A federal jury has found guilty a former executive of French power and transportation company Alstom for his role in a multi-year, multi-million-dollar foreign bribery scheme and related money-laundering scheme in Indonesia. For compliance officers and in-house counsel, the case is a cautionary tale about the far-reaching jurisdictional scope of the Foreign Corrupt Practices Act.
The underlying dispute concerned FCPA charges brought by the Department of Justice against Lawrence Hoskins, a U.K. citizen employed by the U.K.-based subsidiary of Alstom. Hoskins was assigned to work with a French subsidiary of Alstom on a project in Indonesia. He was first indicted in 2013.
In December 2014, Alstom had pleaded guilty and agreed to pay a $772 million criminal penalty for FCPA violations to resolve charges that it paid tens of millions of dollars in bribes to government officials in several countries in exchange for energy contracts, including in Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan.
According to the evidence presented at trial, Hoskins, in his role as senior vice president for Alstom’s International Network, engaged in a conspiracy to pay bribes to officials in Indonesia—including a high-ranking member of the Indonesian Parliament and the President of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia—in exchange for assistance in securing a $118 million contract, known as the Tarahan project, for Alstom Power and its consortium partner, Marubeni, to provide power-related services for Indonesian citizens.
To conceal the bribes, Hoskins and his co-conspirators, according to the evidence, retained two consultants to appear to provide legitimate consulting services on behalf of Alstom Power in connection with the Tarahan project. However, prosecutors said they were able to show evidence the primary purpose of hiring the consultants was to conceal the bribes to Indonesian officials.
They also showed evidence at trial that the first consultant retained by Hoskins and other members of the conspiracy received hundreds of thousands of dollars in his Maryland bank account to be used to bribe the member of Parliament. “The consultant then transferred the bribe money to a bank account in Indonesia for the benefit of the official,” the Department of Justice said.
Even though the Justice Department presented evidence at trial that Hoskins repeatedly e-mailed and called U.S.-based co-conspirators regarding the scheme while they were in the United States, Hoskins himself never set foot in the United States during the scheme. Nevertheless, prosecutors had argued Hoskins violated the FCPA by acting as an “agent” of Alstom’s U.S. subsidiary and for conspiring to violate the FCPA with employees and other agents of the U.S. subsidiary.
In 2015, the U.S. District Court for the District of Connecticut dismissed both charges, finding in favor of Hoskins. On appeal, the Second Circuit agreed with the district court, but ruled Hoskins could still be prosecuted under the FCPA if prosecutors could show he acted as an “agent” of a “domestic concern.” The Department of Justice, thus, moved forward with trial.
That brings us to the latest development in the case: Following a two-week trial, a jury of the U.S. District Court for the District of Connecticut on Friday reached its verdict, finding Hoskins guilty of FCPA violations, money laundering, and related conspiracy charges. Sentencing has been scheduled for Jan. 31, 2020, before U.S. District Judge Janet Bond Arterton of the District of Connecticut.
For companies being investigated by the Department of Justice 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,” states a client alert from Vinson & Elkins. “Such information will likely be a necessary component of what constitutes full cooperation under the FCPA Corporate Enforcement Policy for cooperating companies going forward.”
The client alert continues: “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.”