This week we are pleased to have a guest post from Edward Heath and Kevin Daly. Attorneys Heath and Daly are members of Robinson & Cole’s Manufacturing Industry Group and regularly counsel clients on anti-corruption compliance.
A Brief Overview of the FCPA
The Foreign Corrupt Practices Act (FCPA) is a federal statute that prohibits United States companies and individuals from bribing foreign government officials in order to gain or retain business. It is a major civil and criminal enforcement priority for the federal government. Each year, the aggregate amount of penalties paid under the FCPA totals hundreds of millions of dollars.
Although it is well known that the FCPA applies to U.S. companies and U.S. individuals (e.g., U.S. citizens and residents) there is a common misconception that its reach ends at our borders. However, there are some circumstances where the FCPA can reach individuals outside of the U.S. Foreign persons who act as the agents, employees, officers, directors or shareholders of U.S. companies can be held liable under the FCPA. Foreign persons who commit an FCPA violation while in the U.S. are also covered.
Recent Court Decision Addresses Geographic Reach
The United States Court of Appeals for the Second Circuit’s recently issued a decision affirming this point. United States v. Hoskins arose out of an alleged bribery scheme involving Alstom, S.A. (“Alstom”), a global company based in France that operates in the power and transportation industries. Specifically, the government claims that Alstom and several of its subsidiaries (including UK-based and U.S.-based subsidiaries) bribed Indonesian government officials in order to obtain a $118 million power contract from the Indonesian government. The government contends that Mr. Hoskins, while working in France for Alstom’s U.K. subsidiary, was one of the people responsible for approving and authorizing the alleged bribes. Although parts of the alleged scheme occurred within the U.S. (e.g., payments were made from U.S. bank accounts), and some co-conspirators were based in the U.S., Mr. Hoskins never traveled to the U.S., never was employed by Alstom’s U.S. subsidiary, and is not a U.S. citizen or resident.
The government charged Mr. Hoskins with violating the FCPA, alleging that he conspired and aided and abetted in FCPA violations committed by others. The Second Circuit, however, rejected the government’s theories. The court held that Congress set the limits on the geographic reach of the FCPA in the statute, and that the scope cannot be expanded through accomplice or conspiracy liability theories to reach persons, like Mr. Hoskins, who are beyond the geographic reach of the statute.
Nonetheless, the court held that he can be tried on the theory that he acted as an agent for Alstom’s U.S. subsidiary. Agents of U.S. companies are explicitly covered by the FCPA, regardless of whether they are U.S. citizens or residents. To convict on such a theory, the government would be required to prove that that Hoskins was an agent of Alstom’s U.S. subsidiary.
While Hoskins is only binding within the Second Circuit (Connecticut, New York, and Vermont), and the government is evaluating further appellate options, it poses an obstacle to government efforts to expand FCPA liability beyond the specific categories of foreign persons enumerated in the statute.