Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
On August 24, the Second Circuit rejected the government’s argument for a broad interpretation of personal jurisdiction in FCPA cases, ruling in United States v. Hoskins that a non-resident foreign national lacking sufficient ties to a U.S. entity cannot be charged with conspiracy to violate the FCPA or with aiding and abetting an FCPA violation. The three-judge panel upheld the lower court’s finding that Lawrence Hoskins, a British national and former Alstom SA executive, could not be charged with conspiring or aiding and abetting something he could not be directly charged with because he was “not an agent, employee, officer, director or shareholder of an American issuer or domestic concern” within the scope of the FCPA’s jurisdictional provision and had not himself taken actions insider the U.S.
Hoskins was an employee of Alstom’s UK subsidiary and working for a French subsidiary; the government alleged that he was “one of the people responsible for approving the selection of, and authorizing payments to,” consultants used by Alstom’s U.S. subsidiary to bribe Indonesian officials related to a power contract. The government alleged numerous US acts in furtherance of the bribery (including e-mails and calls by Hoskins to the U.S.), although Hoskins himself never traveled to the U.S. during the scheme. Hoskins was one of four executives charged in 2013 in connection with the bribes; the other three executives – all of whom worked for the US-based subsidiary, Alstom Power, Inc. (which entered into a deferred prosecution agreement) – entered guilty pleas. The company pleaded guilty in December 2014 and paid a fine of $772 million.
The charges against Hoskins included an FCPA conspiracy count as well as substantive FCPA bribery violations and related money laundering charges. The District Court granted Hoskins’ motion to dismiss part of the conspiracy count, ruling that if Hoskins was not alleged in that count to be a covered person under the FCPA, then the government could not impose accomplice liability either. Similarly, where the government had not alleged that Hoskins ever traveled to the U.S. during the bribery scheme, then he could not be accused of conspiring to violate the provision proscribing acts by foreign nationals taken within the U.S. The District Court allowed the count to move forward where it separately alleged that Hoskins was also an agent of the US subsidiary, which would bring him within the FCPA’s defined reach.
The Second Circuit agreed with the District Court that if Hoskins was not an agent of Alstom’s U.S. subsidiary (something the court assumed for the purpose of the appeal only), and therefore himself covered under the FCPA, then he could not be charged with conspiracy or complicity liability. The court relied primarily on the idea that Congress enacted an “affirmative legislative policy” in the FCPA that was intended to punish some categories of defendants, taking into account considerations of extraterritoriality, while intentionally omitting others. Secondarily, the court also held that there was no “’clearly expressed congressional intent to’ allow conspiracy and complicity liability to broaden the extraterritorial reach of the statute.” The court summed up its ruling as requiring that the government demonstrate that Hoskins “falls within [a category enumerated in the FCPA] or acted illegally on American soil.”
The court did reverse the District Court’s second ruling that unless Hoskins traveled to the U.S. during the bribery scheme, he could not be charged with conspiring to violate the FCPA provision covering acts by foreign nationals within the U.S. The government had indicated that it still intended, at trial on the other counts, to prove that Hoskins was an agent of the U.S. subsidiary, thereby bringing him back within the categories explicitly covered by the FCPA. (The substantive FCPA counts remaining did allege that Hoskins was acting as an agent).
On March 2, 2017, a three judge panel for the United States Court of Appeals for the Second Circuit heard oral arguments in U.S. v. Hoskins. The government charged U.K. citizen Lawrence Hoskins with FCPA violations as part of a larger scheme involving a U.S. subsidiary of French company Alstom S.A. Hoskins, a non-resident foreign national who did not act on U.S. soil and who was an executive of a non-U.S. company (Alstom UK), argued in federal district court that Congress did not intend for people like him to be subject to direct FCPA liability, and that the government cannot circumvent Congressional intent by charging him with accomplice liability. In August of 2015, the federal district court in Connecticut ruled in Hoskins’ favor, holding that the government would first have to show that Hoskins was subject to direct liability as an agent of a U.S. concern in order to reach accomplice liability. The legal issues at hand are detailed in previous FCPA Scorecard posts here and here.
In addition to the important question of the scope of liability of foreign nationals under the FCPA, this argument has a secondary importance related to the right of the government to appeal criminal matters under Title 18 U.S.C. § 3731. Section 3731 allows the government to appeal “from a decision, judgment, or order of a district court dismissing an indictment or information or granting a new trial after verdict or judgment, as to any one or more counts, or any part thereof….” Here, Hoskins argues that the court did not dismiss any counts, so the government had no right to make the interlocutory appeal. For its part, the government argues that the court’s ruling was effectively a dismissal of a portion of a count, making the matter appealable.
In ruling on the Hoskins case, the Second Circuit will have the potential to expand or limit both the reach of the FCPA, and the power of the federal government to bring interlocutory appeals when a trial court rules against it in a criminal matter.
According to a June 1 news report, the DOJ has named Daniel Kahn to lead the Fraud Sections FCPA unit. Mr. Kahn has led the FCPA unit on an interim basis since March of this year. He was previously the Assistant Chief of the FCPA Unit since 2013. Mr. Kahn has led significant recent FCPA prosecutions including the Alstom case, which led to a record $772 million fine, and the Esquenazi case, which generated case law on the FCPAs definition of a foreign official. (See previous FCPA Scorecard coverage of those cases here and here.)
On March 29, the UK Serious Fraud Office charged another Alstom S.A. employee, Terence Stuart Watson, in its ongoing corruption investigation of the beleaguered French power and transportation company. The SFO has previously charged 6 other individuals in this investigation. The charges against Watson, the Alstom Country President for the UK and Managing Director of Alstom Transport UK & Ireland, are related to alleged bribery in Hungary concerning the companys supply of trains to the Budapest Metro between 2003 and 2008. The SFOs prior charges have involved alleged corruption spanning Hungary, India, Poland, and Tunisia, and included charges against the former Senior Vice President of Ethics and Compliance related to alleged bribery in Hungary. In late 2014, the company pleaded guilty to FCPA charges brought by the US Department of Justice, and agreed to pay a record $772 million fine to resolve those charges.
On November 13 a federal district judge sentenced Alstom S.A., a French power and transportation company, to pay a record $772 million fine to resolve FCPA charges. The fine, agreed on by Alstom and various subsidiaries in December 2014 as part of its guilty plea, is the largest criminal FCPA fine ever paid. For other prior coverage on Alstom, please see here.
On August 13, the U.S. District Court for the District of Connecticut held in the individual prosecution of Lawrence Hoskins, a former executive of the U.K. division of Alstom Power, S.A., a French power and transportation company, that the government cannot charge a non-resident foreign national with conspiracy to violate the FCPA if he is not subject to direct liability under the statute due to lack of jurisdiction. United States v. Hoskins, No. 3:12-CR-238 (D. Conn. Aug. 13, 2015). Under the FCPA's anti-bribery provisions, jurisdiction extends to three types of individuals and entities: (1) domestic concerns, defined as U.S. citizens, residents, or nationals, or any company organized under the laws of a U.S. territory or having its principal place of business in the U.S.; (2) a United States issuer of securities, or any officer, director, employee, or agent thereof; and (3) any person who while in United States territory commits an act in furtherance of an FCPA violation. See 15 U.S.C. §§ 78dd-1, 78dd-2, 78dd-3. The government, however, has maintained a more expansive view of the FCPA's jurisdiction. As detailed in its FCPA Resource Guide, the government has argued that "[a] foreign national or company may also be liable under the FCPA if it aids and abets [or] conspires with . . . an issuer or domestic concern, regardless of whether the foreign national or company itself takes any action in the United States." This theory of liability was recently tested in Hoskins. In Hoskins, the government alleged that Hoskins approved and authorized payments to consultants retained for the sole purpose of paying bribes to Indonesian government officials to secure a contract to build power stations for Indonesia's state-owned electric company. Initially the indictment alleged that Hoskins was an agent of Alstom's U.S. subsidiary, and thus an agent of a domestic concern. That count of the indictment was later amended to allege that he conspired by acting "together with" a domestic concern to violate the FCPA. Hoskins moved to dismiss the count, arguing that an individual cannot be prosecuted for conspiracy to violate the FCPA when he himself is not subject to the statute's jurisdiction. The district court agreed and applied the doctrine set forth in Gebardi v. United States, 287 U.S. 112 (1932): where Congress passes a criminal statute that excludes a certain class of individuals from liability, the government cannot evade congressional intent by charging those same individuals under a conspiracy or aiding and abetting theory of liability. The court examined the FCPA's text and legislative history and determined that Congress did not intend to extend accomplice liability to non-resident foreign nationals who are not otherwise subject to direct liability. The court ultimately ruled that the government would have to prove at trial that Hoskins was acting as an agent of a domestic concern — and therefore subject to direct liability — in order to allege that he conspired to violate or aided and abetted a violation of the FCPA.
On May 12, the UK Serious Fraud Office announced yet more corruption charges against Alstom SA, the beleaguered French power and transportation company that last year pleaded guilty in the US to allegations of bribery and agreed to pay the largest criminal penalty for FCPA violations ever to the DOJ. The new charges were brought against the former senior vice president of ethics and compliance and director of Alstom International Limited for alleged bribery in Hungary related to a Budapest Metro contract for trains. The charges arise from the same conduct as last months bribery charges against another company and employee affiliated with Alstom, and continue the recent trend of compliance professionals facing increased personal liability. The SFO has now charged six individuals in its long-running investigation of Alstom.
Continuing the steady drumbeat of corruption allegations against Alstom SA, a French power and transportation company, on April 16 new bribery charges were brought by the UK Serious Fraud Office against a company and employee affiliated with Alstom. These latest charges related to alleged bribery in Hungary related to a Budapest Metro contract for trains. The charges are in addition to 2014 charges in the UK against the same Alstom subsidiary and other former employees related to corruption in India, Poland, and Tunisia, and separately, according to news reports, related to alleged bribes in Lithuania. Alstom also pleaded guilty last year in the US to allegations of bribery in yet a different set of countries, and agreed to pay the largest criminal penalty for FCPA violations ever to the DOJ. Several Alstom employees in the US have either pleaded guilty or are under indictment.
On March 23, former Bechtel Corp. executive Asem Elgawhary was sentenced to 42 months in prison and ordered to forfeit $5.2 million for accepting kickbacks in connection with a scheme to manipulate the bidding process for power contracts in Egypt. Elgawhary, a dual citizen of the U.S. and Egypt, pleaded guilty in December to violations of the mail fraud, conspiracy, and tax laws in federal court in Maryland. As the general manager of a joint venture between Bechtel and Egypt's state-owned oil company, Elgawhary accepted payments from three power companies in return for favorable treatment in the contract bidding process. One of those companies was Alstom, S.A., which last December pleaded guilty to a number of FCPA violations, including paying bribes to Elgawhary. As the recipient of the bribes, Elgawhary was not charged under the FCPA, but the DOJ nevertheless pursued numerous criminal charges against him, continuing its trend of attempting to address the demand side of foreign corruption as well as the supply side. Elgawhary's case also illustrates the risks inherent in entering into certain business relationships with state-owned or controlled entities; in the Alstom plea papers, Elgawhary, an executive of a U.S. company, was explicitly characterized as an "Egyptian official."
On December 22, 2014, Alstom S.A. (Alstom), a French power and transportation company, and various subsidiaries pleaded guilty to a range of FCPA violations and agreed to pay a $772 million criminal fine, the largest on record for an FCPA case. According to DOJ officials, the bribery scheme "spanned many years, occurred in countries around the globe and in several business lines." The size of the fine was also no doubt influenced by DOJ's perception that Alstom was insufficiently cooperative, at least until several of its executives were indicted.
- Tina Tchen to discuss the Time’s Up Legal Defense Fund at the AHLA ForWard: Women Advancing Hospitality conference
- Jonice Gray Tucker to discuss "Protect yourself from a CFPB investigation" at the National Association of Settlement Purchasers Conference
- APPROVED Webcast: Financial services licensing developments: 2018-2019
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Jeffrey P. Naimon and Jonice Gray Tucker to discuss "Enforcement and litigation trends" at the American Bankers Association General Counsel Meeting
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- David S. Krakoff to discuss "The DOJ corporate enforcement policy and your disclosure calculus one year in: Are companies benefitting?" at the American Conference Institute International Conference on the Foreign Corrupt Practices Act
- Moorari K. Shah to discuss "Legal & regulatory issues " at the Opal Group Marketplace Lending & Alternative Financing Summit
- Jonice Gray Tucker to discuss "Hot topics in consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss "Anti-money laundering/OFAC compliance" at the Institute of International Bankers U.S. Regulatory/Compliance Orientation Program