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« Coming Soon: Russia's FCPA? | Main | Brian D. Smith (1950-2011) »
Wednesday
Mar162011

You're Grounded

An Italian citizen extradited from Germany in July last year to face FCPA charges was released from jail two weeks after his arraignment in California. But he can't leave home.

Flavio Ricotti was granted pre-trial bail of $500,000 and placed under "home incarceration." He can only go out for medical treatment, religious services, and court appearances -- and only then with the fed's pre-approval.

Ricotti, 49, was indicted in April 2009 with five other former executives of California-based valve-maker Control Components Inc. (CCI). He was a fugitive until his arrest in Germany and extradition to the U.S. The federal court in California denied the government's request that he be jailed until his trial.

His home incarceration includes "active electronic monitoring," paid for by Ricotti himself.

Under "intensive pretrial supervision," the U.S. is holding his passport, his travel is restricted to central California, he's not allowed to go inside any airport, seaport, railroad, or bus terminal that allows travel outside the U.S., and his place of residence must be approved by the government and can't be changed without further approval.

Ricotti and his co-defendants are charged with one count of conspiracy to violate the FCPA and the Travel Act, one count of violating the FCPA, and three counts of violating the Travel Act. They face up to five years in prison for each count.

The others from CCI indicted with Ricotti are Stuart Carson, former chief executive officer; Hong (Rose) Carson, former director of sales for China and Taiwan; Paul Cosgrove, former director of worldwide sales; David Edmonds, former vice president of worldwide customer service; and Han Yong Kim, the former president of CCI’s Korean office. They and Ricotti are scheduled to go on trial on October 4 this year.

In July 2009, valve-maker CCI pleaded guilty to violating the anti-bribery provisions of the FCPA and the Travel Act. It admitted bribing foreign officials in a decade-long scheme to secure contracts in about 36 countries. CCI's three-year plea agreement imposed a criminal fine of $18.2 million.

The government alleges that Ricotti, who was CCI’s vice president and head of sales for Europe, Africa, and the Middle East from 2001 through 2007, arranged bribes of at least $750,000 to officers and employees of state-owned companies, and bribes of about $380,000 to officers and employees of private companies. The payments allegedly related to projects in the United Arab Emirates, Kazakhstan, India and Qatar.

In pre-trial motions, the defendants have challenged whether officers and employees of state-owned companies are "foreign officials" under the FCPA. A hearing on their motion to dismiss is set for May 9.

Two former CCI employees pleaded guilty last year to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI. In January 2009, Mario Covino, the company's former director of worldwide factory sales, pleaded guilty to one count of conspiracy to violate the FCPA. He admitted arranging bribes of about $1 million.

In February last year, Richard Morlok, CCI’s former finance director, pleaded guilty to one count of conspiracy to violate the FCPA. He admitted arranging about $628,000 in bribes.

Covino and Morlok are cooperating with prosecutors and won't be sentenced until at least February 6, 2012.

Download the minutes of the July 16, 2010 detention hearing in U.S. v. Flavio Ricotti here.

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