Second Circuit Rejects DOJ’s Efforts to Broaden FCPA’s Extraterritorial Reach Through Conspiracy or Other Accomplice Liability

In a significant decision limiting the reach of the Foreign Corrupt Practices Act (“FCPA”), the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) recently rejected the U.S. government’s attempt to use conspiracy and accomplice liability to reach conduct by a non-U.S. person that had occurred outside the United States.

In United States v. Hoskins,1 the U.S. government alleged that several defendants, including U.K. national Lawrence Hoskins, were part of a scheme to bribe officials in Indonesia so that their employer, a global company headquartered in France, could secure a US$118m contract from the Indonesian government.

The French company’s U.S. subsidiary allegedly retained two consultants to bribe Indonesian officials. Hoskins never directly worked for the U.S. subsidiary, but while working from France, allegedly was one of the people responsible for approving the selection of, and authorizing payments to, the consultants, knowing that a portion of those payments was intended to bribe Indonesian officials in exchange for their influence and assistance in awarding the contract. Hoskins repeatedly e-mailed and called U.S.-based employees regarding the scheme, but Hoskins never traveled to the United States while the alleged bribery scheme was ongoing. Citing this conduct, the U.S. Department of Justice (the “DOJ”) argued that Hoskins was criminally liable under two theories: (1) violating the FCPA by acting as an agent of the U.S. subsidiary; and (2) conspiring with and aiding and abetting the U.S. subsidiary and its employees in violating the FCPA.

In rejecting the U.S. government's second argument that Hoskins conspired to violate the FCPA or aided and abetted an FCPA violation, the appellate court said that the FCPA had established three clear categories of persons who are covered by the Act:

  • Issuers with securities registered with the U.S. Securities and Exchange Commission (the “SEC”) or that are required to file reports with the SEC, as well as any officer, director, employee, or agent of such issuer, or any stockholder acting on behalf of the issuer, using interstate commerce in connection with the payment of bribes;
  • U.S. companies and U.S. persons using interstate commerce in connection with the payment of bribes; and
  • Non-US persons or businesses taking acts to further certain corrupt schemes, including the payment of bribes, while present in the United States.

The Second Circuit ruled that if the FCPA would not apply to a defendant as a principal, then it could not apply to that defendant as a co-conspirator or accomplice. Normally, if a defendant acts as a co-conspirator or accomplice to a crime, then he or she can be charged with conspiracy or accomplice liability even in situations where he or she would have no possible liability for the underlying crime. The Hoskins court, however, held that the FCPA embodies an affirmative legislative policy against agent and accomplice liability. It drew this conclusion from the FCPA’s text, structure and legislative history, carefully considering the legal precedent that U.S. law does not apply outside the United States without express statutory authorization.

Consequently, the court said, Hoskins – a non-U.S. person who had not entered the United States while the alleged bribery scheme was ongoing – could not be directly liable under the FCPA nor liable under any conspiracy or accomplice theory. The court, however, did permit the U.S. government to proceed against Hoskins on its theory that he had acted as an agent of the US subsidiary and was therefore liable for violating the FCPA.

This is a significant decision for several reasons. First, courts rarely have the opportunity to adjudicate the FCPA’s reach because most companies subject to FCPA-related allegations choose to settle with the DOJ and SEC. Hoskins demonstrates that, when litigated, the DOJ’s expansive theories of FCPA jurisdiction may not hold up in court. The case is a clear rejection of an approach that the DOJ has advocated for some time now in its Resource Guide to the U.S. Foreign Corrupt Practices Act. It places a significant limitation on the DOJ’s ability to charge foreign companies and individuals based on an FCPA conspiracy or other accomplice theory where such defendants have not taken any action in furtherance of the FCPA violation while in the United States.

That said, the practical implications of the Hoskins decision remain to be seen. As an initial matter, Hoskins is only binding in the Second Circuit (which covers New York, Connecticut and Vermont), and other courts may decline to follow it. Further, as Hoskins itself also makes clear, the DOJ can still seek to proceed on an agency theory when charging foreign companies and individuals, thus potentially avoiding the limiting effects of Hoskins where the facts permit such a path. Finally, the decision may further encourage the DOJ to work with its foreign enforcement counterparts to charge non-U.S. based individuals in other countries, especially where an agency theory appears more tenuous.

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1.No. 16-1010-cr (2d Cir. Aug. 24, 2018).