DOJ’s FCPA Reach Over Foreign “Agents”
The Criminal Information against two former executives of Unaoil, Inc. was unsealed on October 30, 2019, laying out the U.S. government’s case against them for facilitating bribes on behalf of companies in foreign countries in exchange for oil and gas contracts.1 Former CEO Cyrus Ahsani and former COO Saman Ahsani, both citizens of the United Kingdom, pled guilty to conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. § 78dd-1 et seq.2 To make a case for conspiracy under 18 U.S.C. § 371, the government must show that two or more persons entered into an agreement to commit an offense against the United States. Previously, the Department of Justice (“DOJ”) would use the conspiracy hook to prosecute foreign nationals and foreign entities in FCPA cases as they typically do not qualify as “issuers,” “domestic concerns,” and “persons” for FCPA jurisdiction as those terms are defined by the statute.3 However, last year the Second Circuit in United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018), held that a non-resident foreign national who cannot be held liable for primary liability cannot be held liable as a co-conspirator or aider and abettor either unless the government can establish that the individual acted as an agent of an “issuer,” “domestic concern,” or “person.”4 Despite the Second Circuit’s holding in Hoskins, the DOJ charged the Ahsanis — two U.K. citizens who primarily acted abroad — by asserting that they acted as agents of companies that are subject to primary FCPA liability.5
I. The Second Circuit Narrows Reach of FCPA Conspiracy and Accomplice Liability
In United States v. Hoskins, the Second Circuit held that foreign nationals acting abroad independently of anyone subject to FCPA principal liability may not be prosecuted for conspiracy to violate the FCPA or aiding and abetting an FCPA violation.6 In that case, the DOJ had charged Lawrence Hoskins, a citizen of the United Kingdom and former Alstom UK executive, with aiding and abetting or conspiring to violate the FCPA.7 The government alleged that Mr. Hoskins had facilitated payments to third parties that were then passed on to Indonesian officials to secure a $118 million infrastructure contract with a state-owned power company.8 According to the allegations, Mr. Hoskins was not physically present in the U.S. but his alleged co-conspirators were.9 For purposes of establishing jurisdiction, the DOJ alleged that one of the payments authorized by Mr. Hoskins from Alstom to the consultants went through a Maryland-based bank account.10
Mr. Hoskins appealed, arguing he could not be charged as either a co-conspirator or an accomplice to FCPA violations because he did not fall within the categories of persons subject to liability as a principal.11 According to the Second Circuit’s analysis, the FCPA covers four categories of people:
- American citizens, nationals, and residents, regardless of whether they violate the FCPA domestically or abroad;
- Most American companies, regardless of whether they violate the FCPA domestically or abroad;
- Agents, employees, officers, directors, and shareholders of most American companies, when they act on the company’s behalf, regardless of whether they violate the FCPA domestically or abroad; and
- Foreign persons (including foreign nationals and most foreign companies) not within any of the aforementioned categories who violate the FCPA while present in the United States.12
The Second Circuit concluded that the statute’s text, combined with its legislative history and the presumption against extraterritoriality, compelled the conclusion that foreign nationals who act abroad and lack a direct connection to one of the categories of persons subject to principal FCPA liability cannot be liable as accomplices or conspirators.13
II. The Government Continues to Prosecute Foreign Individuals Acting Abroad
The Hoskins ruling may have reigned in the DOJ who had previously relied on theories of conspiracy or aiding and abetting in cases involving foreign individuals or entities who could not be charged as principals. In fact, the DOJ and SEC’s combined FCPA Resource Guide, published in 2012, states that “[i]ndividuals and companies, including foreign nationals and companies, may also be liable for conspiring to violate the FCPA … even if they are not, or could not be independently charged with a substantive FCPA violation.”14 This directly contradicts the Second Circuit’s holding in Hoskins.
In the recent case against the Ahsanis, which was brought in the Southern District of Texas, the DOJ at least seems to acknowledge the Second Circuit’s position in Hoskins. The government emphasizes that the Ahsanis were agents of issuers, U.S. concerns, and persons under the meaning of the FCPA. For example, the government states that “C. Ahsani and S. Ahsani, while acting within the scope of their employment with [Unaoil] and within the scope of their agency with various companies, including Companies 1-25….”15 Each of the 25 unnamed companies is identified as either an “issuer,” “domestic concern,” or “person.”16 The government also emphasizes the Ahsanis’ involvement in the scheme, providing the factual support for the agency relationship between them and the companies that are subject to primary liability under the FCPA.
Note the government states that C. Ahsani was a United States citizen until July 2011.17 While some of the alleged acts occurred when C. Ahsani was a United States citizen, some occurred after. For the acts occurring while he was a citizen, his citizenship would qualify him as a “domestic concern” under the FCPA, subjecting him to principal liability without regard to his agency relationship with the companies at issue.
III. What This Means for You
For companies being investigated by the DOJ and SEC for FCPA violations, the likely effect of Hoskins will be that the government will take a broad view of what constitutes an agency relationship and will likely expect an increased amount of information from cooperating companies about their relationships with foreign actors and entities. Such information will likely be a necessary component of what constitutes full cooperation under the FCPA Corporate Enforcement Policy for cooperating companies going forward. It will be important to document the relationships companies have with foreign actors and entities, including the nature and scope of the relationship, the duration of the relationship, and require that any extension of the relationship in terms of scope or duration that contemplates additional work must be memorialized in writing.
Subscribe to The V&E Report to receive weekly email updates.
1 See Information, United States v. Ahsani et al., No. 19-147, at 35 – 39 (S.D.T.X., Mar. 4, 2019).
2 See Id.
3 See Department of Justice & Securities and Exchange Commission, A Resource Guide to the FCPA at 34 (“Individuals and companies, including foreign nationals and companies, may also be liable for conspiring to violate the FCPA… even if they are not, or could not be independently charged with a substantive FCPA violation.” ), available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf#page=43.
4 Hoskins, 902 F.3d at 97.
5 See Information, United States v. Ahsani et al., No. 19-147 (S.D.T.X., Mar. 4, 2019).
6 Hoskins, 902 F.3d at 97.
7 Id. at 72.
11 Id. at 76.
12 Id. at 85.
13 Id. at 97.
14 See Department of Justice & Securities and Exchange Commission, A Resource Guide to the FCPA at 34, available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf#page=43.
15 See Information, United States v. Ahsani et al., No. 19-147, at 14 (S.D.T.X., Mar. 4, 2019).
16 See Id. at 6 – 12.
17 See Id. at 2.