Former Alstom Executive’s Acquittal Poses Test for DOJ (1)

The acquittal of a former Alstom S.A. executive convicted on bribery charges complicates the Justice Department’s pursuit of foreign persons without a clear connection to the U.S.

A Connecticut federal judge on Wednesday cleared Lawrence Hoskins, a U.K. national, of his convictions for violating the Foreign Corrupt Practices Act, finding prosecutors failed to present sufficient evidence at trial. The charges stem from Hoskins’ alleged involvement in bribing Indonesian government officials while working for the French power company.

The government’s case against Hoskins was narrowed prior to his 2019 trial after a federal appeals court found the FCPA didn’t cover foreign nationals who weren’t directly employed by the offending company’s U.S. subsidiary.

The court left room for FCPA charges to stick, so long as prosecutors could prove Hoskins was acting as an agent of “domestic concern.”

“A judge simply might not agree with DOJ that a person was an agent,” said James Koukios, a partner at Morrison & Foerster LLP. “It’s a proof problem.”

Agency theory, used to pin non-U.S. persons and companies with liability by claiming they were acting on behalf of a U.S. firm, was put to the test at trial. And a purported lack of evidence in applying this theory to Hoskins served as the basis for the judge’s acquittal decision.

The outcome “shows how difficult it will be for DOJ to use agency theory moving forward,” said Koukios, who previously served as a senior deputy chief of the Fraud Section in the Justice Department’s Criminal Division.

The Case

A jury found Hoskins guilty in Nov. 2019 of helping to arrange bribes to secure contracts in Indonesia for Alstom while operating as an agent of the company’s Connecticut-based subsidiary, Alstom Power Inc.

Before a verdict was reached, Hoskins’ attorneys filed a motion for acquittal of all charges, including those for money laundering.

Judge Janet Bond Arterton determined that the government’s evidence didn’t clearly show that Hoskins acted under control of Alstom’s subsidiary to the point of being its agent. She did, however, deny Hoskins’ attempt to escape conviction on several money laundering-related charges.

A Justice Department spokesman declined to comment Thursday on Arterton’s ruling.

Prosecutors, in opposition to Hoskins’ acquittal motion, argued that they introduced “overwhelming” evidence proving he agreed to and carried out Alstom Power Inc.'s instructions for the hiring of so-called consultants on its Indonesian development project. They also relied on corporate emails to show that the Alstom Power Inc. (API) had the authority to control Hoskins’ conduct.

But Arterton said those emails only proved that API could determine the terms on which consultants would be hired and Hoskins’ assistance in securing the consultants. They did not, she added, show API has any authority to direct Hoskins’ actions.

None of the elements of control typical to an agency relationship were present in the evidence, the judge held.

‘Expansive View’

This case is the most recent example of the Justice Department’s “very expansive view of agency theory,” said Koukios.

In addition to its use in actions against foreign individuals, agency theory is often employed in corporate actions, where prosecutors will attempt to peg a parent company with liability for a subsidiary’s actions.

But “it’s not as simple as saying ‘you’re my subsidiary in another country, therefore you’re an agent,’” Koukios said, adding that there’s now a question of whether the government will scale back its use of the theory in the corporate context.

In 2019, the FCPA unit of the DOJ’s Fraud Section unveiled seven corporate resolutions, including some of its largest ever, for a total of $1.6 billion in U.S. criminal penalties. It declined to prosecute two companies last year, while charging a total of 34 individuals.

It’s an area of law that experienced significant growth during the past decade and has resulted in more countries cooperating with the U.S. foreign bribery investigations.

Hoskins partial acquittal isn’t likely to have a major impact on the DOJ’s pursuit of foreign bribery where its authority is unquestioned, William Steinman, a founding partner of Steinman & Rodgers LLP, told Bloomberg Law.

“There are plenty of people over whom the Justice Department has solid, robust, traditional jurisdiction” under the FCPA, he said. This case “doesn’t represent the vast majority of FCPA cases brought against individuals,” but rather the DOJ attempting to push the boundaries of the statute.

“There shouldn’t be a significant hit to the body of cases that they will bring,” Steinman added.

Looking Ahead

Hoskins had requested a new trial as an alternative to acquittal, which Arterton conditionally granted.

This means the government could get another shot at proving Hoskins was an agent of API should there be an appeal of Arterton’s decision.

“Essentially what the judge is saying is ‘You didn’t get it right at trial, you didn’t prove the facts sufficient to show agency at trial, but maybe we’ll end up at trial again and you’ll have additional evidence,” said Steinman. “It’s very fact driven.”

Federal prosecutors are also pursing charges, unsealed Feb. 18, against two other former Alstom executives and a former executive of Japanese trading company Marubeni Corp. Those cases are tied to the same bribery at issue in Hoskins’ trial.

Five former Alstom and Marubeni employees have pleaded guilty for alleged bribery schemes stemming from the Justice Department’s probe. Both companies have also pleaded guilty.

Although the facts are different in the recently revealed cases, Arterton’s ruling for Hoskins could offer a road map to the parties for what they will be expected to show at trial.

“It kind of signals to the government what they’re going to have to prove,” said Steinman. “It will be interesting to see how those shake out.”