On August 24, the United States Court of Appeals for the Second Circuit ruled that a non-resident foreign national cannot be held criminally liable for aiding or abetting or conspiring to violate the Foreign Corrupt Practices Act, unless the government can show that he acted as an agent of a “domestic concern” or while physically present in the United States.
This ruling in United States v. Hoskins may impact the scope of FCPA prosecutions, and alter the investigation dynamic by potentially limiting the number of defendants and cooperators.
The case relates to the DOJ’s investigation into Alstom S.A., a French power and transportation company. In December 2014, Alstom pleaded guilty to criminal FCPA charges in the United States, and reached a $772 million resolution with the DOJ. Leading up to that resolution, the DOJ in 2013 charged Lawrence Hoskins, a British national and former Alstom UK executive based in Paris, with FCPA and money-laundering violations in connection with a bribery scheme to secure a $118 million project to build power stations for Indonesia’s state-owned electricity company.
The government alleged that Hoskins knew that he was approving and authorizing payments to “consultants” retained for the purpose of paying bribes to Indonesian officials. However, Hoskins never worked directly with Alstom’s American subsidiary, Alstom Power, Inc., and never traveled to the United States during the course of the bribery scheme.
The Second Circuit affirmed the district court’s ruling that the government cannot use accomplice or conspiracy-related charges to extend liability beyond the categories of persons who may be charged under the FCPA. In other words, a person may not be guilty as an accomplice or co-conspirator for an FCPA crime that he is incapable of committing as a principal. Since Hoskins was never a U.S. citizen, national, or resident, and was not accused of acting in furtherance of the bribery scheme while in the United States, the court concluded the DOJ could not expand the jurisdictional reach of the FCPA by charging Hoskins with conspiring to violate the FCPA.
The DOJ had argued that Hoskins could be charged with conspiring with, and aiding and abetting, a domestic concern — here, Alstom’s U.S. subsidiary — to violate the FCPA. DOJ asserted this was possible, even if Hoskins did not act as the subsidiary’s agent and therefore could not be charged with a substantive violation of the FCPA.
The DOJ has repeatedly invoked accomplice theories of liability to prosecute foreign defendants that did not act within the United States. For instance, even though they took no action in the United States, Japanese and European companies (Marubeni, JGC, and Snamprogetti) were charged in 2012 with conspiracy and aiding and abetting a domestic concern’s FCPA violations. The DOJ’s argument in Hoskins was also consistent with the Resource Guide to the Foreign Corrupt Practice Act (available here in pdf), which reflects the government’s view of the law. That guidance contended that a foreign national who had never acted in the United States “could still be subject to jurisdiction under a traditional application of conspiracy law . . . .”
Although theories of liability under the conspiracy and aiding and abetting statutes apply even if the defendant cannot be held liable for the underlying substantive offense, the Second Circuit held that the FCPA reflects an “affirmative legislative policy” to limit conspiracy and aiding and abetting liability under the statute. Under this policy, accomplice liability does not extend to certain persons when the structure of a legislative scheme makes clear that the legislature did not intend to extend accomplice liability to a person who ordinarily would fall within the common law or statutory definition of complicity.
In reaching this holding, the Second Circuit, like the district court, relied on Gebardi v. United States, 287 U.S. 112 (1932), which established that, where Congress excludes a class of individuals from liability under a criminal statute, the government may not rely on accomplice theories of liability to prosecute those same individuals. Similarly, the Second Circuit found that the text, structure, and legislative history of the FCPA all demonstrated that Congress had affirmatively tailored the FCPA to exclude foreign nationals from liability when they do not act as agents, employees, directors, officers or shareholders of an American issuer or domestic concern, and when they operate outside United States territory.
The Second Circuit did allow the DOJ to proceed against Hoskins if the government could prove that Hoskins was acting as an agent of Alstom’s U.S. unit, reversing a portion of the lower court’s decision. The Second Circuit recognized that if the government could prove that Hoskins was an agent of a domestic concern, he could be held liable under the FCPA for conspiring with employees and other agents of Alstom and for conspiring with foreign nationals who conducted relevant acts while in the United States.
The option to charge individuals as co-conspirators or accomplices provides the government with a powerful tool. As a result, the DOJ will likely seek to develop evidence regarding potential avenues of agency association among the various parties involved in an alleged bribery scheme and also seek to push the boundaries regarding the definition of an “agent” under the FCPA. The DOJ may also look for opportunities to extend notions of territorial jurisdiction under the FCPA to defendant conduct that occurs in the United States, but where the defendant was not physically present in the U.S. Finally, the Hoskins ruling may also accelerate a trend of the DOJ working with foreign partners to help prosecute their citizens in their own jurisdictions for corruption offenses if those individuals cannot be prosecuted in the United States.
Notably, the money laundering portion of the charge against Hoskins remains unaffected by the Second Circuit’s ruling. The DOJ has increasingly used the Money Laundering Control Act to complement the FCPA in prosecuting international bribery cases since it allows the government to reach areas outside the strict confines of the FCPA.
Ultimately, while the Hoskins ruling is significant, it only applies to a subset of potential defendants (e.g., foreign nationals who act exclusively outside of the U.S. and are not acting on behalf of a domestic concern as a officer, director, employee, shareholder, or agent), and certain — but not all — potential charges for those individuals (e.g., FCPA conspiracy or accomplice liability).
Ryan Rohlfsen is a Chicago-based partner in Ropes & Gray’s litigation & enforcement group. He represents companies and individuals from around the world in civil and criminal government enforcement matters, internal investigations, and civil litigation. Prior to joining Ropes & Gray, he was a Senior Trial Attorney with the DOJ’s Criminal Division – Fraud Section in Washington, D.C. and Chicago. At the DOJ, he was part of the FCPA Enforcement Unit. He can be contacted here.
The author thanks Joshua Asher for his contributions to this post. He’s a litigation and enforcement associate at Ropes & Gray.