Briefing

March 10 2020

US Court Dismisses FCPA Charges Against Non-US Defendant, Leaves Money Laundering Conviction Intact

Last week, in a closely watched and long-running criminal case, a US district court sentenced former Alstom executive Lawrence Hoskins to 15 months’ imprisonment after overturning his trial conviction on bribery charges, but upholding his conviction on related money laundering charges. The decision highlights some of the legal hurdles the US government faces in charging non-US persons under the Foreign Corrupt Practices Act (“FCPA”) as well as the broad reach of US money laundering statutes.

On appeal at an earlier stage in the case, the US Court of Appeals for the Second Circuit limited the ability of the US Department of Justice (“DOJ”) to enforce the FCPA against certain non-US nationals like Mr. Hoskins. The Second Circuit held that persons who are not directly subject to the FCPA – because they are not US persons, do not work for either a US company or a non-US company that has US-registered securities, and did not engage in any conduct in furtherance of an FCPA violation while present in the territory of the United States – cannot be found guilty of an FCPA violation based on conspiracy or accomplice theories of liability. The Second Circuit allowed DOJ to proceed, however, on the theory that Mr. Hoskins acted as an agent of a US company. On remand, following a trial, a jury convicted Mr. Hoskins on both FCPA and money laundering charges. Post-trial, the district court dismissed the FCPA charges, finding that DOJ had failed to prove that Mr. Hoskins acted as an agent of a US company; in the same order, the court upheld the related money laundering charges.

This client alert highlights some key aspects and implications of the decision.

First, the district court’s ruling provides significant guidance regarding what it means to be an “agent” of a US company or a US securities issuer for purposes of the FCPA, a term the statute does not define. Specifically, the district court held that DOJ must prove that a US company or a US securities issuer controlled the actions of the purported agent, and that it is not enough that a US company or securities issuer more broadly controlled the project on which the purported agent assisted.

Second, the Second Circuit’s decision and the district court’s ruling, taken together, have limited DOJ’s ability to secure FCPA convictions against non-US persons. At least within the Second Circuit, DOJ can successfully bring an FCPA case against a non-US person only where the foreign national was an agent – or an officer, director, employee, or stockholder – of a US company or a US securities issuer. The district court’s ruling on agency further raises the bar for DOJ.

Third,as a practical matter, companies would be wise not to modify their anti-bribery compliance programs based on either this decision or the prior ruling on appeal. Other courts could come out differently and find that non-US persons can be charged with conspiracy to violate the FCPA or aiding and abetting a violation of the statute.[1] Moreover, as demonstrated by Mr. Hoskins’s own conviction on money laundering charges, Hoskins has no impact on DOJ’s ability to charge bribery-related conduct under other criminal statutes. The US money laundering statutes in particular have broad reach, and can apply where alleged bribe payments are sent to or from or pass through the United States.

Background on the Hoskins Case

The defendant, Lawrence Hoskins, is a UK national who was employed by a UK subsidiary of French power company Alstom S.A. Mr. Hoskins was based in France on assignment at another Alstom subsidiary, working on securing contracts for Alstom in Asia. DOJ alleged that Mr. Hoskins and others schemed with Alstom’s US subsidiary to secure contracts in Indonesia through bribery. There was no allegation that Mr. Hoskins traveled to the United States or worked directly for Alstom’s US subsidiary. Based on this conduct, the French parent pleaded guilty, and three other Alstom entities – including Alstom US – entered into deferred prosecution agreements with DOJ.

DOJ charged Mr. Hoskins with, among other things, conspiring with Alstom US, its employees, and others to violate the FCPA and aiding and abetting violations of the statute. Significantly, DOJ also brought money laundering and money laundering conspiracy charges. In its ruling on appeal after the trial court dismissed certain of the charges against Mr. Hoskins, the Second Circuit rejected these conspiracy and accomplice liability theories with respect to the FCPA. The Second Circuit, however, left open the possibility that Mr. Hoskins violated the FCPA as an “agent” of Alstom US or its employees and did not address the related money-laundering charges. At trial, the district court instructed the jury that to establish the requisite “agency” relationship, there must be an understanding that the “principal [Alstom US] will be in control of the undertaking,” which the court defined to consist of “the acts or services which the agent [Mr. Hoskins] performs on behalf of the principal [Alstom US].”

Following his jury trial, Mr. Hoskins was convicted in November 2019 on 11 of the 12 counts with which he was charged. Thereafter, however, the district court granted in part Mr. Hoskins’s post-trial motions and dismissed the FCPA charges. In doing so, the district court emphasized that an essential element of agency is the “principal’s right to control the agent’s actions,” stating that it is not enough to demonstrate control over “the broader project on which the purported agent works.” The district court found that while the evidence at trial demonstrated that Alstom US controlled the project at issue, there was no evidence that Alstom US controlled Mr. Hoskins’s actions in connection with that project. Having found that DOJ failed to establish that Mr. Hoskins acted as an agent of a US company, the district court granted Mr. Hoskins’s motion for a judgment of acquittal with respect to the FCPA charges. The district court, however, rejected Mr. Hoskins’s challenge to his conviction on the money laundering counts.

The Reach of US Anti-Bribery Enforcement Remains Broad

The Second Circuit’s ruling in Hoskins represents an exception to the general rule that a person can be found guilty of conspiracy or aiding and abetting even if the person does not fall within the class of people who can commit the substantive offense. The district court’s recent decision in the case clarifies that DOJ has a high burden where DOJ alleges that a non-US national who cannot be prosecuted on a conspiracy or complicity theory under the Second Circuit’s ruling is alleged to have acted as an agent of a US company or a US securities issuer.

Notwithstanding these rulings, the FCPA’s reach remains broad. Non-US persons (including both companies and individuals) continue to be subject to the FCPA in any of the following circumstances:

• when a non-US company issues securities on a US exchange, both the company and any of its officers, directors, employees, agents, or stock-holders acting on its behalf may be subject to the FCPA;
• when a person (company or individual) acts as an agent, employee, officer, or director of a US company, or they are a stock-holder of a US company acting on its behalf;
• finally, other non-US persons (including both companies and individuals) not falling within the above who take any action to violate the FCPA while present in the territory of the United States may also be subject to the statute.

While these bases for FCPA liability remain intact, Hoskins will cause US prosecutors to reassess how to proceed in investigations involving foreign companies and nationals that are similarly situated to Mr. Hoskins. Although DOJ will in all likelihood be reluctant to bring FCPA charges against a foreign national on an agency theory if DOJ cannot prove control over the purported agent by a US company, individual, or securities issuer, DOJ is likely to continue pursuing money laundering charges in these circumstances. The US money laundering statutes give DOJ broad authority to bring charges where bribe payments are sent from, to, or through the United States, and Hoskins does not limit DOJ’s ability to charge foreign nationals with money laundering under traditional conspiracy and complicity theories.

Some Considerations Looking Forward

Companies investigating and/or assessing conduct that may implicate the FCPA would be wise to continue the best practices they have developed over the years. With respect to non-US companies and individuals, companies should pay particular attention to and look out for evidence that could otherwise establish a US link, such as:

• whether any non-US person acted as an agent of a US company or individual;
• whether any non-US person engaged in conduct in furtherance of an FCPA violation while present in the United States; and
• whether any non-US person engaged in conduct in violation of US money-laundering laws.

While it remains to be seen whether, and to what extent, DOJ may change its approach to FCPA enforcement based on the decisions in Hoskins, DOJ has broad authority to charge money laundering in cases involving allegations of foreign bribery, even where Hoskins would preclude charges under the FCPA itself.