Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Harry Cassin Managing Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor

FCPA Blog Daily News


Not What They Had In Mind

A U.K.-funded anti-corruption court in Afghanistan this week sentenced the manager of a British company that guards the British embassy in Kabul to two years in prison for bribery.

Bill Shaw, a 28-year British army veteran who retired as a major and was awarded the MBE, will be sent next week to one of the country's most notorious jails, Pul-e-Charkhi, according to reports from the Guardian and others.

Shaw was also fined $25,000. Convicted with him was an an Afghan, Maiwand Limar, who was also sentenced to two years in prison.

Shaw said he made what he believed were legitimate payments of $25,000 to gain release of two bombproof vehicles confiscated by Afghan security forces last year. He said he used an intermediary and tried for weeks to obtain an official receipt.

He was sentenced by three judges sitting on an anti-corruption tribunal that's funded largely by the U.K. Shaw's case was one of the first to come before the special court.

Shaw said he cooperated with Afghan investigators, giving interviews and returning to the country in early January after a vacation in the U.K. He was arrested on March 3rd.

Shaw's lawyer, Kimberley Motley, criticized the trial. "For some reason," she said, "[the tribunal] decided not to follow Afghan law or the U.N. conventions to which Afghanistan is a party. Furthermore, the presumption of innocence did not exist for him."

The U.S. and other Western countries have criticized Afghan President Hamid Karzai for corruption. But he has blamed foreigners for importing most of the graft. Now his government is apparently targeting expatriates. In addition to Shaw's prosecution, three Italian medical workers in Helmand were arrested and held briefly last month for plotting to murder the local governor. This month in Kabul, police raided at least five bars and restaurants popular with foreigners, alleging illegal sales of alcohol.


The People's DOJ

As part of its online make-over, the Justice Department has now indexed FCPA enforcement actions from mid-2004 onward. They're listed alphabetically and can all be found on a public page called FCPA and Related Enforcement Actions.

A click, for example, on United States v. BAE Systems, plc reveals the court docket number (10-CR-035-JDB) original filing date (February 4, 2010), and court (District of Columbia).

Under Related Documents for BAE appear links to the Information, the Government's Sentencing Memorandum, the DOJ's Press Releases, the Judgment, and the Plea Agreement.

Or from the main index click on United States v. ABB Vetco Gray, Inc., et al (Court Docket Number: 04-CR-279). You learn the case was first filed on June 22, 2004 in the Southern District of Texas. Related documents linked to the page are the Information, the Plea Agreements as to ABB Vetco Gray Inc. and ABB Vetco Gray (UK) Ltd., and the DOJ's Press Release for the Plea.

Still on ABB, you'll find a category called Related Cases. It lists:

U. S. v. John Joseph O’Shea: Docket No. 04-CR-279 (11/16/09)

U. S. v. Fernando Maya Basurto: Docket No. 09-CR-325 (06/10/09)

U. S. v. Vetco Gray Controls Inc., et al: Docket No. 07-CR-004 (01/05/07)

U. S. v. Aibel Group Limited: Docket No. 07-CR-005 (01/05/07)

You can drill down into the related cases as well.

A couple of caveats. The index doesn't update in real time. We found some entries that hadn't refreshed in a few weeks and were missing the latest pleadings, so be careful. And remember, there's nothing indexed (yet) before June 2004.

Still, this is a big step toward an accessible archive of DOJ-provided FCPA enforcement information.

Let's hope for more of the same.


Everybody Gets Hurt

Click on the image for more informationProfessor Elizabeth Spahn from New England Law | Boston spoke at Georgetown's symposium in March on combating global corruption. She made the case against bribery, debunking the old excuses that sometimes graft is necessary, or culturally acceptable, or that it's a victimless crime.

Prof Spahn has seen grand and petty corruption up close, in Indonesia and China, among other places. Don't try telling her a little grease for the wheels is just fine. It isn't, and she knows it.

Her latest salvo, adapted from her symposium talk, will appear in the Georgetown International Law Journal (summer 2010). Here's a sneak preview, courtesy of that publication:

If we get rich enough, maybe we could afford to personally avoid the avalanche of toxic products descending on clueless consumers of global products. Someone else’s puppies and babies get killed. We rich, educated very much First World Americans and Europeans can afford organic, locally grown slow food; children’s toys hand carved by hippies in Vermont or Tyrol. Caveat emptor, after all.

The impact of a self-reinforcing cycle of bribes, regulations and deteriorating quality control is not limited to consumer purchases however. Even the truly wealthy consume air and water. Systemic bribery has a negative impact on environmental regulation.

Analysis of a cross section of more than 100 countries . . . finds that corruption negatively impacts pollution control. Bribery reduced the effectiveness of environmental regulation. . . .

That analogy between bribery and garbage turns out to be more than merely hypothetical. Like it or not, we are all in this together. Everybody gets hurt.

In a uranium-tipped footnote to the passage, she says: "Illegal logging in Indonesia, combined with porous bribery-infected border controls in Borneo, created a cycle of environmental degradation . . . The entire Indian tiger population at the Sariska reserve was poached in a two year period. A large ship containing hundreds of tons of chemical waste containing hydrogen sulfide in concentrated doses dumped the waste off the coast of Ivory Coast killing ten people and sending another 100,000 to the hospital with unknown long-term consequences." [citations omitted].

Prof Spahn let's the world know where she stands, and it's a good place.


What's Wrong Down Under?

Australia is the world's sixth largest country by land mass, only slightly smaller than America's lower 48 states. With just 22 million people and abundant resources, the country exports coal, iron ore, gold, uranium, alumina, meat, wool and wheat, as well as wine, olives, fruit and vegetables.

Its open trade policy produced 17 consecutive years of economic growth before the global financial crisis, which hardly slowed the progress. Last year the economy managed 1.5% growth during the first three quarters -- the best performance in the OECD.

But for overseas anti-corruption enforcement, Australia is an international laggard, a recalcitrant country without any numbers on the scoreboard. What's going on?

This week, one of Australia's biggest natural resource firms, BHP Billiton, disclosed that it's the target of a U.S. SEC investigation for potential FCPA offenses. The company would only say the investigation relates to "certain terminated minerals exploration projects" and involves "possible violations of applicable anti-corruption laws involving interactions with government officials."

It hasn't said where the compliance problems may have occurred. There are large-scale copper projects in Chile and Zambia, nickel targets in Australia, manganese targets in Gabon, and diamond targets in Canada. It explores for iron ore, coal, bauxite and manganese at home and in South America, Russia, and West Africa.

U.K. investigators also said this week they're looking into BHP's operations in Cambodia and beyond; they've reportedly identified several possible instances of multi-million dollar bribes to foreign officials.

BHP isn't the only Australian company under the gun. Rio Tinto, the world's largest mining company and a superpower in the iron-ore business, is making headlines. Last month, four of its executives were given long jail sentences -- up to 14 years -- by a court in China. They were convicted of bribery and industrial espionage. (Germany's Cartel Office is examining the planned merger of the iron-ore production of BHP and Rio Tinto, which would create a duopoly in control of most of the world's supply.)

Another Aussie company in international hot water is Securency -- half owned by the Reserve Bank of Australia. Late last year, the Central Bank of Nigeria began investigating whether a Securency company called Note Printing Australia bribed Nigerian officials in return for a banknote supply contract. Australian police were said to be looking into what a press report described as "a series of multi-million-dollar payments made by the RBA companies to politically connected middlemen to help win contracts in Asia, Africa and Latin America."

Meanwhile, the Australian Securities & Investments Commission -- the chief anti-corruption enforcement agency -- hasn't said whether it's investigating BHP or the other companies.

That's the problem. Australia hasn't recorded any enforcement against bribery abroad. The OECD scores the country in the worst category -- "little or no enforcement" -- along with 21 other slumbering members. In October last year, the head of the OECD's anti-corruption group, Patrick Moulette, complained that Australia hasn't "launched a single prosecution for foreign bribery offences in the decade since it joined dozens of nations in ratifying an anti-bribery convention."

At home, Australia is perceived to be among the cleanest countries in the world for business -- it ranked 8th in Transparency International's latest survey. Abroad, however, its reputation is taking a beating and its OECD partners appear to be losing patience. What will Australia do?


Are GM Employees Government Officials?

The end came last month for a privately-held American company called Nexus Technologies. It pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act and the Travel Act. As part of its plea, Nexus admitted to operating "primarily through criminal means" -- and it agreed to cease operations.

After being indicted in 2008 with its owner and three other individuals, Nexus tried to mount a defense. In October 2009, the company and its owner and president Nam Nguyen sought more information about who the defendants allegedly bribed, and they filed a motion to dismiss the entire indictment.

An FCPA violation needs an offer, payment, or promise to pay anything of value to a “foreign official." The original indictment claimed that employees of six entities –- the Vung Tau Airport, the Southern Flight Management Center, an aviation industry business, a Vietsovpetro Joint Venture, the Petro Vietnam Gas Company, and the Tourism and Trading Company -– were "foreign officials" because the entities were controlled by Vietnamese government agencies.

The defendants said:

The instant indictment fails to state a criminal offense because it alleges that the recipients of the improper payments were “foreign officials” because they were employees of entities “controlled” by various Vietnamese ministries of the government. Such a definition of “foreign official” is unsupported by the text or the purpose of the FCPA. The FCPA is a public bribery statute which criminalizes improper payments to officials performing a public function. Mere control of an entity by a foreign government no more makes that entity’s employees “foreign officials” than control of General Motors by the U.S. Department of the Treasury makes all GM employees U.S. officials. [our emphasis]

They also said the FCPA’s definition of “foreign official” -- which includes employees of any foreign government “department, agency or instrumentality” -- is unconstitutionally vague. Especially in the context of socialist and communist states like Vietnam, they argued, defining a “foreign official” to include employees of entities solely based on government “control” of those entities would unfairly sweep nearly all economic activity within the scope of the statute.

The government responded two weeks later with a superseding indictment. It was directed to the "foreign official" issues and it escalated the charges from five to 28 counts -- one count of conspiracy, nine counts each of violating the FCPA, the Travel Act, and money-laundering.

The new indictment revised the descriptions of the six Vietnamese entities in question -- saying they were "agencies and instrumentalities" of the Vietnamese government instead of merely being “controlled” by departments, agencies or instrumentalities of the government.

In November 2009, the defendants filed a motion to dismiss the new indictment. They said it still didn't allege that the six entities performed government functions which would make their employees "foreign officials."

In December 2009, the judge denied the defendants’ motion to dismiss without addressing the substantive issue of who's a "foreign official" under the FCPA. After the motion failed, Nexus and the three remaining co-defendants reportedly started serious discussions with the DOJ about plea deals.

It was too late for Nexus; the company was forced out of existence.

What's the case mean?

First, that the government isn't going to budge on its view of who's a "foreign official."

Second, the cost of challenging an FCPA action in court can be enormous. Nexus and co-defendant Nguyen sought dismissal with a frontal assault on the government’s interpretation of a “foreign official.” The DOJ then reached into its arsenal, increasing the charges from five to 28 counts. The nine FCPA charges, nine Travel Act charges, and nine money laundering charges were all based on the same nine transactions. But they multiplied the risk of long-term jail sentences for the individual defendants if convicted.

Third, the trial judge, if he felt strongly about it, could have looked at the issue of who's a "foreign official." He side-stepped it instead, handing the government a victory and the defendants a defeat.

Download a copy of defendants' first motion to dismiss here.

Download a copy of the superseding indictment here.

Download a copy of defendants' second motion to dismiss here.

Download a copy of the government's memorandum in opposition to second motion to dismiss here.


Release 10-01 Is Here

The Justice Department yesterday issued the first FCPA Opinion Procedure Release of 2010, and the first since August 2009.

A U.S. company submitted a request on February 24 this year, with supplemental information on March 19. Here are the facts:

The Requestor contracted with a U.S. government agency to design and build a facility in a foreign country. The contract required the Requestor to hire a local individual designated by the U.S. government to serve as facility director. But the individual was also serving as a paid officer for an agency of the foreign country and was therefore a "foreign official" under the FCPA.

Would hiring and paying the facility director / foreign official violate the FCPA?

No, said the DOJ. Because the Requestor was contractually bound to hire and pay the individual "as directed by the U.S. Government Agency," and because the Requestor played no role in the individual's selection, and won't gain any advantage in obtaining or retaining work through the individual, there's no FCPA violation.

Short and sweet -- the Requestor's dilemma was solved in less than 700 words.

Download DOJ Opinion Procedure Release 10-01 dated April 19, 2010 here.


U.K. Court Approves Chodan Extradition

A judge in London said today that KBR's one-time sales manager accused by the U.S. of helping bribe Nigerian officials should be extradited to Texas to face trial.

Wojciech Chodan, 71, of Maidenhead, England, who's a U.K. citizen, was indicted in February 2009 by a federal grand jury in Houston. His fellow countryman Jeffery Tesler, a London lawyer indicted at the same time, also lost his extradition hearing last month in London. Telser said he plans to appeal.

They were charged with one count of conspiracy to violate and ten counts of violating the FCPA. They face up to 55 years in prison if convicted on all counts. The indictment also seeks forfeiture from them of more than $132 million, the amount of the bribes U.S. prosecutors say they arranged to pay on behalf of KBR and its partners to Nigerian officials.

KBR pleaded guilty in February 2009 to violating the Foreign Corrupt Practices Act. It paid a $402 million criminal fine and, with its former parent company Halliburton, $177 million in disgorgement. KBR's former CEO, Albert "Jack" Stanley, pleaded guilty in September 2008 to conspiring to violate the FCPA and to mail and wire fraud charges. He's been cooperating with prosecutors and hasn't been finally sentenced.

In March, two of KBR's partners in Nigeria disclosed huge financial reserves for potential FCPA settlements with U.S. authorities. French company Technip said it has a €245 million provision for its role in the TSKJ Nigeria joint venture. And Italian energy giant ENI SpA said it has set aside €250 million.

Download the federal grand jury's February 17, 2009 indictment of Jeffrey Tesler and Wojciech Chodan here.


No Jail For Convicted Siemens Execs

Two former senior managers from Siemens who were central actors in the company's global bribery scandal were convicted by a criminal court in Germany Tuesday but let off with only probation and fines.

Michael Kutschenreuter and Hans-Werner Hartmann, both 55, were found guilty in a Munich court of breach of trust and abetting bribery.

Kutschenreuter, who headed Siemens' telecoms group, was given probation for two years and fined €160,000. Hartmann, former accounting chief at the telecoms unit, was given an 18-month suspended sentence and ordered to pay €40,000 to charity.

In December 2008, Siemens AG pleaded guilty in the United States to violating the Foreign Corrupt Practices Act, reaching settlements with the Department of Justice and the Securities and Exchange Commission. At the same time, the company resolved charges by the Munich Public Prosecutor’s Office based on its corporate failure to supervise its officers and employees.

It paid a criminal fine of $450 million in the DOJ settlement and $350 million in disgorgement of profits under its agreement with the SEC. In the German case, it paid €395 million, on top of the €201 million it had paid in October 2007 to settle a related action brought by the Munich Public Prosecutor.

Siemens has said its global bribery may have topped $1.8 billion. The Justice Department's information charging the company in the biggest FCPA enforcement action ever tells of more than 4,000 payments to foreign officials to obtain or retain business -- and systematic and intentional violations of the FCPA's internal controls and books and records provisions.

According to the U.S. charging documents, Siemens' telecoms unit paid bribes of $5.3 million in Bangladesh and $4.5 million in Nigeria.

At least three other former Siemens executives have been convicted of bribery over the past few years. They were also given suspended sentences of around two years.

No one from the company has been charged in the U.S., possibly because American prosecutors haven't been able to assert jurisdiction over them. This week's convictions of Kutschenreuter and Hartmann may have been the final criminal trials in Germany of Siemens' personnel involved in the company's massive global bribery.

The German defendants' light treatment in their home courts contrasts sharply with this week's U.S. sentencing of American Charles Paul Edward Jumet. He was given 87 months in prison -- the longest sentence ever for FCPA-related offenses.


The Case For More Cases

People ask us why there's so much going on with the FCPA and other anti-corruption laws right now? What's changed? they want to know. And what's coming?

Here's what we tell them:

Human rights. Politicians, activists, and citizens everywhere have a better understanding that graft destroys liberty and freedom and replaces it with fear and repression. Those forced to pay bribes for police protection, medical services, electricity, drinking water, and education are less free than those who don't. Clean government is becoming the new norm.

National and global security. The world's a dangerous place. And countries with corrupt governments aren't reliable allies. They have leaky borders, erratic law enforcement agencies, and weak passport controls. Corrupt countries are safe havens for the bad guys so reducing corruption helps protect the rest of us.

Bang for the buck. How much does it cost a government to bring an enforcement action against a big corporation? And how much does a government get back in penalties? In the Siemens case -- the best example -- the U.S and Germany may have spent, say, $10 or $20 million on the prosecution. They got back $1.6 billion. A great return, and a great argument at budget time for more enforcement resources.

Low-hanging fruit. Some enforcement actions -- lots of them these days -- are falling into the lap of the DOJ, SEC, and now the SFO. Public companies are generally required under the U.S. securities laws to self-report potential FCPA violations. Then they're required to conduct an internal investigation and report the results to the law enforcement agencies. Those agencies then propose proportionate penalties. There's some negotiation but in the end all companies must cut a deal. Case closed. How difficult was that for the feds?

The big mo. Like environmental cases 20 years ago, or drug suits, or waves of antitrust actions -- legal trends come into fashion and then fade. When something is hot, everyone wants in -- prosecutors, private firms, politicians, and NGOs. And when the press joins the party, get ready for take off. Right now the legal tilt is toward anti-corruption enforcement. Are we at the apex? Not yet. Let's see what happens over the next few years.


Feds Tidy Up Shot-Show Case

The government yesterday filed a superseding indictment in the prosecution of the 22 shot-show defendants, charging them under a consolidated grand jury indictment with 44 counts, including conspiracy to violate the FCPA, substantive FCPA offenses, conspiracy to commit money laundering, and aiding and abetting.

Prosecutors proposed trying the defendants in four groups:

The first group: Daniel Alvirez, Lee Allen Tolleson, Andrew Bigelow, Pankesh Patel, John Benson Weir III.

The second group: David Painter, Lee Wares, Jonathan Spiller, Michael Sacks, Israel Weisler.

The third group: Patrick Caldwell, Stephen Giordanella, John Mushriqui, Jeana Mushriqui, John Godsey, Mark Morales.

And the fourth group: Helmie Ashiblie, Yochanan Cohen, Haim Geri, Amaro Goncalves, Saul Mishkin, Ofer Paz.

As reported in March, one of the 22 defendants, Daniel Alvirez, is expected to plead guilty soon to charges of conspiracy to violate the FCPA. Although he's included in yesterday's superseding indictment, the government in March released a two-count superseding information against him alone. An information generally indicates a plea bargain is in the works or already agreed.

Alvirez faces up to five years in prison for each of the two conspiracy counts in the information. He could have faced up to 20 years in jail on the money-laundering charge that was dropped, and five years in prison for each substantive FCPA offense he originally faced.

Alvirez and the other shot-show defendants were first charged in 16 separate indictments. They allegedly plotted with an undercover FBI agent to bribe the minister of defense of an African country.

Download a copy of the superseding indictment released April 19, 2010 in U.S. v. Amaro Goncalves et al here.


Longest FCPA Prison Sentence

The Virginia man who pleaded guilty in November to being part of an overseas bribery conspiracy that began in 1996 was sentenced today to 87 months in prison and fined $15,000. Prosecutors said it's the longest sentence ever in an FCPA-related case.

Charles Paul Edward Jumet, 53, had been charged in a two-count criminal information. In his guilty plea, he admitted conspiring with others to violate the FCPA by making corrupt payments to government officials in Panama and giving a false statement to the FBI about how he paid some of the bribe money.

Jumet, an American citizen, was an officer of Ports Engineering Consultants Corporation (PECC), an affiliate of Virginia Beach-based Overman Associates. In December 1997, the Panamanian government awarded PECC a no-bid, 20-year contract to maintain lighthouses and buoys along Panama’s waterway. In exchange, Jumet and others authorized corrupt payments to Panamanian officials.

By 2003, he and his co-conspirators had paid $212,400 to the former administrator and deputy administrator of Panama’s National Maritime Ports Authority and to a former, high-ranking elected official of Panama.

The FCPA conspiracy count carried a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the scheme. The false statement count carried a maximum penalty of five years in prison and a fine of $250,000.

Under the conspiracy law, 18 U.S.C. § 371, the statute of limitations can reach back to FCPA-related criminal behavior more than five years old if the conspiracy ended within the past five years.

A second man has also pleaded guilty in the case. John W. Warwick, 64, of Virginia Beach, Va., admitted in February to allegations in a one-count indictment charging him with conspiring to bribe Panamanian officials. He agreed to forfeit $331,000 that he made through the bribery. He's scheduled to be sentenced on May 14, 2010.

According to the Richmond Times Dispatch, Jumet said at sentencing: "I am truly sorry for what I have done." He said he initially didn't know the deal involved anything illegal, but conceded he didn't withdraw once he did learn.

The DOJ's Lanny Breuer said, "Today’s sentence -- the longest ever imposed for violating the FCPA –- is an important milestone in our effort to deter foreign bribery. As this case confirms, foreign corruption carries with it very serious penalties, which can include substantial prison time for individuals who violate the law."

View the DOJ's April 19, 2010 release here.

Download the November 10, 2009 criminal information in U.S. v. Charles Paul Edward Jumet  here.

Download the DOJ's statement of facts here.

Download Jumet's plea agreement here.

Download John W. Warwick's plea agreement here.


Blackwater And Bribery

Will the latest federal indictment involving private security firm Blackwater lead to Foreign Corrupt Practices Act charges? It's possible, based on allegations against the five defendants.

On Friday, a federal grand jury in North Carolina indicted Gary Jackson, Blackwater’s former president; William Matthews, the former executive vice president; Andrew Howell, the former general counsel; Ana Bundy, a former vice president; and Ronald Slezak, a former weapons manager.

They were charged with 15 counts of conspiracy to violate firearms laws, making false statements and representations on federally licensed firearms dealers' records, possession of machine guns, possession of other firearms (short-barrelled shotguns) not registered in the National Firearms and Registration and Transfer Record, and aiding and abetting.

They weren't charged with bribing foreign officials. But federal investigators have reportedly been looking into possible violations of the Foreign Corrupt Practices Act by Blackwater, now renamed Xe. And the indictment contained this allegation:

Another means [of circumventing the possession and disposition of arms] consisted of Blackwater/Xe's efforts to gain favor with the Government of the Kingdom of Jordan. When the King of Jordan came to examine Blackwater/Xe's training facility at Moyock, North Carolina, the defendants arranged to present the King and/or his entourage with several firearms as gifts. When the defendants subsequently realized they were unable to account for the disposition of the firearms, they falsified four separate Alcohol, Tobacco, and Firearms (ATF) Form 4473s for submission to federal authorities. The defendants falsely completed the forms to give the appearance that the weapons had been purchased by them as individuals.

Giving gifts to foreign officials to obtain or retain business can violate the FCPA. Members of royal families are foreign officials under the law.

In November last year, the New York Times reported that Blackwater executives authorized secret payments of about $1 million to Iraqi officials that might have violated the FCPA. The payments were "intended to silence [the officials'] criticism and buy their support after a September 2007 episode in which Blackwater security guards fatally shot 17 Iraqi civilians in Baghdad," the Times said.

Four former employees the Times interviewed for the November story claimed the payments were approved by the company's president and money was wired to Iraq from accounts in Jordan. The employees didn't know if the payments were actually made. The report said "Blackwater’s strategy of buying off the government officials, which would have been illegal under American law, created a deep rift inside the company, according to the former executives."

A report by the Times Friday said, "While the indictment is somewhat limited in scope, it could be the government’s opening salvo in a broader offensive to bring criminal charges against the company. They could include charges for bribery and export violations, according to officials familiar with the case, perhaps under a strategy of turning former and current executives of the company against one another."

Download a copy of the April 15, 2010 indictment in U.S. v. Gary Jackson et al here