DOJ Recommends 15 Months for Exec in Bribery Case

September 11, 2012

The Wall Street Journal on September 10, 2012 released the following:

“By C.M. Matthews

The Justice Department said a former executive of an industrial valve manufacturer who admitted to authorizing bribes in China should be sentenced to 15 months in prison.

Federal prosecutors recommended the sentence for Paul Cosgrove, former director of international sales for Control Components Inc., in court papers filed in federal district court in Santa Ana, Calif. last week. But, the prosecutors also said they wouldn’t oppose 15 months of home confinement because of Cosgrove’s health problems.

Cosgrove pleaded guilty in May to violating the Foreign Corrupt Practices Act, which prohibits improper payments to foreign officials to win business. He was charged along with five other former Control Components executives in April 2009 in connection with an alleged bribery scheme. Two other Control Components executives were also charged in a related matter in 2009.

According to court documents, Cosgrove approved improper payments in connection with a sprawling, global bribery scheme to win contracts for Rancho Santa Margarita, Calif.-based Control Components. So far, five other former CCI executives have pleaded guilty to charges stemming from the alleged scheme. Control Components pleaded guilty in July 2009 to violating the Travel Act, which prohibits commercial bribery, and the FCPA. The company paid an $18.2 million criminal penalty and agreed to implement rigorous internal controls.

Prosecutors said last week that they could not dispute a probation office report that said Cosgrove has “serious health issues.” Cosgrove had quadruple bypass surgery in 2010, according to court documents, and suffers from chronic health problems including heart disease and diabetes. The report recommended three years of probation and six months of home confinement for Cosgrove.

But prosecutors said that was an inadequate sentence because, “the sentencing end of deterrence in FCPA cases is important as the statute is intended to combat a culture of corruption that could otherwise undercut the business development and good governance of nations around the world.” While Cosgrove’s conduct warranted jail time, they said they would not object to home confinement, so long as it was for at least 15 months.

“To the extent the Court concludes that these factors outweigh the aggravating factors which would otherwise warrant a sentence of imprisonment within the guidelines range, any period of home confinement should be as long as the otherwise-applicable term of incarceration,” they wrote. “To state it differently, the government sees nothing in the Probation Officer’s analysis which would warrant only six rather than 15 months of home detention.”

The prosecutors also said Cosgrove should pay up to $20,000 in fines.

Cosgrove’s lawyers have filed their own sentencing memorandum under seal. They didn’t immediately respond to a request for comment.

Cosgrove’s sentencing is scheduled for Sept. 13”

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Douglas McNabb – McNabb Associates, P.C.’s
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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.


Foreign Firms Most Affected by a U.S. Law Barring Bribes

September 4, 2012

The New York Times on September 3, 2012 released the following:

“By LESLIE WAYNE

A law intended to prohibit the payment of bribes to foreign officials by United States businesses has produced more than $3 billion in settlements. But a list of the top companies making these settlements is notable in one respect: its lack of American names.

The companies that have reached the biggest settlements under the law, known as the Foreign Corrupt Practices Act, include Siemens, the German engineering giant; Daimler, the maker of Mercedes-Benz vehicles; Alcatel-Lucent, the French telecommunications company; and the JGC Corporation, a Japanese consulting company. The lone American company in the top 10 is KBR, the former Kellogg Brown & Root, a subsidiary of Halliburton, the Texas oil services company. As a group, they have paid nearly $3.2 billion in settlements.

Since the law was enacted in 1977, the definition of “American” has expanded greatly to include foreign companies that are listed on United States stock exchanges, sell securities in the country or do business here. At the same time, foreign companies that turn to “facilitation payments” and other forms of under-the-table dealings with local officials in far-flung places have run afoul of the act, either because of cultural differences in business dealings or because of failure to recognize the breadth of the law.

“These big settlements are with sprawling, multinational companies,” said Andy Spalding, a law professor at the University of Richmond and a contributing editor to the F.C.P.A. Blog, which tracks the top settlements. “Yet they are based, in part, in the United States. A culture of compliance may be slower to take in other countries, and many are not aware of the rapid escalation of F.C.P.A. cases or its broad jurisdictional scope.”

The best-known case is that of Siemens, which paid $800 million to the United States and another $800 million to Germany to settle a corruption investigation. Even though the financial settlements took place in 2008, the criminal case against eight former executives continues. In December, they were charged with paying $100 million in bribes to Argentine officials, including former President Carlos Menem, to secure a $1 billion contract for Siemens. All eight executives live in Argentina, Germany or Switzerland, and none have been arrested or extradited — a long and complicated process.

The Siemens case is illustrative. The bribery took place in Argentina. The people offering the bribes were not American, and the people demanding them were Argentine officials. Siemens is a German company. The hook for the United States was that Siemens’s securities traded in the United States.

In the Daimler case, the company admitted that its subsidiary in Russia had bribed local officials, that a German subsidiary had made payments to Croatian officials using an American shell company and that improper payments had been made to Chinese officials in an effort to persuade the officials to buy Daimler vehicles. Some of the money flowed through United States bank accounts, and Daimler has extensive operations in the United States.

Peter Y. Solmssen, general counsel at Siemens, said European companies were only now becoming aware that the law applied to them. This is in part because of the attention given to his company’s case.

“U.S. companies have been living with this law a lot longer than European companies,” Mr. Solmssen said. “It’s been part of their awareness. Our case was a real watershed. It woke up a lot of people in Europe. There had not been a lot of headline cases before that to make people sit up and take notice.”

There is a “culture in many northern European companies that they have to do these things to get business,” he said. “Our message is that they don’t have to.”

It some ways, the foreign cases were easy pickings for the Justice Department: the behavior was obvious, and the cases fairly clear-cut. Many of the settlements involved events that took place a decade ago, before companies, especially foreign ones, were fully aware of the extent of the law or realized that it applied to them.

Given the many years it takes to develop and prosecute these cases, some of them are reaching the settlement stage only now, even if the companies have since halted the practices that landed them in trouble.

“Many of these are ‘cash cow’ cases for Justice,” said Michael Koehler, an assistant professor at the Southern Illinois University School of Law who also writes the F.C.P.A. Professor blog. “It’s a government program that is profitable to the U.S. Treasury. Even more, the U.S. feels that if the home countries are not going to prosecute, the U.S. has a moral obligation to do so.”

Moreover, in a world where businesses operate in an almost borderless fashion, it is often hard to determine what is domestic and what is foreign.

“The world is flat,” said Matthew T. Reinhard, a lawyer at Miller & Chevalier in Washington who represents corporations in cases brought under the law. “You could be based on Mars and Justice will come after you. There was a period before Siemens when the culture of compliance was not as prevalent in foreign-based companies as those in the U.S. But there is a cultural shift, and the U.S. is on the crest of this wave.”

In addition, the United States law is much tougher and broader in scope than anticorruption laws in many other countries. Typically, laws to root out corporate bribery elsewhere in the world apply only to top corporate officials, not to all employees, as the United States law does.

Justice Department officials argue that it is in the United States’s interest to prosecute corporate bribery wherever it takes place. American executives have long complained that they are at a disadvantage when competing for overseas business against bribe-paying foreign competitors. Department officials say that by prosecuting foreign companies, they are seeking to level the playing field — and to end the grumbling from American executives.

Lanny A. Breuer, an assistant United States attorney general who has made such cases one of his signature efforts, said he maintained an evenhanded approach in his pursuit of corporate bribe-payers. It is just that foreign companies are only now beginning to catch up to their American counterparts in altering their behavior, he said.

“Over all, we have pursued cases against American and foreign companies equally,” Mr. Breuer said in an interview. He acknowledged that the top 10 settlements were skewed toward foreign companies, but said: “I am convinced that we are calling it down the middle. Some years we are criticized for it being too much American, other years that it is too much international. It is usually from the very same critics.”

Of the 78 companies now under investigation for suspected violations of the law, most are American — among them Alcoa, Goldman Sachs, Pfizer and Wal-Mart. Avon disclosed in a regulatory filing last month that it was in talks to settle an investigation into whether it had paid bribes to foreign officials.

Jeffrey M. Kaplan, a lawyer in Princeton, N.J., who specializes in cases brought under the corruption act, said there was “something strange” about the fact that nine of the top 10 settlements involved foreign companies. But he added that when the specifics of the cases were examined, “no one would feel sorry for these companies.”

The biggest settlements on the list stemmed from the Bonny Island bribery case, one of the biggest corruption cases in American history. It accounted for four of the top 10 companies: KBR; Technip, of France; JGC; and Snamprogetti Netherlands and its parent company, Eni, of Italy. The bribery, sweeping in scope and decades in duration, involved a $6 billion plan to bribe Nigerian officials to obtain engineering, procurement and construction contracts for a liquefied natural gas facility on Bonny Island in Nigeria.

These settlements accounted for more than $1.6 billion in fines and penalties to the Justice Department and the Securities and Exchange Commission. On top of that, American and foreign executives involved in the bribery scandal faced criminal sentences. In February, Halliburton’s former chief executive, Albert J. Stanley, was sentenced to two and a half years in prison for his role in the scheme.

“There are a lot of multinational corporations that are operating in high-risk environments,” Mr. Reinhard, the Washington lawyer, said. “In many of these countries, companies that are involved in oil or telecom or pharma are more likely to encounter foreign officials on a regular basis. They are your customers. That presents an opportunity in ways that dealing with other businessmen doesn’t.””

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

Federal Crimes – Be Careful

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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.


Taking Aim at the Foreign Corrupt Practices Act

May 1, 2012

The New York Times on April 30, 2012 released the following:

“BY PETER J. HENNING

The Foreign Corrupt Practices Act has been at the center of a tug of war between business interests and federal authorities.

The United States Chamber of Commerce has led efforts to change the law, in response to ramped up prosecutions by the Justice Department and the Securities and Exchange Commission in the last few years. While the proposed changes are described as a means to “improve” the law, they would also make it more difficult to pursue cases.

But the revelations in The New York Times that Wal-Mart Stores squelched an investigation into bribery at its Mexican subsidiary may impel prosecutors to be even more forceful in applying the law and put legislative efforts to change it on the back burner.

Business leaders have long contended that the law is overly broad and too aggressively enforced, while federal authorities view it as a powerful means to police the overseas conduct of American companies.

The Foreign Corrupt Practices Act was adopted in 1977 in the wake of revelations of bribery of foreign officials by more than 400 United States companies. This was a time when misconduct by the Central Intelligence Agency and the Watergate scandal were still fresh in the public consciousness, so efforts to clean up business and government were paramount.

The law contains two parts: it prohibits bribing a foreign official for the purpose of “obtaining or retaining business,” and it requires that public companies file proper financial statements and maintain a system of internal controls.

The books and records provision is enforced regularly, most recently in the conspiracy prosecution of a former managing director of Morgan Stanley for hiding deals with a Chinese official. The Justice Department and the S.E.C. share authority over enforcement, which means companies have to deal with two sets of investigators whenever a potential violation comes to light.

For the first 30 years or so after its enactment, the antibribery portion of law was used sporadically. Only a handful of cases were brought each year against companies, almost always ending in settlements involving a modest fine, and even fewer involved individuals.

Prosecutors have now made enforcement of the law a priority, and more industries have been caught up in investigations. The Justice Department has filed cases against pharmaceutical manufacturers, like Pfizer, for dealings with state-run health care programs, and is reported to be pursuing an investigation into the dealings of American movie studios in China.

The push for changes in the statute coincided with its expanded enforcement as companies now have to deal with the vagaries of the law once viewed as a mild nuisance at best.

At a hearing before a House subcommittee last year, a former attorney general, Michael B. Mukasey, represented the United States Chamber of Commerce in supporting changes to restrain use of the law because “more expansive interpretations of the statute may ultimately punish corporations whose connection to improper acts is attenuated or, in some cases, nonexistent.”

The revelations about Wal-Mart’s conduct, however, shows the law’s importance as an anticorruption tool for policing large businesses.

Tinkering with the law could send the wrong signal to other countries about the importance of curbing bribery. Support among Congressional leaders for revisions that would make it harder to prosecute companies may dissolve if they could easily be portrayed as being soft on bribery — something that would become fodder for an opponent in an election campaign.

The Justice Department’s increased enforcement of the Foreign Corrupt Practices Act has also included more charges against individuals rather than just companies. But that shift has also led to problems. In one of its most prominent cases, prosecutors dismissed charges against 22 defendants from the “Africa Sting” case in which the government used an undercover informant to entice suppliers into agreeing to pay bribes to receive contracts with an African government, all of which was fictitious.

The charges foundered over issues regarding the conduct of the informant that raised questions about whether individuals were unfairly enticed into the deals. Federal juries could not reach a verdict after two trials of a group of the defendants, and the Justice Department decided to forgo further prosecutions.

As James B. Stewart wrote in a New York Times column last week, there has been a noticeable absence of corporate employees charged with violations even when it appears that the company condoned foreign bribery.

But while companies have been much more amenable to settling investigations rather than challenging charges in court, prosecuting individuals faces a number of hurdles. Corrupt payments are often made by foreign intermediaries acting on behalf of the company, many of whom have no ties to the United States. It does little good to charge someone when there is not a realistic prospect that the person can be brought to the United States.

Pursuing a case against senior executives for turning a blind eye to questionable payments can be quite difficult. The notion that management “had to be aware of what was going on” may well be true in some instances, but that perception alone is not enough to prove any individual corruptly and willfully violated the Foreign Corrupt Practices Act, which is the required legal intent standard for a conviction.

Foreign bribery can takes years to come to the government’s attention, so the five-year statute of limitations can preclude prosecuting those involved in the payments. As I discussed in an earlier piece, the Wal-Mart payments to Mexican officials from 2003 to 2005 probably cannot be pursued against individuals at the company unless something more recent occurred.

Interestingly, in the Dodd-Frank Act, Congress extended the statute of limitations for securities fraud crimes to six years, apparently leaving out violations of the Foreign Corrupt Practices Act. Even that small increase in the time available to pursue a case can help prosecutors in putting together charges. Congress can alter the limitations period for any offense, and the Justice Department may point to Wal-Mart to ask Congress to extend the time frame in which foreign bribery charges can be filed.

The investigation of Wal-Mart has brought the Foreign Corrupt Practices Act to the attention of the public in a way not seen since the 1970s scandals that led to its adoption. Congress may find it politically impossible to adopt changes to the statute that would arguably make it more difficult to pursue cases as long as the allegations of foreign bribery by a leading American company remain in the headlines.”

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

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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.


Bribes Without Jail Time

April 30, 2012

The New York Times on April 27, 2012 released the following:

“By JAMES B. STEWART

As reported in a front-page article in The New York Times this week, the Wal-Mart Mexican bribery scheme has all the makings of a gripping criminal prosecution: millions of dollars in illegal payoffs to Mexican government officials and evidence of a cover-up scheme that went all the way to Wal-Mart headquarters in Bentonville, Ark.

And the Foreign Corrupt Practices Act, which outlaws the bribery of foreign officials by American executives, carries stiff penalties for those convicted: fines of up to $5 million and up to 20 years in prison.

So who’s likely to go to jail?

No one, if past precedent is any guide.

Exhibit A for any lawyer representing potential Wal-Mart defendants would probably be last year’s bribery case against the huge poultry, pork and beef producer Tyson Foods. Like Wal-Mart, Tyson employees bribed Mexican officials. When Tyson officials learned about the scheme, they covered it up. Even worse, they tried to keep the bribes going by changing the nature of the illegal payments. The scheme ultimately reached into Tyson’s executive suite in Springdale, Ark., with the company’s president of international operations and its chief administrative officer among those involved.

Last year, the Justice Department charged Tyson with conspiracy and with violating the Foreign Corrupt Practices Act. Tyson didn’t contest the facts, agreed to resolve the charges with a deferred prosecution and paid a $4 million criminal penalty. The company paid an additional $1.2 million and settled related regulatory complaints that it had maintained false books and records and lacked the controls to prevent payments to phantom employees and government officials.

It’s axiomatic that people, not corporations, commit crimes. So what happened to the Tyson executives involved? Not only did the Justice Department and the Securities and Exchange Commission take no action against them, but the executives involved weren’t even named.

As I reported in a column last year, the highest-ranking Tyson executive involved was Greg Lee, then its chief administrative officer. Tyson announced in April 2007, the same month it disclosed its conduct to the government, that Mr. Lee would retire early. There was no mention of any bribery investigation. John Tyson, the company’s chairman, praised his “dedicated service to the company over the last three decades,” and the company paid Mr. Lee nearly $1 million and awarded him a 10-year consulting contract worth an additional $3.6 million. Mr. Lee was entitled to be reimbursed for his country club dues, to the use of a car and to “personal use of the company-owned aircraft for up to 100 hours per year,” according to his employment agreement. (Mr. Lee didn’t respond to my messages seeking comment.)

Wal-Mart’s Mexican bribery scandal, and the question of what to do about it, reached company headquarters in September 2005, according to the account by David Barstow of The Times. This was little more than a year after Tyson executives covered up their scandal. Given the subsequent outcome of the Tyson case, is it any wonder that Wal-Mart executives’ first reaction would have been to sweep the matter under the rug? Only after Mr. Barstow started asking questions did the company turn itself in to the Justice Department, no doubt hoping for something like the resolution its Arkansas neighbor received.

Neither the Justice Department nor the S.E.C. would comment on the Tyson case, now closed, or the continuing Wal-Mart investigation.

Both agencies have stepped up their investigations and prosecutions of Foreign Corrupt Practices Act violations in recent years, and they now have units dedicated to foreign bribery cases. Last year, the S.E.C. brought cases against 14 companies and 12 people. Major companies caught up in recent bribery investigations include Johnson & Johnson, Halliburton and Siemens. Just this week, the former Morgan Stanley executive Garth Peterson pleaded guilty to violating the act while based in Shanghai. Morgan Stanley wasn’t charged, and it appears to have been a model corporate citizen. It fired Mr. Peterson and didn’t mince words. It turned over evidence to the government and disclosed the inquiry in an S.E.C. filing.

Despite this laudable effort, an outcome like that in the Tyson case — in which a company admits the facts and pays a fine but no individuals are charged — hardly seems isolated. According to research by Qi Chen, working with Prof. Andrew Spalding at the Chicago-Kent College of Law at the Illinois Institute of Technology, 37 of the 57 companies involved in bribery enforcement actions from 2005 to 2010 settled bribery accusations and had no related individuals charged.

One of the most vocal critics of the failure to charge individuals has been the former Republican-turned-Democratic Senator Arlen Specter, who held hearings on the issue in 2010 while chairman of the Senate Judiciary Committee. “Criminal fines are added to the costs of doing business,” Mr. Specter said then. “Going to jail is what works to deter crime.”

This week he told me: “I’ve been speaking out on this issue everywhere I can. The Justice Department takes the view that deferred prosecutions are sufficient to deter bribery. But it obviously hasn’t worked. Maybe the Wal-Mart case will finally impel them to take a different view.”

That is not to say that no one has gone to jail for violating the Foreign Corrupt Practices Act. Albert J. Stanley, former chairman and chief executive of KBR, the global contracting concern that was once a subsidiary of Halliburton, was sentenced in February to 30 months in prison for a scheme to bribe Nigerian authorities in return for contracts to build liquefied natural gas facilities. Frederic Bourke, co-founder of the handbag maker Dooney & Bourke, was sentenced to one year and a day for his involvement in a scheme to bribe officials in Azerbaijan in a failed effort to take over the state-owned oil company. Last year, eight former executives of the German technology giant Siemens were charged with bribing Argentine officials in what the Justice Department characterized as “a stunning level of deception and corruption.” But the defendants live abroad and may never be successfully prosecuted in the United States.

I couldn’t find a case of an executive at a major American-based, publicly traded company who was successfully prosecuted and sent to jail. A majority of individual prosecutions appear to involve people of relatively limited means who are in smaller or privately held companies or who are officials in foreign companies based outside the United States, where there is little likelihood of a conviction. A typical case seems more like that of Gerald and Patricia Green, two Hollywood producers who were convicted of bribing the head of the Bangkok film festival. The couple was sentenced to six months in prison followed by six months of home confinement in 2010. At the time, Mr. Green was 83 years old and suffered from emphysema.

“It does appear that executives from U.S. public companies are not being pursued with the same vigor as individuals at private companies or who work on their own,” said Richard L. Cassin, founder of the firm CassinLaw and author of “Bribery Abroad” and “Bribery Everywhere.” “There are still a lot of enforcement actions against corporations where there are no indictments against individuals. The percentage of criminal cases against individuals is still very tiny.”

He suggests this may be partly because corporate executives, especially those with prominent lawyers whose fees are paid by their employers, are less likely to settle. And the Justice Department has suffered some embarrassing setbacks in a few recent litigated cases against individual defendants.

Asked for comment, the department provided this statement: “Prosecuting individuals who violate the law is an important part of our F.C.P.A. enforcement efforts. Since 2009, the Justice Department has secured convictions against 36 individuals for F.C.P.A.-related offenses. In all cases, we thoroughly review the facts and the law to determine whether criminal charges against individuals can be brought.”

An S.E.C. spokeswoman said: “We’re committed to holding individuals accountable. Where we have the evidence to bring cases against individuals, we do so, and we view that as a high priority.”

According to both the Justice Department and the commission, an important aspect of assessing a company’s cooperation is how it disciplines any executives found to be involved in a bribery scheme. Wal-Mart issued a statement this week saying: “We will not tolerate noncompliance with F.C.P.A. anywhere or at any level of the company. We are confident we are conducting a comprehensive investigation, and if violations of our policies occurred, we will take appropriate action.”

I asked Wal-Mart who, if anyone, involved in the bribery allegations had been disciplined, but I didn’t get a response. Eduardo Castro-Wright, who was described in The Times’s article as the driving force in the bribery conspiracy, is the former head of the company’s Mexican operations and remains at Wal-Mart, where he became vice chairman in 2008. Wal-Mart announced last September that Mr. Castro-Wright would retire on July 1, and he has since emphasized that his decision to retire had nothing to do with any bribery allegations.

In a send-off that echoes Tyson’s praise for Mr. Lee, Wal-Mart’s chief executive, Mike Duke, said: “Eduardo has made many contributions at Wal-Mart, beginning in Mexico and continuing until today. He has been a strong advocate for our customers and in every assignment has brought passion and commitment to the job.”

Mr. Castro-Wright isn’t a member of Wal-Mart’s board, but this week he resigned from the board of the insurer MetLife. “I now must focus my energy in spending personal time with my family and in protecting my good name,” he said, and confidently predicted that “these outside distractions will be resolved favorably within the next several months.”

But Wal-Mart may not turn out to be another Tyson. Professor Spalding told me “a lot has happened” since 2010, which is when he compiled the statistics on individual prosecutions. “The Department of Justice is making a strong push to hold individuals liable,” he said.

“Despite some recent embarrassing losses, the department must be looking for some high-profile prosecutions. Wal-Mart is about as high profile as you can get. This case could turn out to be a poster child for individual liability.””

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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

————————————————————–

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.


Executives Facing US Accusations Under FCPA May Be Encouraged to Fight Charges

January 13, 2012

Bloomberg Businessweek on January 13, 2012 released the following:

“(Updates with SEC broker fiduciary rule and Hong Kong ‘professional investor’ in Compliance Policy, French stock-ADRs in Compliance Action, Alliance One in Courts, Keneally and Kerr in Interviews and Vaughan and Kim Hak Heon in Comings and Goings/Notable Passings.)

Jan. 13 (Bloomberg) — Executives facing trial in U.S. courts over accusations of bribing foreign officials may be encouraged to fight charges as prosecutors regroup after two courtroom setbacks and await a verdict in their largest overseas corruption probe targeting individuals.

One of two cases hailed by the government as milestones in its enforcement of the Foreign Corrupt Practices Act was dismissed last year by a judge who said the jury verdict convicting two men at an electricity tower company of bribing Mexican officials was tainted by prosecutor misconduct in “a sloppy, incomplete and notably over-zealous investigation.”

In the first prosecution under the FCPA based on a sting operation, a judge declared a mistrial for four of 22 defendants accused of participating in a fake $15 million weapons deal involving Gabon. A separate trial is under way for a second group of defendants.

The 2011 outcomes will make individual defendants in FCPA cases more confident in contesting charges. This is so in particular because they may face long prison terms under the plea deals the Justice Department offers, even as corporations continue to self-report and settle, said Philip Urofsky, a former FCPA prosecutor who now defends cases at Shearman & Sterling LLP.

In a crackdown on overseas bribery that started during the Bush administration, the government settled 57 cases against companies from 2005 through 2011 without trial, reaping $4.1 billion for the U.S. treasury, according to Justice Department data. A push to prosecute more individual defendants during the same period has produced mixed results, with some beating charges outright and others getting less punishment than prosecutors sought.

Laura Sweeney, a spokeswoman for the Justice Department, said the government has had “great success” against individuals since increasing its enforcement actions in 2009.

The 1977 law bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S.”

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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

————————————————————–

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.


Federal Judge Slams FBI, Prosecutors For Misconduct in Bribery Case

December 6, 2011
FBI Seal

Forbes on December 6, 2011 released the following:

“Daniel Fisher, Forbes Staff

A friend in Texas sent me this scorching ruling by a federal judge in California, throwing out the Foreign Corrupt Practices Act convictions of a couple of utility-equipment executives because of prosecutorial misconduct and downright false testimony by an FBI agent.

The 41-page ruling by U.S. District Judge Howard Matz in Los Angeles, issued Dec. 1, doesn’t spare criticism of anyone involved — including the judge himself. Stuck in the crossfire of prosecution and defense motions during the bitterly contested five-week trial, Motz says, he missed “the proverbial forest for the trees.”

“There were so many motions that it was difficult to step back and look into whether what was going on reflected not isolated acts but a pattern of invidious conduct.”

The facts against manufacturing executives Keith E. Lindsey and Steve K. Lee of Lindsey Manufacturing were ugly, but then doing business in Mexico often is. According to the Justice Department, the men were frustrated about losing a contract to state-owned Mexican utility Comisión Federal de Electricida, so they hired the middleman they suspected had helped a rival company win the business. That firm, dubbed Grupo in the indictment, was run by Enrique and Angela Aguilar.

Over time Lindsey paid Grupo $5.9 million in “commissions” at an eyebrow-raising 30% rate. Money from Grupo’s account was used to pay for a $297,000 Ferrari, a luxury yacht, and $29,000 in private-school bills to the benefit of some CFE executives. A Lindsey bookkeeper testified she changed the accounting entry for the commissions to 15% in what prosecutors said was evidence Lee knew Grupo was a front.

A jury convicted Lindsey, Lee and the company on all counts on May 10, with Assistant Attorney General Lanny A. Breuer crowing “Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last.”

But then things turned ugly for the prosecution. In Matz’s retelling this is a case of the government turning a sketchy, circumstantial case into a convincing one by manipulating the evidence. Those private-school tuition payments above? The same prosecutor had earlier accused a Texas subsidiary of European manufacturing conglomerate ABB of paying them, a conflict the government shrugged off as inconsequential.

Defense lawyers smelled a rat in the way the government linked the ABB case to theirs. In the Texas case ABB paid $28.5 million in fines for routing bribes it dubbed a “Third World Tax” through another Aguilar-linked entity called Sorvill. The same prosecutor, Nicola Mrazek, was in charge of both cases.

The Feds indicted the Aguilars and arrested Angela when she was across the border in Texas. Then they indicted Lindsey and its top executives in October 2010, based partly on evidence obtained in a search of Lindsey offices. The search warrant included an affidavit by FBI agent Farrell Binder stating that Lindsey had paid Sorvill, the front company in the ABB case.

Oops. The defense later proved that statement was false, and after a long delay got its hands on the string of 14 draft affidavits showing the first 12 versions didn’t have that claim. Agent Susan Guernsey compounded the problem by testifying twice to a grand jury about the nonexistent payments to Sorvill, as well as saying Lee executives took suspicious actions in 2006 in response to an IRS audit they didn’t learn about until later. She also testified that “pretty much all” the money in the second Aguilar-linked company, Grupo, came from Lee when in an earlier affidavit she’d accurately pegged the amount at 70% (leaving room for somebody else to provide the cash allegedly used to bribe Mexican officials).

Defense lawyers pressed for the documents to back up their suspicions but only got them in April 15 of this year, 10 days into the trial.

Matz, in his decision throwing out the case, was especially harsh with Guernsey, saying her testimony “does not necessarily establish that she knowingly committed perjury. Perhaps she was sloppy, or lazy, or ill-prepared.”

“In the Court’s considered opinion, once the prosecutors secured the First Superseding Indictment and certainly by the time they were gearing up to present their case at trial, they concluded not only that Guernsey would be an exceedingly poor witness – – as she turned out to be – – but also that its investigation was terribly flawed.”

Matz didn’t go as far as to say the defendants were “entitled to a finding of factual innocence; they are not.” They are entitled to dismissal, he said, to relieve them from “further anguish and anxiety” — and teach the government a lesson.

The Supreme Court has ruled that prosecutors are not typical courtroom advocates but representatives “of a sovereign whose obligation to govern impartially is as compelling as its obligation to govern at all,” Matz said. “He may prosecute with earnestness and vigor – – indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones.”

“In this Court’s experience, almost all of the prosecutors in the Office of the United States Attorney for this district consistently display admirable professionalism, integrity and fairness. So it is with deep regret that this Court is compelled to find that the Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.””

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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.


Florida Telecommunications Company, Two Executives, an Intermediary and Two Former Haitian Government Officials Indicted for Their Alleged Participation in Foreign Bribery Scheme

July 13, 2011

The U.S. Department of Justice (DOJ) on July 13, 2011 released the following press release:

“WASHINGTON – Cinergy Telecommunications Inc., Cinergy’s president and director, the president of Florida-based Telecom Consulting Services Corp. and two former Haitian government officials have been charged in a superseding indictment for their alleged roles in a foreign bribery, wire fraud and money laundering scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Special Agent in Charge Jose A. Gonzalez of the Internal Revenue Service – Criminal Investigation’s (IRS-CI) Miami Field Office.

According to the superseding indictment, the defendants allegedly participated in a scheme to commit foreign bribery and money laundering from December 2001 through January 2006. The indictment alleges that during this time period Cinergy and its related company, Uniplex Telecommunications Inc., allegedly paid more than $1.4 million to shell companies to be used for bribes to foreign officials of the Republic of Haiti’s state-owned national telecommunications company, Telecommunications D’Haiti (Haiti Teleco).

According to court documents, Cinergy and Uniplex executed a series of contracts with Haiti Teleco that allowed the companies’ customers to place telephone calls to Haiti. The bribe payments allegedly were authorized by Washington Vasconez Cruz, the telecommunications companies’ president, and Amadeus Richers, the companies’ director, and were allegedly paid to Haitian government officials at Haiti Teleco, including Patrick Joseph and Jean Rene Duperval. According to the superseding indictment, the purpose of these bribes was to obtain various business advantages from the Haitian officials for Cinergy and Uniplex, including preferred telecommunications rates and credits toward sums owed. To conceal the bribe payments, the defendants allegedly used various shell companies to receive and forward the payments, including J.D. Locator Services, Fourcand Enterprises and Telecom Consulting Services.

The six defendants charged in the superseding indictment are:

  • Washington Vasconez Cruz, 63, of Miami, the president of Cinergy and Uniplex, is charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering;
  • Amadeus Richers, 60, of Pembroke Pines, Fla., and Brazil, the then-director of Cinergy and Uniplex, is charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering;
  • Cinergy Telecommunications Inc., a privately-held telecommunications company incorporated in Florida, is charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering;
  • Patrick Joseph, 49, of Miami and Haiti, a former general director for telecommunications at Haiti Teleco, is charged with one count of conspiracy to commit money laundering;
  • Jean Rene Duperval, 44, of Miramar, Fla., and Haiti, a former director of international relations for telecommunications at Haiti Teleco, is charged with two counts of conspiracy to commit money laundering and 19 counts of money laundering; and
  • Marguerite Grandison, 42, of Miramar, the former president of Telecom Consulting Services Corp., and Duperval’s sister, is charged with two counts of conspiracy to commit money laundering and 19 counts of money laundering.

The superseding indictment also charges Duperval and Grandison with laundering corrupt payments authorized by Joel Esquenazi and Carlos Rodriguez on behalf of another Florida telecommunications company.
Duperval was charged previously in the indictment returned on Dec. 7, 2009, with one count of conspiracy to commit money laundering and 12 counts of money laundering. Grandison was previously charged with one count of conspiracy to violate the FCPA and to commit wire fraud, seven counts of FCPA violations, one count of conspiracy to commit money laundering and 12 counts of money laundering.
Esquenazi and Rodriguez were charged in the initial December 2009 indictment and are unaffected by the superseding indictment. They are scheduled to stand trial on July 18, 2011.

An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt in a court of law.

The conspiracy to commit violations of the FCPA and wire fraud count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost. The FCPA counts each carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The conspiracy to commit money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The superseding indictment also gives notice of criminal forfeiture.

On May 15, 2009, Juan Diaz, the president of J.D. Locator Services, pleaded guilty to one count of conspiracy to violate the FCPA and money laundering. He admitted to receiving more than $1 million in bribe money from telecommunications companies. On July 30, 2010, he was sentenced to 57 months in prison.

On Feb. 19, 2010, Jean Fourcand, the president and director of Fourcand Enterprises Inc., pleaded guilty to one count of money laundering for receiving and transmitting bribe monies in the scheme. On May 5, 2010, he was sentenced to six months in prison.

On March 12, 2010, Robert Antoine, the former director of international affairs for Haiti Telco, pleaded guilty to one count of conspiracy to commit money laundering. He admitted to receiving more than $1 million in bribes from Miami-based telecommunications companies. On June 2, 2010, he was sentenced to 48 months in prison.

The government’s investigation is ongoing. The Department of Justice is grateful to the government of Haiti for continuing to provide substantial assistance in gathering evidence during this investigation. In particular, Haiti’s financial intelligence unit, the Unité Centrale de Renseignements Financiers (UCREF), the Bureau des Affaires Financières et Economiques (BAFE), which is a specialized component of the Haitian National Police, and the Ministry of Justice and Public Security provided significant cooperation and coordination in this ongoing investigation.

The case is being prosecuted by Senior Trial Attorneys Nicola J. Mrazek and James M. Koukios of the Criminal Division’s Fraud Section, with the assistance of the U.S. Attorney’s Office for the Southern District of Florida. The Office of International Affairs in the Justice Department’s Criminal Division also provided assistance in this matter. The cases were investigated by the IRS-CI Miami Field Office.”

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

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

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