The District of Connecticut recently vacated a defendant’s convictions at trial for violating the Foreign Corrupt Practices Act (“FCPA”) — but declined to similarly vacate his related money laundering convictions. This case provides another example of how the money laundering statutes can be a particularly powerful and flexible tool for federal prosecutors, and how they can yield convictions even if the underlying offenses do not (and perhaps are not even charged).
The case involves Lawrence Hoskins, a British citizen who had been employed by Alstom UK Limited but worked primarily for a French subsidiary of Alstom, the parent company. Hoskins allegedly participated in a corruption scheme involving a project in Indonesia. The bidding process for the project also involved Alstom Power Inc. (“API”), another subsidiary of Alstom that is based in Windsor, Connecticut. According to the government, Alstom hired two consultants, Sharafi and Aulia, who bribed Indonesian officials to secure the contract for the project.
Much ink has been spilled by the media and legal commentators regarding the district court’s decision (which the government is appealing) to vacate the defendant’s FCPA convictions, on the grounds that he did not qualify as an “agent” of API for the purposes of the FCPA statute. We will not focus on that issue here. Rather, we of course will focus on the fact that the defendant’s convictions for money laundering, and conspiring to launder money, nonetheless survived. Importantly for the money laundering charges, the district court did not find that there in fact was no underlying corruption scheme. Rather, the court found that the defendant could not be convicted under the FCPA for allegedly participating in this scheme. Thus, there was still a “specified unlawful activity,” or SUA, which produced “proceeds” to generate money laundering transactions.
The case also reminds us that, as we have blogged, it is relatively easy for the U.S. government to prosecute foreign individuals for conduct occurring almost entirely overseas, because the nexus between the offense conduct and the U.S. does not need to be robust for U.S. jurisdiction to exist.
In his motion to vacate four of his money laundering convictions, Hoskins argued that the government failed to prove a sufficient nexus between the offenses and the United States, because the government failed to prove that he “knew that any funds would be transferred from accounts within the United States, let alone any transfers by Mr. Sharafi [one of the consultants] from Maryland to Indonesia.” “Specifically, Defendant argues that even if it was reasonable for the jury to ‘infer that API would be paying Mr. Sharafi directly or that Mr. Hoskins would have known that,’ it was nonetheless unreasonable for the jury to infer that Mr. Hoskins knew that those payments would be to or from a location within the United States.” The government responded that such evidence of knowledge was not required under the law, and even if it was, sufficient evidence of such knowledge had been introduced at trial. The district court declined to address whether such evidence was required. Instead, the court found that, although other reasonable inferences could be drawn from the trial record, the evidence allowed a reasonable jury conclusion that Hoskins knew that payments would pass through API in Connecticut because (i) Hoskin’s duties included oversight of the retention of consultants, and (ii) it was generally known within Alstom that payments to consultants began in Connecticut, even if they later passed through foreign subsidiaries before reaching the consultant.
The defendant also argued that venue in Connecticut was improper for three of the money laundering counts because the evidence failed to satisfy the venue provision of the money laundering statute at 18 U.S.C. § 1956(i)(3). Specifically, Hoskins argued that “the charged transfer of funds, from API in Connecticut to Mr. Sharafi in Maryland and then to Indonesia, did not constitute a ‘single continuing transaction.'” Rather, according to Hoskins, these stream of fund transfers represented two separate transactions: one from Connecticut to Maryland, and another from Maryland to Indonesia. The government countered that there was “ample evidence” that there had been a plan from the beginning that money would flow from Connecticut to Indonesia. The district court sided with the government by relying on a 1996 decision by the Second Circuit, United States v. Harris, which found for the purposes of determining whether a single money laundering transaction had occurred under 18 U.S.C. § 1956(a)(2) that multiple transfers of funds from New York to Connecticut to Switzerland could represent single transfers that served to conceal the location of the funds.
More generally, this case and its outcome echoes another unusual aspect of the intersection of the FCPA and money laundering statutes (on which we have blogged, here and here) : the DOJ’s use of the money laundering statutes to accomplish what the FCPA statute cannot—the bringing of charges against a foreign official. The FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business. However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it. Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA. Undeterred, the DOJ prosecutes these same foreign officials for violating the money laundering statutes — which have extraterritorial application — based on the theory that the officials were laundering the proceeds of the underlying FCPA violations for which they could not be prosecuted directly.
Shortly after vacating the FCPA convictions, the district court sentenced the defendant to 15 months of imprisonment. Bear in mind that the government filed a sentencing memorandum requesting a sentence of seven to nine years. Without describing here all of the many technical calculations under the Federal Sentencing Guidelines, the government’s position rested primarily on the argument that the defendant’s sentence for money laundering should be very high because of the defendant’s participation in the underlying FCPA scheme, “even assuming Hoskins was not an agent of API and thus not himself criminally liable for substantive FCPA violations.” Although the district court imposed a much lower sentence, this again shows how the government can attempt to “boot strap” desired results at any stage in a FCPA case through the broad and flexible money laundering statutes.