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Holding individuals accountable

Overview
The Department of Justice unsealed a 35-page indictment filed in February of 2015 against three individuals who were executives at Alstom S.A. (Alstom) and Marubeni Corporation (Marubeni) this week. Alstom is a French power and transportation company. Marubeni is a Japanese based trading company.

The three individuals named were Junji Kusiinoki of Marubeni and Reza Moenaf, and Eko Sulianto from Alstrom. The indictment alleged the three engaged in Conspiracy, Foreign Corrupt Practices Act (violations), Conspiracy to Commit Money Laundering and Money Laundering. Alstom had partnered with Marubeni to bid on power projects in Indonesia. At least four other individuals have been indicted on these charges.

In December of 2014 Alstom agreed to plead guilty and pay over $772 million in fines with the Department of Justice in order to resolve apparent violations of the FCPA. As part of their plea agreement Alstom agreed to retain an independent corporate monitor. Earlier in March of 2014 Marubeni pled guilty to foreign bribery charges and paid an $88 million dollar fine.

Six years later…

The indictment outlines the contour of the offenses by first describing the projects the companies were bidding on. “The Tarahan Project (sometimes referred to simply as “Tarahan”), was a project to provide power-related services to the citizens of Indonesia that was bid and contracted through Indonesia’s state-owned and state-controlled electricity company, Perusahaan Listrik Negara (“PLN”) and two projects, “The Muara Tawar Projects” were to expand the Muara Tawar power plant.”

Importantly the indictment goes on to state, “PLN, the state owned and controlled electricity company in Indonesia was an “agency” and “instrumentality” of a foreign government as those terms are used in the FCPA, Title 15,United States Code Sections 78dd-2(h)(2)  and 78 dd-(3)(f)(2).

The DoJ goes on to cement the jurisdiction of the United States by stating,

The defendant EKO SULIANTO (“SULIANTO”), was the Director of Sales of Alstom Indonesia. SULIANTO’s responsibilities to Alstom Indonesia included assisting other Alstom entities’ efforts to obtain contracts with new customers and to retain contracts with existing customers in Indonesia including assisting Alstom Power US to obtain projects in Indonesia. Thus, SULIANTO was an agent of a “domestic concern,” Alstom Power U S, as that term is used in the FCPA, Title 15, United States Code, Section7 8dd-2(h)(l).

Similar language was used for the other defendants in the matter as well as Alstom and Marubeni.

The Lawrence Hoskins verdict and its progeny

Lawrence Hoskins is a United Kingdom national and former senior vice president for the Asia region for France-based Alstom who was found guilty of violation of the FCPA in November of 2019. Hoskins’ actions were related to this same matter. This was a hotly debated case with Hoskins arguing 1) He was not a US citizen, 2) was not employed by a US company, and 3) never set foot in the US while working for Alstom and therefore not subject to the jurisdiction of the U.S.

The issue of the U.S.’s jurisdictional reach has been an issue of concern for many entities conducting international business. In previous cases the DOJ claimed jurisdiction on a theory of accomplice or co-conspirator liability. Those theories were ultimately struck down by the Second Circuit Court of Appeals. However, the issue of an agent of a domestic was the issue at this trial. The judge in the Hoskins case ruled that the “principal need only control the undertaking” rather than the agent itself. As that definition of “agent of a domestic concern” is the basis for extending U.S. jurisdictional reach in these matters, foreign nationals are now on notice.

It appears that with the Hoskins verdict the DoJ will now apply that standard in pursuing individuals for violations of the FCPA. The unsealing of this 2015 indictment is such an occurrence.

It invariably gets down to communications.

In the unsealed document the Department of Justice lists several damning emails that appear to indicate the named executives were clearly aware of the retaining of consultants for the purposes of paying bribes to Indonesian officials in order to secure contracts worth more that $438 million.

A couple of the emails included in the indictment:

  • “As you know, we do not like to have a US domiciliated company as a consultant with payment in the U S, and most probably in USD.”
  • “Attached is some analysis as we spoke about last week….Please delete E-mail after you print.”
  • The email attached a spreadsheet entitled, “Friend Analysis” which listed various government officials and the connections that Consultant B and another consultant had to those officials, including that Consultant B had the “Bank account for [a high-level executive in the Minister of Mines and Energy].”
  • “PLN has expressed their concerns over our ‘agent’. They did not like the approach made by the agent. More importantly they concerned whether they can trust on the agent or not in regards to ‘rewards’ issue. They concern that if we have won the job, whether their rewards will still be satisfactory or this agent only give them pocket money and disappear, Nothing has been shown by the agent that the agent is willing to spend money.”
  • Mitsubishi has retained some lobbyist from the government.

Federal Register

Observations

As the government advances with its stated objective of holding individuals responsible for bad corporate conduct (See the Yates Memo) there will be more and more examples like this forthcoming.

The costs and fines are in excess of $1 billion in just this matter. The contracts competed for were approximately $400 million. The “fees” paid to the consultants amounted to $2.3 million. These activities were apparently undertaken during 2002 through 2009.

The government is on the path to executing on exactly what it said it was going to do, albeit slowly. The key takeaway for individuals transacting in international business is to understand the instructions given to the jury by Judge Arterton in the Hoskins case:

Judge Arterton instructed the jury to consider the definition of “agent” to include—

  • a manifestation by the principal that the agent will act for it;  
  • the agent’s acceptance of an “undertaking”—meaning “acts or services” for the principal; and  
  • an understanding that the principal is “in control” of those acts or services.

Judge Arterton clarified that “one may be an agent for some business purpose and not others.” In this case, agency must be “in connection with the specific events related to the contract known as the Taharan project.”

While this may not be comforting, it is clarity.

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