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16 January 2020
The recent uptick in FCPA trials should not come as a surprise; U.S. Department of Justice (“DOJ”) officials have over the past few years emphasized their increased emphasis on individual liability, stressing the importance of holding individuals who engage in white collar crimes equally as accountable as those who commit other crimes. DOJ’s FCPA Unit Chief stated in 2014 that DOJ is “very focused” on prosecuting individuals and companies, because “going after one or the other is not sufficient for deterrence purposes.” In 2015, DOJ issued new guidance (subsequently known as the “Yates Memo”) prioritizing holding individuals accountable for corporate wrongdoing. Moreover, the change in presidential administration did not result in a philosophical shift by DOJ when it came to individual accountability: in a November 2018 speech by then-Deputy Attorney General Rod J. Rosenstein (available here), DOJ made clear its continued belief that “[t]he most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.”
DOJ continues to demonstrate that it intends to remain true to its policy announcements about individual accountability. DOJ’s FCPA Unit announced 35 charges against individuals in 2019 – the most of any year on record. Perhaps most significantly, though, with this unprecedented number of criminal charges levied against individuals also came an unprecedented number of FCPA-related jury trials.
Jury trials in the FCPA landscape are historically uncommon. This is largely the result of the typical identity of FCPA defendants in past years: corporate entities. Corporate defendants are generally reluctant to subject themselves to the inherently risky nature of trials and potential convictions, leading them to typically opt instead for some form of settlement. Individual defendants, on the other hand, face the prospect of physical imprisonment and have proved more likely to exercise their right to a jury trial.
As DOJ has increasingly charged individuals, more FCPA-related charges are making their way to a jury. While there were no FCPA-related jury trials from 2013 until 2016, there was one trial and conviction in 2017, another trial and conviction in 2018, and four trials in 2019, resulting in four convictions and one acquittal. More jury trials loom in 2020, with one already underway.
The implications for the increasing prevalence of FCPA-related jury trials are significant. Because corporate-defendant settlements involve little judicial interaction, there has been scant opportunity for the development of FCPA case law. Rather, the contours of the FCPA – including what conduct exactly violates it – have been drawn by prosecutors and defense attorneys in the course of agreeing upon settlement terms. With no legal precedent emanating from such interactions, the legal community has relied predominantly on the terms of settlement agreements and DOJ guidance in delimiting the strictures of the FCPA – until recently.
The 2019 conviction of British national Lawrence Hoskins is a prime example of valuable FCPA-related jurisprudence emanating from the current spate of jury trials. In 2013, the DOJ charged Hoskins, a former executive of the French power and rail transportation company Alstom S.A., with conspiring with and aiding and abetting other Alstom executives to violate the FCPA. Hoskins successfully moved to dismiss the conspiracy charge, arguing that, as a citizen of the United Kingdom who worked in France at a French subsidiary of Alstom, he did not fall within any of the three categories of defendants under the FCPA (“issuers”, “domestic concerns”, and foreign persons who act in furtherance of the bribery scheme while in U.S. territory). The U.S. government appealed the dismissal to the U.S. Court of Appeals for the Second Circuit, which rejected the DOJ’s theory of extraterritorial jurisdiction under the FCPA. At the same time, however, the Second Circuit found that Hoskins could be convicted of violating the FCPA if the DOJ could demonstrate that Hoskins was an “agent” of a domestic concern.
After a two-week jury trial, on November 8, 2019, Hoskins was found guilty as an agent of a domestic concern of participating in a scheme to bribe foreign officials in violation of the FCPA, as well as three counts of money laundering and two counts of conspiracy (see here for the DOJ press release). Practitioners now know that the government cannot rely on conspiracy or aiding and abetting theories of liability to extend FCPA liability to non-U.S. persons or companies where none otherwise exists, but that it can rely on an agency theory to effectuate such an extension.
In 2020, the trend of individual enforcement for FCPA violations will continue. As a consequence, we expect to continue to see a number of individuals going to trial rather than settling.
Those who choose to go to trial may be emboldened by the recent acquittal on December 2, 2019, of Lebanese national Jean Boustani. Boustani faced money laundering charges related to an alleged $200 million bribery scheme in Mozambique. In acquitting him, jurors struggled to find sufficient nexus to the United States. While Boustani himself was not charged with any FCPA violations, seven other individual defendants are facing FCPA and other charges related to the same bribery scheme. These defendants, as well as others whose charges raise close jurisdictional questions are likely to continue to litigate the precise boundaries of the FCPA’s reach.
On December 4, 2019, Assistant Attorney General Brian A. Benczkowski remarked that “[a]t the rate we are going, in another ten years, the FCPA section in white collar crime textbooks will be chock full of judicial opinions with which to challenge law students” (available here). While the exact nature of those judicial opinions of course remains to be seen, one thing is certain: the ambiguous and undefined boundaries of the FCPA are starting to come into clearer focus.
The authors would like to thank Aviva Kushner and Melanie Blair for their contribution in preparing this article.