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April 03, 2020

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Judge Tosses FCPA Jury Verdict

On February 26, 2020, Judge Janet Bond Arterton, a federal judge for the District of Connecticut, overturned a former Alstom SA executive’s conviction under the Foreign Corrupt Practices Act (FCPA) relating to a project to build power plants in Indonesia. Judge Arterton found that, despite a jury verdict to the contrary, prosecutors failed to prove that Lawrence Hoskins, a British national who never set foot in the United States, was an agent of Alstom SA’s U.S. subsidiary subjecting him to liability under the FCPA. This case has been closely watched for its implications on Department of Justice’s (DOJ’s) and Securities & Exchange Commission’s (SEC’s) — the US regulators that enforce the FCPA — prosecutorial and extraterritorial reach.

Background

From 2001-2004, Mr. Hoskins, a UK citizen, worked for Alstom UK Limited, a British subsidiary of Alstom. To secure contracts in connection with the Indonesian energy projects, Mr. Hoskins allegedly hired two consultants to bribe Indonesian officials. As a result of his role in the bribery scheme, the US Department of Justice charged Mr. Hoskins with conspiracy to violate the FCPA, which prohibits certain U.S. companies and individuals from paying bribes to foreign officials in furtherance of their business dealings abroad.

The Second Circuit previously held on appeal of a discrete issue in the Hoskins case that “the FCPA clearly dictates that foreign nationals may only violate the [FCPA] outside the United States if they are agents, employees, officers, directors, or shareholders of an American issuer or domestic concern.”

On remand, Mr. Hoskins was tried on seven FCPA counts, as well as five related money laundering charges. After the Government concluded its presentation of evidence, Hoskins moved for a judgment of acquittal.  That motion was denied without prejudice. On November 8, 2019, the jury found Mr. Hoskins guilty on all counts but one for money laundering. Subsequently, Mr. Hoskins renewed his motion for acquittal.

FCPA Exposure for Foreign Nationals

In overturning the jury’s FCPA verdicts, Judge Arterton found that “[no] rational jury could conclude that Mr. Hoskins agreed or understood that [the US subsidiary] would control his actions . . . , as would be required to create an agency relationship,” subjecting him to FCPA liability.   The government’s case had fallen short because it failed to introduce evidence to support the conclusion that Mr. Hoskins was working under the U.S. subsidiary’s control such that he was its agent for FCPA purposes. The U.S. subsidiary’s lack of control over Hoskins, individually, outweighed the fact that the U.S. subsidiary had overall control of the project.

Money Laundering Exposure for Foreign Nationals

On the other hand, Judge Arterton upheld the money laundering convictions against Mr. Hoskins. The Court ruled the evidence was sufficient to support the jury’s determination that Mr. Hoskins knew Alstom was using U.S. bank accounts to fund the bribes, particularly when he knew the funds were coming from Alstom’s U.S. subsidiary.

Likewise, the Court upheld the jury’s determination that Connecticut was a proper venue. Alstom’s U.S. subsidiary’s transfers from its accounts in Connecticut to the consultants’ accounts in Maryland were part of the same transactions as the consultants’ eventual transfers to Indonesia.

Implications

Critics of the DOJ viewed the FCPA charges against Hoskins as emblematic of an overly aggressive view of the regulator’s extraterritorial reach. Judge Arterton’s decision found the government could not support its expansive interpretation of FCPA enforcement reach.

© Copyright 2020 Squire Patton Boggs (US) LLP

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About this Author

Chase S. Goldstein litigation lawyer Squire PB
Associate

Chase Goldstein represents international and domestic clients in white collar criminal matters, government enforcement actions and internal investigations.

+1 213 689 5108
Elizabeth Weil Shaw attorney Squire Patton Boggs
Associate

Elizabeth Weil Shaw assists clients primarily with government enforcement actions and inquiries, as well as internal investigations and compliance reviews. Liz has analyzed matters involving investigations by the US Securities and Exchange Commission, Department of Justice and State Attorneys General. She is a contributor to the firm's Anticorruption Blog.

303-830-6129