FCPA Liability: Texas Federal Court Finds No Jurisdiction Over Foreign National Under Agency Theory | Vinson & Elkins LLP
The court ruled that the government did not have jurisdiction over the defendant under a theory of agency liability.1 In 2018, the United States District Court for the District of Connecticut also rendered an acquittal judgment in United States v. Hoskins, overturning the jury’s verdict on all FCPA counts on the basis of a finding that no reasonable juror could have concluded that the defendant acted as an “agent” of the company that bribed officials in Indonesia. (Find out more about Hoskins Click here.) Hoskins is on appeal to the Second Circuit, and the government is appealing the Rafoi-Bleuler decision in the Fifth Circuit, creating the possibility of a circuit split over the scope of the agency’s liability under the FCPA.
According to Rafoi-Bleuler court and the Second Circuit, Section 78dd-2 of the FCPA establishes a limited basis for extraterritorial jurisdiction over foreign nationals whose alleged violations of law have occurred outside of the United States.2 According to the second circuit, the foreign national must be an agent, employee, officer, director or shareholder of a US issuer or domestic company.3 The term “agent” is not defined in the FCPA and the courts have applied its meaning at common law.4
The replacement indictment in Rafoi-Bleuler alleged that the defendant, owner of a wealth management company, had aided its co-defendants – all current or former employees of PDVSA or its subsidiaries – in an illegal bribe scheme. The defendant, Daisy Rafoi-Bleuler, was charged with violations of the FCPA and the 1986 Money Laundering Control Act (“MLCA”) for opening bank accounts to conceal the proceeds of the scheme from her clients. co-defendants, while other co-defendants have been accused of soliciting third-party vendors in exchange for illicit bribes.5
The indictment alleged that Ms. Rafoi-Bleuler knowingly assisted (i) PDVSA’s wholly owned US subsidiary, PDVSA Services, Inc. (“PDVSA-S”), (ii) Bariven SA, another subsidiary of PDVSA, and (iii) its co-defendants in conducting financial transactions through interstate commerce using the proceeds of an illicit scheme. While the defendant admittedly had limited ties to the United States itself, the government argued that the United States was competent because it was an agent of PDVSA-S, a national company.
The Court’s agency analysis
To establish extraterritorial jurisdiction under the FCPA, the government had to show that the defendant was an “officer, director, employee or agent” of PDVSA-S or was an agent of its US-based co-defendants.6 The court explained that, in such circumstances, establishing the existence of the agency “requires unchallenged proof of mutual agreement and control over the details of the person and the agency, so that the principal controls them. details of the mission “.seven
The defendant argued that she had no previous association or affiliation with the United States or the co-defendants, and that her conduct was “in strict accordance with Swiss law on anti-money laundering and anti-money laundering. other financial laws and regulations ”.8 Therefore, his actions and those of his firm on behalf of the co-defendants were only professional services and did not form part of any agency relationship. The government disagreed, arguing that the defendant had ties to the United States because she had received telegraphic instructions from her co-defendants and communicated with them via email, phone and messaging apps while ‘she was in Switzerland and whether they were in the United States or Venezuela.9
The court ruled that in law communications through interstate commerce could not serve as direct evidence to establish an agency relationship.ten The court concluded that the government could not report any acts committed by the defendant in the United States and, therefore, could not establish an agency relationship in the United States.11
Defendant’s Vagueness Argument Related to Criminal Charge of “Agents” Under FCPA and MLCA
The respondent also argued that, because the government could not demonstrate “an established agency relationship that occurred in the United States”, “the term” agent “is so vague that, as it is applied to it, it is unjustified and violates[ed]”The due process clauses of the US Constitution.12 The court found this argument to be well founded. The court explained that “no court has interpreted the [FCPA or MLCA] or made a judicial decision that fairly discloses how [“agent”] can be applied to establish jurisdiction ”, which“ alone establishes the vagueness of the term ”.13
What happens next?
All eyes will be on the decision of the second home circuit in the pending appeal. Hoskins to see how the panel applies the term “agent” to a foreign national who has not committed any relevant act in the United States. Texas District Court. For now, the Rafoi-Bleuler and Hoskins rulings give ammunition to foreign defendants outside the United States to argue the government lacks jurisdiction when laying charges using agency theory when there is no direct evidence or undisputed that the foreign national was controlled by domestic principals engaging in conduct that violates the FCPA. Additionally, due to the court’s responsiveness to the defendant’s vagueness argument, the ruling creates the possibility of more regular challenges to the FCPA and MLCA by foreign defendants.
1 United States v. Rafoi-Bleuler, Case No.4: 17-CR-0514-7 (SD Tex. 10 November 2021), Dkt. No. 255 (the “Decision”).
2 Decision at 13-14; see United States v. Hoskins, Case No.3: 12-CR-238 (JBA), 2020 WL 914302, at * 2 (D. Conn. March 9, 2020).
3 United States v. Hoskins, 902 F.3d 69, 97 (2d Cir. 2018).
4 See Decision in 5 n.6,
5 Username. to 3-5.
6 See username. at 13-14.
seven Username. to 15.
8 Username. to 6.
9 See username. at 15-16, 16 n.16.
ten Username. to 15.
11 Username. at 15-16.
12 Username. to 21.
13 Username. to 22.