Jury finds former executive Lawrence Hoskins guilty in key case testing agency under the FCPA
On November 8, 2019, after a single day of deliberation, jurors in the long-awaited trial of Lawrence Hoskins, former Vice President of the French conglomerate Alstom S.A., found him guilty of one count of conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”) and six counts of violating the FCPA (in addition to separate conspiracy and money laundering counts). Hoskins faced charges in the District of Connecticut for his role in a conspiracy in which a US subsidiary of Alstom bribed government officials to win a US$118 million contract to build power plants in Indonesia (the “Tarahan Project”). In 2014, the French company pleaded guilty to two counts of violating the FCPA and paid a US$772 million criminal penalty to DOJ. The wrinkle in Hoskins’s case was jurisdictional: Hoskins did not neatly fall into any of the three classes of persons over whom FCPA jurisdiction exists. He was not a US citizen, was not employed by a US company, and never set foot in the US while working for Alstom.
Nevertheless, DOJ claimed jurisdiction on a theory of accomplice or co-conspirator liability. As described in a prior DLA Piper Client Alert, in 2018, the Second Circuit Court of Appeals rejected DOJ’s attempt to expand the FCPA’s scope and ruled that a non-resident foreign national operating entirely outside the physical territory of the United States cannot be liable for violations of the FCPA under aiding-and-abetting or conspiracy theories unless he was directly liable under the statute as an employee, director or “agent” of a US company. The Second Circuit noted that to hold otherwise would be to “transform the FCPA into a law that purports to rule the world.” United States v. Hoskins, 902 F.3d 69, 92 (2d Cir. 2018).
As a result, DOJ’s trial against Hoskins primarily turned on whether Hoskins acted as an agent of the US-based Alstom subsidiary (“Alstom U.S.”).
As the FCPA itself does not define “agent,” there was substantial disagreement between the parties as to the proper instruction to the jury. In a significant pretrial ruling, Judge Arterton sided with DOJ in finding that the “principal need only control the undertaking” rather than the agent itself. DOJ defined “undertaking” as including “the defendant’s activities in support of Alstom Power Inc.’s efforts to secure the Tarahan Project.” The court determined that too narrow a definition “might wrongly suggest to the jury that a higher level of generalized control over the agent is required.” Judge Arterton also rejected the defendant’s attempt to list aspects of the agency relationship such as “the right to control Mr. Hoskins’ conduct,” “the right to supervise and assess Mr. Hoskins’ work” or “the right to terminate his services,” holding that “[n]arrowly listing aspects of an agency relationship as defendant requests is likely to mislead the jury and is unnecessary to ensure the jury’s understanding of agency principles.”
At trial, DOJ focused on Hoskins’s relationship with Alstom U.S. and his alleged willing complicity in the broader bribery scheme. In their opening statement, prosecutors claimed Hoskins identified which Indonesian government officials to pay, which consultants to hire and the specifics of how, when and where to make payments. Conversely, Hoskins sought to distance himself from any US connections.
On the second day of trial, it was reported that Ed Thiessen, a former Alstom executive, explained how payments to officials required approval from Alstom’s US subsidiary. He further testified that if the US subsidiary did not agree to the terms and conditions for the payments to consultants (and by implication, to government officials), Hoskins was responsible for renegotiating with the consultants. While prosecutors readily acknowledged that Hoskins committed the alleged crimes from “his office in Paris and hotels in Indonesia,” they argued that he nonetheless acted as an agent of Alstom U.S. because the acts were committed as part of the “undertaking” that Alstom U.S. tasked Hoskins to perform.
Following the presentation of evidence, Judge Arterton instructed the jury to consider the definition of “agent” to include—
- a manifestation by the principal that the agent will act for it;
- the agent’s acceptance of an “undertaking”—meaning “acts or services” for the principal; and
- an understanding that the principal is “in control” of those acts or services.
Judge Arterton clarified that “one may be an agent for some business purpose and not others.” In this case, agency must be “in connection with the specific events related to the contract known as the Taharan project.”
After a single day of deliberation, jurors found Hoskins guilty of one count of conspiracy to violate the FCPA and six counts of violating the FCPA (in addition to separate conspiracy and money laundering counts). In keeping with the court’s jury instruction, the jury apparently deemed Hoskins an agent of Alstom U.S. despite his minimal connections to the US. In response, Hoskins hinted at a post-trial challenge when the defense vowed to “continue to work tirelessly towards clearing Lawrence’s good name.”
The jury’s guilty verdict highlights the importance of agency and the direction that DOJ is likely to take in prosecuting cases involving non-US citizens or entities with minimal connection to the US.
Even after the Hoskins verdict, the potential reach of FCPA liability remains unsettled in other ways. For instance, while Hoskins’s trial approached, a decision was issued in United States v. Firtash, Docket No. 13-CR-00515 (N.D. Ill. June 21, 2019), which sets the stage for a circuit split over the viability of FCPA charges that are brought on aiding and abetting or conspiracy grounds against non-resident foreign nationals who operate entirely outside of the United States. Specifically, in Firtash, Judge Pallmeyer held that the Seventh Circuit would likely reject the reasoning set forth in the Second Circuit’s opinion for the Hoskins appeal (again, discussed in our alert here) because such reasoning was largely based upon the FCPA’s legislative history and not its text only. Consequently, Firtash denied a motion to dismiss a criminal count that could now be precluded in the Second Circuit pursuant to Hoskins.