Hoskins: Second Circuit rejects DOJ’s expansive interpretation of the FCPA’s extraterritorial reach to non-US persons

On August 24, 2018, the Second Circuit curtailed the DOJ’s use of conspiracy and accomplice liability to charge non-US persons who did not have contact with the United States with violations of the US Foreign Corrupt Practices Act (“FCPA”).[1] The DOJ has tried to expand the FCPA’s extraterritorial jurisdictional reach by charging persons who are not otherwise covered by the statute with conspiracy to violate the FCPA or aiding and abetting another to do so.[2] The Second Circuit’s decision to reign in the government’s over-expansive approach is likely to impact how the DOJ and the SEC approach and evaluate non-US persons in FCPA investigations moving forward.

Background

In 2015, the DOJ indicted Lawrence Hoskins, a British citizen assigned to Alstom Resources Management, a subsidiary of French energy company Alstom S.A. (“Alstom”), alleging that he had conspired with Alstom and its US subsidiary to engage consultants to bribe Indonesian officials to secure a US$118 million power contract. Hoskins was never a US citizen, national, or resident, and was not accused of having acted in furtherance of the bribery scheme while in the United States.

The DOJ charged Hoskins with: (1) conspiring with Alstom, its US subsidiary and others to violate the FCPA and with aiding and abetting those violations; and (2) conspiring to violate the FCPA and aiding and abetting violations of the FCPA while acting as an agent of Alstom’s US subsidiary.[3]

The District Court dismissed a portion of the indictment, ruling that Hoskins could not be charged with conspiracy to violate the FCPA because he did not fall within one of the categories of persons covered by the statute:

1. “issuers,” which are generally companies that are traded on US public exchanges or that make certain reporting disclosures to the SEC;

2. “domestic concerns” (i.e., US persons and companies);

3. officers, directors, employees, and agents of issuers or domestic concerns, or stockholders acting on behalf of issuers or domestic concerns; or

4. other persons who committed an act in furtherance of a bribe payment “while in the territory of the United States.”[4]

The District Court reasoned that because Hoskins was not a US person, and the DOJ had not alleged that he committed any acts in furtherance of the bribery scheme while in the United States, that the DOJ could only charge Hoskins for conspiring to violate the FCPA as an agent of a domestic concern. The DOJ filed an interlocutory appeal with the Second Circuit.

Second Circuit decision

The Second Circuit focused its analysis on whether a non-US national who was not present in the United States and had not worked for a US company during the course of the alleged bribery scheme could nevertheless be liable as an accomplice or a co-conspirator with respect to FCPA violations by others. After considering the FCPA’s legislative history, the Second Circuit determined that Congress had exhibited “a desire to leave foreign nationals outside the FCPA 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.”[5] As a result, the court affirmed the District Court’s decision to dismiss the portion of the indictment alleging that Hoskins conspired to violate the FCPA or acted as an accomplice. This holding is in stark contrast to how the DOJ has viewed its ability to bring conspiracy and aiding and abetting charges against non-US persons.

The Second Circuit, however, also held that the DOJ could proceed with a theory of liability premised on Hoskins acting as an agent of Alstom’s US subsidiary, as agents of domestic concerns are within the ambit of the enumerated categories of persons covered by the FCPA.  

Takeaways

The Hoskins decision will likely impact how the DOJ and the SEC evaluate the conduct of non-US persons in FCPA investigations. The government has often used aggressive conspiracy theories against foreign individuals and entities despite the lack of any apparent US nexus to their individual conduct. Indeed, the DOJ and the SEC have unabashedly proclaimed their endorsement of expanding the extraterritorial reach of the FCPA by asserting conspiracy and aiding and abetting charges against non-covered persons. For example, the DOJ/SEC Resource Guide to the FCPA specifically states: “Individuals and companies, including foreign nationals and companies, may also be liable for conspiring to violate the FCPA — i.e., for agreeing to commit an FCPA violation—even if they are not, or could not be, independently charged with a substantive FCPA violation.”[6] The DOJ and the SEC will obviously have to reassess their position in light of the Second Circuit’s decision.

Time will tell exactly how the DOJ and the SEC will react to the ruling, but the decision provides additional means for non-US persons and entities to defend themselves during the course of an FCPA investigation. That being said, the DOJ and the SEC are likely to focus their efforts on developing facts that may suggest foreign individuals and entities had an agency relationship with issuers or domestic concerns or committed some acts in furtherance of the alleged misconduct while in the United States, which would thereby bring them within the scope of the FCPA.

The Hoskins decision may also encourage even further cooperation among international regulators — if the DOJ and the SEC cannot pursue actions against certain individuals or entities, foreign regulators may step in to enforce their local anti-corruption laws.

[1] United States v. Hoskins, -- F.3d --, 2018 WL 4038192, at *1-2 (2d Cir. Aug. 24, 2018)

[2] For our alert regarding the trial court decision, see http://www.nortonrosefulbright.com/knowledge/publications/131610/hoskins-decision-limits-fcpa-reach

[3] Third Superseding Indictment, United States v. Lawrence Hoskins, No. 3:12cr238 (Apr. 15, 2015).

[4] 15 U.S.C. §§ 78dd-1, 78dd-2, 78dd-3.

[5] The Court also determined that the government had not shown clear congressional intent to “allow conspiracy and complicity liability to broaden the extraterritorial reach of the statute.”

[6] U.S. Dep’t. of Justice and S.E.C., A Resource Guide to the U.S. Foreign Corrupt Practices Act (2012), https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf