Increased Risk of FCPA Prosecution of Foreign National Executives of U.S. Issuers: Recent Court Decision Allows Open-Ended Statute of Limitations and Bases FCPA Jurisdiction on Email Routed Through US Servers

by Foley Hoag LLP

A recent federal court decision highlights the increasing risk of prosecution for foreign national executives under the Foreign Corrupt Practices Act ("FCPA”).  The decision from the federal district court in New York denied a motion to dismiss filed by three defendants, all former foreign national executives of Magyar Telekom Plc. (“Magyar”), a Hungarian telecommunications company, finding that:

  • The five-year statute of limitations under the FCPA does not run while a defendant is outside of the United States; and
  • Emails sent and received outside of the United States, but routed through or stored on servers in the United States, were enough to assert jurisdiction over the defendants under the FCPA, regardless of whether the defendants intended or even knew that the emails were routed through the United States.

In December 2011, the Securities and Exchange Commission (“SEC”) initiated a civil enforcement action against the executives alleging that, as officers, directors, employees or agents of an Issuer, they violated the FCPA by orchestrating bribes of government officials in Macedonia and Montenegro to obtain various competitive advantages, including inducing the officials to block competitors from entering certain markets and to enable Magyar to acquire majority ownership of a formerly state-owned telecommunications provider.  At the time the alleged bribes took place, Magyar was publicly traded through American Depository Receipts listed on the New York Stock Exchange and was registered with the SEC, qualifying it as an “Issuer” under the FCPA.  The bribes were allegedly paid under the guise of sham contracts, which were not accurately recorded in Magyar’s books.  The defendants also allegedly made false representations to Magyar’s auditors. 

The Company and its majority owner, Deutsche Telekom AG of Germany, settled with the Department of Justice (“DOJ”) and the SEC, agreeing to pay $95 million to resolve both civil and criminal charges stemming from this same conduct, and the case proceeded against the executives alone.

The three foreign national executives moved to dismiss the SEC action on several grounds, including two often-asserted FCPA defenses - that the statute of limitations had expired and that the court lacked jurisdiction over the defendants.  The court rejected both arguments and denied the motion to dismiss in its entirety.

Open-Ended Statute of Limitations
The defendants argued that the SEC’s claims were barred by the FCPA’s five-year statute of limitations.  Although it was undisputed that more than five years had passed since the underlying alleged misconduct, the court ruled that the FCPA statute of limitations does not run while a defendant is physically outside of the United States.  If this aspect of the decision stands, it would mean that the SEC could bring an FCPA enforcement action against a foreign national for an indefinite period of time so long as the foreign national does not step foot into the United States.

FCPA Jurisdiction based on email routed through the United States
The defendants argued that the SEC did not allege sufficient facts to satisfy the FCPA jurisdictional requirement that the defendants made use of United States mail or other instrumentality of interstate commerce corruptly in furtherance of the alleged bribery scheme. 

The SEC based its substantive jurisdictional argument on a series of emails to and from the executives, all of which were sent and received abroad, but were routed through or stored on servers in the United States. The court found that the defendants’ emails satisfied the FCPA jurisdictional requirement, regardless of whether the defendants actually knew of the location of the servers or actually intended their email to go through the United States.  If this aspect of the decision stands, a single email sent and received abroad with the aid of servers in the United States could lead to jurisdiction under the FCPA over foreign national executives working abroad.

Background on FCPA
First enacted in 1977, the FCPA was designed to prevent and criminalize bribery of foreign officials, including employees at state-owned enterprises.  Specifically, the FCPA prohibits U.S. individuals, private and public companies, other companies operating in the U.S., including non-U.S. companies that are traded on U.S. stock exchanges, certain foreign subsidiaries and joint ventures, as well as agents and intermediaries, from making payments to foreign officials in order to secure any favorable business treatment.  The FCPA also requires U.S. public companies to keep accurate books and records.

For more background on the FCPA, click here.

The majority of the DOJ’s and the SEC’s criminal prosecutions and civil enforcement actions against individuals under the FCPA are brought against foreign national executives.  The decision in this case highlights the very broad reach sought by US authorities for the FCPA, and the risk that foreign national executives may find themselves facing FCPA enforcement actions in the United States based on minimal contacts with the United States, including their use of electronic communications services based in or routed through the United States.  Companies and their executives can reduce these risks by developing and implementing effective anti-corruption compliance programs.


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.

© Foley Hoag LLP | Attorney Advertising

Written by:

Foley Hoag LLP

Foley Hoag LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.