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From Securities Regulation Daily, August 27, 2018

No FCPA liability for foreign national unless a domestic agent

By Lene Powell, J.D.

A non-resident foreign national who allegedly participated in a foreign bribery scheme could not be prosecuted under the Foreign Corrupt Practices Act (FCPA) for conspiracy when he himself was not directly subject to the statute, the Second Circuit held. The FCPA’s careful language and legislative history showed that Congress did not intend to extend liability beyond enumerated categories via accomplice liability. Nevertheless, the district court was instructed to reinstate a dismissed count because the government might still be able to show that the defendant was an agent of a domestic concern who conspired with foreign nationals who conducted relevant acts while in the United States (U.S. v. Hoskins, August 24, 2018, Pooler, R.).

FCPA violations. Lawrence Hoskins was a senior vice president for the Asia Region of Alstom, U.K., a subsidiary of Alstom Power, U.S. In a series of indictments, the government alleged that Hoskins violated the FCPA by authorizing payments to "consultants" for the purpose of paying bribes to Indonesian officials to influence the award of a project to build power stations for Indonesia’s state-owned electric company.

In the district court proceedings in the Southern District of New York, Hoskins moved to dismiss a count that alleged that he "conspired by acting together" with a domestic concern to violate the FCPA. Hoskins argued that as a non-resident foreign national who was not an agent of a domestic concern and did not allegedly commit acts while physically present in the territory of the United States, he could not be prosecuted for conspiracy when he himself was not directly subject to the statute. The district court agreed, concluding that Congress did not intend to impose accomplice liability on non-resident foreign nationals who were not subject to direct liability. The government brought an interlocutory appeal.

No accomplice liability. On appeal to the Second Circuit, the three-judge panel was asked: Can a person be guilty as an accomplice or a co-conspirator for an FCPA crime that he or she is incapable of committing as a principal? The panel stated a "firm baseline rule" with respect to both conspiracy and complicity that provides, generally, yes. Where the crime is defined such that only certain categories of persons may commit the crime through their own acts, persons not within those categories can still be guilty of conspiring to commit the crime or of the substantive crime itself as an accomplice.

However, the panel found that an exception applied in this case. Under Gebardi v. U.S. and U.S. v. Amen, accomplice liability does not apply if it is clear that Congress did not intend for accomplice liability to extend to certain persons whose conduct might otherwise fall within the general common-law or statutory definition of complicity. The panel found that the carefully tailored text of the FCPA and legislative concern about extraterritorial application meant that Congress did not intend for persons outside of the statute’s delimited categories to be subject to conspiracy or complicity liability.

Extraterritorial reach. Even if Congress did not intend FCPA liability to be strictly limited to the enumerated categories, the panel said it would still rule for Hoskins because the government did not establish a clearly expressed congressional intent to allow conspiracy and complicity liability to broaden the extraterritorial reach of the statute. Under RJR Nabisco, extraterritorial application is limited by a statute’s terms, and remedial provisions must be analyzed independently to discern whether they allow extraterritorial application. The FCPA does not impose liability on a foreign national who is not an agent, employee, officer, director, or shareholder of an American issuer or domestic concern—unless that person commits a crime within the territory of the United States. That is to say, the government could not expand the extraterritorial reach of the FCPA by recourse to the conspiracy and complicity statutes. Accordingly, to hold Hoskins liable, the government was required to demonstrate that he fell within a specified category or acted illegally on American soil.

Agent of a domestic concern. Although the government could not extend liability beyond the statute’s terms, the panel nevertheless found that the district court had erred in dismissing the second object of the conspiracy, which alleged that Hoskins willfully conspired with various co-defendants to, "while in the territory of the United States," commit acts in furtherance of bribing foreign officials. The government might be able to show that as an agent, Hoskins committed the first object by conspiring with employees and other agents of Alstom U.S., and committed the second object by conspiring with foreign nationals who conducted relevant acts while in the United States. Accordingly, the panel reversed the portion of the holding that Hoskins was incapable of conspiring to violate Section 78dd-3 because he was never in the United States, with instructions for the district court to reinstate the second object of the conspiracy.

A "close and difficult case." In a separate concurrence, Judge Gerard Lynch wrote that he joined the majority decision but suggested that Congress might want to revisit the FCPA with this "close and difficult" case in mind. Lynch noted that the particular situation of someone like Hoskins, who is alleged to have participated in directing or assisting Americans to violate the FCPA, was not explicitly discussed by Congress, and such a case might well never have occurred to those drafting the law. But the court was bound to apply the law as written, and the result in this case was "questionable as a matter of policy," said Lynch.

The case is No. 16-1010-cr.

Attorneys: Sandra Slack Glover, U.S. Attorney's Office, for the United States. Christopher J. Morvillo (Clifford Chance US LLP) for Lawrence Hoskins.

Companies: Alstom S.A.; Alstom Power, Inc.

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