June 28, 2022

Volume XII, Number 179

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June 27, 2022

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Limits On DOJ’s Ability To Reach Foreign Bribery Highlighted By Recent Decision

On Feb. 26, 2020, a federal court in Connecticut partially overturned jury verdicts in the criminal prosecution of a U.K. national who had allegedly bribed Indonesian government officials while working at a European subsidiary of Alstom SA. As criminal trials involving the Foreign Corrupt Practices Act (FCPA) are rare, the ruling is a significant setback to the Department of Justice (DOJ) in its effort to extend the global reach of the FCPA.

In U.S. v. Hoskins, U.S. District Court Judge Janet Bond Arterton held that because the DOJ had failed to present sufficient evidence that Lawrence Hoskins was an “agent” of Alstom’s U.S. subsidiary, it could not prosecute him for acts taken wholly overseas. The decision, which applied the test for extraterritorial application of the FCPA used in the U.S. Court of Appeals for the Second Circuit, is expected to push prosecutors to secure more evidence regarding the extent of control exercised by U.S. subsidiaries over foreign nationals allegedly involved in overseas bribery. 

In acquitting Hoskins, Judge Arterton relied heavily on traditional agency law principles captured in the Third Restatement of Agency – namely, that agency exists only if a principal manifests that the agent shall act for the principal, the agent accepts the undertaking, and there is an understanding between the parties that the principal is in control. Although Alstom’s U.S. subsidiary had controlled portions of the project where the bribery occurred, Judge Arterton found that the company did not control the manner in which Hoskins carried out his assigned tasks. Moreover, the court found no evidence that Hoskins had agreed to such control, or that the U.S. subsidiary had the authority to terminate him. Without these critical indicia of agency, the jury’s verdict that Hoskins was an “agent” of a “domestic concern” under the FCPA had to be reversed.

Although the Second Circuit’s view of the FCPA has proven influential, federal courts around the country have varied in their interpretation of the FCPA’s reach over foreign nationals acting outside the United States. For example, in 2019 a federal court in Chicago rejected a Ukrainian defendant’s attempt to use the same test employed by the Second Circuit. The decision (U.S. v. Firtash) instead applied Seventh Circuit law, which the court interpreted as permitting the FCPA to reach extraterritorial conduct even if the defendant is not “controlled” by a U.S. company.

These lower court decisions highlight ambiguities in the FCPA’s reach and emphasize the need for U.S. companies with overseas operations to carefully assess potential risks. While a robust anti-corruption compliance program remains the best defense against enforcement of the FCPA and foreign anti-bribery laws, companies should consider conducting particularly close due diligence on any foreign personnel who may arguably be acting as an “agent” of a U.S. entity.

© 2022 BARNES & THORNBURG LLPNational Law Review, Volume X, Number 63
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About this Author

Eric Beste Partner San Diego Financial and Regulatory Litigation, Litigation, White Collar and Investigations
Partner

Eric focuses his practice on white collar criminal defense, internal investigations and compliance matters, and complex business litigation. Leveraging his proven track record of supervising and litigating high-profile matters as a federal prosecutor, he provides experienced counsel to clients seeking to mitigate the risks inherent in the modern business world. Among the litigation matters in which Eric can provide the most value are those involving securities fraud, corporate malfeasance, domestic and foreign corruption, tax crimes, defense procurement fraud, government contracting...

619-321-5015
Alexandra S. Kelly Partner LOS ANGELES Compliance and Monitorships Drug and Medical Device Financial and Regulatory Litigation Litigation

Alex Kelly focuses her practice on white collar criminal matters and the resolution of complex civil litigation claims. She is valued by clients and colleagues alike for her strong case management skills and ability to handle difficult and/or high-stakes matters. Alex’s white collar practice includes defending against government investigations, advising on corporate compliance practices, and monitoring companies on behalf of the U.S. government. Notably, Alex is serving on the team assisting the Special Compliance Coordinator appointed by the U.S. Department of Commerce to monitor, assess...

310-284-3895
 Vincent P. Trace Schmeltz III, Barnes Thornburg Law Firm, Chicago and Washington DC, Corporate and Litigation Law Attorney
Partner

Trace Schmeltz is a partner in the Chicago office of Barnes & Thornburg LLP, where he is the co-chair of the firm’s Financial, Corporate Governance, and M&A Litigation Group and a member of the White Collar Crime Defense Practice Group. A trial attorney with experience in numerous forums including the Delaware Court of Chancery, he concentrates his practice on securities, commodities, mergers and acquisitions and white collar criminal litigation. In addition, he has pursued and defended claims on behalf of auditors, investment banks, corporate boards and corporations....

312-214-4830
Meena T. Sinfelt, Barnes and Thornburg, Washington DC and Columbus, Corporate and Litigation Law Attorney
Partner

Meena advises clients involved in government investigations by the Department of Justice (DOJ), Department of State, Department of Treasury, Congressional inquiries, the Inspector General for various federal agencies, qui tam actions, FCPA matters, and tort and contract disputes. She also counsels clients on the Foreign Corrupt Practices Act (FCPA), Office of Foreign Assets Control (OFAC) and international export regulations and antitrust compliance matters. Meena is experienced in conducting internal investigations and witness preparation for grand jury appearances, federal agency...

202-371-6368
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