Hoskins escapes FCPA convictions while money laundering convictions remain

Eversheds Sutherland (US) LLPOn February 26, 2020, the US District Court for the District of Connecticut reinforced the Second Circuit’s recent decision to limit prosecutors’ ability to pursue Foreign Corrupt Practices Act (FCPA) charges against foreign nationals acting extraterritorially. The court overturned the conviction of a foreign national, Lawrence Hoskins, charged with violating the FCPA, finding that prosecutors failed to prove that the individual was the agent of an international company’s US subsidiary or could otherwise be held liable under the FCPA.1  But, while the judge overturned Hoskins’ FCPA convictions, it sustained the money laundering convictions based on the same misconduct, supporting another avenue for prosecutors to bring charges against foreign nationals in extraterritorial corruption and bribery cases.

Lawrence Hoskins, a former executive of Alstom International Networks (Alstom), is a British citizen who worked for Alstom’s UK subsidiary. Hoskins allegedly assisted Alstom’s US subsidiary Alstom Power Inc. (API) in obtaining a $118 million contract from Indonesia’s state-owned electricity company by hiring two consultants to pay bribes to Indonesian officials. Hoskins was not physically present in the United States when the alleged misconduct took place. 

In August 2018, the Second Circuit limited the scope of the FCPA by ruling that Hoskins and other similarly situated individuals (i.e. individuals who are not US citizens, nationals, or residents, and did not take actions in furtherance of the bribery while physically in the United States) can only be charged with violating the FCPA “if they are agents, employees, officers, directors, or shareholders of an American issuer or domestic concern.”2  

Following the Second Circuit’s decision, the US Department of Justice (DOJ) argued that Hoskins was guilty of FCPA violations because he was an agent of API, which was a “domestic concern” as defined in the FCPA. At trial, the prosecutors showed the jury emails from API executives asking Hoskins to take certain actions. Hoskins countered that he was employed by Alstom’s UK subsidiary, which was separate and distinct from other business units, including API. 

In November 2019, a jury found Hoskins guilty on six counts of violating the FCPA, four counts of money laundering, and one count of conspiracy to violate the FCPA. But last week the court granted Hoskins’ motion for a post-verdict acquittal on the seven FCPA charges finding that while API generally controlled the Indonesian power project and set the terms for choosing the consultants that bribed the officials, the fact that Hoskins executed those directions was not sufficient to prove that he was API’s “agent.” 

The Court concluded that the government’s evidence did not prove an essential element of agency including the principal’s right to control the agent’s actions. The evidence presented by the government to prove that Hoskins was API’s agent only showed that API controlled the process of hiring the consultants and that Hoskins assisted API in those efforts. The Court found that no reasonable jury could have found that API controlled Hoskins’ actions—it did not have the ability to terminate Hoskins’ participation in the hiring of consultants, assess his performance, or otherwise exert control over his actions. Notably, while the judge overturned Hoskins’ FCPA convictions, the judge rejected Hoskins’ motion for acquittal as to the money laundering convictions.

On February 18, 2020, only a week prior to the judge’s decision to overturn Hoskins’ FCPA convictions, the DOJ unsealed a superseding indictment in the US District Court for the District of Connecticut charging three other Alstom executives—who are also foreign nationals—allegedly involved in the same scheme to bribe Indonesia officials.3  The superseding indictment charges two former executives of Alstom’s Indonesian subsidiary, and a former executive of the Japanese conglomerate, Marubeni Cop, with conspiracy to violate the FCPA and conspiracy to commit money laundering. The two executives of Alstom’s Indonesian subsidiary also face two counts of violating the FCPA and one count of money laundering, and the executive of the Japanese conglomerate is charged with six counts of violating the FCPA and four counts of money laundering. As in Hoskins, the DOJ is pursuing the FCPA and conspiracy to violate the FCPA charges under the agency theory.4  

Hoskins is yet another example of the DOJ’s successful use of the Money Laundering Control Act (MLCA) to prosecute individuals in corruption and bribery cases.  The court’s decision to overturn the FCPA convictions while sustaining the money laundering convictions against Hoskins may cause prosecutors to rethink the types of charges they bring against individuals involved in bribery and corruption cases.5 In the future, prosecutors may choose to bring only money laundering charges against foreign nationals acting extraterritorially—even if the misconduct involves bribery and corruption. 

For example, to convict the three Alstom executives recently indicted on FCPA charges, prosecutors will need to present stronger evidence that the individuals were indeed “agents” of the US subsidiary. The DOJ may have an easier time obtaining and preserving convictions on the money laundering charges. 

The DOJ also continues to employ other novel legal theories to prosecute individuals in FCPA cases. An example can be found in the prosecution of two former Cognizant executives for allegedly approving a $2 million bribe paid to secure a construction permit in India.6  In that case, the DOJ is arguing that each of the three emails that an executive sent constitutes a separate FCPA violation, even though the emails all related to the same bribe. If the court agrees with this logic and finds that every act related to a bribe constitutes a separate violation, it would set the stage for a drastic increase in penalties imposed in both corporate and individual FCPA prosecutions. 

Going forward, the district court’s decision to overturn Hoskins’ FCPA convictions may discourage the DOJ from focusing on the FCPA to prosecute corruption and bribery cases extraterritorially and may affect how the DOJ structures indictments. As demonstrated by the court’s unwillingness to overturn Hoskins’ money laundering convictions, foreign individuals (and corporations) are not off the hook – the DOJ is increasingly and successfully using the MLCA to secure convictions in corruption and bribery cases. 
_____
1 United States v. Hoskins, Case No. 3:12-cr-00238 (D. Conn. Feb, 26, 2020).
2 United States v. Hoskins, Case No. 16-1010 (Aug. 24, 2018).  
3 United States v. Kusonoki, et al., Case No. 3:13-cv-00212 (D. Conn. Feb. 18, 2020).
4 The company and five other individuals (including three Alstom executives) have already pled guilty to charges related to the Indonesia bribery scheme.
5 Legal Alert: The Hoskins conviction and the implications of the DOJ’s success in using the money laundering statute to policy bribery (Nov. 12, 2019).
6 United States v. Coburn, et al., Case No. 2:19-cr-00120 (D.N.J. Feb. 19, 2019).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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