The district court, guided mainly by appellate court decisions defining basic principles of agency in the civil context, instructed the jury that to find hoskins guilty on the fcpa charges, it had to. Apr 09, 2015 corruption is clearly a principalagent problem. We believe it would be an exceptional case in which a parent could properly be held criminally responsible for the acts of its foreign subsidia ry under an agency theory. There are two circumstances under which a payment, gift, offer, or promise of anything of value to a foreign official may qualify as an affirmative defense under the fcpa. Judge arterton noted that an essential element of agency is the principals right to control the agents actions. Brower also serves on wlf legal policy advisory board and is the wlf legal pulses featured expert contributor, white collar crime and corporate compliance.
Foreign corrupt practices act fcpa has dominated international anticorruption enforcement. This theory, while attractive on its face, is problematic. In addition to the fcpa conspiracy count, the government had also charged hoskins with substantive fcpa violations that were based on an agency theory. Former alstom executive lawrence hoskins judge overturns fcpa. On behalf of the millions of businesses and organizations whose interests we represent, we write to express our appreciation to the department and the sec for the november 14, 2012 release of. Corruption has corrosive effects on democratic institutions, undermining public accountability and diverting public resources from impor. First, the text of the statute makes the agents of u. Doj clarifies position on agency liability under the fcpa post. Feb 04, 2011 under the fcpa a company or individual can put itself at risk under three different knowledge standards. Foreign corrupt practices act overview the fcpa contains two types of provisions. Hoskins was charged with conspiracy to violate the fcpa and substantive fcpa charges based on agency and accessory liability theories in relation to his participation in a bribery scheme on behalf of. The fcpa imposes bribery liability in a threepart statutory scheme. While they enjoy a relatively lesser public profile, the fcpa provisions governing publicly traded companies books and. This november 2019 post concerning the jury verdict in the longrunning foreign corrupt practices act enforcement action against lawrence hoskins the fcpa conduct hoskins was found guilty of.
Commerce and trade chapter 2bsecurities exchanges 78m. On behalf of the millions of businesses and organizations whose interests we represent, we write to express our appreciation to the department. Court refuses to extend fcpa liability beyond statutorily. Brower is a shareholder with brownstein hyatt farber schreck, llp in las vegas, nv and washington, dc. While they enjoy a relatively lesser public profile, the fcpa provisions governing publicly traded companies books and records practices and accounting controls warrant significant attention in any fcpa compliance program. The district court, guided mainly by appellate court decisions defining basic principles of agency in the civil context, instructed the jury that to find hoskins guilty on the fcpa charges, it had to find 1 a manifestation by the principal here, alstomu. November 21, 2019 download pdf on november 8, 2019, a connecticut jury found lawrence hoskins, a british national and former executive of the french power and rail transportation company, alstom s. Any commercial organization may be subject to prosecution if it carries on even part its business in the uk, regardless of where the alleged improper activity actually takes place. Whether doj uses agency liability in this fashion remains to be seen.
C presents two case studies to demonstrate the workable application of oecd agency under the fcpa. Assessing the ambiguous status of tribal leaders and other. Fcpa can harness the commonlaw doctrine of agency to expand the reach of the statute. Of the eight individual enforcement actions, the sec has been responsible for four. Jury finds former executive lawrence hoskins guilty in key. The doctrine of respondeat superior clearly applies to agents who commit fcpa violations that are, in part, intended to benefit the parent company. Fcpa with its provisions that prohibit the bribery of overseas public officials.
March, 2020 download pdf on february 26, 2020, the u. Dec 09, 2019 to evaluate hoskins conduct to look for proof of an agency relationship and control by the principal, and made clear that a person or entity may be an agent for some business purposes and not for others. Under this theory, a subsidiary is virtually always an agent of its parent. Collateral consequences and considerations for declinations with disgorgement although the cdm smith declination resolved the dojs investigation, it was followed by the opening of investigations in india. Hoskins allegedly acted as a agent of alstomus, and in that capacity, committed acts in violation of the fcpa the agency theory. Although hoskins and the government agreed that the definition of agency should draw from traditional agency. Released in november 2012, a resource guide to the u. Court overturns fcpa convictions of former power company. Given the vague and broad definitions of agency, reliance on a jur y being able to apply such concepts correctly at trial may not be a winning defense 21 id. Foreign national convicted of fcpa violations under agency. The government alleged that hoskins was responsible, along with others, for retaining two consultants tasked with paying bribes to.
Individuals and businesses are prohibited from bribing foreign officials in order to retain or obtain business. We believe it would be an exceptional case in which a parent could properly be held criminally responsible for the acts of its foreign subsidia ry under an agency theory, absent any authorization, direction, or actual control by. The most widelyused definition of corruptionthe abuse of entrusted power for private gainmakes this abundantly clear, as the idea of entrusted power implies an agency relationship, and abuse implies that the agent is acting in ways that are not in the principals interests. A resource guide to the us foreign corrupt practices act sec. Doj clarifies position on agency liability under the fcpa. Knowing the situation where a company or person authorizes an agent to.
Fcpa update 1 november 2017 volume 9 number 4 fcpa update u. In the recent, longawaited decision in united states v. Hoskins, independently of his agency relationship, allegedly conspired with alstomus, its employees and foreign consultants, to violate the fcpa the conspiracy theory. Collateral consequences and considerations for declinations with disgorgement although the cdm smith declination resolved the. Federal judge acquits exalstom executive on fcpa charges. Accordingly, before pursuing an fcpa case based on an agency theory. One ofthenew avenues inthe study ofpolitical corruption isthat ofneoinstitutional economics, of which the principalagent theory is a part. Under the agency theory, the fcpa charges turned on whether the government could show that hoskins was an agent of a domestic concern i. A guide to the foreign corrupt practices act of 1977. Court of appeals for the second circuit rejected the expansive interpretation of fcpa jurisdiction over foreign individuals put forward by the u. Second circuit declines to expand fcpas jurisdictional reach. According to the court, no agency relationship exists where a.
After considerable debate through at least three congresses, the foreign corrupt practices act amendments of 1988 were signed into law as title v of the. Potential fcpa liability for thirdparty conduct gibson dunn. Circuits decision narrowing the reach of the fcpa to nonresident foreign nationals, and the potential difficulties doj may have prosecuting nonu. Under the fcpa a company or individual can put itself at risk under three different knowledge standards. Hoskins was charged with conspiracy to violate the fcpa and substantive fcpa charges based on agency and accessory liability theories in relation to his participation in a bribery scheme on behalf of alstom s. Fcpas antibribery provisions for the actions of a subsidiary not only when the parent directly participated in the subsidiarys misconduct, but also under traditional agency principles. After a single day of deliberation, jurors found hoskins guilty of one count of conspiracy to violate the fcpa and six counts of violating the fcpa in addition to separate conspiracy and money laundering counts. The foreign corrupt practices act fcpa is a critically important statute for combating corruption around the globe.
This previous post highlighted the dojs recent foreign corrupt practices act enforcement action against cdm smith inc. Because the second circuit had not addressed the definition of agency under the fcpa, pretrial briefing focused on this critical issue. In this case, agency must be in connection with the specific events related to the contract known as the taharan project. Parent company and subsidiary liability for fcpa violations. Fcpa liability for foreign individuals the second circuit. Traditional agency theory according to the restatement third of agency, an agency.
This november 2019 post concerning the jury verdict in the longrunning foreign corrupt practices act enforcement action against lawrence hoskins the fcpa conduct hoskins was found guilty of allegedly occurred between 2002 and 2004 and the trial took place in 2019 nearly 15 years later noted that the jury verdict was not the final chapter in the enforcement action, just merely a development. Foreign corrupt practices act faq national whistleblower center. Trial judges ruling casts doubt on agency theory of fcpa. Hoskins, independently of his agency relationship, allegedly conspired with alstomus, its employees and foreign consultants, to violate the fcpa the conspiracy theory, and. Foreign executives fcpa convictions overturned foley hoag. Traditional agency theory according to the restatement third of agency, an agency relationship is a fiduciary relationship that arises when one person. After a single day of deliberation, jurors found hoskins guilty of one count of. The term foreign official is defined under the fcpa as department, agency, or instrumentality thereof, or of a. Any officer or employee of a foreign government or any department, agency, or.
Pursuant to a socalled declination with disgorgement, cdm smith agreed to. Foreign corrupt practices act is the department of justices and securities and exchange commissions detailed compilation of. After dojs victory in the hoskins trial on an agency theory, it appears that the. Knowing the situation where a company or person authorizes an agent to make an improper payment or making a payment to an agent knowing some or all of the payment will go to a foreign governmental official. The fcpa addresses the problem of international corruption in two ways.
The same federal district court judge who presided over last years trial of former alstom executive lawrence hoskins. Periodical and other reports a reports by issuer of security. A principalagent model of corruption nico groenendijk faculty of public administration and public policy, university of twente, the netherlands abstract. One ofthenew avenues inthe study ofpolitical corruption isthat ofneoinstitutional economics, of which the principalagent theory. Former alstom executive lawrence hoskins judge overturns. Fcpa bribery but with money laundering and travel act violations for. The general theory of employment, interest, and money by. Department of justice announces flurry of fcpa cases against individual defendants in the past two months, the u.
Five less predictable predictions for fcpa enforcement in. Second circuit declines to expand fcpas jurisdictional. Jury convicts foreign national of fcpa violations under. Fcpa cases premised on thirdparty liability theories are more commonly. District court for the district of connecticut entered a judgment of acquittal for lawrence hoskins on all foreign corrupt practices act fcpa charges. The long arm of the fcpa posthoskins insights venable llp. Department of justice doj has announced seven guilty pleas, two indictments, and two arrests of individuals in connection with alleged fcpa offenses. The foreign corrupt practices act fcpa is the most effective transnational anticorruption law in the world.
Foreign corrupt practices act amendments of 1988 in response to these criticisms, congress for a number of years considered amending the 1977 foreign corrupt practices act. Pdf one of the new avenues in the study of political corruption is that of neoinstitutional economics, of which the principalagent theory is a part find, read and cite all the research. Although hoskins and the government agreed that the definition of agency should draw from traditional agency law principles and include an element of control, they disagreed on the. The passage of the foreign corrupt practices act fcpa by the u. To make that showing, the doj and sec will evaluate the parents control including the parents knowledge and direction of the subsidiarys actions, both. The application of agency principles to legal liability determinations conflates liability with traditional agency law. The 2016 fcpa enforcement actions against individuals have been a combination of new and old. Apr 05, 2016 this theory, while attractive on its face, is problematic. The most widelyused definition of corruptionthe abuse of entrusted power for private gainmakes this abundantly clear, as the idea of entrusted power implies an agency. Instead, the court engaged in a painstaking analysis of the legislative history of the fcpa and concluded that congress intended to.
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