June 12, 2013 Articles

FCPA, Due Process, and Jurisdictional Overreach by the DOJ and SEC

The FCPA itself and due-process concerns likely limit the statute's expanded extraterritorial reach.

By Bruce J. Casino and Scott Maberry

The new 120-page Foreign Corrupt Practices Act (FCPA) Guide, “A Resource Guide to the U.S. Foreign Corrupt Practices Act,” published in November 2012 by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), provides some helpful parsing of the somewhat complex set of rules of personal jurisdiction under the FCPA. It confirms familiar bases for jurisdiction: Issuers and domestic concerns are subject to the FCPA by virtue of nationality, and foreign entities may be subject by way of the territoriality principle for acts committed in the United States in furtherance of a violation. But the guide steps onto shakier ground in asserting FCPA jurisdiction over “a foreign national or company . . . [that] aids and abets, conspires with, or acts as an agent of an issuer or domestic concern, regardless of whether the foreign national or company itself takes any action in the United States.”

The guide elaborates on this in an FCPA jurisdiction hypothetical:

Moreover, even if [a foreign company conspiring with a U.S. corporation to violate FCPA] and Intermediary had never taken actions in the territory of the United States, they can still be subject to jurisdiction under a traditional application of conspiracy law and may be subject to substantive FCPA charges under Pinkerton [v. United States, 328 U.S. 640 (1946)]liability, namely, being liable for the reasonably foreseeable substantive FCPA crimes committed by a co-conspirator in furtherance of the conspiracy.

In Pinkerton, the U.S. Supreme Court held that a conspirator may be found guilty of a substantive offense committed by a co-conspirator in furtherance of the conspiracy if the co-conspirator’s acts were reasonably foreseeable. 328 U.S. at 647–48. The guide here takes the position that Pinkerton liability creates jurisdiction over a foreign co-conspirator whose actions do not touch the territory of the United States.

In SEC v. Sharef,2013 U.S. Dist. LEXIS 22392, Fed. Sec. L. Rep (CCH), P.97,292 (S.D.N.Y. Feb. 19, 2013), as well as in a case with somewhat similar facts, Straub, (see below) the SEC and the DOJ argued for a foreseeable-effects test for jurisdiction, which the court in Sharef held amounted to a “tort-like foreseeability requirement,” and rejected. This standard, derived from tort substantial-liability law, it will be argued below, is different from the standard for in personam jurisdiction.

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