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Second Circuit Ruling Offers Ways to Mitigate FCPA Risk Through Corporate Structure
The Foreign Corrupt Practices Act (FCPA) is an unusual beast. It is used by the Department of Justice (DOJ) and the U.S. Securities and Exchange Commission to extract eye-watering sanctions from companies after years of investigation — millions on the lower end and billions on the higher. The DOJ employs the FCPA to indict defendants who live outside the United States, engage in purported misconduct outside the United States, and cause the alleged harm outside the United States. And when those defendants are employed or affiliated with U.S. companies, then those companies can be on the hook too.
Yet despite the statute's breadth and its aggressive enforcement, it has largely escaped judicial scrutiny. Individuals and companies are reluctant to test the bounds of the law and risk federal prison or crippling penalties. They cut the best deals they can get and move on. But one man, Lawrence Hoskins, has refused to fall in line and has almost single-handedly shaped recent FCPA jurisprudence, which could be a boon to corporate counsel and compliance officers.
The Hoskins Story
Hoskins' story is quintessentially FCPA: The conduct occurred almost entirely abroad, many years ago. From 2002 to 2009, he worked for a corporation headquartered in Europe, and though he was technically employed by its UK subsidiary, he was assigned to work in France. Hoskins was not a U.S. citizen and did not participate in the bribery scheme while on U.S. soil. Hoskins' only connection to the United States was that the department in which he worked performed functions for the corporation's various subsidiaries, including for one based in Connecticut. That subsidiary used consultants to bribe foreign officials to secure a contract. The company resolved the case with the DOJ in late 2014, for a then-record setting $772 million in penalties (barely cracking the top 10 today). Hoskins fought the case, and ultimately prevailed on the FCPA charges.
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