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Hoskins: The Second Circuit Rejects Broad Use of Conspiracy under the FCPA

Background

UK national Lawrence Hoskins formerly worked for Alstom S.A. (Alstom), a global company headquartered in France. Hoskins was charged with conspiracy to violate the Foreign Corrupt Practices Act of 1977 (FCPA) for his alleged role in facilitating a bribery scheme involving Alstom’s US subsidiary. Although Hoskins was neither employed by Alstom’s US subsidiary, nor physically present in the United States during the alleged scheme, the US Department of Justice (DOJ) alleged that he was “one of the people responsible” for facilitating unlawful payments to Indonesian officials to help secure a $118 million contract for the company. The DOJ alleged that several acts in furtherance of the scheme occurred within the United States, including the use of US bank accounts to transfer the unlawful payments.

Hoskins moved to dismiss the first count of the indictment, which charged him with conspiring to violate the FCPA. In moving for dismissal, Hoskins argued that he could not be liable for conspiring to violate the FCPA, or aiding and abetting such a violation, because he did not fall within one of the specific groups of people covered by the FCPA’s prohibitions. The text of the FCPA imposes liability only for a narrow category of individuals: (i) “issuers” (and their officers, directors, employees and agents) of securities listed on US stock exchanges; (ii) “domestic concerns” and their officers, directors, employees and agents (i.e., American persons and companies); and (iii) foreign persons acting in the United States in furtherance of the corrupt scheme. See 15 USC § 78dd-1 – 3. The District Court for the District of Connecticut ruled in favor of Hoskins upon finding that the FCPA does not apply to a foreign national who is not “an agent of a domestic concern” and who “does not commit acts while physically present in the territory of the United States.” United States v. Hoskins, 123 F. Supp. 3d 316, 319 (D. Conn. 2015).

The Second Circuit Decision

On appeal, the Second Circuit considered whether the government “may employ theories of conspiracy or complicity to charge a defendant with violating the [FCPA] even if he is not in the categories of persons directly covered by the statute.” Hoskins, 2018 WL 4038192, at *1. The Second Circuit rejected the DOJ’s broad theory of liability under the FCPA, largely affirming the district court’s dismissal of the conspiracy and aiding and abetting charges against Hoskins. As basis for its decision, the Second Circuit explained that the plain text, structure and legislative history of the FCPA reflect a Congressional intent to limit the jurisdictional reach of the statute to the enumerated categories of defendants. Accordingly, the Second Circuit determined that the FCPA does not reach nonresident foreign nationals, such as Hoskins, who do not have an agency relationship with a US person, and who are not officers, directors, employees or stockholders of American companies. Id. at *20. In reaching that conclusion, the Second Circuit noted the recent US Supreme Court case RJR Nabisco Inc., v. European Company, 136 S. Ct. 2090 (2016), which reinforced the presumption against applying US law extraterritorially unless Congress clearly expressed that affirmative intent. Id. at *13. As the Second Circuit explained, to adopt the government’s over-expansive view “would transform the FCPA into a law that purports to rule the world.” Id. at *20.

Although Hoskins could not be held liable under the FCPA unless “he falls within one of [the statute’s enumerated] categories,” the Second Circuit held that the government could establish Hoskins’ liability by proving that he acted unlawfully as an agent of a domestic concern. Id. at *24. The court reasoned that “the government’s intention to prove that Hoskins was an agent of a domestic concern places him squarely within the terms of the statute . . . .” Id. at *1. 

Significance of Hoskins and Open Questions

Hoskins is one of the few cases in which an individual or entity has challenged the scope of the government’s enforcement authority under the FCPA. The vast majority of FCPA cases are settled out of court, which has seemingly reinforced the government’s expansive view of the statute’s reach. The Hoskins decision serves as another example of courts’ reluctance to apply US laws extraterritorially absent a clear Congressional mandate to do so. In this respect, Hoskins is a reminder that jurisdictional arguments should be considered as a first-line defense for foreign entities and individuals facing prosecution under US law. 

Nonetheless, while the Hoskins decision ostensibly narrows the government’s jurisdictional reach when prosecuting nonresident foreign nationals under the FCPA, it remains to be seen whether other circuits will reach the same conclusion as the Second Circuit. In addition, it is unclear whether Hoskins will affect the government’s enforcement decisions or whether the government will simply seek to hold nonresident foreign nationals liable as agents. The fact that the Second Circuit allowed the government to proceed with its agency theory suggests that the court’s decision may have turned more on form than substance. 

© 2018 McDermott Will & Emery

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James M. Commons, McDermott Will Emery Law Firm, Litigation Attorney
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James M. Commons is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C. office.  Prior to joining McDermott, James was an associate in the Washington, D.C. office of a prominent international law firm.

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Gordon Greenberg, Mc Dermott Law Firm, Los Angeles, Corporate and Litigation Law Attorney
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Gordon A. Greenberg regularly represents clients in civil and criminal investigations, as well as in trials and congressional hearings. He has significant experience defending clients in high-stakes, bet-the-company matters that have civil and criminal components. Gordon has more than 30 years of experience handling a wide range of business crime investigations and trials.

Previously, Gordon was a federal prosecutor, serving as the chief of the Financial Investigations Unit in the Los Angeles US Attorney's Office, and was also a state and special federal prosecutor in Chicago. As a prosecutor, he tried several precedent-setting cases including US V. Cuevas, the first extradition of an individual from Switzerland to the United States for money laundering-related offenses, and US v. Barry Minkow, ZZZZ Best, et al., one of the largest securities/money laundering cases tried on the West Coast in the 1980s.

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Paul M. Thompson, McDermott Will Emery, White Collar Criminal Defense,
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Paul M. Thompson is a partner in the law firm of McDermott Will & Emery LLP and serves as the Partner-in-Charge of the Firm’s Washington, D.C., office.  Paul focuses his practice on white-collar criminal defense, congressional investigations and appellate matters.  Paul has been repeatedly recognized by the National Law Journal in its Appellate Hot List.  He was named as a “Star” in Benchmark Litigation 2015 for his work on white-collar matters and appeals. 

Paul is a former federal prosecutor.  He has represented clients...

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Irene Firippis, McDermott Law Firm, Washington DC, Corporate Law Attorney
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Irene A. Firippis focuses her practice on white-collar and securities defense matters, government investigations and anticorruption compliance. She has represented clients in investigations and enforcement matters involving the United States Securities and Exchange Commission (SEC), United States Department of Justice (DOJ), Financial Industry Regulatory Authority (FINRA) and state securities agencies.

Irene also serves on the Firm’s Washington, DC office Associate Forum Committee.

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