In November 2019, we reported that a jury found Lawrence Hoskins, a senior executive at a French company, guilty of Foreign Corrupt Practices Act ("FCPA") violations. Two years earlier, the District Court granted dismissal of the FCPA count of the indictment on grounds that Hoskins—a non-US citizen who was employed by a UK subsidiary of the French company—could not be liable for violating the FCPA because he was not in the US during the offense, and he was not an employee, officer, director, or shareholder of the US subsidiary/issuer. The Second Circuit reversed, holding that, under these circumstances, Hoskins could be convicted if he was an "agent" of the US subsidiary. US v. Hoskins, 902 F.3d 69 (2d Cir. 2018).
Following the Second Circuit's 2018 decision, the case was returned to the District Court, and Hoskins was tried last fall. The DOJ succeeded in persuading the jury that Hoskins was an "agent" of the US subsidiary through evidence that Hoskins had acted in furtherance of the US subsidiary's improper undertaking, and had done so with its knowledge and assent.
At the conclusion of the trial, Hoskins moved the District Court for a judgment of acquittal, and the Court took the unusual step of granting it. While the Court acknowledged the evidence put forward by the government (and credited by the jury) that (i) Hoskins acceded to and carried out the US subsidiary's instructions regarding the hiring of consultants on the subject project, and (ii) this was an undertaking that the US subsidiary "controlled," the Court found "no evidence upon which a rational jury could conclude that Mr. Hoskins agreed or understood that [the US subsidiary] would control his actions on the [subject project]." US v. Hoskins, Ruling on Def's Rule 29(C) and Rule 33 Mot., No. 3:12cr238, (JBA), ECF No. 617, at 14, 18 (D. Conn., Feb. 26, 2020) (emphasis added). The Court also found that the typical indicia of control for an agency relationship—the right to hire or fire and the right to reassign—were not present as between the US subsidiary and Hoskins. Id. at 17-18.
The Court's ruling did not dispose of the entire case against Hoskins; it left the conviction on four money laundering counts intact. The decision is nevertheless significant because it represents the rare instance where a court, in the context of a litigated FCPA case, gave definition to a key term of the statute based on the facts before it. As the Hoskins Court made clear, mere agreement and action consistent with the principal's undertaking is not enough to establish the agency relationship. Rather, agency-based liability requires evidence that the principal controlled another's actions, and did so in connection with the improper undertaking.
The court's ruling in Hoskins will undoubtedly serve to guide future FCPA prosecutions that premise liability on an agency relationship. This includes the FCPA indictment against three non-US individuals that was unsealed just last month. US v. Kusunuoki et al., No. 3:13-00212 (JBA), ECF No. 18 (D. Conn., Feb. 26, 2015). The court's ruling in Hoskins may also be relevant to corporate resolutions that are negotiated and reached outside the courtroom. In particular, it could assist the Government in its efforts to determine when a non-US subsidiary that was responsible for alleged bribery acted as the "agent" of the US parent for purposes of assessing the parent's FCPA liability, and will help ensure that the parent–subsidiary relationship demonstrates not only that the parent controlled the subsidiary, but that it did so in connection with the improper undertaking.1
1 Cf. US v. Alcoa World Alumina LLC, No. 14-cr-0007 (W.D. Pa. Jan. 8, 2014) (parent held liable based solely on grounds that it controlled the subsidiary, despite lack of evidence that it was aware of, let alone directed, bribery conduct of subsidiary).
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP