In the U.S. Department of Justice’s recent resolution with three subsidiaries of Hewlett-Packard Company (“HP”), the information filed in conjunction with the plea agreement with HP’s Russian subsidiary, Zao Hewlett-Packard A.O. provides insight into the range of facts or factors that may bear on establishing jurisdiction over a foreign subsidiary under 15 U.S.C. § 78dd-3. As is well established, the anti-bribery provisions of the FCPA do not apply directly to foreign subsidiaries of entities otherwise subject to their provisions. This includes wholly-owned foreign subsidiaries of U.S. companies.
The essence of establishing jurisdiction under 15 U.S.C. § 78dd-3 is whether activities in furtherance of the improper inducement take place within the territory of the United States. Whether one has caused conduct within the territory of the United States is generally viewed as meeting the jurisdictional requirements under 15 U.S.C. § 78dd-3. In the information filed against HP’s Russian subsidiary, several concurrent factual bases were alleged that might serve of a basis for jurisdiction under 15 U.S.C. § 78dd-3. Two of the more interesting are included in the alleged overt acts.
One is the allegation that a member of the conspiracy transmitted an email to the Russian subsidiary that was routed through the United States. It is unclear whether the allegation is premised on the theory that, at least in the past, most email traffic is routed through the United States. But it does imply that a rather expansive approach to using email traffic as a basis for jurisdiction may be applied.
The other rather clever approach to establishing jurisdiction is the use of sub-certifications that HP required of its senior and regional management under Sarbanes-Oxley. In the sub-certification transmittal to HP in the United States that included the Russian subsidiary, no deficiencies in the internal controls were reported and a lack of awareness of fraud involving employees in management was asserted. In each instance, the representations were alleged to be false.
In sum, the information filed in conjunction with Zao Hewlett-Packard A.O.’s plea agreement demonstrates the ease by which territorial jurisdiction under 15 U.S.C. § 78dd-3 can be established. It reaffirms advice that is generally given that foreign subsidiaries should be fully subject to anti-bribery compliance programs. As a practical matter, they are subject to the anti-bribery provisions of the FCPA.