Second Circuit Limits Extraterritorial Application of FCPA
09/05/2018On August 27, 2018, a three-judge panel of the Second Circuit limited the extraterritorial application of the Foreign Corrupt Practices Act (“FCPA”), holding the statute does not apply to foreign nationals who commit crimes outside the U.S. and who lack sufficient ties to U.S. entities. U.S. v. Hoskins, No. 16-1010 (2d Cir. Aug. 24, 2018). The panel largely upheld a decision by the United States District Court for the District of Connecticut, which concluded that the government could not evade the statute’s requirement that a foreign person had to act “while in the United States” by charging a retired British executive of a French multinational company with conspiring with persons in the United States to violate the FCPA. The Court noted, however, that the government could still proceed on an alternative theory that the foreign person acted as an agent of those U.S. persons.
A retired British executive was charged in the District of Connecticut with 12 counts, including seven under the FCPA which are the subject of the appeal. Count One charged a two-pronged conspiracy to violate the FCPA, alleging the British executive conspired with an American company to bribe Indonesian officials to secure a $118 million contract from the Indonesian government, both in the capacity of its agent and in his own capacity as a foreign person. Six additional counts charged him with substantive violations of the FCPA, again alleging that he was an agent of the American company and also that he “aided and abetted” that company’s efforts. The indictment alleged the retired British executive violated either 15 U.S.C. § 78dd-2, which prohibits American companies and persons and their agents from using interstate commerce in connection with payment of bribes, or 15 U.S.C. § 78dd-3, which prohibits foreign persons or businesses from taking acts to further certain corrupt schemes, including the payment of bribes, while present in the U.S. The District Court dismissed all of Count One of the indictment, except for the charge that the executive violated 15 U.S.C. § 78dd-2 by acting as an agent of an American company.
The Second Circuit held that it had clear authority to hear the interlocutory appeal of a dismissal of portions of counts in an indictment under 18 U.S.C. § 3731, and largely upheld the decision of the District Court on the merits. Specifically, the panel held that, despite the general rule that a defendant can be liable for conspiracy or as an accomplice for crimes he did not or could not physically commit, a clear affirmative decision by Congress can exclude certain classes of persons from liability under particular statutes. The Court further concluded that the text, structure, and legislative history of the FCPA demonstrate a clear affirmative decision to exclude foreign nationals who are not residing in the U.S., are acting outside of American territory, lack an agency relationship with a U.S. person, and are not directors, stockholders, employees, or officers of American companies. Thus, “the FCPA does not impose liability on a foreign national who is not an agent, employee, officer, director, or shareholder of an American issuer or domestic concern—unless that person commits a crime within the territory of the United States, [and] . . . The government may not expand the extraterritorial reach of the FCPA by recourse to the conspiracy and complicity statutes.” Hoskins, slip op. at 69. Consequently, the retired British executive, as a foreign national residing in France working for a French company, could not violate the FCPA unless he came into the United States or acted abroad as an agent of an American company. The Second Circuit thus left undisturbed the District Court’s decision that the executive could be charged as a member of the conspiracy under 15 U.S.C. § 78dd-2 through an agency theory.
Intriguingly, although the Court held that a foreign person could not be charged with conspiring with U.S. persons in the United States to violate § 78dd-3, it came to a different conclusion with respect to conspiring with foreign persons who committed acts in the United States. Thus, the Second Circuit overturned the District Court’s decision regarding an agency theory under 15 U.S.C. § 78dd-3, holding that if the government can show that the retired British executive was acting as an agent of an American person he can be convicted of conspiracy if the government provides that “as an agent, [he] committed the first object by conspiring with employees and other agents of [the American company] and committed the second object by conspiring with foreign nationals who conducted relevant acts while in the United States.” Hoskins, slip op. at 72. Judge Lynch, though he joined the panel in full, wrote separately to emphasize the narrow scope of the clear Congressional intent exception to the general principle that conspirators can be liable even when they could not be liable as principles.
Despite the ruling, the retired British executive will still face charges for violating the FCPA if the government can prove its case under an agency theory. The case adds some much-needed clarity to the extraterritorial reach of the FCPA in cases against individuals. Given the paucity of reported decisions in the FCPA area, this decision will be especially helpful precedent for foreign individuals facing FCPA-related investigations.