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 Team and regularly counsel clients on trade compliance, anti-corruption compliance, and other corporate compliance issues.
Last week, a jury found a former executive of a French multinational company guilty of violating the Foreign Corrupt Practices Act, money laundering, and conspiracy in connection with alleged bribery in Indonesia. The case is a significant test of the geographic reach of the FCPA because the defendant was a foreign national who was employed by a foreign corporation and never entered U.S. territory during the course of his employment, but he was convicted on the theory that his actions were taken as an agent for his employer’s U.S. subsidiary.
The U.S. Department of Justice alleged that the defendant arranged for the payment of bribes to Indonesian government officials (including a member of the Indonesian parliament and executives of a state-owned electricity company) in order to secure contracts to build power plants in Indonesia. The defendant disguised the bribes by characterizing them as consulting fees paid to third-party consultants. The contracts were awarded to a U.S. subsidiary of the defendant’s employer.
At an earlier stage of the case, the District Court held that the defendant could not be liable for conspiring or aiding and abetting an FCPA violation because he was not a U.S. national, was not present in U.S., and was not employed by a U.S. company. The Second Circuit affirmed this ruling, but also held that the defendant could be convicted of a principal violation of the FCPA if he were acting as an agent of a U.S. company.
At trial, the government presented evidence that the defendant was acting as an agent for the U.S. subsidiary in arranging for the bribes to the Indonesian officials. The jury was instructed to consider whether the U.S. subsidiary indicated that the defendant was acting on its behalf, whether the defendant accepted such an undertaking, and whether there was an understanding that the U.S. subsidiary was in control of the defendant’s acts or services. The government presented evidence that the U.S. subsidiary approved and controlled the payments arranged by the defendant and that the defendant took direction from the U.S. subsidiary. The jury convicted the defendant after one day of deliberations.
This case pushes the limits of the geographic reach of the FCPA. For foreign manufacturers with a U.S. presence, this case is a warning shot that the government may use the slenderest domestic connection to prosecute foreign affiliates and their personnel. For U.S. companies with an overseas presence, the case serves as confirmation that creative corporate formalities may not shield domestic assets or personnel from criminal liability for FCPA violations.