Home > Enforcement and Prosecution Policy and Trends > Second Circuit Clarifies Limits of FCPA's Extraterritorial Reach
Second Circuit Clarifies Limits of FCPA's Extraterritorial Reach
By Patrick Rowan, Alex J. Brackett and Government Investigations Group
The U.S. Court of Appeals for the Second Circuit narrowed the reach of the Foreign Corrupt Practices Act ("FCPA" or "the Act") in ruling that the government cannot use aiding and abetting or conspiracy statutes to charge a defendant with violating the FCPA if the defendant is not in the category of persons directly covered by the Act.
Defendant Lawrence Hoskins, a UK citizen, worked for a UK subsidiary of Alstom S.A. The government alleged that Hoskins was involved in authorizing payments by a U.S. subsidiary of Alstom to consultants who bribed Indonesian officials. The Court rejected the government's theory that Hoskins could aid and abet or conspire to commit a violation of the FCPA, but left open the theory that he may fall into one of the categories covered by the Act as an agent of a "domestic concern" (Alstom's U.S. subsidiary). Three categories of persons are subject to the Act: 1) issuers of securities and their officers, directors, employees, shareholders and agents; 2) U.S. persons and companies and their agents; and 3) foreign persons or businesses taking actions while present in the U.S. For purposes of the ruling, the Court assumed Hoskins was not an agent of Alstom's U.S. subsidiary.
Hoskins was a non-resident foreign national, acting outside the U.S., who did not work for a U.S. company during the alleged scheme, and never visited the U.S. Rejecting the DOJ's long held theory of the FCPA's expansive reach, the Court held that the omission of this category of persons from the Act by Congress "was a limitation created with surgical precision to limit [the FCPA's] jurisdictional reach." Thus the government could not use conspiracy and aiding and abetting statutes to reach Hoskins.
According to the Second Circuit, foreign nationals can only be liable under the FCPA if they: 1) acted in the U.S.; 2) were officers, directors, employees or shareholders of a U.S. company; or 3) were agents of a U.S. company. To hold Hoskins liable, the government will have to demonstrate that he was an agent of the U.S. subsidiary of Alstom.
The Second Circuit's decision is illuminating on the reach of the FCPA, but the impact on future enforcement actions may be limited given the range of other theories available to the government, including the agency liability theory that remains alive in Hoskins.
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