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Second Circuit – Once Again – Sides With Hoskins On FCPA Issue


To call U.S. v. Hoskins a long-drawn out Foreign Corrupt Practices Act enforcement action would be an understatement.

In 2013, the DOJ criminally charged Lawrence Hoskins (a United Kingdom national and former senior vice president for the Asia region for France-based Alstom) with conspiracy to violate the FCPA’s anti-bribery provisions among other charges. (See here for the prior post). The conduct at issue alleged occurred between 2002 and 2004.

Unlike certain of his co-defendants who pleaded guilty, Hoskins put the DOJ to its burden of proof and at the trial court level argued in a motion to dismiss that the FCPA charges should be dismissed “on the basis that [the indictment] charges a legally invalid theory that he could be criminally liable for conspiracy to violate the FCPA even if the evidence does not establish that he was subject to criminal liability as a principal, by being an “agent” of a “domestic concern.” (See here for the prior post).

As stated by the trial court Judge Janet Bond Arterton (D.Conn.) in a 2015 decision (see here), the disputed issue was “whether a nonresident foreign national could be subject to criminal liability under the FCPA, even where he is not an agent of a domestic concern and does not commit acts while physically present in the territory of the United States, under a theory of conspiracy or aiding and abetting a violation of the FCPA by a person who is within the statute’s reach.” Judge Arterton answered the question no and concluded that accomplice liability could not extend to Hoskins under the circumstances of the case and thus granted the motion to dismiss.

After the DOJ’s motion for reconsideration was rejected, the DOJ appealed to the Second Circuit.

In its 2018 decision (see here for the prior post), the Second Circuit court rejected the DOJ’s expansive jurisdictional theory of prosecution. As stated by the court:

“[W]e are asked to decide whether the government may employ theories of conspiracy or complicity to charge a defendant with violating the Foreign Corrupt Practices Act (“FCPA”), even if he is not in the categories of persons directly covered by the statute. We determine that the FCPA defines precisely the categories of persons who may be charged for violating its provisions. The statute also states clearly the extent of its extraterritorial application. Because we agree with the district court that the FCPA’s carefully-drawn limitations do not comport with the government’s use of the complicity or conspiracy statutes in this case, we AFFIRM the district court’s ruling barring the government from bringing the charge in question.”

Notwithstanding the above, the Second Circuit allowed the government to pursue FCPA charges based on the factual issue of whether Hoskins was “an agent of a domestic concern.” As stated by the court:

“Provided that the government makes this showing, there is no affirmative legislative policy to leave his conduct unpunished, nor is there an extraterritorial application of the FCPA. Accordingly, the government should be allowed to argue that, as an agent, Hoskins committed the first object by conspiring with employees and other agents of Alstom U.S. and committed the second object by conspiring with foreign nationals who conducted relevant acts while in the United States.”

Six years after being charged and approximately 15 years after the alleged conduct at issue took place, in Fall 2019 the trial actually occurred and Hoskins “was found guilty … for his role in a multi-year, multimillion-dollar foreign bribery scheme and a related money laundering scheme.” (See here for the prior post).

However, in a major setback for the DOJ, in February 2020 Judge Arterton granted Hoskins motion for acquittal on all FCPA charges. (See here for the prior post). In pertinent part, Judge Arterton concluded “that even when drawing all reasonable inferences in the Government’s favor, the evidence adduced at trial cannot support the conclusion that Mr. Hoskins acted subject to API’s control such that Mr. Hoskins was an agent of API.”

Judge Arterton denied Hoskin’s motion for acquittal on the five money laundering charges he was convicted of by the jury. In sentencing Hoskins for the money laundering violations, Judge Arterton significantly rejected the DOJ’s 7-9 year sentencing recommendation and sentenced Hoskins to approximately 1 year.  (see here for the prior post).

Even so, the case was not over as the DOJ quickly filed a notice of appeal of Judge Arterton’s grant of the motion for acquittal on the FCPA charges. (See here for the prior post). As stated by the DOJ in its opening brief, the issue on appeal was as follows:

“Whether, viewing the evidence in a light most favorable to the guilty verdict, a rational jury could have found that the defendant, a senior executive in a corporate support function of multinational holding company Alstom S.A., was an agent of a Connecticut-based Alstom business, Alstom Power Inc. (“API”), in the course of his assisting API to secure a power plant contract in Indonesia, including by hiring consultants to funnel bribes to Indonesian officials, where the defendant repeatedly followed API’s instructions and API was in charge of all facets of the project.”

For his part, Hoskins also filed a cross-appeal and his opening brief framed the issues as follows:

“First, whether Mr. Hoskins’s Speedy Trial Act and Sixth Amendment rights were violated by the extraordinary delay between his indictment in July 2013 and eventual trial in October 2019, particularly in light of the fact that Mr. Hoskins’s alleged involvement in the charged offenses ceased in 2004.

Second, whether the district court gave an erroneous jury instruction with respect to Mr. Hoskins’s withdrawal defense by failing to instruct the jury that resignation from the business enterprise through which the charged crimes were committed could constitute withdrawal if, following that resignation, Mr. Hoskins severed all contact with his alleged co-conspirators, performed no further acts in furtherance of the offense and received no benefit from the offense.

Third, whether the government failed to establish venue in the District of Connecticut for Counts Nine, Ten and Twelve, the substantive money-laundering offenses, each of which involved discrete transfers of funds from Maryland to Indonesia in violation of 18 U.S.C. 1956(a)(2)(A).”

With that nearly decade long and multi-faceted background, last Friday in this opinion the Second Circuit – once again – sided with Hoskins on the FCPA issue and stated:

“We hold that the district court properly granted Hoskins’s motion for judgment of acquittal for violations of the FCPA because there was no agency or employee relationship between Hoskins and Alstom Power, Inc.”

As to the relevant background, the opinion (authored by Judge Rosemary Pooler) states:

“Because Hoskins is not an American citizen, was not employed by the American subsidiary, and did not enter the United States while allegedly working on the scheme, he falls outside the category of persons directly covered by the FCPA. The government nevertheless contended that Hoskins was liable under the FCPA as a co‐conspirator or accomplice to the American subsidiary’s FCPA violation. Earlier in this litigation, we rejected that theory and held that a person could not be “guilty as an accomplice or a co‐conspirator for an FCPA crime that he or she is incapable of committing as a principal[.]” United States v. Hoskins (“Hoskins I”), 902 F.3d 69, 76 (2d Cir. 2018). The government then revised its prosecutorial theory, arguing Hoskins’s work for API’s American subsidiary rendered him an “an agent” of “a domestic concern”—a category of persons squarely within the FCPA’s terms. See 15 U.S.C. § 78dd‐2. The jury convicted Hoskins of eleven counts, seven of which were FCPA violations, and four of which were money laundering charges, and acquitted him on one count of money laundering. Hoskins then moved for acquittal, arguing he was not an agent within the meaning of the FCPA. The district court granted that motion, see United States v. Hoskins (“Hoskins II”), 2020 WL 914302, at *7, *13 12 (D. Conn. Feb. 26, 2020), and the government brought this appeal.”

[…]

As to the question of agency, the district court drew (as it must) all inferences in favor of the government that “API both 1) controlled the hiring of consultants for the Tarahan Project, and 2) gave Mr. Hoskins instructions, which he followed.” Hoskins II, 2020 WL 914302, at *7. However, the court concluded that the government failed to adduce evidence to “support the conclusion that Mr. Hoskins acted subject to API’s control such that Mr. Hoskins was an agent of API.” Id. The court reasoned that although API might have been the final decision‐maker as to which consultant to hire and on which terms, the emails and testimony produced at trial did not demonstrate that API had any authority to control Hoskins’s interim actions as those contracts were finalized, which is key to establishing a principal‐agent relationship. Id. at *8. The court also found it relevant that Pierucci, within Alstom’s overall organizational chart, did not have any authority to “fire, reassign, demote, or impact the compensation of Mr. Hoskins.” Id. The court granted Hoskins’s motion for acquittal on the FCPA counts, (one through seven).”

The opinion then states in pertinent part:

“The crux of this appeal is whether there was an agency relationship between Hoskins and API.

[…]

The parties agree that the common law meaning of agency we apply here is the correct one. There was no explicit or implied agency or employee relationship between Hoskins and API such that the elements of an agency 9 relationship were proven beyond a reasonable doubt. Hoskins was employed by a different subsidiary, within the IN department, which provides global support to all sales and operational subsidiaries. The record demonstrates that Hoskins’s actions in furtherance of securing consultants for the Tarahan Project were all subject to the decision‐making of Pierucci and other executives of API.

Conspicuously missing from the evidence is anything indicating that Pierucci or other API representatives actually controlled Hoskins’s actions as Hoskins and his API counterparts operated under separate, parallel employment structures. Pierucci did not hire Hoskins, lacked the ability to fire Hoskins, and lacked any say in Hoskins’s compensation. This lack of control over Hoskins is fundamental to the question of whether Hoskins was an agent because the “chief justifications for the principal’s accountability for the agent’s acts are the principal’s ability to select and control the agent and to terminate the agency relationship, together with the fact that the agent has agreed expressly or implicitly to act on the principal’s behalf.” Restatement (Third) of Agency § 1.01 11 cmt. c.

There is, of course, some evidence of direction from Pierucci and API to Hoskins. Pierucci asked Hoskins to execute certain tasks, such as revising agreements and sending them to API. Hoskins asked for approval from API before moving forward with Aulia, indicating that he looked to API for instruction. And the record shows Hoskins located and hired 21 consultants at the behest of API and that these consultant contracts required Hoskins’s approval.

Yet the fact that Hoskins collaborated with and supported API and Pierucci does not mean he was under their control within the meaning of the FCPA. Identifying consultants to become agents of API does not make Hoskins himself an agent of API. Nor does reviewing contracts for API to make sure they complied with API standards make Hoskins an agent. The government argues that because Hoskins provided API with support, he is an agent. But the government cites to no authority that supports such a broad definition of “agent” within the meaning of FCPA.

At bottom, the government failed to present sufficient evidence to allow the jury to find an agency relationship. Indeed, the record demonstrates Hoskins and API’s relationship lacks key elements of agency, such as any indication that Hoskins had any authority to act on API’s behalf, and whether API could “revoke” any authority it purportedly gave to Hoskins, or even do anything to control Hoskins’s actions. See 12 Williston on Contracts § 35:30 (4th Ed. 2021) (explaining that a principal has the authority to revoke an agent’s power orally or otherwise); Restatement (Third) of Agency § 1.01 cmt. c. The government argues that API revoked Hoskins’s authority when it declined to go with Harsono, whom Hoskins and Moenaf suggested as a consultant, instead going with Sharafi. This can hardly be said to be a revocation of authority, but rather a collaboration between multiple corporate employees and subsidiaries to obtain the desired result: finding an effective but not incriminating consultant.

There is no evidence that Hoskins was authorized to enter into any agreements on API’s behalf. The government itself notes that “Hoskins could not hire a consultant without API’s instruction.” Govt’s Br. at 55. Yet a hallmark of a principal‐agent relationship is that an agent can bind principals to certain legal commitments. See Restatement (Third) of Agency § 1.01 cmt. c (explaining that agents have “power to affect the principal’s legal relations through the operation of apparent authority”). While Hoskins may have supported API by attending meetings with consultants in Jakarta, it was ultimately API that did the negotiating and contracting. For example, one of the government’s key pieces of evidence was a meeting at a hotel in Jakarta where Sharafi agreed to reduce his commission from 3 to 1 percent, with Aulia receiving the 2 percent difference. Yet there is no indication that Hoskins had any authority to negotiate these percentages nor that he served as anything more than a messenger for API at this meeting. Minskoff, 98 F.3d at 708 (describing how an agent has the authority to conduct a transaction for the principal because of the principal’s manifestations). The fact that Hoskins supported the Tarahan Project, which API had control over, does not support a finding of a principal‐agent relationship. Hoskins supported API’s endeavors because of his role within the IN department of Alstom, not because API granted him agency authority.

Likewise, the facts the dissent points to do nothing more than illustrate why there was no agency relationship. The dissent writes that the government had to prove “only that API could terminate his involvement — and thus revoke his authority — at least in part.” Dissent at 6. Yet the dissent, like the government at trial, fails to specify any facts showing that API could terminate its relationship with Hoskins or otherwise exerted control over Hoskins. As discussed above, there is no doubt that Hoskins supported API and identified consultants, but the dissent’s argument requires extrapolating facts that do not appear in the record, instead of the appropriate course of drawing permissible inferences in the government’s favor. “[I]t is not enough that inferences in the government’s favor are permissible. We must also be satisfied that the inferences are sufficiently supported to permit a rational juror to find that element, like all elements, beyond a reasonable doubt.” Pauling, 924 F.3d at 657 (citation omitted). Here, such inferences are not supported by any facts in the record.

Our affirmance of the district court’s judgment of acquittal is not done lightly. We have viewed all evidence with reasonable inferences drawn in the government’s favor, but “we may not permit that rule to displace the even more important rule that all elements of an offense must be proven beyond a reasonable doubt.” Id. at 662. While there is some evidence that Hoskins supported API in his working relationship with the corporation, it is not sufficient to establish that API exercised control over the scope and duration of its relationship with Hoskins. Without this control over the relationship, there can be no finding of a principal‐agent relationship within the meaning of the FCPA.”

Although the Second Circuit sided with Hoskins on the FCPA issue, the court “affirm[ed] the district court’s order denying Hoskins’s motion to dismiss the indictment on Speedy Trial Act and Speedy Trial Clause grounds, as well as the district court’s denial of Hoskins’s motion for a judgment of acquittal based on erroneous jury instructions.”

As hinted at in Judge Pooler’s majority opinion, there was a dissent by Judge Raymond Lohier. In pertinent part, the dissent states:

“To start, I agree with my colleagues that Hoskins’s liability under the FCPA turns on whether the Government proved that he acted as an “agent of [a] domestic concern” in furtherance of the scheme to win the Tarahan project. Here, API is the “domestic concern.” The FCPA unfortunately leaves the term “agent” undefined, but the parties agree that the common-law definition of agency applies, and the District Court instructed the jury using that definition. Although the wisdom of the Government’s concession on this point is debatable, we are stuck with the common-law definition for purposes of resolving this appeal. But even under that definition, the jury’s verdict was sound.

[…]

My colleagues focus on whether API had a right to terminate Hoskins as a general matter. But ultimately, in my view, and as the District Court itself recognized, this appeal boils down to whether the Government presented sufficient evidence of API’s control over Hoskins’s actions “in connection with the specific events related to the Tarahan Project.”

There is no doubt that the corporate organizational charts introduced at trial paint a picture that favors the majority’s account. The charts show that Alstom was divided into “Sectors” and “Functions.” The “Sectors” were business units operated through Alstom’s subsidiaries, like API. The “Functions,” meanwhile, included corporate divisions such as the General Counsel’s office and Alstom’s International Network that provided support, coordination, and oversight across multiple Sectors and regions. As International Network’s Area Senior Vice President for Asia Pacific and Northern and Eastern Europe, Hoskins helped identify, negotiate with, and approve third-party consultants in those regions.

At trial, there was no dispute that the corporate organizational charts and other evidence showed that Hoskins formally reported only to International Network, and not to API or any other Alstom Sector. That evidence reflects that the reporting lines of a “Function” like International Network would not have converged with the reporting line of a business unit such as API until the level of the Deputy CEO of the parent corporation in France.

But Alstom’s organizational charts mask the reality of the relationship between Hoskins and API on the ground. The jury heard testimony, which it was entitled to credit, that the head of sales and marketing for Alstom’s global boiler business and employee of API, appellant Frederic Pierucci, in fact “called the shots as far as the strategy on the [Tarahan] project and as far as a consultant or agent.” According to one trial witness, Hoskins “didn’t call the shots or the strategy on Tarahan. Fred Pierucci . . . was in control. So in that sense, Mr. Hoskins would have been reporting to [Pierucci] on the Tarahan Project.”(“[I]t was ultimately API that did the negotiating and contracting [of consultants].”).

As the majority acknowledges, “[t]he record demonstrates that Hoskins’s actions in furtherance of securing consultants for the Tarahan Project were all subject to the decision-making of Pierucci and other executives of API.” Yet the majority insists that there was insufficient “evidence to allow the jury to find an agency relationship” because “Hoskins and API’s relationship lack[ed] key elements of agency, such as any indication that Hoskins had any authority to act on API’s behalf, and whether API could revoke any authority it purportedly gave to Hoskins, or even do anything to control Hoskins’s actions.”

I respectfully disagree. To prove the existence of an agency relationship under the circumstances of this case, the Government was not required to show that API could cut Hoskins out of the scheme entirely. It had to prove only that API could terminate his involvement — and thus revoke his authority — at least in part. In my view, the Government made that more limited showing.

[…]

To be sure, the evidence of API’s authority to cut ties with Hoskins — the central evidence of the agency relationship that the majority finds lacking — was slim. But slim is not the same thing as insufficient. There was sufficient evidence to reject Hoskins’s motion to vacate under Rule 29 and let the jury’s verdict stand under Rule 33. Where, as here, a properly instructed jury has found that API controlled Hoskins at least in part — and therefore that an agency relationship existed — the Government must be given every benefit of the doubt as to the accuracy of the jury’s answer. See Eppolito, 543 F.3d at 45 (in reviewing a Rule 29 judgment of acquittal, we must “credit[] every inference that the jury might have drawn in favor of the government” (quotation marks omitted)). There is no “manifest injustice” in that answer.”

The post Second Circuit – Once Again – Sides With Hoskins On FCPA Issue appeared first on FCPA Professor.



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