On August 24, 2018, nearly 18 months after hearing oral argument, the U.S. Court of Appeals for the Second Circuit issued a decision in United States v. Hoskins,[1] that significantly limits the Department of Justice’s (“DOJ”) ability to use the conspiracy statute or accomplice liability to prosecute a foreign national who lacks direct ties to the United States or a U.S. company for Foreign Corrupt Practices Act (“FCPA”) violations. Affirming in part and reversing in part the District Court decision, the three-judge panel ruled 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.”[2] Although the Appeals Court also confirmed DOJ’s ability to prosecute a foreign national under the conspiracy statute or accomplice liability where the foreign national acted as an agent of the U.S. company, the Court’s ruling represents a dramatic defeat for DOJ, which has increasingly been charging foreign nationals with conspiracy to violate the FCPA, regardless of whether they were alleged to be an agent. Because of DOJ’s expansive view of agency doctrine in the context of FCPA enforcement, it remains to be seen how large an impact the Hoskins decision ultimately will have on the ability of DOJ to prosecute foreign nationals for FCPA violations. Regardless, given increasingly aggressive enforcement of anticorruption laws abroad and in the United States, multinational companies are still well-advised to implement and maintain robust anticorruption compliance programs designed to prevent violations from occurring.
Background
In connection with an alleged bribery scheme involving French company, Alstom S.A., and its Connecticut-based subsidiary, Alstom Power, Inc. (“Alstom US”), DOJ charged individuals, including Lawrence Hoskins, with substantive violations of the FCPA and conspiracy to violate the FCPA for retaining consultants to bribe Indonesian officials to secure a $118 million power supply contract. During the relevant time, Hoskins, a British citizen, was employed by Alstom’s British subsidiary but assigned to a French subsidiary, Alstom Resource Management.[3] In his role as senior vice president overseeing Alstom’s Asian region, Hoskins allegedly coordinated with his co-conspirators to retain, supervise, and instruct consultants in Indonesia.[4] DOJ charged Hoskins with a multi-object conspiracy to violate the FCPA.
Three of Hoskins alleged co-conspirators pled guilty to charges, including conspiracy to violate the FCPA and violating the FCPA. These individuals admitted to channeling bribes through consultants who paid off a member of the Indonesian Parliament and high-ranking members of the Indonesian state-owned electricity company.[5] In 2014, Alstom S.A. agreed to pay a $772 million criminal fine to settle charges related to $75 million worth of bribery payments made around the world, including in Indonesia.[6]
In the indictment, DOJ charged Hoskins with, among others crimes, one count of conspiracy to commit violations of the FCPA and aiding and abetting.[7] Hoskins chose to defend the case in part on the grounds it is “a legally invalid theory that he could be criminally liable for conspiracy to violate the [FCPA].”[8] The District Court granted Hoskins’s motion to dismiss Count One of the indictment related to the first object of the conspiracy to the extent that the Count sought to charge Hoskins with conspiring to violate Section 78dd-2 of the FCPA without demonstrating that Hoskins fell into one of the statute’s enumerated categories: a domestic concern, or an officer, officer, director, employee, agent or stockholder thereof.[9] The District Court reasoned that in such a circumstance Hoskins would not be an individual contemplated by the statute as being prosecutable.[10] The District Court also dismissed Count One to the extent that it alleged that Hoskins conspired to violate Section 78dd-3, which prohibits acts “while in the territory of the United States,” because Hoskins had never entered the United States during the relevant period.[11] In addressing the question of “whether a nonresident foreign national could be subject to criminal liability under the FCPA, even where he is not an agent of a domestic concern and does not commit acts while physically present in the territory of the United States, under a theory of conspiracy or adding and abetting . . .,”[12] the District Court answered, no. The government sought an interlocutory appeal of the dismissal of Count One of Hoskins’s multi-count indictment.
The Court’s Opinion
A three-judge panel affirmed in part and reversed in part the District Court’s decision.[13] In a significant defeat for DOJ, the panel upheld the dismissal of Count One for conspiracy to violate the FCPA, holding that the FCPA clearly dictates that foreign nationals may only violate the statute outside the United States if they are agents, employees, officers, directors or shareholders of an American issuer or domestic concern, and that they cannot be held liable for conspiracy or complicity relating to an FCPA violation unless they are within one of these categories, or acted illegally on American soil. The panel reversed the lower court’s decision to dismiss the portion of the conspiracy count premised upon the second object of the conspiracy under Section 78dd-3 even under circumstances where the government intended to prove that Hoskins acted as an agent of a domestic concern in violating the FCPA. While the lower court premised its dismissal on its determination that Mr. Hoskins never entered the territory of the United States and therefore could not be prosecuted directly under Section 78dd-3, the Panel held that the government could still pursue a conspiracy violation under 78dd-3 by proving that “Hoskins committed the first object by conspiring with employees and other agents of Alstom U.S. and committed the second object by conspiring with foreign nationals who conducted relevant acts while in the United States.”[14] Notably, the Second Circuit panel undertook a painstaking review of the FCPA’s legislative history to reach its decision that foreign nationals cannot be prosecuted for conspiracy to violate the FCPA or with complicity unless they are included within the categories of persons identified as liable for an FCPA violation or they committed an illegal act within the United States.
Common Law Rule and Application of Gebardi
The Court began its analysis of DOJ’s use of conspiracy and accomplice liability with a discussion of the common law rule for these crimes. It...
