FCPA Liability: Texas Federal Court Finds No Jurisdiction Over Foreign National Under Agency Theory
By Palmina Fava, Brian Howard, John Goodwin, and Milan Sova
On November 10, 2021, the United States District Court for the Southern District of Texas granted a motion to dismiss Foreign Corrupt Practices Act (“FCPA”) charges brought against a Swiss resident and citizen, rejecting the government’s argument that the Swiss national was an agent of a wholly owned subsidiary of Petróleos de Venezuela, S.A. (“PDVSA”). This case represents the second time in three years that a court has rejected the government’s interpretation of who qualifies as an agent of a U.S. company.
The court held that the government did not have jurisdiction over the defendant under an agency liability theory.1 In 2018, the United States District Court for the District of Connecticut similarly entered a judgment of acquittal in United States v. Hoskins, overturning the jury’s verdict on all FCPA counts based on a finding that no reasonable juror could have found that the defendant acted as an “agent” of the company who bribed officials in Indonesia. (For more on Hoskins click here.) Hoskins is on appeal to the Second Circuit, and the government is appealing the Rafoi-Bleuler decision to the Fifth Circuit, setting up the potential for a circuit-split on the scope of agency liability under the FCPA.
According to the Rafoi-Bleuler court and the Second Circuit, Section 78dd-2 of the FCPA establishes a limited basis for extraterritorial jurisdiction over foreign nationals whose alleged violations of the statute occurred outside the United States.2 According to the Second Circuit, the foreign national must be an agent, employee, officer, director, or shareholder of an American issuer or domestic concern.3 The term “agent” is not defined in the FCPA, and courts have applied its common law meaning.4
The superseding indictment in Rafoi-Bleuler alleged that the defendant, the owner of a wealth management company, assisted her codefendants — all current or former employees of PDVSA or its affiliates — in an illegal kickback scheme. The defendant, Daisy Rafoi-Bleuler, was charged with violations of the FCPA and Money Laundering Control Act of 1986 (“MLCA”) for setting up bank accounts to conceal the proceeds of her codefendants’ scheme, while other codefendants were charged with the illegal solicitation of third-party vendors in exchange for illicit kickbacks.5
The indictment alleged that Ms. Rafoi-Bleuler knowingly assisted (i) PDVSA’s wholly owned U.S.-based subsidiary, PDVSA Services, Inc. (“PDVSA-S”), (ii) Bariven S.A., another PDVSA subsidiary, and (iii) her codefendants in conducting financial transactions through interstate commerce using the proceeds of an illicit scheme. While the defendant admittedly had limited connections to the U.S. herself, the government argued that the U.S. had jurisdiction because she was an agent of PDVSA-S, a domestic concern.
The Court’s Agency Analysis
To establish extraterritorial jurisdiction under the FCPA, the government had to demonstrate that the defendant was an “officer, director, employee, or agent” of PDVSA-S or was an agent of her U.S.-based codefendants.6 The court explained that, in such circumstances, establishing that agency exists “requires undisputed evidence of mutual assent and control over the details of the person and agency, such that the principal controls the details over the assignment.”7
The defendant argued that she had no prior association or affiliation with the U.S. or the codefendants, and that her conduct was “in strict accordance with Swiss anti-money laundering and other financial laws and regulations.”8 Consequently, her and her firm’s actions on behalf of the codefendants were merely professional services and were not part of any agency relationship. The government disagreed, arguing that the defendant had ties to the U.S. because she received wire instructions from, and communicated with, her codefendants via email, phone, and messaging applications while she was in Switzerland and they were in the U.S. or Venezuela.9
The court held that, as a matter of law, communications through interstate commerce could not serve as direct evidence to establish an agency relationship.10 The court found that the government could not point to any act that the defendant committed in the United States and, therefore, could not establish an agency relationship in the U.S.11
Defendant’s Vagueness Argument Related to Criminally Charging “Agents” Under the FCPA and MLCA
The defendant also argued that, because the government could not show “an established agency relationship that occurred in the United States,” “the term ‘agent’ is so vague that, as applied to her, it is unjustified and violat[ed]” the U.S. Constitution’s due process clauses.12 The court found merit in this argument. The court explained that “no court has interpreted the [FCPA or MLCA] or rendered a judicial decision that fairly discloses the manner in which [“agent”] may be applied to establish jurisdiction,” which “alone establishes the vagueness of the term.”13
What Comes Next?
All eyes will be on the Second Circuit’s decision in the current appeal in Hoskins to see how the panel applies the term “agent” to a foreign national who did not commit any relevant acts in the U.S. The Second Circuit may give a sufficient roadmap for the application of the term to undermine the vagueness argument that the defendant made to the Texas district court. For now, the Rafoi-Bleuler and Hoskins decisions give ammunition to foreign national criminal defendants located outside of the U.S. to argue that the government lacks jurisdiction when bringing charges using an agency theory where there is no direct or undisputed evidence that the foreign national was controlled by domestic principals engaged in conduct that violates the FCPA. Also, because of the court’s receptiveness to the defendant’s vagueness argument, the decision creates the possibility of more due process challenges to the FCPA and MLCA by foreign defendants.
1 United States v. Rafoi-Bleuler, Case No. 4:17-CR-0514-7 (S.D. Tex. Nov. 10, 2021), Dkt. No. 255 (the “Decision”).
2 Decision at 13-14; see United States v. Hoskins, Case No. 3:12-CR-238 (JBA), 2020 WL 914302, at *2 (D. Conn. Mar. 9, 2020).
3 United States v. Hoskins, 902 F.3d 69, 97 (2d Cir. 2018).
4 See Decision at 5 n.6,
5 Id. at 3-5.
6 See id. at 13-14.
7 Id. at 15.
8 Id. at 6.
9 See id. at 15-16, 16 n.16.
10 Id. at 15.
11 Id. at 15-16.
12 Id. at 21.
13 Id. at 22.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.