Tennessee Couple Indicted for Alleged Role in Warzone Contracting Scheme

July 17, 2013

The Federal Bureau of Investigation (FBI) on July 16, 2013 released the following:

Alleged to Have Steered $6.9 Million in Proceeds from Defense Subcontracts in Afghanistan

ALEXANDRIA, VA— Keith Johnson, 46, and Angela Johnson, 44, both of Maryville, Tennessee, were indicted by a federal grand jury today on charges of conspiracy to commit wire fraud and substantive wire fraud for their alleged role in a scheme to steer $6.9 million from Department of Defense (DOD) subcontracts in Afghanistan to shell entities through kickbacks and the use of assumed names.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Mythili Raman, Acting Assistant Attorney General of the Justice Department’s Criminal Division; Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office; Robert E. Craig, Defense Criminal Investigative Service (DCIS) Special Agent in Charge of Mid-Atlantic Field Office; John Sopko, Inspector General for Special Inspector General for Afghanistan Reconstruction (SIGAR); and Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU), made the announcement following the grand jury’s return of the indictment.

Keith and Angela Johnson face a maximum penalty of 20 years in prison for conspiracy and up to 20 years in prison on each count of wire fraud if convicted.

According to the indictment, between July 2007 and June 2010, Keith and Angela Johnson engaged in a scheme to defraud Company #1, a DOD contractor, relating to two contracts worth more than $269 million. The contracts at issue were to provide vehicle-fleet maintenance for the Afghan National Army (ANA). Keith Johnson worked for Company #1 in Kabul, Afghanistan, as its project manager and procurement manager for the ANA contracts. Johnson fielded requests for vehicle parts from Company #2, a Company #1 subcontractor. Company #1 would then issue purchase orders for those parts to subcontractors after receiving multiple bids. In September 2007, Keith and Angela Johnson formed Company #4 as a Tennessee corporation, but they listed Angela Johnson’s mother and daughter on its corporate documents. Thereafter, Keith Johnson used his position in Company #1 to steer parts-supply purchase orders and other business on the ANA contracts to Company #4. To conceal Keith Johnson’s relationship to Company #4, Angela Johnson used her maiden name when interacting with Company #1 on Company #4’s behalf.

According to the indictment, the Johnsons also agreed with two other individuals at Company #2 to further the scheme. The two Company #2 employees helped steer Company #1 business to the Johnsons through Company #4, and Keith Johnson helped steer Company #1 business to Company #3, an entity operated by the two Company #2 employees using a fictional name. The Company #2 employees allegedly paid kickbacks to the Johnsons through a shell company. As part of the scheme, the Johnsons also allegedly participated in a bid-rigging practice of coordinating inflated bids on behalf of Company #3 or Company #4 to ensure that the other company would receive particular contracts. The conspirators also caused Company #1 to order excess parts that were not yet needed on Company #1’s contracts, and Company #4 did not ultimately supply all parts in compliance with Company #1’s requirements.

According to the indictment, the conspirators obtained $6,933,179.31 in proceeds from the scheme, which they used in part to purchase, among other items, several luxury vehicles and more than $191,000 in jewelry.

This case is being investigated by the Defense Criminal Investigative Service, the Federal Bureau of Investigation, the Special Inspector General for Afghanistan Reconstruction, and the U.S. Army Criminal Investigation Division. The case is being prosecuted by Assistant U.S. Attorney Ryan Faulconer of the U.S. Attorney’s Office for the Eastern District of Virginia and Trial Attorney Daniel Butler of the Criminal Division’s Fraud Section, who is also a Special Assistant U.S. Attorney in the Eastern District of Virginia.

Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.”

Federal Wire Fraud Crimes – 18 U.S.C. § 1343

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme

December 13, 2011

The Federal Bureau of Investigation (FBI) on December 13, 2011 released the following:

“WASHINGTON— Eight former executives and agents of Siemens AG and its subsidiaries have been charged for allegedly engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara for the Southern District of New York and Ronald T. Hosko, Special Agent in Charge of the FBI, Washington Field Office’s Criminal Division.

The defendants charged in the indictment returned late yesterday are:

  • Uriel Sharef, a former member of the central executive committee of Siemens AG;
  • Herbert Steffen, a former chief executive officer of Siemens Argentina;
  • Andres Truppel, a former chief financial officer of Siemens Argentina;
  • Ulrich Bock, Stephan Signer, and Eberhard Reichert, former senior executives of Siemens Business Services (SBS); and
  • Carlos Sergi and Miguel Czysch, who served as intermediaries and agents of Siemens in the bribe scheme.

The indictment charges the defendants and their co-conspirators with conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the wire fraud statute, money laundering conspiracy and wire fraud.

“Today’s indictment alleges a shocking level of deception and corruption,” said Assistant Attorney General Breuer. “The indictment charges Siemens executives, along with agents and conduits for the company, with committing to pay more than $100 million in bribes to high-level Argentine officials to win a $1 billion contract. Business should be won or lost on the merits of a company’s products and services, not the amount of bribes paid to government officials. This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.”

“As alleged, the defendants in this case bribed Argentine government officials in two successive administrations and paid off countless others in a successful effort to secure a billion dollar contract,” said U.S. Attorney Bharara. “When the project was terminated, they even sought to recover the profits they would have reaped from a contract that was awarded to them illegitimately in the first place. Bribery corrupts economic markets and creates an unfair playing field for law-abiding companies. It is critical that we hold individuals as well as corporations accountable for such corruption as we are doing today.”

“Backroom deals and corrupt payments to foreign officials to obtain business wear away public confidence in our global marketplace,” said FBI Special Agent in Charge Hosko of the Washington Field Office’s Criminal Division. “The investigation into this decades-long scheme serves as an example that the FBI is committed to curbing corruption and will investigate those who try to advance their businesses through foreign bribery.”

According to the indictment, the government of Argentina issued a tender for bids in 1994 to replace an existing system of manually created national identity booklets with state of the art national identity cards (the DNI project). The value of the DNI project was $1 billion. In 1998, the Argentine government awarded the DNI project to a special-purpose subsidiary of Siemens AG.

The indictment alleges that during the bidding and implementation phases of the project, the defendants and their co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project. According to the indictment, members of the conspiracy worked to conceal the illicit payments through various means. For instance, Bock made cash withdrawals from Siemens AG general-purpose accounts in Germany totaling approximately $10 million, transported the cash across the border into Switzerland and deposited the funds into Swiss bank accounts for transfer to officials. Bock, Truppel, Reichert, and other conspirators also allegedly caused Siemens to wire transfer more than $7 million in bribes to a bank account in New York disguised as a foreign exchange hedging contract relating to the DNI project. Over the duration of the conspiracy, the conspirators allegedly relied on at least 17 off-shore shell companies associated with Sergi, Czysch and other intermediaries to disguise and launder the funds, often documenting the payments through fake consulting contracts.

In May 1999, according to the indictment, the Argentine government suspended the DNI project, due in part to instability in the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy allegedly committed Siemens to paying additional bribes to the incoming officials and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government.

When the project was terminated in May 2001, members of the conspiracy allegedly responded with a multi-faceted strategy to overcome the termination. According to the indictment, the conspirators sought to recover the anticipated proceeds of the DNI project, notwithstanding the termination, by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim alleged wrongful termination of the contract for the DNI project and demanded nearly $500 million in lost profits and expenses. Members of the conspiracy allegedly caused Siemens to actively hide from the tribunal the fact that the contract for the DNI project had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption.

In related actions, the indictment also alleges that members of the conspiracy continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration and to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region. In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations. Conspirators continued to conceal these additional payments through various means. For example, Sharef, Truppel and other members of the conspiracy allegedly caused Siemens to transfer approximately $9.5 million through fictitious transactions involving a Siemens business division that had no role in the DNI project. They also caused Siemens to pay an additional $8.8 million in 2007 under the legal cover of a separate arbitration initiated in Switzerland by the intermediaries to enforce a sham $27 million contract from 2001 between SBS and Mfast Consulting, a company controlled by their co-conspirator intermediaries, which consolidated existing bribe commitments into one contract. The conspirators caused Siemens to quietly settle the arbitration, keeping all evidence of corruption out of the proceeding. The settlement agreement included a provision preventing Sergi, Czysch and another intermediary from testifying in, or providing information to, the Washington arbitration.

Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitral tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest. On Aug. 12, 2009, following Siemens’ corporate resolutions with the U.S. and German authorities—new management of Siemens caused Siemens AG to forego its right to receive the award and, as a result, the company never claimed the award money.

The indictment charges the defendants with conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.

The charges announced today follow the Dec. 15, 2008, guilty pleas by Siemens AG and its subsidiary, Siemens S.A. (Siemens Argentina), to criminal violations of the FCPA. As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.

In a parallel civil action, the Securities and Exchange Commission (SEC) announced charges against executives and agents of Siemens. The department acknowledges and expresses its appreciation of the significant assistance provided by the staff of the SEC during the course of these parallel investigations.

Today’s charges follow, in large part, the laudable actions of Siemens AG and its audit committee in disclosing potential FCPA violations to the department after the Munich Public Prosecutor’s Office initiated an investigation. Siemens AG and its subsidiaries disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation; cooperated extensively and authentically with the department in its ongoing investigation; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.

The department and the SEC closely collaborated with the Munich Public Prosecutor’s Office in bringing this case. The high level of cooperation, including sharing information and evidence, was made possible by the use of mutual legal assistance provisions of the 1997 Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

The case is being prosecuted by Principal Deputy Chief Jeffrey H. Knox of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Jason P. Hernandez and Sarah McCallum of the U.S. Attorney’s Office for the Southern District of New York. The Fraud Section of the Justice Department’s Criminal Division and the Complex Frauds Unit of the U.S. Attorney’s Office for the Southern District of New York are handling the case. The case was investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.