Second Circuit Affirms District Judge Dismissal of Alstom Official’s FCPA Convictions
The Second Circuit Court of Appeals affirmed the district judge’s post-conviction dismissal of FCPA counts against Lawrence Hoskins, a former Alston executive, for his involvement in bribery scheme to secure a $118 million energy contract in Indonesia.
The Hoskins FCPA case has had a long and tortious path through the court system, and the Second Circuit’s decision, which was decided by a 2 to 1 majority, ended with a fractured court decision that raised more questions than provided answers. The majority decision appeared to reflect a pre-ordained decision searching for legal and factual arguments to support the resolution. Indeed, the dissent presented a cogent and more defensible position.
Here is a “quick” review of the events leading to the recent decision. Alstom, Inc.’s U.S. subsidiary hired two consultants to bribe Indonesian officials to secure a $118 million power contract. Hoskins worked for Alstom’s UK subsidiary selected the consultants and authorized payments to them.
Initially, Alstom was charged in U.S. federal court in Connecticut. Hoskins is not a U.S. citizen, was not employed by Alstom’s US subsidiary and never entered the U.S. when working on the scheme. The U.S. argued that Hoskins was a co-conspirator or accomplice to the U.S. subsidiary’s FCPA violation. In an initial appeal, the Second Circuit rejected the U.S. theory of liability ruling that Hoskins, as an accomplice or co-conspirator, could not be liable for a crime that he was incapable of committing as a principal.
After the Second Circuit’s initial ruling, DOJ prosecutors, therefore, went to trial against Hoskins on the theory that Hoskins acted as an “agent” of a “domestic concern,” in this case, Alstom’s U.S. subsidiary. The jury convicted Hoskins of eleven counts, seven of which were FCPA violations, and four of which were money laundering counts. In finding the defendant guilty, the jury rejected defense arguments that Hoskins was not an “agent” of a “domestic concern” under the FCPA statute.
The trial judge dismissed the FCPA convictions against Hoskins, finding that there was insufficient evidence for a reasonable juror to find that Hoskins acted as an agent of a domestic concern. The judge sentenced Hoskins to 15 months in jail.
In a split decision (2 to 1), the Second Circuit affirmed the trial judge’s ruling that there was insufficient evidence to sustain the jury’s guilty verdicts on the seven FCPA counts. The issue boiled down to whether there was adequate evidence that Hoskins acted as an agent of Alstom’s U.S. subsidiary.
In reaching its decision, the majority found that under well-established common law principles applicable to principal-agency relationships, Alstom’s U.S. subsidiary had insufficient authority over Hoskins and his activities to support the conclusion that Hoskins was an agent of Alstom’s U.S. subsidiary.
Hoskins was employed by a different Alstom subsidiary, which provided global support to all of Alstom’s subsidiaries around the globe. The Court cited the absence of any evidence that any of the primary actors in the conspiracy “actually controlled” Hoskins’s actions. Further, the Court noted that the co-conspirators in the U.S. did not have the ability to fire Hoskins, set or alter his compensation, and therefore lacked the fundamental element of a principal-agency relationship — the ability to hire and terminate an agent working on a principal’s behalf.
The dissent, however, challenged the majority’s rationale. First, the dissent noted that Hoskins was given the authority to hire and fire the specific consultants used to pay the bribes to Indonesian officials, and to negotiate the terms of their compensation. Hoskins’s authority to set these terms was specifically under the authority and control of Alstom’s U.S. subsidiary, suggesting that, in fact, there was an “agency” relationship between Alstom’s U.S. subsidiary and Hoskins.
Second, the dissent noted that Alstom’s U.S. subsidiary revoked in part Hoskins’s authority over the hiring of consultants when it instructed him not to hire a specific consultant being considered for the bribery scheme.
And finally, the dissent noted that Hoskin’s organization was charged with supporting all other international sectors, including the U.S. subsidiary, when requested to do so. In this case, Alstom’s U.S. subsidiary requested that Hoskins assist in the hiring and payment of the consultants.
While the jury found sufficient evidence of a principal-agency argument and rejected the defense claims, the district court and the appellate majority appeared destined to reverse the FCPA convictions.