On August 12, 2022, the Second Circuit upheld trial Judge Janet Bond Aterton’s (D. Ct) acquittal of a former Alstom SA executive on all FCPA counts, thereby ending one of the most closely watched prosecutions under the FCPA in nearly a decade and confirming, beyond a reasonable doubt, that there was no evidence of an explicit or implied agency relationship between the former executive and the company’s US subsidiary.
In 2014, the French company pleaded guilty to two counts of violating the FCPA for bribing Indonesian government officials in hopes of winning a US$118 million contract to build the Tarahan power plant project (Tarahan project). As part of that plea, Alstom paid a US$772 million criminal penalty to the Department of Justice.
Lawrence Hoskins, former vice president of the French conglomerate, faced charges in the District of Connecticut for his role as a co-conspirator in the bribery scheme, although he 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. DOJ initially claimed jurisdiction on a theory of accomplice or co-conspirator liability. The Second Circuit rejected that theory in 2018, noting 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. See our alert The Second Circuit rules against DOJ's aggressive assertion of extraterritorial FCPA jurisdiction over foreign accessories.
DOJ’s trial against Hoskins primarily turned on whether Hoskins acted as an agent of Alstom US, the US-based Alstom subsidiary. At trial, the DOJ focused on Hoskins’ relationship with Alstom US and his alleged willing complicity in the broader bribery scheme, particularly (i) Hoskins’ role in identifying which Indonesian government officials to pay; (ii) which consultant to hire; and (iii) the specifics of how, when and where to make the payments, which required approval from Alstom US.
DOJ further argued that, in performing these tasks, Hoskins acted as an agent of Alstom US because the acts were committed as part of the “undertaking” that Alstom US tasked Hoskins to perform. On November 8, 2019, jurors found Hoskins guilty of one count of conspiracy to violate the FCPA and six counts of violating the FCPA. See our alert Jury finds former executive Lawrence Hoskins guilty in key case testing agency under the FCPA.
The former executive challenged the verdict in a post-trial motion for acquittal on all FCPA counts, which the District of Connecticut granted on February 26, 2020, ruling that the government had failed to prove that Hoskins was an “agent” of a US entity in connection with the specific events related to the Tarahan Project contract. See our alert US v. Hoskins: in setback for DOJ, court grants post-trial motion for acquittal on all FCPA counts. The District Court pointed to the government’s failure to introduce evidence showing “beyond a reasonable doubt” that there was an understanding between the former executive and Alstom US that Alstom US would be in control of Hoskins’ actions on the specific Tarahan Project or that Alstom US controlled Hoskins’ actions in a manner consistent with agency relationships.
DOJ appealed the District Court decision, which the Second Circuit affirmed on Friday, August 12, 2022, reaffirming the traditional principles of principal/agent relationships and holding that the government failed to establish, beyond a reasonable doubt, an explicit or implied agency relationship between Hoskins and Alstom US.
The court stressed the lack of evidence that Alstom US controlled Hoskins, which it qualified as “key” in determining whether Hoskins was an agent of Alstom US. The court noted that Hoskins worked under a separate employment structure and that Alstom US had no authority in setting the former executive’s compensation or to terminate him.
The court also stressed that the former executive lacked the authority to bind Alstom US, pointing to the lack of evidence that the former executive could enter into any agreements on behalf of Alstom US, including consulting deals, for which he had no permission without instruction from Alstom US.
This decision represents an important check on the DOJ in cases premised on an agency theory as well as a reminder that traditional agency principles apply when attempting to assert jurisdiction over foreign accessories that do not fall neatly under the three categories of persons subject to the FCPA. Mere “support” in furtherance of the bribery scheme is not enough, absent authority to bind the principal subject to the FCPA.
To find out more about the implications of this decision, please contact any of the authors.