Fifth Circuit's Ruling In United States v. Rafoi

• Jurisdiction: United States,Federal
• Law Firm: Steptoe & Johnson
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Money Laundering, Trials & Appeals & Compensation
• Author: Ms Iris E. Bennett, Patrick F. Linehan, Lucinda Low, Drew C. Harris, Meredith Lewis, Nicholas P. Silverman and Thomas Greco
• Published date: 22 February 2023

On February 8, 2023, the US Court of Appeals for the Fifth Circuit reversed a district court's decision dismissing the Foreign Corrupt Practices Act (FCPA) and money laundering charges against two non-US defendants for lack of subject-matter jurisdiction.¹This is a win for the government after several setbacks in FCPA prosecutions of non-US persons acting outside of the United States. The Fifth Circuit applied a lenient standard for evaluating the sufficiency of the charges, and took the view that the question of whether a statute reaches extraterritorial acts is a merits issue to be litigated at trial rather than a question of subject-matter jurisdiction that can prevent a court from even hearing the matter. At the same time, the Fifth Circuit declined to address an important question presented to the court, i.e., whether these cases can be brought against non-US persons on the basis of a secondary liability theory such as conspiracy or accomplice liability.

I. Backdrop: The Hoskins Litigation

The implications of the Fifth Circuit's decision are best understood against the backdrop of a long-running litigation in the Second Circuit'United States v. Hoskins'that unfolded in recent years and has involved some of the same questions of law. In Hoskins, which eventually involved not one but two appellate court decisions, the government ultimately failed to prevail on its FCPA liability theories against a non-US defendant.

Hoskins was a British citizen who worked at Alstom SA, a French company with a subsidiary in the United States. Hoskins was charged with FCPA, money laundering and conspiracy offenses for his alleged role in a bribery scheme involving the US subsidiary's operations in Indonesia. In the first of two appellate decisions in the matter, the Second Circuit rejected the government's theory that Hoskins was secondarily liable as a co-conspirator and accomplice to the US subsidiary's FCPA violation. Instead, the Second Circuit ruled that only a person capable of violating the FCPA as a principal can be prosecuted under a conspiracy or complicity theory.² Put another way, under the Second Circuit's reasoning, secondary liability theories cannot be used to expand the jurisdictional reach of the FCPA beyond the categories of actors expressly enumerated in the statute. One of those categories is 'any agent of a domestic concern.'³ The Second Circuit remanded the case for trial to determine whether Hoskins was liable as an agent of a 'domestic concern' (in this case, Alstom's US subsidiary). On remand, a jury convicted Hoskins on that theory. In its second decision in Hoskins, however, the Second Circuit affirmed the District Court in rejecting the jury's verdict on the grounds that the evidence presented by the prosecution was insufficient as a matter of law to find that Hoskins was an 'agent' within the meaning of the statute.⁴

II. The District Court's Decision in United States v. Rafoi and United States v. Murta

In the cases on review before the Fifth Circuit, the US District Court for the Southern District of Texas adopted the Second Circuit's reasoning in the Hoskins decisions to dismiss FCPA-related charges against...