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August 31, 2018

Second Circuit Decision Rejects the Government’s Attempts to Expand the Jurisdictional Reach of the FCPA

By Graham Billings, Solomon L. Wisenberg

The Second Circuit recently held that nonresident foreign nationals acting entirely outside the United States cannot be held criminally liable under the Foreign Corrupt Practices Act (“FCPA”) under general conspiracy or complicity theories.  United States v. Hoskins, No. 16-1010 (2d Cir. Aug. 24, 2018).  The groundbreaking decision sharply limits the Department of Justice’s ability to reach foreign nationals and should have an immediate impact on individuals and corporations facing investigations or prosecutions under the FCPA. 

The action arose out of the Department of Justice’s investigation into Alstom S.A., a French power and transportation company.  Lawrence Hoskins, a British national and former senior executive of Alstom’s U.K.-based subsidiary, allegedly entered into a conspiracy with executives of Alstom’s U.S.-based subsidiary to pay bribes to Indonesian officials in exchange for assistance in securing a contract for Alstom to provide electrical services to Indonesian citizens.  The executives allegedly retained consultants to provide legitimate consulting services in connection with the project to conceal the bribes.  Although the Government alleged that several parts of the scheme occurred in the United States, it conceded that Hoskins never traveled to the United States nor directly worked for the U.S. subsidiary at any point during the alleged conspiracy.  Hoskins was charged in the District of Connecticut with conspiracy to violate the FCPA and to launder money, as well as with substantive FCPA and money laundering violations.

By way of background, three categories of persons are subject to the FCPA’s provisions: (1) issuers of securities under 15 U.S.C. § 78l or issuers who are required to file reports under 15 U.S.C. § 78o(d), or any officer, director, employee, or agent of such issuer, or any stockholder acting on behalf of the issuer, using interstate commerce in connection with the payment of a bribe; (2) American companies and persons using interstate commerce in connection with the payment of a bribe; and (3) foreign persons or businesses taking acts in furtherance of the payment of a bribe (among other acts) while in the United States.[1]  Hoskins moved to dismiss the FCPA conspiracy charge, arguing that a nonresident foreign national who does not qualify under any of these three categories and thus is not subject to direct liability cannot be criminally liable for FCPA conspiracy under an accomplice theory.  The District Court granted Hoskins’s motion to dismiss in part. 

On August 24, 2018, the Second Circuit unanimously affirmed the District Court’s partial dismissal of the FCPA conspiracy charge, largely following the District Court’s analysis.  The Second Circuit began by noting that the well-established rule that, under general conspiracy law, a person may be liable for conspiracy or complicity “even though he was incapable of committing the substantive offense.”[i]  However, the Court noted that an exception to the general rule exists where the statutory framework makes clear that Congress intended that accomplice liability not apply.[ii]  After extensively reviewing the FCPA’s legislative history, the Second Circuit determined that Congress carefully delineated the classes of people subject to criminal liability, excluding nonresident foreign nationals who were not agents of a domestic concern and did not take action in furtherance of a corrupt payment within the United States. 

The Hoskins decision has been highly anticipated for several reasons.  Because appellate cases on the scope and application of the FCPA are exceedingly rare, the Second Circuit’s thorough analysis of the legislative history and structure of the FCPA cannot be ignored, absent statutory amendments, in future FCPA prosecutions.   More importantly, however, is the Second Circuit’s detailed rejection of the Government’s attempt to expand its jurisdiction under the FCPA.  Hoskins directly contradicts the positions taken by the Department of Justice and the Securities and Exchange Commission in their 2012 Resource Guide to the Foreign Corrupt Practices Act and will affect the Government’s decision-making in ongoing and future FCPA enforcement actions.  Hoskins thus provides crucial guidance for individuals seeking to challenge the Government’s aggressive interpretations of other definitional aspects of the FCPA and opens the possibility of challenges to the jurisdictional reach of similar federal criminal statutes, such as the international prongs of the money laundering statutes. 

Although the impact of Hoskins is most apparent for individuals facing FCPA charges, the decision also creates opportunities for corporations under investigation.  The Department of Justice has obtained several settlements with foreign corporations over the past few years based on its expansive conspiracy and complicity theories.  Hoskins provides a possible basis for corporations to limit the scope of these settlements and narrow the amount of information disclosed regarding foreign employees who acted outside the United States while remaining cooperative with the Government’s investigation.

[1] 15 U.S.C. §§ 78dd-1–3­­. 
[i] Salinas v. United States, 522 U.S. 52, 64 (1998). 
[ii] See United States v. Bodmer, 342 F. Supp. 2d 176, 181 n.6 (S.D.N.Y. 2004) (“[W]here Congress passes a substantive criminal statute that excludes a certain class of individuals from liability, the Government may not evade Congressional intent by charging those individuals with conspiring to violate the same statute.” (citing Gebardi v. United States, 287 U.S. 112 (1932))). 

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