Dispute Over Agency in Foreign Bribery Case Gets Second Hearing
A decision by an appeals court could affect future prosecutions of foreign executives under the Foreign Corrupt Practices Act
The long-running prosecution of a former Alstom SA executive came before the Second Circuit Court of Appeals for a second time on Tuesday, with a three-judge panel hearing arguments on a legal question that could affect the government’s enforcement of a widely used antibribery law.
Lawrence Hoskins was found guilty by a jury in late 2019 of helping to bribe Indonesian officials. But soon after, a district court judge partly overturned the conviction, ruling that federal prosecutors hadn’t shown sufficient evidence that Mr. Hoskins, a British citizen who worked for Alstom in the suburbs of Paris, fell under the reach of U.S. law.
The judge’s acquittal gave new life to a legal dispute that has plagued the case nearly since its inception in 2013. Depending on which side prevails, the government could find it more difficult to prosecute foreign nationals like Mr. Hoskins who allegedly play a role in arranging bribes for U.S.-linked companies without ever setting foot in the U.S.
The question before the Second Circuit concerns how broadly prosecutors can apply the U.S. Foreign Corrupt Practices Act, a law that prohibits companies with certain ties to the U.S. from paying bribes to foreign public officials to gain a business advantage. The law applies to a company’s shareholders, directors, employees and agents.
In Mr. Hoskins’s case, prosecutors alleged that he acted as an agent of a former Alstom subsidiary based in Windsor, Conn., while technically working as an employee of the parent company in Paris. Lawyers for Mr. Hoskins disputed that view, saying the subsidiary, Alstom Power Inc., didn’t have sufficient authority over him.
The matter was ultimately a factual question that had to be decided by a jury, Judge Janet Bond Arterton, who oversaw Mr. Hoskins’s case, ruled during pretrial litigation.
Judge Arterton blocked prosecutors from separately prosecuting Mr. Hoskins for aiding and abetting in the Indonesian bribery scheme, unless they could prove he was an agent. The matter came before the Second Circuit, with another three-judge panel ruling in 2018 in Mr. Hoskins’s favor.
The ruling placed prosecutors in a position where proving that Mr. Hoskins had acted as an agent of the Alstom subsidiary was a crucial step to securing his conviction on bribery charges.
The dispute was complicated by the fact that the FCPA doesn’t provide a definition of what constitutes an agent. Leading up to trial, Mr. Hoskins and prosecutors argued over what jurors should be instructed about a common law definition that has emerged from legal precedent.
When Mr. Hoskins’s trial finally occurred in New Haven, Conn., in late 2019, prosecutors presented what they said was evidence that Mr. Hoskins had acted as an agent of the Alstom subsidiary. That included emails and testimony that appeared to show that Mr. Hoskins helped recruit the third-party consultants who would be instrumental in securing a $118 million power contract for Alstom Power in Indonesia.
Jurors ultimately decided to convict Mr. Hoskins on the strength of that evidence. After the trial, Judge Arterton overruled them, throwing out his conviction on charges of violating the FCPA, while letting separate money-laundering charges stand.
Mr. Hoskins was sentenced to 15 months in prison for the money-laundering charges, and is serving his sentence.
The U.S. Justice Department appealed Judge Arterton’s acquittal of Mr. Hoskins on the FCPA charges last year. Mr. Hoskins, in response, appealed several other aspects of the judge’s handling of the case, including her decision to let the money-laundering charges stand.
Appearing before the Second Circuit on Tuesday, David Novick, a prosecutor from the U.S. attorney’s office for Connecticut, argued that Judge Arterton shouldn’t have overruled the jury’s conviction.
Returning to evidence presented at trial, he emphasized interactions between Mr. Hoskins and Alstom Power that suggested the subsidiary had some degree of control over the executive’s actions.
“The common thread…is the constant need to check for approval with API [Alstom Power] before Mr. Hoskins could do anything on [the subsidiary’s] behalf,” Mr. Novick said. “One can glean from what happened on the ground here, evidence that API had the right to control Mr. Hoskins because in fact they did repeatedly.”
A lawyer for Mr. Hoskins, Christopher Morvillo, argued that it was Mr. Hoskins who exercised control over the Alstom subsidiary—not the other way around.
“The evidence showed conclusively that API could not fire Mr. Hoskins, could not reassign him, could not demote him, could not affect his compensation,” he said. “What agency relationship exists when the principal cannot do any of those three things?”