The U.S. Department of Justice has long taken an expansive view of the territorial reach of the Foreign Corrupt Practices Act (FCPA). Indeed, the FCPA Resource Guide specifically states that foreign nationals and companies may be criminally liable for conspiring or aiding and abetting an FCPA violation even if they did not take any act in furtherance of the violation within the territory of the United States. However, in a rare court decision interpreting the FCPA, the U.S. Court of Appeals for the Second Circuit dealt a blow to the DOJ’s expansive reading.
On August 24, 2018, the Second Circuit issued its long-awaited ruling on the question of whether a foreign national, who was never in the United States, may be held liable for conspiring or aiding and abetting a U.S. company in violation of the FCPA if that individual is not in the categories of persons directly covered by the statute. In United States v. Hoskins,1 the Second Circuit concluded that, because the individual did not commit the actions in question while in U.S. territory, the individual was beyond the extraterritorial reach of the FCPA, and the government cannot use conspiracy and aiding-and-abetting liability to expand the statute’s territorial limitations.
The individual in question, Lawrence Hoskins, is a British national and former executive of a British subsidiary of the French manufacturer Alstom. Alstom and several of its subsidiaries were accused by the DOJ of facilitating bribes to acquire lucrative manufacturing contracts from the Indonesian government. Although Alstom reached a global corporate settlement with the DOJ, prosecutors still pursued criminal charges against several executives within the company, including Hoskins.
According to the DOJ’s allegations, Alstom’s American subsidiary hired two consultants to facilitate the bribery scheme to acquire a $118 million contract from the Indonesian government. Although Hoskins never set foot in the United States and was not employed by Alstom’s American subsidiary, the DOJ alleged that Hoskins approved the bribe payments. Thus, Hoskins was indicted under a theory of accomplice liability for conspiring to violate two separate provisions of the FCPA. First, the DOJ alleged that Hoskins violated the provision of the FCPA that prohibits foreign nationals from taking acts to advance a corrupt scheme, in this case the payment of bribes to foreign officials. Second, the DOJ alleged that as an agent of Alstom’s American subsidiary, Hoskins aided and abetted other executives with U.S. contacts in facilitating the bribes. The FCPA provides three general categories of persons or entities covered by its anti-bribery provisions:
- Issuers of securities and their officers, directors, employees, agents, and shareholders;
- American companies or persons; and
- Foreign companies or persons while present in the United States.
Because Hoskins’ alleged conduct did not fall into any of these three categories, the DOJ instead argued that he should be held liable as an accomplice or co-conspirator. As the Hoskins Court put it, the question posed in the case is whether “a person [can] be guilty as an accomplice or a co-conspirator for an FCPA crime that he or she is incapable of committing as a principal?”
The Hoskins Court began its analysis by determining whether common-law conspiracy and accomplice liability doctrines apply to statutes, like the FCPA, which define the categories of individuals who may be prosecuted for violating them. After analyzing analogous case law in both the Supreme Court2 and the Second Circuit,3 the Hoskins Court found that individuals not within those categories may still be guilty of conspiracy to commit the crime or the substantive crime itself through accomplice liability. This common law principle has an exception, however: cases where Congress clearly states that common law principles of conspiracy and accomplice liability do not apply to a particular statute. The DOJ argued that the FCPA did not fall within that exception. By contrast, Hoskins argued the FCPA had “an affirmative Congressional intent to exclude certain persons from liability.”
To resolve this question, the Hoskins Court analyzed the legislative history of the statute and concluded that the FCPA should be construed narrowly, noting that “Congress delineated as specifically as possible the persons who would be liable, and under what circumstances liability would lie.”
The Hoskins Court explained that the Committee Report to the FCPA “took great pains” to emphasize that foreign nationals are covered under the statute within three categories only:
- Those acting on American soil,
- Those who were officers, directors, employees, or shareholders of U.S. companies, and
- Those who were agents of U.S. companies.
Moreover, the Hoskins Court held that the presumption against extraterritoriality prohibits the DOJ from using conspiracy and complicity statutes to charge Hoskins with any criminal offense not otherwise punishable under the FCPA due to the statute’s territorial limitations.
The Hoskins opinion still permitted an alternative route for criminal liability, however: factually demonstrating that Hoskins acted as an agent of a domestic concern. In such an instance, there would be no extraterritorial application of the FCPA. Thus, the Hoskins Court remanded the case to district court with instructions that the DOJ may argue that Hoskins, as an agent, committed the first object of the conspiracy in concert with U.S. employees of Alstom, and the second object in concert with foreign nationals conducting relevant acts while in U.S. territory.
The Second Circuit’s ruling is significant because it rejects a long-held view by the DOJ that it can charge foreign nationals under an aiding and abetting or conspiracy theory and gives practitioners leverage to push back on the DOJ’s expansive view of FCPA jurisdiction. From a practical standpoint, the more significant impact may come after the case has been remanded to the lower court, since presumably the court will add some clarity on the type of relationship necessary to establish that a foreign national who never enters the United States nor works for a U.S. company is an agent for purposes of falling within the coverage of the FCPA, which in turn will help to guide individuals and companies that operate internationally.