In a case that demonstrates the need to challenge in court the U.S. government’s interpretation of how far the FCPA reaches, the United States Court of Appeals for the Second Circuit rejected DOJ’s attempt to use aiding and abetting and conspiracy theories to prosecute an individual who otherwise was not covered by the FCPA. To the question it posed – “can a person be guilty as an accomplice or a co-conspirator for an FCPA crime that he or she is incapable committing as a principal?” – it resoundingly answered No.

In United States v. Hoskins, the government charged Mr. Hoskins, a non-U.S. citizen who worked for a UK subsidiary of Alstom S.A. with violations of the FCPA. Mr. Hoskins was assigned to work with a French subsidiary of Alstom on a project in Indonesia. The government alleged that Alstom’s U.S. subsidiary retained two consultants to bribe Indonesian officials to get the project work. The government alleged that Hoskins was involved in the selection of, and authorizing payments to, the consultants knowing that some of the money would be used to pay a bribe. The government concedes that Hoskins never traveled to the U.S., but he called and emailed “U.S.-based coconspirators” while they were in the U.S. The government charged Hoskins under two theories – that he was an agent of the U.S. subsidiary and that he aided or abetted or conspired with the U.S. subsidiary. The government applied these two theories to both FCPA jurisdiction over U.S. domestic concerns (15 U.S.C. § 78dd-2) and FCPA jurisdiction over any person that commits part of the violation while in the territory of the U.S. (15 U.S.C. § 78dd-3).

In ruling in favor of Mr. Hoskins, the Second Circuit relied on an exception to the general rule that accomplice and conspiracy liability applies to criminal conduct – “conspiracy and accomplice liability will not lie when Congress demonstrates and affirmative legislative policy to leave some type of participant in a criminal transaction unpunished.” It continued that such “an affirmative legislative policy can be discerned by looking to the statute’s text, structure, and legislative history.” The Court reviewed the FCPA and it legislative history and concluded:

… The carefully tailored text of the statute, read against the backdrop of a well-established principle that U.S. law does not apply extraterritorially without express congressional authorization and a legislative history reflecting that Congress drew lines in the FCPA out of specific concern about the scope of extraterritorial application of the statute, persuades us that Congress did not intend for persons outside of the scope of the statute’s carefully delimited categories to be subject to conspiracy or complicity liability.

This holding is directly contrary to the “guidance” that the DOJ and SEC issued with respect to the FCPA’s reach. In its 2012 Resource Guide, the government 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.

The Second Circuit Hoskins decision makes it clear that this is not the case – either for conspiracy charges or for aiding and abetting charges. One can only hope that the amendments to the Resource Guide will be issued quickly in the wake of this decision.

The Court affirmed that the government could prosecute Mr. Hoskins as an agent of the U.S. subsidiary because that is a category of persons covered by the FCPA. The opinion provides a good synopsis of who is covered by the FCPA:

  1. American citizens, nationals, and residents, regardless of whether they violate the FCPA domestically or abroad;
  2. most American companies, regardless of whether they violate the FCPA domestically or abroad;
  3. agents, employees, officers, directors, and shareholders of most American companies, when they act on the company’s behalf, regardless of whether they violate the FCPA domestically or abroad;
  4. foreign persons (including foreign nationals and most foreign companies) not within any of the aforementioned categories who violate the FCPA while present in the United States.

It is this guidance companies and individuals should look to in determining the reach of the FCPA. This has the force of law.