This prior post  highlighted the Second Circuit’s recent decision in U.S. v. Hoskins in which the court rejected the DOJ’s expansive jurisdictional theory of prosecution against Lawrence Hoskins, a U.K. national.
This post continues the analysis by highlighting various “big picture” issues.
Legislative History Matters
In large part, the Second Circuit’s opinion was based on the FCPA’s legislative history demonstrating once again that legislative history matters.
Some FCPA commentators object to the notion that the FCPA is ambiguous or that resort to legislative history is important. For instance, the FCPA Blog has long maintained (see here  and here  for examples) that FCPA lawyers say that the law is “complicated, technically challenging, obscure, poorly drafted and badly organized” but warns,” don’t believe it. There’s no evidence in the record that judges or juries have any trouble understanding the FCPA.”
Just more uninformed gibberish from the FCPA Blog as federal court judges rightly care about the motivations of Congress in passing the FCPA, the competing bills Congress considered in enacting the FCPA, and Congress’s intent as to various elements of the FCPA.
As highlighted in this 2015 post , while FCPA judicial decisions are sparse, a common thread in nearly all FCPA judicial decisions is judges resorting to legislative history to give meaning to the FCPA.
U.S. v. Hoskins was just the latest example and I was happy to see the Second Circuit cite my article “The Story of the Foreign Corrupt Practices Act ” in its decision. The article, according to a certain metric , is by far the most read FCPA article and if you haven’t read it, you can download it here . This includes DOJ and SEC enforcement attorneys who are seemingly oblivious as to the legislative history of the specific law they are entrusted with enforcing.
The FCPA Guidance Was an Advocacy Piece
In my 2012 article “Grading the FCPA Guidance ,” I noted that the Guidance is an advocacy piece and not a well-balanced portrayal of the FCPA as it is replete with selective information, half-truths, and, worse information that is demonstratively false.
The passage of time has further demonstrated this point.
For instance, the Guidance  states:
“The five-year limitations period applies to SEC actions seeking civil penalties, but it does not prevent SEC from seeking equitable remedies, such as an injunction or the disgorgement of ill-gotten gains, for conduct pre-dating the five-year period.”
As highlighted in this prior post , in 2017 the Supreme Court unanimously disagreed.
Relevant to U.S. v. Hoskins, the Guidance states:
“Individuals and companies, including foreign nationals and companies, may also be liable for conspiring to violate the FCPA—i.e., for agreeing to commit an FCPA violation—even if they are not, or could not be, independently charged with a substantive FCPA violation.”
Obviously the Second Circuit disagreed and as Mark Srere (Bryan Cave) observes :
“The Second Circuit Hoskins decision makes it clear that this is not the case – either for conspiracy charges or for aiding and abetting charges. One can only hope that the amendments to the Resource Guide will be issued quickly in the wake of this decision.”
The Same Concept Applies to SO Many Other FCPA Issues
One of the most interesting aspects of the decision was the concurring opinion of Judge Gerard Lynch (an Obama appointee) who wrote “only to state why I regard this as a close and difficult case.”
Judge Lynch wrote:
“The FCPA … is not an ordinary domestic criminal law, but a novel expansion of criminal liability to impose duties on American businesses to conform to domestic ethical standards even when they operate beyond our borders, in lands with different cultures, laws, and traditions. I agree with my colleagues that the extraterritorial effects of the FCPA require us to exercise particular caution before extending its reach even farther than that expressly declared by the statutory text.”
That is an interesting statement from a federal appellate court judge even if it is factually inaccurate (i.e. the FCPA does not just impose duties on American businesses, but applies under various scenarios to foreign businesses as well).
The most interesting statement though from Judge Lynch is the following:
“[W] do not sit to decide how Congress might have written the law if it had specifically considered this case. We can only apply the law that Congress did write … […] Our only task is to enforce the laws as Congress has written them. (emphasis in original).
This spot-on statement applies to SO many other FCPA issues.
For instance, the FCPA issue is not whether the “foreign official” element of the FCPA’s anti-bribery provisions should capture employees of state-owned or state-controlled enterprises, but whether the FCPA as written by Congress does. The 11th Circuit’s decision in U.S. v. Esquenazi was deeply flawed (see this article  at pgs. 170-190 for more information) and various canons of statutory construction yield a “no” answer. Among other reasons, in both the Esquenazi and Hoskins cases, the DOJ advanced the absurd position (for more see my amicus brief  encouraging the Supreme Court to hear the Esquenazi petition) that because the OECD Convention mentions x, the FCPA must therefore mean x. The 11th Circuit bought into this DOJ position, but the Second Circuit rightly rejected it and stated”despite the government’s urging to the contrary, nothing in the OECD Convention required Congress to create such liability”).
The FCPA issue is not whether payments outside of foreign government procurement (in other words in connection with licenses, permits, certifications, etc.) should be captured by the FCPA’s anti-bribery provisions, but whether the FCPA as written by Congress does. As highlighted in this article , the government has an overall losing record on this issue when put to its burden of proof and the 5th Circuit’s decision in U.S. v. Kay was flawed as well (among other reasons the court was not provided with a complete and thorough analysis of relevant legislative history).
If either of the above FCPA issues reached the Supreme Court, the question is not whether the government’s position would fail, but by how wide of a margin. (See this  prior post to learn more).
The FCPA issue is not whether the FCPA’s anti-bribery provisions should have a facilitation payments exception, but rather that the FCPA as written by Congress does have such exception. Problem here is that – in the minds of many  – the government has largely read this exception out of the FCPA through its enforcement theories.
In my 2010 article “The Facade of FCPA Enforcement ” I “encourage[d] more FCPA defendants to challenge the enforcement agencies and further expose the facade of FCPA enforcement.”
A lot has happened since then and there remain many FCPA issues that would likely fail if subjected to judicial scrutiny.
FCPA Institute - Boston (Oct. 3-4)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.