Gregory A. Brower is a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC. Mr. Brower also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance
The same federal district court judge who presided over last year’s trial of former Alstom executive Lawrence Hoskins, which resulted in Hoskins’ conviction on several Foreign Corrupt Practices Act (“FCPA”) and other charges, recently set aside the verdict, at least with respect to the FCPA counts. The judge granted a defense motion for judgement of acquittal or, in the alternative, a new trial, adding some confusion to the question of what evidence is adequate to prove that someone is acting as an agent of an entity that is subject to the FCPA.1
Hoskins, a British citizen was employed by Alstom UK Limited, a part of the French parent company, but he worked primarily for Alstom Resource Management SA, a French subsidiary of Alstom. The charges stemmed from a power-plant project in Indonesia that involved both an Indonesian subsidiary of Alstom and a U.S.-based subsidiary named Alstom Power Inc. (“API”). U.S. prosecutors alleged that consultants hired by Alstom bribed Indonesian government officials in an effort to secure certain government contracts. In 2012, a federal grand jury in Connecticut indicted Hoskins charging that he initiated the bribery scheme on behalf of API, which as a U.S. subsidiary of Alstom is a “domestic concern” for FCPA liability purposes. Prosecutors further alleged that even though API didn’t actually employ Hoskins, he could and did serve as API’s agent for the purpose of facilitating the bribery scheme and, therefore, could be and was guilty of violating the FCPA. A jury convicted him on all but one FCPA-related counts, and also on several money laundering counts.
Following his conviction, Hoskins filed a motion for a judgment of acquittal under Federal Rule of Criminal Procedure (“Fed.R.Crim.P.”) 29, or, in the alternative, a motion for a new trial under Fed.R.Crim.P. 33. With respect to the FCPA counts, he argued that the government failed to prove that he was an agent of API, the relevant “domestic concern,” because there was no evidence that anyone at API exercised any control over him in connection with the Indonesian project. Because control is fundamental to establishing an agency relationship, he argued, no reasonable jury could have concluded he was an agent of API absent evidence of control. In response, the government maintained the evidence clearly showed that Hoskins was carrying out API’s instructions vis-à-vis the Indonesian consultants and that API “controlled the undertaking.” In response, Hoskins argued that just because API employees may have asked him to do certain things does not mean he actually did those things as API’s agent.
After engaging in a very long and thorough analysis of agency law as applied in this context, the district court concluded that the government did introduce evidence that would permit a rational jury to conclude that API both (1) controlled the hiring of consultants for the project, and (2) gave Hoskins instructions, which he followed. Thus, the court framed the ultimate question as follows: “… whether … a ‘reasonable mind might fairly conclude … beyond a reasonable doubt’ that Mr. Hoskins agreed to and did act subject to API’s control.” The court answered this question in the negative, finding that the evidence adduced at trial could not support the conclusion that Hoskins acted subject to API’s control such that he was an agent of API. The court found compelling that while the evidence showed API controlled the project in question, the evidence didn’t show that API controlled Hoskins’ specific actions. While the court agreed with the government that the evidence showed Hoskins was involved in the hiring of the consultants, it held that “agency requires more than mere authorization to assert a particular interest or position on behalf of the purported principal.”
The court therefore found that the government “thoroughly demonstrated” that API was the business leader of the project, that API exercised authority over which consultants were hired and according to what terms, that Hoskins worked on the project, and that he may have performed tasks upon request by API employees. Nevertheless, the court decided that because a rational jury could not conclude that Hoskins agreed or understood that the API would control his actions on the project, and because there was no evidence upon which a rational jury could conclude that API actually had the authority or ability to control his actions, he could not be said to have been acting as the agent of a domestic concern as would be required for a violation of the FCPA.
While the specific facts of this case make it somewhat unique, FCPA enforcement actions aimed at foreign nationals employed by foreign companies, i.e., neither U.S. stock issuers nor domestic concerns, are not uncommon. Absent a reversal on appeal, this rather narrow interpretation of the principal-agent relationship is likely to force investigators in such cases to dig deeper to find evidence of actual control by a target company of its putative agent. This decision is also likely to encourage defense lawyers to challenge charges brought against foreign employees of foreign companies where the nexus to a U.S. stock issuer or domestic concern is tenuous.