Second Circuit Knocks Out FCPA Conspiracy Charge Against Foreign National

Investigations and White Collar Defense

Over the years, the Foreign Corrupt Practices Act of 1977 (FCPA) has expanded beyond U.S. issuers and domestic concerns to cover foreign companies and foreign individuals. The Department of Justice and the U.S. Securities and Exchange Commission have further expanded the net using conspiracy and aiding and abetting theories to pull in companies and individuals who would otherwise, under the terms of the statute, not be covered. On Aug. 24, 2018, the United States Court of Appeals for the Second Circuit in United States v. Hoskins weighed in, ruling that foreign employees of non-issuers/nondomestic companies could not be charged with conspiracy or aiding and abetting an FCPA offense when the foreign employee’s actions were conducted wholly outside the United States. More specifically, the Second Circuit held that the FCPA does not impose liability on a foreign national who is working for a foreign company that qualifies as neither an issuer nor a domestic concern under the terms of the statute, unless that person is also either an agent, employee, officer, director or shareholder of an “American issuer or domestic concern,” such as a U.S. parent or affiliate, or commits an act in furtherance of the scheme when he is physically within the territory of the United States.

Why it matters: The ruling significantly restricts the government’s ability to prosecute foreign actors for their role in foreign bribery schemes, even if those schemes also involve U.S. companies, U.S. actors or even U.S. subsidiaries. The ruling also shows a continued commitment—in line with recent U.S. Supreme Court precedent—to restrict the extraterritorial application of U.S. criminal law to the wording of the statute in question. This should provide foreign companies and individuals caught up in FCPA enforcement actions with significant defenses to efforts to bring them to trial in the United States.

In this case, the defendant, Hoskins, was one of four executives charged with facilitating bribes to help Alstom SA, a global power and transportation company headquartered in France, win a $118 million power contract from the Indonesian government. While the other three executives worked for Alstom’s Connecticut-based subsidiary and while the scheme had multiple connections to the United States, Hoskins worked for Alstom’s United Kingdom subsidiary and the French parent and had never actually entered the United States (although the government contended that Hoskins was involved in and helped direct the scheme from abroad). Despite this lack of direct U.S. affiliation, the government alleged that Hoskins conspired with Alstom’s U.S.-based subsidiary and its employees to violate the FCPA and also aided and abetted their violations.

A panel of the Second Circuit rejected the government’s contention. Reviewing the FCPA’s plain language and legislative history, the Second Circuit held that the statute provided jurisdiction over only four types of persons:

“(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; [and] (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 “single, obvious omission,” the court held, applied to “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.” Because a portion of the government’s indictment alleged that Hoskins did not act as an agent on behalf of Alstom’s U.S. subsidiary (even though he acted in concert with the U.S. company), the Second Circuit affirmed the dismissal of that portion of the indictment. The Second Circuit allowed another portion of the indictment to proceed because the government claimed it intended to prove that Hoskins acted as an agent of the U.S. company, and therefore fell within the FCPA’s statutory ambit.

Importantly, the Second Circuit reached this conclusion despite recognizing the well-established rule in federal criminal law that, generally, a person “may be liable for conspiracy even though he was incapable of committing the substantive offense.” Thus, in the ordinary case, a person can be convicted for his or her role in helping commit the crime, even if that person, on his own, did not meet all the statutory elements required to complete the offense. But here, based on its close scrutiny of the FCPA’s legislative history and concerns regarding expansive liability of foreign actors, the Second Circuit applied an exception to the general rule. Because the Second Circuit found that Congress had affirmatively decided to exclude from liability those persons not part of the FCPA’s statutory framework, the court refused to allow the government to “override that policy using the conspiracy and complicity rules.”

Finally, based on recent U.S. Supreme Court jurisprudence, the Second Circuit raised an independent basis for dismissing the portion of the indictment at issue. Under the Supreme Court’s recent precedent in RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2100-01 (2016), and Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), federal criminal statutes cannot apply extraterritorially unless they “manifest[ ] an unmistakable congressional intent to apply extraterritorially.” Thus, even “when a statute provides for some extraterritorial application, the presumption against extraterritoriality operates to limit that provision to its terms.” As a result, the Second Circuit held that the government could not extend the FCPA’s extraterritorial reach beyond the statute’s explicit language by resorting to conspiracy or aiding-and-abetting liability.

This holding is an important one to consider when assessing how to handle an FCPA charge against a foreign national.



pursuant to New York DR 2-101(f)

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