US Appellate Court Rejects DOJ's Expansive Use of Conspiracy for FCPA Jurisdiction

On August 24, 2018, the Second Circuit Court of Appeals rejected the government's broad interpretation of the jurisdictional reach of the Foreign Corrupt Practices Act ("FCPA") and held the government could not use aiding and abetting and conspiracy theories to prosecute an individual who was not otherwise covered by the FCPA. Specifically, the Court held that the FCPA does not apply to foreign nationals without ties to US entities for foreign bribery crimes.  In this briefing, our New York team discusses the decision and its implications.

Background

In United States v. Hoskins, the government alleged that Lawrence Hoskins, a UK national and former Alstom SA executive based in Paris, was part of scheme to bribe officials in Indonesia so that Alstom could win an $118 million contract from the Indonesian government. While the government alleged that some of the funds for bribes were paid from bank accounts held in the United States, and that some conspirators held meetings within the United States regarding the bribery scheme, the government conceded that Hoskins never set foot in the United States or worked for a US company during the alleged scheme. The government charged Hoskins under two theories: (1) that he aided or abetted or conspired with an Alstom US subsidiary and (2) that he was an agent of the US subsidiary

DOJ Theory Rejected

As to the government's aiding and abetting and conspiracy theories, the Court definitively answered "No" to the question, "[C]an a person be guilty as an accomplice or co-conspirator for an FCPA crime that he or she is incapable of committing as a principal?" Notably, this holding directly contradicts the Department of Justice's "Resource Guide to the US Foreign Corrupt Practice Act" (available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf), which reflects the government's view that a foreign national who had never acted in the United States "could still be subject to jurisdiction under a traditional application of conspiracy law . . . ."

The FCPA establishes several different categories of persons over whom the government may exercise jurisdiction. The statute prohibits a company issuing securities regulated by federal law from using interstate commerce in connection with certain types of corrupt payments to foreign officials. The same prohibitions apply to any "domestic concern," a term that encompasses "any individual who is a citizen, national, or resident of the United States"—regardless of where the person is—as well as businesses that are organized under state or federal law or have principal places of business in the United States. Moreover, the FCPA applies to "any officer, director, employee, or agent of," or "any stockholder thereof acting on behalf of," any issuer or domestic concern. Further, the statute's prohibitions apply to "any person other than an issuer" or "a domestic concern"—including both natural, foreign persons and businesses organized under foreign law—while that person is "in the territory of the United States."

Reviewing the above, the Second Circuit summarized FCPA jurisdiction as covering the following persons and entities:

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 Second Circuit recognized that it is a "firm baseline rule" with respect to the principles of both conspiracy and complicity law that where the crime is so defined that only certain categories of persons, such as employees of a particular sort of entity, may commit the crime through their own acts, persons not within those categories can be guilty of conspiring to commit the crime or of the substantive crime itself as an accomplice. However, there is a narrow exception to this general principle where it is clear from the structure of the legislative scheme that Congress must have intended that accomplice or conspiracy liability not extend to persons whose conduct might otherwise fall within the general common-law or statutory parameters of complicity or conspiracy law.

The Court reviewed the FCPA's text, structure, and legislative history to discern whether there was Congressional intent to assign liability to a non-resident foreign national acting outside the US. The Court found that "the carefully tailored text of the statute, read against the backdrop of a well-established principle that US 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 the statute's carefully delimited categories to be subject to conspiracy or complicity liability." Thus, the Court concluded that a non-resident foreign national acting outside the US was affirmatively excluded from the categories of persons liable under the FCPA and the government could not circumvent that exclusion by charging such individuals with conspiracy to violate that statute.

Nevertheless, the Second Circuit allowed the government to pursue FCPA charges on the theory that Hoskins acted as an agent of a US subsidiary because that category "places him squarely within the terms of" the FCPA. Therefore, the case against Hoskins will continue.

Conclusion

The case is noteworthy because it limits the DOJ's ability to assert jurisdiction over non-resident foreign nationals for conduct outside of US territory—at least for purposes of the FCPA and within the Second Circuit. Whether the DOJ will attempt to expand the extraterritorial reach of other statutes—or of the FCPA in other federal circuits—remains to be monitored.