An attempt by the government to extend its reach under the Foreign Corrupt Practices Act was headed off by the U.S. Court of Appeals for the Second Circuit Friday, upholding a lower court’s dismissal of conspiracy charges against a foreign national.
Consisting of Chief Judge Robert Katzmann and Circuit Judges Rosemary Pooler and Gerard Lynch, the panel ruled that U.S. District Judge Janet Bond Arterton of the District of Connecticut was right, in part, in dismissing the government’s conspiracy charge. Lynch issued a separate concurring opinion, while Pooler wrote the unanimous opinion.
The decision turned on a close reading of the FCPA’s definition of who could potentially be held liable in a conspiracy situation. Pointing to precedent, the panel found that Congress had used “surgical precision” to define liabilities in the statute, and falling outside those liabilities necessarily bars an attempt by prosecutors to rope a person in on conspiracy charges.
As the panel noted repeatedly, the interlocutory appeal by the government boiled down to a primary issue: whether a nonresident foreign national, acting entirely outside the United States, and who is not an employee or agent of an American company, may be liable based on a conspiracy or complicity theory put forward by the government.
Ultimately, the panel, the congressional record, prior precedent, and the text of the FCPA itself made it clear the answer is no.
Lawrence Hoskins, a U.K. citizen who worked for a subsidiary of the French company Alstom in France, is alleged by U.S. authorities to have been part of a scheme to bribe Indonesian government officials to secure a $118 million contract for a separate, U.S.-based Alstom subsidiary.
Hoskins never worked for the U.S. subsidiary nor traveled to the United States during the alleged bribery scheme’s time period. Nevertheless, federal authorities contend Hoskins was involved with finding consultants and authorizing funds for them, some of which flowed from U.S. bank accounts, to bribe Indonesian officials on behalf of the U.S. subsidiary.
Hoskins faced 12 total charges, but only the dismissal of the first charge of conspiracy to violate the FCPA was at issue on interlocutory appeal. He argued before the district court that the FCPA holds only certain, narrowly defined groups of people liable. The government couldn’t make an end-run around these limitations by using conspiracy or aiding-and-abetting charges to get over the fact he did not fall into one of the statue’s categories.
Arterton agreed, leading to the government’s interlocutory appeal.
The panel first addressed the conspiracy liability faced by Hoskins. The issue turned on the panel’s detailed analysis of the FCPA’s affirmative legislative policy exception. The U.S. Supreme Court found in its 1932 decision in Gebardi v. U.S. that the legislative intent behind the anti-trafficking Mann Act was not to have the women transported across borders punished for conspiracy, even if she was a willing participant of the illegal transportation.
Gebardi and other subsequent precedent applied to Hoskins’ case showed Congress’ clear intent in carving out areas that the FCPA did not touch, largely out of legitimate extraterritoriality concerns. The statute’s language, Pooler wrote in her opinion, has a “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.”
Throughout, the panel noted the government’s arguments would appear to substantially increase the FCPA’s reach, at one point arguing for a transformation of the FCPA “into a law that purports to rule the world.”
“In short, the legislative history of the FCPA further demonstrates Congress’s affirmative decision to exclude from liability the class of persons considered in this case and we thus hold that the government may not override that policy using the conspiracy and complicity rules,” Pooler wrote.
The panel went on to note that, even if the legislative record handed an established and affirmative policy, it would have ruled in favor of Hoskins on the basis of a presumption against extraterritorial application of the FCPA based on the recent Supreme Court decision in RJR Nabisco v. The European Community. Since the FCPA clearly dealt with extraterritoriality issues, the panel found, it would be inappropriate to allow the government to extend beyond what is described in the law itself through the use of conspiracy or complicity statutes.
In his concurring opinion, Lynch said the allegations raise issues that Congress may not have considered before and may be worth doing so in the future. Considering Hoskins significant position in the company and alleged role in the scheme, the practical application of an international anti-bribery statute may need to be revisited, the judge suggested.
“It makes little sense to permit the prosecution of foreign affiliates of United States entities who are minor cogs in the crime, while immunizing foreign affiliates who control or induce such violations from a high perch in a foreign parent company,” Lynch wrote. “That is the equivalent of punishing the get-away driver who is paid a small sum to facilitate the bank robber’s escape, but exempting the mastermind who plans the heist.”
The government did win a reversal from Arterton’s dismissal on the issue of Hoskins’ potential agency. Throughout its decision, the panel assumed for the sake of the appeal that Hoskins was not an agent of Alstom. In reversing the district court, the appellate panel said the government should have the opportunity to at least make that argument going forward, which could potentially provide them with the enumerated category, under which Hoskins could face the very FCPA charges he just beat on appeal.
Hoskins was represented by Clifford Chance partner Christopher Morvillo on the appeal. He declined to comment.
A spokeswoman for the Department of Justice said the department is reviewing the ruling and considering next steps in this pending case.