DOJ Global Corruption Efforts Beyond the FCPA

Although courts have reined in the application of the Foreign Corrupt Practices Act (FCPA) anti-bribery provisions in the past two years, the US Department of Justice (DOJ) shows no sign of scaling back its global anti-corruption efforts. In fact, it appears to be expanding them, at least in part by using different laws – such as those prohibiting money laundering and wire fraud – to target individuals engaged in foreign bribery conduct that may be outside the scope of the FCPA. Courts have thus far upheld the application of these statutes to such conduct, even where the bribery is alleged to have occurred largely overseas and entirely between non-US individuals.

In November 2019, Lawrence Hoskins was found guilty of FCPA and money laundering violations following a jury trial in the United States District Court for the District of Connecticut. According to the evidence, Hoskins, a non-US citizen employed by a UK subsidiary of a French company, had hired consultants who bribed Indonesian officials in order to win energy contracts for a US subsidiary of the French company. Following a pre-trial interlocutory appeal in which the Second Circuit ruled that the DOJ could not charge Hoskins with 'conspiring to violate the FCPA, or aiding and abetting a violation of it, if he did not fit into one of the statute's categories of defendants',¹ the government obtained a conviction based on the theory that Hoskins, as an 'agent' of the US subsidiary, acted in furtherance of the US subsidiary's bribe payments with the US subsidiary's knowledge and assent.²

After the trial, the district court took the unusual step of reversing the verdict and entering a judgment of acquittal on the FCPA counts.³ While acknowledging the evidence put forward by the government (and credited by the jury), the court nevertheless concluded that it did not establish that Hoskins acted as an 'agent' of the US subsidiary.⁴ Noting that the typical indications of control for an agency relationship – the right to hire or fire and the right to reassign – were not present between the US subsidiary and Hoskins, the court held that there was 'no evidence upon which a rational jury could conclude that Mr Hoskins agreed or understood that [the US subsidiary] would control his actions' with respect to the project in question.⁵

Importantly, the judge's ruling left intact Hoskins' conviction on four money laundering counts, which were premised on essentially the same conduct underlying the FCPA counts.⁶ The govern- ment's appeal of the judge's ruling on the FCPA counts is currently pending.⁷

The impact of Hoskins on the DOJ's approach to FCPA prosecutions is reflected in the DOJ's recently revised FCPA guidance.⁸ The revised guidance maintains the long-standing DOJ position that:

[a] foreign company or individual may be held liable for aiding or abetting an FCPA violation or for conspiring to violate the FCPA, even if the foreign company or individual did not take any act in furtherance of the corrupt payment while in the territory of the United States.⁹

Referencing Hoskins, however, it also notes that 'at least in the Second Circuit', an individual's 'conduct and role' must 'fall into one of the specifically enumerated categories expressly listed in the FCPA's anti-bribery provisions' in order to be 'criminally prosecuted for conspiracy to violate the FCPA anti-bribery provisions or aiding and abetting an FCPA anti-bribery violation'.¹⁰

Although Hoskins put limits on the DOJ's FCPA enforcement capabilities, the DOJ has been using other statutes to address conduct that it may not be able to reach under the FCPA. Both the money laundering and wire fraud statutes allow the government to charge individuals who, like Hoskins, may not fall within any of the FCPA's specific categories of chargeable individuals because they are not US citizens, present on US soil or officers, directors, employees or 'agents' of US issuers or concerns. These statutes have also laid the basis for prosecutions of foreign officials receiving bribes overseas, which the FCPA does not penalise.

Section 1956 of Title 18, United States Code, is the United States' primary money laundering enforcement statute. It prohibits certain financial transactions involving the proceeds of 'specified unlawful activities'.¹¹ To prove money laundering under section 1956, the government must establish that an individual:

(1) knowing that the property involved in a financial transaction represented the proceeds of some form of unlawful activity, (2) conducted or attempted to conduct a financial transaction (3) which in fact involved the proceeds of that unlawful activity, (4) either (a) with the intent to promote the carrying on of that unlawful activity or (b) with the knowledge that the transaction was designed at least in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds of the unlawful activity.¹²

While Section 1956 requires the government to prove that the defendant knew that he or she was 'dealing with the proceeds of "some" crime', it does not require proof that he or she knew 'precisely what specified unlawful activity produced the money, so long as he believed that the money was from some unlawful activity'.¹³ In addition, a defendant may be convicted of money laundering even though he or she 'is not a party to, much less convicted of, the specified unlawful activity'.¹⁴

By its plain terms, Section 1956 extends to conduct outside the United States.¹⁵ Subsection (f) of the statute provides for 'extraterritorial jurisdiction', so long as 'the conduct is by a United States citizen' or 'occurs in part in the United States' and 'the transaction or series of related transactions' exceed US$10,000.¹⁶ Courts generally consider that transfers of criminal proceeds that begin or end in the United States satisfy the requirement that the 'conduct occur in part in the United States'.¹⁷ This includes correspondent banking transactions, in which the US nexus consists entirely of US banks that merely facilitate the transfer of funds between non-US financial institutions.¹⁸

The Hoskins case exemplifies how money laundering charges can reach foreign corruption conduct that the FCPA cannot. As mentioned above, the district court in that case left intact the money laundering convictions, even though these were predicated on violations of the FCPA that the court vacated. Hoskins sought dismissal of the money laundering counts on grounds that the evidence failed to show he 'knew that any funds would be transferred from accounts within the United States'.¹⁹ The government disputed that such knowledge was required to be established and the court, without deciding the issue, found that the evidence showed the defendant knew that payments to the overseas consultant began within the United States subsidiary (in Connecticut) or would pass through a third-party in Maryland before reaching the consultant overseas.²⁰

A recent prosecution in the Eastern District of New York, United States v Boustani, also illustrates how a money laundering charge can be used to target foreign corruption that may be out of the jurisdictional reach of the FCPA. There, the defendant, Jean Boustani, a Lebanese citizen and chief executive officer of an Abu Dhabi-based investment company, was charged with participating in a scheme of bribery and kickbacks to Mozambique officials and Swiss bankers.²¹ The government alleged that Boustani and others obtained three loans totalling more than US$2 billion for the benefit of companies owned and controlled by the Mozambican government and diverted more than US$200 million of the loan proceeds to bribe Mozambican government officials to ensure that the Mozambican companies would enter into the loan arrangements and the government of Mozambique would guarantee the loans.²² According to the indictment, the loans were subsequently sold to investors based on misrepresentations about how loan proceeds would be used and the Mozambican government's ability to repay the loans.²³ While the bribery scheme occurred primarily overseas, Boustani and others sought and secured investors in the United States, who funded the loans using New York City-based bank accounts, and the Abu Dhabi investment company received the fraudulent loan proceeds from New York City-based bank accounts.²⁴ In announcing the charges against Boustani and his co-defendants, the DOJ described the conduct as 'a brazen international criminal scheme in which corrupt Mozambique government officials, corporate executives and investment bankers stole approximately [US]$200 million in loan proceeds that were meant to benefit the people of Mozambique', and affirmed the DOJ's commitment to use 'all tools at [its] disposal to prosecute those who engage in money laundering, financial fraud and corruption at the expense of US investors, wherever those individuals may be located'.²⁵

Even though Boustani was alleged to have paid bribes to foreign officials, he was not charged with violating the FCPA and likely could not have been, since he was not an officer, director, employee or agent of a US issuer or a domestic concern, nor was he a US citizen or physically present in the United States. Instead, Boustani was charged with money laundering, wire fraud and securities fraud conspiracies.²⁶ The money laundering conspiracy count was premised on violations of various different laws, including the FCPA and Mozambican anti-corruption law.²⁷ Boustani sought to dismiss the charge on grounds that the extraterritorial reach of the money laundering statute did not cover his conduct because the transfers of funds in question had taken place abroad, between non-US entities, in accounts held by non-US citizens and at banks in foreign countries.²⁸ The court rejected this...