Hoskins II Foreign National Liability
The US Court of Appeals for the Second Circuit has recently resolved the nearly decade-long prosecution of Lawrence Hoskins, a foreign national, for bribing Indonesian officials in violation of the FCPA. The long-awaited resolution of the United States v. Hoskins prosecution addresses who may be considered an “agent” of a “domestic concern” under the FCPA in the Second Circuit and may portend the Department of Justice’s (DOJ) increased use of other statutes to pursue and prosecute foreign nationals who are not within the FCPA’s reach.
1. Recap of Hoskins I and Hoskins II
a. Hoskins I
In 2013, DOJ charged Lawrence Hoskins, a former senior vice president employed by the UK subsidiary of Alstom Holdings S.A. (Alstom), a French holding company, with substantive FCPA and money laundering violations, as well as related conspiracies. The government contended that Alstom’s US based subsidiary, Alstom Power, Inc. (API) acting through Hoskins and others, retained consultants to bribe officials in Indonesia, including a member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara, a state-owned electricity company, in connection with Alstom’s efforts to win the “Tarahan Project” in 2003. The project involved a $118 million contract awarded to Alstom and a consortium partner to provide power-related services for the citizens of Indonesia from facilities in Tarahan.
The government alleged multiple theories of jurisdiction over Hoskins, who was not a US citizen and whose actions did not take place within the US. Among those theories, the government argued that even if Hoskins was not an agent of API such that he fell within the enumerated categories of the FCPA, Hoskins was liable as a co-conspirator or accomplice to API’s substantive FCPA violation.
Hoskins moved to dismiss the conspiracy charge, arguing that FCPA liability was limited to a defined set of persons and, because he was a foreign national who did not enter the US in the course of the alleged scheme, he did not come within that definition. The district court agreed with Hoskins, holding that “where Congress chooses to exclude a class of individuals from liability under a statute, the Executive [may not] . . . override the Congressional intent not to prosecute” those individuals by charging them for conspiracy to violate that statute.[1]
The Second Circuit affirmed in part, concluding that Hoskins (a foreign national) could not be liable for conspiring to violate the FCPA without a showing that he was acting as an employee, officer, director, or agent of Alstom US when he engaged in the prohibited conduct i.e., that he was “an agent of a domestic concern” or that he took action in furtherance of the violation while in the United States.[2] However, the court reversed the district court’s ruling insofar as it prohibited the government from attempting to establish that Hoskins was an agent of a domestic concern, i.e., that he could be held liable as an agent of API for conspiring with foreign nationals who committed relevant acts while in the United States.
b. Hoskins II
On remand, the government revised its theory of prosecution, arguing that Hoskins was liable as an agent of a domestic concern, and in 2019 Hoskins was tried and convicted of multiple FCPA and money laundering violations. Hoskins subsequently moved for acquittal arguing that the evidence was insufficient for the jury to have found that he was an agent of API.[3] The district court, applying common law principles of agency, granted the motion, holding that the government failed to prove that “Mr. Hoskins acted subject to API’s control such that he was an agent of API.” The court reasoned that unlike traditional agency relationships, API did not dictate Hoskins’ compensation, promotion, or termination, and there was no evidence that it directed his involvement with the Taharan Project. The government and Hoskins subsequently appealed.
2. Hoskins III
On August 12, 2022, the Second Circuit affirmed Hoskins’ acquittal on FCPA charges in a 2-1 decision.[4] The Second Circuit pointed out that the record was bereft of any evidence indicating that API controlled Hoskins’ actions, noting that API had not hired Hoskins, and that there was no evidence that API had the ability to fire Hoskins or that API had any say as to Hoskins’ compensation. Instead, Hoskins and API “operated under separate, parallel employment structures.” Nor did the record contain any evidence that Hoskins had the authority to act on API’s behalf, which the court described as the “hallmark of a principal-agent relationship.” For instance, there was no evidence presented that Hoskins had the authority to enter contracts on API’s behalf. In the majority’s view, “Hoskins supported API’s endeavors because of his role within [his] department of Alstom, not because API granted him agency authority.”
Judge Raymond Lohier dissented in part. First questioning the government’s wisdom in agreeing to apply the common law definition of agency in the lower court proceedings, Judge Lohier contended that even under the common law definition, the jury’s verdict was correct. In Judge Lohier’s view, it was API’s authority over Hoskins in the context of the particular bribery scheme that was important, not, as the majority had focused on, Hoskins’ role and relationship to API in the larger Alstrom corporate hierarchy. The corporate organizational charts, which the majority relied upon in analyzing whether an agency relationship existed, only “mask[ed] the reality of the relationship between Hoskins and API on the ground,” which was that API was “call[ing] the shots” in relation to the bribery scheme and thus, an agency relationship did exist.
3. Implications, Foreign National Liability, and Other Statutes
Hoskins III has clear implications for the reach of the FCPA. The Second Circuit’s ruling reiterates that traditional agency principles apply when attempting to assert jurisdiction over foreign accessories that are not within the categories of persons specifically enumerated in the FCPA.
However, other federal statutes provide avenues for the government to hold individuals accountable for bribery-related crimes in foreign countries, so long as DOJ can establish venue in the US. DOJ routinely uses mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, to charge bribery offenses. Additionally, the Travel Act, 18 U.SC. § 1952, can be used to indict individuals for bribing foreign officials. Further, the Money Laundering Control Act (MLCA) provides another avenue for DOJ to hold individuals accountable. The MLCA, pursuant to 18 U.S.C. §§ 1956 and 1957, prohibits certain financial transactions involving specified unlawful activity, including violations of the FCPA and other countries' official bribery statutes.
DOJ has articulated these concepts in its FCPA Resource Guide. For example, the FCPA Resource Guide provides that business and individuals should be aware that “conduct that violates the FCPA’s anti-bribery or accounting provisions may also violate other US statutes and regulations” and that certain of these laws may be violated “even if all of the elements of an FCPA violation are not present.”[5] The FCPA Resource Guide specifically mentions the Travel Act and the MLCA, stating with respect to the latter that “although foreign officials cannot be prosecuted for FCPA violations, they can be prosecuted for money laundering violations where the specified unlawful activity is a violation of the FCPA.”[6]
Footnotes
[1] United States v. Hoskins, 123 F. Supp. 3d 316, 321 (D. Conn. 2015), aff'd in part, rev'd in part, 902 F.3d 69 (2d Cir. 2018).
[2] United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018) (Hoskins I).
[3] United States v. Hoskins, No. 3:12CR238 (JBA), 2020 WL 914302, at *1 (D. Conn. Feb. 26, 2020), aff'd, 44 F.4th 140 (2d Cir. 2022) (Hoskins II).
[4] United States v. Hoskins, 44 F.4th 140 (2d Cir. 2022) (Hoskins III).
[5] Id.
[6] U.S. Dep't of Justice, Criminal Div. and U.S. Sec. & Exch. Comm'n, Enf't Div., A Resource Guide to the U.S. Foreign Corrupt Practices Act: Second Edition, at 48-49 (July 2020), https://www.justice.gov/criminal-fraud/fcpa-resource-guide.