FCPA – Extraterritorial application of the United States law

USA v. Lawrence Hoskins – Docket No. 16-1010-cr

Lawrence Hoskins, now age 67, is a British national and former Alstom Senior Vice President for the Asia Region, purportedly based in Paris, France.

In 2013, Hoskins was charged with Foreign Corrupt Practices Act (“FCPA”) and money-laundering offenses.

Hoskins along with others, allegedly paid bribes to officials in Indonesia – including a member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia – in exchange for assistance in securing a $118 million contract, known as the Tarahan project, for the company and its consortium partner to provide power-related services for the citizens of Indonesia.

To conceal the bribes, Hoskins and others retained two (2) consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project.

In August 2015, the federal district court in Connecticut dismissed one count of the indictment against Hoskins, holding that he couldn’t be held criminally liable for conspiring to violate or aiding and abetting a violation of the FCPA.

In a March 2018 there was a decision rejecting the government’s request for reconsideration. The DOJ appealed.

On August 24, 2018, a federal appeals court ruled that Hoskins, categorized as a non-resident foreign national cannot be charged with conspiracy to violate the Foreign Corrupt Practices Act or with aiding and abetting a violation of the FCPA, unless the government can show that he acted as an agent of a “domestic concern” or while physically present in the United States, which largely affirmed a lower court ruling that rejected the DOJ’s argument for expansive personal jurisdiction in FCPA cases.

The court was challenged to decide whether the government may employ theories of conspiracy or complicity to charge a defendant with violating the FCPA, even if Hoskins is not in the category of persons directly covered by the statute.

The provisions provide jurisdiction over the following persons, in the following scenarios or categories:

(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.

The court said the single, obvious omission is jurisdiction over a foreign national who acts outside the United States, but not on behalf of an American person or company as an officer, director, employee, agent, or stockholder.

The court determined that the FCPA defined precisely the categories of persons who may be charged for violating its provisions. The statute also stated clearly the extent of its extraterritorial application.

The court stated the government has not established a “clearly expressed congressional intent to” allow conspiracy and complicity liability to broaden the extraterritorial reach of the statute.

However, the court did state that Hoskins conspired with, and aided and directed, that person in the commission of the offense and that Congress might want to revisit the statute with this case in mind, as the result reached seems questionable as a matter of policy.

The FCPA represents an effort by the United States to keep its own nationals free of corruption when dealing in foreign countries where corruption is endemic. Such corruption undermines the ethical foundations of American businesses, and risks accustoming American businesspeople and corporations to corrupt practices that they encounter abroad, with the attendant possibility of importing back to the United States practices they become familiar with in countries with less developed principles of the rule of law and the transparency and impartiality of government regulation.

The DOJ can still pursue FCPA charges based on the factual issue of whether Hoskins was an agent of a domestic concern, the appellate court said.

Hoskins still faces money laundering charges.

I welcome your thoughts and opinions.

Jonathan