Issue link: https://digital.shearman.com/i/1265921
UNUSUAL DEVELOPMENTS FCPA DIGEST July 2020 26 United States, this left the government with the sole jurisdictional argument that Hoskins acted as an agent of an Alstom subsidiary based in the United States. The government's agency theory— which was praised extensively by former Assistant Attorney General Brian Benczkowski in December 2019 following Hoskins' conviction—rested on allegations that Hoskins acted subject to the subsidiary's control, but the defendant argued evidence at trial bore out the opposite conclusion: the U.S. Alstom subsidiary had no right to control his actions with respect to the Indonesian project in question. In February 2020, after years of extensive litigation and nearly five years after his not-guilty plea, Hoskins successfully challenged the government's agency theory that had brought his conduct into the jurisdictional confines of the FCPA. The district court granted Hoskins' post-trial motions for acquittal and a new trial with respect to all six FCPA counts and one conspiracy to violate the FCPA count. He remains convicted of the money laundering and the conspiracy to commit money laundering counts and was sentenced to fifteen months imprisonment in March 2020. In another blow to the DOJ's effort to obtain individual FCPA convictions, the court in Baptiste & Boncy overturned jury convictions of FCPA-related counts for both defendants. Unlike the Hoskins reversal, this post-trial motion had little to do with the DOJ's charging decisions or evidence and more to do with the opposing counsel: both defendants had filed a motion for a new trial on the basis of ineffective assistance of counsel and for a judgment of acquittal. At trial, the jury had convicted Baptiste of several counts: one count of conspiracy to commit offenses against the United States, including Travel Act and FCPA violations, one count of violating the Travel Act, and one count of conspiracy to commit money laundering. The same jury found Boncy guilty of one count of conspiracy to violate the FCPA but acquitted him on the money laundering and Travel Act charges. Baptiste argued in his motion for a new trial that his counsel's representation fell below an objective standard of reasonableness. His counsel had no criminal experience, did not review the bulk of the material the government provided, including important recordings and trial exhibits, failed to subpoena witnesses, pursued a defense that was not available to the defendant, and allowed counsel for Boncy to cross examine the government's witnesses—despite the fact that Boncy's trial strategy was to portray Baptiste as the primary driver of the alleged conspiracy. On March 11, 2020, the court issued a memorandum and order granting Baptiste's motion for a new trial based on the ineffective assistance of counsel. The court also granted Boncy's motion for a new trial based on the prejudice he experienced due to the trial counsel's ineffective assistance to his co-defendant. The status of the new trial is currently pending. RECORD REWARDS ISSUED UNDER THE SEC WHISTLEBLOWER PROGRAM In June 2020, the SEC announced a $50 million whistleblower award, its largest ever, to an individual who provided firsthand observations of misconduct which resulted in a successful enforcement action against a publicly-traded company. Under the confidentiality provisions of the SEC program, additional information was not provided. The second-largest award of $39 million was awarded to an individual in 2018, and since this program started in 2012, the SEC has awarded over $500 million to eighty-three individuals—including, in one widely reported example, related to the FCPA investigation of BHP Billiton in 2015. The whistleblower awards are paid from an investor protection fund established by Congress that is financed solely through penalties paid to the SEC for violations of the securities laws. The awards can range from ten to thirty percent of the money the SEC collects when monetary penalties exceed $1 million. Individuals may be eligible for a whistleblower award when they voluntarily provide the SEC with relevant, timely, and credible information that leads to a successful enforcement action. Under the Dodd-Frank Act, the identity of each whistleblower is protected—and the SEC protects that confidentiality. In this record order, the SEC said that a second individual in the case was denied an award because that individual did not meet the statutory definition of a whistleblower under the Dodd-Frank Wall Street Reform Act of 2010. SEC BACKSLIDES ON AGENCY REQUIREMENTS As discussed above, on April 13, 2020, the Securities and Exchange Commission (SEC) charged Asante Berko, the former executive of foreign-based subsidiary of a U.S.-based financial services company, for violating the Foreign Corrupt Practices Act (FCPA) by arranging a bribery scheme in the Republic of Ghana. The case signals that the SEC is less willing than the DOJ to retreat from a more expansive view of agency liability. For years, the SEC and DOJ alike maintained that the liability of a parent company for the conduct of its subsidiary was premised on whether the parent exercised "authorization, direction, and control" of that subsidiary. The DOJ and SEC deviated from this decades-long standard by applying doctrine that defined when an employer/principal was responsible for the acts of its employees/agents. This new view was memorialized in the FCPA Resource Guide authored by the DOJ's Criminal Division and the SEC's Division of Enforcement, which enabled the SEC to charge parent issuers with their subsidiaries' violations of the FCPA's anti-bribery provisions without establishing the parent's liability through the traditional concepts of corporate liability. In essence, the DOJ and SEC applied a theory of strict liability for the