals the practical limits of the FCPA in cases involving foreign nationals, foreign conduct and complex multinational organizations.

Hoskins formerly worked for Alstom S.A., a global company headquartered in France. Hoskins was initially charged with “conspiracy“ to violate the FCPA for his alleged role in facilitating payments to Indonesian officials to secure a $118 million contract for the company (the Tarahan project). Hoskins was neither employed by Alstom’s US subsidiary (API) nor physically present in the United States at any point during the alleged scheme. Hoskins challenged his indictment and, in a significant blow to DOJ, the Second Circuit held that the FCPA does not extend to nonresident foreign nationals who do not have an agency relationship with a US person, or who are not officers, directors, employees or stockholders of a US company. Because Hoskins did not work for API, the Second Circuit held that he could be held liable only if the government proved that he acted as an “agent of a domestic concern“ (i.e., the US subsidiary).

Back in the district court, the case proceeded to trial in November 2019. Although Hoskins worked for the French parent company and never traveled to the United States, the jury nonetheless found that he acted as an agent for API when he took part in retaining consultants who paid bribes on behalf of API. The jury convicted Hoskins on seven FCPA-related accounts in addition to several money laundering counts.

Hoskins again challenged the government’s theory, this time in a motion for judgment of acquittal. In ruling on that motion, the district court focused on a core principle of agency law: that an agency relationship arises only when “one person (a ‚principal‘) manifests assent to another person (an ‚agent‘) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.“ The court emphasized that an essential element of agency is the “principal’s right to control the agent’s actions.“ In this case, the agent was Hoskins, not “the broader project on which the purported agent works,“ the court explained.

In dismissing Hoskins‘ FCPA convictions, the court held that DOJ had not proven that API exercised “control“ over Hoskins‘ actions “sufficient to demonstrate agency“ as a matter of law. In undertaking a traditional agency analysis, the court examined the factual complexities of an international project that involved multiple Alstom affiliates and business units. The court examined the reporting chains between business units and the parent company, the process to retain consultants, and the specific responsibilities in undertaking the Tarahan project. In ruling that a rational jury could not find that Hoskins was an agent of API, the court found that the government had failed to present evidence that “there was an understanding between Mr. Hoskins and API that API would be in control of Mr. Hoskins‘ actions on the Tarahan Project or that API did control Mr. Hoskins‘ actions in a manner consistent with agency relationships.“

While DOJ has repeatedly claimed that the FCPA extends to foreign nationals and foreign entities, even when they did not engage in any conduct in the United States, there are few cases that actually challenge DOJ’s view. In part, this is because large multinational corporations often settle the allegations against them, as Alstom did here, rather than spend years litigating against DOJ. For that reason, the Hoskins case, and the several decisions that it has yielded, is informative.

In Hoskins, DOJ first tried to extend the extraterritorial reach of the FCPA by claiming that Hoskins “conspired“ with US persons or entities. The Second Circuit rejected that theory. Then, DOJ moved to a different theory—that Hoskins acted as an “agent“ of API, the US entity. With its February 26 ruling, however, the district court placed some limits on that theory as well. While the district court’s decision turns on the unique facts of Hoskins‘ case, and it will not deter DOJ from trying to extend the reach of the FCPA to foreign entities or foreign nationals in what it deems are appropriate cases, the Hoskins‚ decision is nonetheless a blow to DOJ. DOJ will need to take it seriously as it proceeds in any similar case going forward. In recent years, there have been several successful challenges to the extraterritorial reach of US criminal laws, with the Hoskins case being only the most recent example. Nonetheless, this trend will no doubt continue, and it may set the stage for more meaningful challenges to the extraterritorial reach of other important US laws.