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Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior 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

Monday
Sep142009

Greens Found Guilty

Here's the text of the Government's press release:
________

Issued on Monday, September 14 at 10:10 a.m. PDT

LOS ANGELES – Two West Hollywood film executives have been found guilty of violating the Foreign Corrupt Practices Act (FCPA) in relation to a sophisticated bribery scheme that enabled the defendants to obtain a series of Thai government contracts, including valuable contracts to manage and operate Thailand's yearly film festival.

Gerald Green, 77, and Patricia Green, 52, were convicted by a federal jury late Friday of conspiracy, violating the FCPA and money laundering. Patricia Green was also found guilty of falsely subscribing U.S. to income tax returns in connection with this scheme.

The Greens were charged on March 11, 2009, in a second superseding indictment with paying kickbacks to the former governor of the Tourism Authority of Thailand (TAT) in exchange for receiving contracts to manage and operate Thailand's annual Bangkok International Film Festival, as well as contracts to provide an elite tourism "privilege card" marketed to wealthy foreigners.

According to the second superseding indictment, the Greens paid approximately $1.8 million in bribes to the former governor through numerous bank accounts in Singapore, the United Kingdom and the Isle of Jersey in the name of the former governor's daughter and a friend of the former governor. The Greens received contracts that generated more than $13.5 million in revenue to their businesses.

The Greens were found guilty of conspiring to violate the FCPA and money laundering laws of the United States, nine counts of violating the FCPA and seven counts of money laundering. Patricia Green was found guilty of two counts of falsely subscribing to a U.S. income tax return – specifically, Form 1120 – knowing that the false and overstated figure included the bribes to the former governor, described as "commissions."

The evidence presented during a 2½-week trial showed that, beginning in 2002 and continuing into 2007, the Greens conspired with others to bribe the former governor of the TAT in order to get the lucrative film festival contracts as well as other TAT contracts. As a result of the then-governor's position at the TAT, the former governor was able to influence the awarding of these contracts. In furtherance of the conspiracy, the Greens used different business entities, some with dummy business addresses and telephone numbers, in their dealings with the TAT in order to hide the large amount of money the Greens were being paid under the contracts.

Moreover, the trial evidence showed that the Greens disguised the bribes as "sales commission" payments and made the payments for the benefit of the former governor through the foreign bank accounts of intermediaries, including bank accounts in the name of the former governor's daughter and friend.

The conspiracy and FCPA charges each carry a statutory maximum penalty of five years in prison. Each of the money laundering counts carries a statutory maximum penalty of 20 years in prison. The tax charges against Patricia Green each carry a statutory maximum penalty of three years in prison. The Greens are scheduled to be sentenced by United States District Judge George H. Wu on December 17 . . . .
__________

Coming up: Lessons From The Greens' Conviction.

Read prior posts about the Greens here.
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Sunday
Sep132009

The Greens, BAE And More

A seven-man, five-woman federal jury in LA on Friday began deliberating the fate of the husband-and-wife movie producers accused of bribing a Thai official. Gerald Green, 77, and his wife Patricia, 52, were tried for conspiracy to violate the Foreign Corrupt Practices Act and violating the FCPA. Other charges included money laundering and illegally transporting money-laundering proceeds, obstruction, and filing false tax returns. They're facing up to five years in prison for each FCPA charge, up to 10 years for each tax count, and up to 20 years for the money-laundering and obstruction charges.

Prosecutors said the Greens paid the former governor of the Tourism Authority of Thailand Juthamas Siriwan more than $1.8 million in bribes. In return, she allegedly awarded them contracts to stage the Bangkok Film Festival worth about $13.5 million.

View prior posts about the Greens here.

* * *
Plea bargaining in Britain? As noted by PBS / Frontline here, the U.K. Mail reported on September 5 that military equipment supplier BAE has been given until the end of the month by the Serious Fraud Office "to avoid a criminal trial for paying bribes in the Czech Republic, Tanzania, and South Africa." The pressure on BAE is a turnaround for the SFO. It caused an uproar in December 2006 by dropping an investigation into allegations the company bribed members of the Saudi Arabian government in exchange for the sale of Typhoon jet fighters. The SFO said it had to stop the investigation after Saudi Arabia threatened to end anti-terrorism cooperation with the British government.

The U.S. Justice Department, meanwhile, is reportedly still investigating BAE's payments to Saudi Prince Bandar bin Sultan of about $2 billion. He was formerly ambassador to the United States. Some of the payments allegedly passed through U.S. bank accounts he controlled.

In the same deal, BAE also delivered an Airbus 340. When interviewed by Frontline's Lowell Bergman earlier this year, the prince's lawyer, former FBI Director Louis Freeh, said the jetliner was a military aircraft and not his client's private plane. But Frontline said it had been directed to "statements by then British Secretary of State for Defense, Des Brow, who in a written answer to a parliamentary inquiry in June 2007 stated that:

Since 1 July 2006, aircraft HZ 124 has landed 15 times at RAF Brize Norton. The aircraft operated in accordance with the MOD regulations for civil aircraft use of military airfields. The regulations also cover the applicability and level of landing, housing, parking and insurance fees charges. The regulations have been adhered to for each flight."
Frontline said Airbus HZ 124 is registered to the Saudi Arabia Ministry of Defense and Aviation and was used for over a decade by Prince Bandar, who had it painted in the colors of his favorite football team, the Dallas Cowboys.

View prior posts about BAE and Prince Bandar here.

* * *
Naming and shaming in Moscow.
Most companies try to solve corruption problems in Russia quietly, but not Ikea. Earlier this year, it loudly suspended a store-opening outside Moscow. It said local bureaucrats imposed a last-minute requirement that its new building be able to withstand winds nearly twice as strong as the most powerful gusts ever recorded at the store's location (here). Now, the New York Times' Andrew Kramer has written about another alleged bureaucratic shakedown of the global furniture retailer, this one in 2000 (here).

What's unusual is that the story is based on Ikea's own disclosures "to the New York Times last month, saying that it hoped publicity might compel the Russian authorities to investigate."

Here's an excerpt from Friday's article:

Weeks before the opening of its flagship store outside Moscow in 2000, Ikea was approached by employees of a local utility company. If the Swedish retailer wanted to have electricity for its grand opening, it had to pay a bribe.

Instead, Ikea rented diesel generators large enough to power a shopping mall. The generators roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the power. . . .

The board of Ikea’s operating company, which is based in the Netherlands, has concluded that the Russian executive hired to manage the generators was taking kickbacks from the rental company to substantially inflate the price of the service. Ikea said that such a fraud could cost it about $196 million over two years.

Ikea canceled the contract and sought redress in Russian civil court. But in rulings over the last two weeks, Ikea has lost another 5 million euros in damages that the judges awarded the generator rental company for breach of contract. . . .

“We have encountered something here that is outside the scope of what we normally encounter,” Mr. Thordson said, describing the global retailer’s situation in Russia. “I have never experienced anything like this. . . . .

Thursday
Sep102009

Corruption Hits The Road

An AP story this week (here) quoted Russian opposition figure Boris Nemtsov as saying, "We'll never solve the problem of traffic under [Moscow mayor Yuri] Luzhkov, no matter how much money is allocated for road construction. The exorbitant prices are directly linked to corruption and ties between road builders and authorities. Traffic jams are about corruption."

Nemtsov said he compiled road building costs "from open sources to shed light on the 17-year tenure" of Moscow's mayor. In China, the United States and Europe, he said, new roads cost between $4.8 million and $9.6 million per mile. But construction of Moscow's new fourth ring road, he reportedly told the AP, is expected to cost a whopping $380 million per mile.

We wondered: Can road construction costs be used as a universal indicator of corruption? Is there a standard scale against which anomalies will reveal or at least suggest the presence of graft? The short answer is, probably not.

Road-building projects, it turns out, are like fingerprints and snowflakes: no two are alike. Terrain, accessibility, soil conditions, climate, elevations, man-made and natural obstructions, drainage requirements -- they all impact costs. Toss in different currency values, labor and equipment expenses, financing charges and so on, and the math can make you giddy. So in most cases, comparing road-building costs around the world probably can't prove the presence (or absence) of corruption beyond a reasonable doubt.

Back in Moscow, we haven't been able to verify the numbers in the AP story. But if the budget for the new ring road is really $380 million per mile or $72,000 per foot, then Neil Young got it right: "The cupboards are bare but the streets are paved with gold."

* * *
Seasons Change. It's been a long time since we headed back to school after Labor Day. We remember the fluttery sensation and sweaty palms, mixed with the afterglow of another New Hampshire summer. September always signaled the start of a new work year and still does, no matter where we happen to be.

* * *
Words we like. From Kurt Vonnegut:

There are now at least a hundred creative writing programs in American colleges and universities, and even in Leipzig, Germany, as I would discover when I was there last October. That the subject is taught anywhere, given the daunting odds against anyone making a living writing stories or poems, might appear to be a scandal, as would be courses in pharmacy, if there were no such thing as drugstores.
From Writers on Writing, Collected Essays from the New York Times.
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Wednesday
Sep092009

Another Alba-Related Investigation

The Wall Street Journal reported yesterday (here) that the Justice Department is "investigating payments that Bahraini prosecutors allege were made by units of Japanese commodities-trading giant Sojitz Group to employees of an aluminum producer in Bahrain." The story says $8.7 million in alleged bribes to employees at Aluminum Bahrain BSC, or Alba, were paid into secret accounts they controlled in Liechtenstein banks. Some of the payments reportedly passed through U.S. banks.

Sojitz acts as a broker for Alba's products, including aluminum billet and alloys. It allegedly enjoyed lower prices in exchange for the payments. The DOJ investigation of Sojitz, which does some business in the U.S., is reportedly based on information provided by Bahraini authorities. The Journal said they "have shared their findings with U.S. Justice Department prosecutors, according to people briefed on the investigation." The payments were allegedly made by units of Nissho Iwai, which merged with Nichimen in 2004 to form Sojitz.

In March 2008, Alba -- majority owned by the government of Bahrain -- sued Alcoa Inc., its long-time raw materials supplier, for corruption and fraud. The federal court suit in Pittsburg alleged that Alba paid $2 billion in overcharges during a 15-year period. The money, according to the suit, first went to overseas accounts controlled by Alcoa's agent and some was then used to bribe Alba's executives in return for more supply contracts. The Justice Department quickly intervened in the case, asking the court for a stay while the government investigates possible criminal violations of the Foreign Corrupt Practices Act and other laws by Alcoa and its executives and agent. Alcoa has denied any wrongdoing and said it is cooperating with the DOJ.

The Wall Street Journal said Bahrain filed a money-laundering indictment against two former Alba employees accused of taking kickbacks from Sojitz.

The Justice Department hasn't commented on the Alcoa investigation or the Wall Street Journal's story naming Sojitz.

Read prior posts about Alba and Alcoa here.
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Tuesday
Sep082009

The Face Of A Fugitive

He's the only FCPA fugitive with his own wanted poster. That's how we know Frerik Pluimers is a big guy -- six three, two hundred thirty-five pounds. Brown hair, brown eyes. Born September 30, 1946. Netherlands passport number W118268941. Indicted in April 1998, when he was president and CEO of New Jersey-based Saybolt International -- charged with violating the Foreign Corrupt Practices Act, the Travel Act, aiding and abetting and conspiracy. He was in Rotterdam, Holland when indicted and didn't come back to the U.S. to face prosecution.

A decade passed with no sign of Pluimers. Then, in March 2008, a Washington, D.C. lawyer appeared in federal court on his behalf. The lawyer, J. Sedwick Sollers, III, had some big news. His client, he said, was "scheduled to appear before the Court for arraignment, guilty plea and sentencing on March 28, 2008."

What happened next? Nothing. There's no record of Pluimers appearing in court on that day or any other. In fact, there's nothing in the docket after Sollers' notice. Pluimers had said, through the lawyer, that he'd be there. But he never showed up. Strange.

And about Pluimers' wanted poster. It's not from the Justice Department or the FBI, as you'd expect in an FCPA case, but the Environmental Protection Agency. Why the EPA? Here's what we know.

In the mid-1990s, Pluimers' former company, Saybolt, falsified results for gasoline it tested by understating lead emissions. In January 1999, the company pleaded guilty in U.S. federal court to conspiracy to violate the Clean Air Act and wire fraud. It paid a $4.9 million fine and spent five years on probation. A former Saybolt vice president, Thomas M. Hayes, was also convicted under the Clean Air Act and sentenced to 57 months in prison.

While digging into Saybolt, the EPA’s Criminal Investigation Division had discovered a $50,000 bribe in 1995 to a Panamanian government official. In exchange, Saybolt won tax concessions and access to a prime business location along the Panama Canal. Indicted in 1998 for the bribe were Pluimers, along with his colleague David H. Mead. Mead went to trial and was found guilty. He served four months in prison and paid a $20,000 fine (here). But Pluimers ran.

Why, though, is the EPA chasing him? His indictment relates only to the Panama bribe. That's not the EPA's turf. So maybe there's something more. Maybe the EPA also indicted him along the way for criminal violations of the Clean Air Act, but decided to keep the indictment sealed until the day of his arrest, which hasn't come yet.

The lawyer who said in March 2008 that Pluimers would turn himself in defends both environmental and FCPA cases. Was Pluimers ready to cut a deal with the DOJ and EPA? Looks like it. Did something or someone spook him at the last minute? Could be. Whatever happened, Frerik Pluimers, the man on the wanted poster, is still an FCPA fugitive.

Download the November 1, 2008 U.S. EPA / CID Wanted Poster of Frerik Pluimers here.

Download the March 24, 2008 Notice of Appearance: J. Sedwick Sollers, III, appearing for Frerik Pluimers in USA v. MEAD, et al , U.S. District Court District of New Jersey, Case No.: 3:98-cr-00240-AET-2 here.

A special thanks to Cody Worthington in Washington, D.C. for his research for this post.
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Monday
Sep072009

Friends And Neighbors

These are good days for FCPA junkies like us. More is written now about enforcement and compliance in a week than used to appear in a year. And a lot of it is original and well outside the conventional wisdom. Among the people producing work in that category (and who have appeared on the FCPA Blog before) are:

David Hess, an assistant professor at the University of Michigan's business school. He thinks about incentives for corporations to keep themselves clean -- through the use of sustainability reports, the Federal Sentencing Guidelines, and deferred prosecution agreements, among others.

Rebecca Walker, a private practitioner, whose ideas on “associative liability” and extending codes of conduct to third parties are important to anyone in the compliance business. And she's humble and charming.

David C. Weiss, a law student at the University of Michigan. He wrote a terrific article for the January 17, 2009 Michigan Journal of International Law. It asks why the Securities and Exchange Commission uses disgorgement in FCPA enforcement actions, where the remedy came from, and where it's going. Great questions, and he's got some answers too.

Andy Spalding, a lawyer and Fulbright scholar. He argues that the Foreign Corrupt Practices Act -- are you ready? -- causes corruption and hurts poor people. Andy respects the rule of law but also spends time trying to understand how laws really work. You've got to love a smart, well-spoken policy-wonking lawyer. As we said when we first heard his ideas, they're a real mind bender.

* * *
Two blogs with full-time FCPA coverage:

wrageblog, where Alexandra Wrage of TRACE has created a bulletin board for the compliance community. She and her contributors dish some great advice. We received a nice invitation to pen a few words there and we're planning to do that soon.

Mike Koehler's fcpa professor is a new resource. He had an FCPA practice for ten years and now teaches business law at Butler University. Many times over the years Mike has helped us understand FCPA enforcement practices, particularly at the SEC. We enjoy his view of the statute itself and what he thinks the words in it are supposed mean.

* * *
And two veteran blogs that only sometimes cover the FCPA but are always worth reading:

Kevin LaCroix's D & O Diary. A reviewer might call his work authoritative, influential, magisterial, and quirky enough to always be inviting. We'll just say it's a must-read site.

Here's a recent excerpt we liked:

It might well be asked why anyone should bother reading both the Wall Street Journal and the New York Times business pages. After all, both usually cover the same stories. Indeed, on Friday, both ran stories discussing the fact that year-to-date bank failures are at the highest level since 1992.
However these same-day articles about the number of bank failures in fact were a great illustration of the value of reading both publications, because the two newspapers presented very different explanations for the run of failed banks . . . . here
Gabe’s Guide to the e_Discovery Universe. It's wild. There can be nearly a hundred posts a month, and its artwork and headlines are reason enough to visit (Crazy woman comes up with notion that e-discovery professionals should be “qualified”).

Our favorite times are when Gabe Acevedo, the blog's creator, hits the road. Then it becomes the world's best (and only?) law-related travelogue. Like his dispatch in April from Chicago:

As everyone knows, the most important part about any conference is the free stuff you get to take home with you, and the ABA Techshow did not disappoint. CDW gave away little mini toy race cars and notepads as well as some other stuff . . . The ABA handed out 2 gig thumbdrives. Definitely one of the cooler types of schwag there. . . . here
Gabe is bursting with enthusiasm and goodwill, and he's always generous with his praise and attributions.

We'll have more to say about other friends and neighbors later.
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Thursday
Sep032009

Guilty Plea In UK Bribe Case

The former director of sales and marketing for Pacific Consolidated Industries (PCI) admitted yesterday that he bribed an official from the U.K. Ministry of Defense (MOD) in return for equipment orders. Leo Winston Smith, 73, pleaded guilty in the U.S. federal district court for central California to conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. §371) and corruptly obstructing and impeding the due administration of the internal revenue laws (26 U.S.C. §7212(a)).

Smith, along with PCI's former president and part owner, Martin Eric Self, 51, paid at least $70,000 in bribes to the MOD official. The money was funneled through a sham marketing agreement PCI created in 1999 with a relative of the official. In return, PCI was awarded MOD contracts worth around $11 million. Smith also admitted under-reporting income on his 2003 U.S. federal tax return and failing to file a 2003 corporate return for his Nevada company, Design Smith Inc.

Sentencing in Smith's case is scheduled for December 18, 2009. He faces a maximum five years in prison on the FCPA conspiracy charge and three years on the tax charge, and a fine of about $255,000.

His co-conspirator, Martin Eric Self, pleaded guilty in May 2008 to violating the FCPA (here). Although Self faced up to five years in prison on each of two FCPA counts, his plea agreement contemplated a prison term of eight months. He was finally sentenced in November 2008 to two years probation. The MOD official, Michael Hale, pleaded guilty in the United Kingdom to accepting nine separate payments from PCI totaling more than $300,000. He was sentenced in April 2007 to two years in prison.

Privately-held PCI manufactures Air Separation Units (ASUs) and other equipment for the military, medical, and oil and gas markets. ASUs generate oxygen in remote, extreme, and confined locations. The Justice Department said that in late 2003, after the alleged illegal conduct occurred, a group of private investors bought California-based PCI. They referred the case to U.S. prosecutors and "fully cooperated in the government’s investigation."

Download a copy of the DOJ's September 3, 2009 release here.

Download a copy of the plea agreement in U.S. v. Leo Winston Smith (Case No.: CR 07-69(A) - AG) here.
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Wednesday
Sep022009

Pfizer, Pharmas And The FCPA

Will drug makers be the target of the next industry-wide Foreign Corrupt Practices Act investigation, following in the footsteps of the oil and gas services companies and orthopedic device makers? It's possible. Their sales practices are in the news a lot these days. And amid the healthcare debate, drug-company behavior anywhere invites attention in Washington and beyond.

Remember the orthopedic device makers? Like Pfizer this week and Eli Lilly earlier this year, they resolved enforcement actions based on illegal domestic sales practices. Soon after, most of them disclosed that the DOJ and SEC were looking into their overseas marketing methods for any FCPA offenses. Those investigations are ongoing. See our post Tough Medicine For Medical Device Makers.

Here's some recent pharma news:

◆ Pfizer's $2.3 billion civil and criminal penalty for unlawful prescription drug promotions.

The New York Times reported here that: "To promote the drugs, authorities said Pfizer invited doctors to consultant meetings at resort locations, paying their expenses and providing perks. 'They were entertained with golf, massages, and other activities,' said Mike Loucks, the U.S. attorney in Massachusetts." (In January, Eli Lilly paid $1.42 billion to settle off-label marketing charges.) New York attorney general Andrew Cuomo said yesterday, "Pfizer's corrupt practices went so far as sending physicians on exotic junkets as well as wining and dining health care professionals to persuade them to prescribe the company's drugs for patients in taxpayer-funded programs." Using similar sales techniques with doctors at government-owned hospitals overseas could violate the FCPA.

◆ Forest Laboratories' document, “Lexapro Fiscal 2004 Marketing Plan.”

It's an 88-page extract from the company's strategic plan for turning the drug into a high-priced bestseller. The document was recently made public by the Senate’s Special Committee on Aging. Forest's plan includes tactics such as a ghostwriting program -- like the one discussed in our post Helping Doctors Cheat. The Lexapro marketing blueprint is aimed at the U.S. domestic market. Some tactics described in the plan, if directed overseas, could have FCPA compliance implications. A copy of Forest's marketing plan for Lexapro can be downloaded here.

◆ Pfizer's foreign lobbying practices.

In July, a senator in the Philippines issued a press release here that accused Pfizer of using illegal tactics to block legislation aimed at lowering drug costs. Senator Mar Roxas said he had written a letter to the U.S. Justice Department requesting an FCPA investigation into Pfizer's practices. He accused the company of offering the country's health secretary "discount cards" in exchange for not implementing the retail drug-price law.

In his letter to Mark Mendelsohn, the Deputy Chief of the Fraud Section at the DOJ's Criminal Division, the senator said,

I understand that your good office is responsible for the enforcement of the anti-bribery provisions of the Foreign Corrupt Practices Act, which makes it unlawful to make a corrupt payment to a foreign national for the purpose of obtaining or retaining business. Thus, any assistance that your office can extend in looking into the allegations of bribery against Pfizer will be invaluable to our efforts of lowering the cost of healthcare, starting with the prices of medicines, in our country. At this juncture, I wish to note that the actions of Pfizer may constitute the offense of corruption of public officials under Philippine laws, as defined in the Philippine Revised Penal Code.
Pfizer disputes the senator's charges. It bought full-page ads in Philippines newspapers saying, "We categorically deny this allegation and consider this a grave affront to our reputation … We have always sought to provide wider access to our high quality medicines."

Thanks to Cody Worthington for the link to the Philippine senator's press release.
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Tuesday
Sep012009

The FCPA's Most Wanted

People charged with a Foreign Corrupt Practices Act-related offense either cop a plea or fight the case in court. Except for those who choose the third option. They run. If they're living outside the U.S. when indicted, they might plan to never come back. That strategy can only work if they happen to be in a country that won't extradite them, which is harder to predict in practice than on paper. Others have tried to find someplace new that's friendly and beyond the reach of the U.S. Justice Department. But as Viktor Kozeny's uncomfortable years in the Bahamas demonstrate, that's not easy either, even with millions of dollars to make it happen.

The first FCPA fugitives appeared in 1982 and the latest this summer. Over the years, plenty have been caught and handed over to U.S. authorities. Others have eventually turned themselves in, deciding a life spent looking over their shoulder isn't for them after all ("Hey there. Small world, isn't it?").

Yet some people facing FCPA charges, including the twelve mentioned below, are still at large, doing whatever they can to stay out of the jurisdiction of the U.S. federal courts.

Let's meet them:

Ousama Naaman, Canadian, intermediary for a U.S. chemical company. Indicted August 2008; arrested July 30, 2009 in Frankfurt, Germany. Now in Germany.

Jeffrey Tesler, British, intermediary for Kellogg Brown & Root (KBR). Indicted February 2009; arrested March 5, 2009 in London, England. Now in the U.K.

Wojciech Chodan, British, salesman for a KBR affiliate. Indicted 2009. Location unknown.

James K. Tillery, American, executive of Willbros International. Indicted 2008. Location unknown.

Edgar Valverde Acosta, Costa Rican, Alcatel’s former senior country officer there. Superseding indictment issued March 2007. Last known location: Costa Rica.

Viktor Kozeny, Czech-born, Irish passport, president and chairman of Oily Rock Group Ltd. Indicted 2005. Now in the Bahamas.

Pablo Barquero Hernandez, Costa Rican, employed by Owl Securities and Investment Ltd. Indicted 2001. Last known location: Costa Rica.

Frerik Pluimers, Dutch, chairman, president and CEO of Saybolt International. Indicted 1998. Last known location: the Netherlands.

Rami Dotan, Israeli, air force officer. Indicted 1994. Last known location: Israel. The brigadier-general in charge of Israeli air force procurement was court martialed in Israel in 1991 and convicted along with two others of bribery, fraud, and theft for skimming at least $10 million from jet engine contracts with General Electric in the U.S. He was demoted to private and sentenced to 13 years' imprisonment. Released in 2003.

Harold Katz, an Israeli and U.S. citizen, Israeli lawyer. Indicted 1994 (with Rami Dotan, above). Last known location: Israel.

Mario S. Gonzalez, Mexican, associated with Grupo Delta, a Mexican corporation acting as intermediary to Pemex. Indicted 1982. Last known location: Mexico.

Ricardo G. Beltran, Mexican, also associated with Grupo Delta. Indicted 1982. Last known location: Mexico.
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Monday
Aug312009

Ehud Olmert And The FCPA

Will the American businessman implicated in Israel's political corruption scandal be charged with violating the Foreign Corrupt Practices Act? Morris Talansky has said that over nearly a decade he gave Israel's former prime minister, Ehud Olmert (left), envelopes stuffed with cash that was used to fund political campaigns and pay for personal expenses. On Sunday, Olmert was indicted in Israel for fraud, breach of faith and deception. He had resigned last year because of the allegations.

One of the three cases against him, arising from the time he was mayor of Jerusalem and later a government minister, concerns the payments he received from Talansky.

The New York Times said,

The most sensational of the three cases involved Morris Talansky, a Long Island businessman, from whom Mr. Olmert is alleged to have received more than $600,000, partly in cash-stuffed envelopes, from 1997 to 2005. Prosecutors accuse Mr. Olmert of hiding the money and failing to report it to the authorities. Though Mr. Olmert has not been charged with taking bribes in the Talansky case, he is accused of abusing his position as a government minister to promote Mr. Talansky’s private business interests in Israel and abroad, constituting a major conflict of interest.
Talansky, 76, testified against Olmert in a deposition in Israel in May 2008. According to the Times, he provided details about "how he had transferred huge sums of cash to Mr. Olmert. Mr. Talansky said that much of the money was for election campaigns, but that some was for Mr. Olmert’s personal use." The deposition forced Olmert to resign a few months later.

The payments appear likely to have violated the antibribery provisions of the Foreign Corrupt Practices Act (corruptly giving anything of value to a foreign official for the purpose of obtaining or retaining business). Will Talansky be indicted?

In January, New York magazine said Talansky could face FCPA charges. “FBI agents are flying all over the place,” the magazine reported. "And U.S. investigators are now using the testimony he gave in Israel as a road map to a possible prosecution." A federal grand jury sitting in New York City was also reportedly looking into possible tax and money-laundering offenses.
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Sunday
Aug302009

Former Faro Salesman Settles With SEC

The Securities and Exchange Commission filed a settled enforcement action Friday against Oscar H. Meza, the former sales director in Asia for Faro Technologies, Inc. Florida-based Faro designs, develops, and markets software and portable computerized measurement devices. The SEC's civil complaint alleged that Meza "authorized bribery payments to employees of Chinese state-owned companies in order to obtain contracts, and that in order to conceal the bribes Meza instructed that account entries be altered."

He was charged with violating the FCPA's antibribery provisions (Section 30A of the Securities Exchange Act of 1934 [15 U.S.C. §78dd-1]), the books and records and internal control provisions (Section 13(b)(5) ofthe Exchange Act and Exchange Act Rule 13b21 [15 U.S.C. § 78m(b)(5) and 17 C.F.R. § 240.13b2-1]), and with aiding and abetting Faro's violations of the anti-bribery, books and records, and internal controls provisions.

The SEC's complaint alleged that beginning in 2004, Meza authorized a former employee of Faro's China subsidiary to make the improper payments. Faro China paid $444,492 in bribes from 2004 through 2006, generating about $4.5 million in sales and $1.4 million in net profit.

Meza will pay a $30,000 civil penalty and $26,707 in disgorgement and prejudgment interest. He's also permanently enjoined from future FCPA violations

In June 2008, his employer Faro resolved FCPA charges with the Justice Department and the SEC. The DOJ settlement required the company to pay a $1.1 million criminal penalty and enter into a two-year non-prosecution agreement that included appointment of a compliance monitor. In settling with the SEC, Faro paid about $1.85 million in disgorgement and prejudgment interest. It self-reported the violations in China to U.S. authorities in March 2006. See our post here.

View the SEC's Litigation Release No. 21190 and Accounting and Auditing Enforcement Release No. 3041 (both dated August 28, 2009) here.

Download a copy of the SEC's complaint in SEC v. Oscar H. Meza, Civil Action No. 1:09-CV-01648 (D.D.C.) (Filed August 28, 2009) here.
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Thursday
Aug272009

Greed, Corruption And Deceit, Feds Say

The trial of the husband-and-wife movie producers accused of violating the Foreign Corrupt Practices Act opened this week in LA. Gerald Green, 77, and his wife Patricia, 54, have pleaded not guilty to all 22 counts of a second superseding indictment. They're charged with conspiracy to violate the FCPA and with substantive FCPA offenses. Other charges include money laundering and illegally transporting money-laundering proceeds, obstruction, and filing false tax returns. The AP has an account here.

Prosecutors say the Greens paid the former governor of the Tourism Authority of Thailand, Juthamas Siriwan, more than $1.8 million in bribes in return for contracts to stage the Bangkok Film Festival. In the prosecution's opening statement, DOJ lawyer Jonathan Lopez told the jury the Greens transferred money into bank accounts of Juthamas' daughter and a friend. He said the "bribes-for-contracts" scheme netted the Hollywood couple about $13.5 million.

"This case is about greed, it's about corruption and it's about deceit," Lopez told the seven man-five woman jury. The Greens "turned TAT into their own personal piggy bank," he said.
Juthamas Siriwan denies taking bribes. She hasn't been charged in Thailand but investigators there say they've found evidence against her. U.S. prosecutors contend the Greens bribed her by disguising the payments as sales commissions and inflating their budgets to cover the costs.

The Greens face up to five years in prison for each FCPA charge, up to 10 years for each tax count, and up to 20 years for the money-laundering and obstruction charges.

The AP said,

Marilyn Bednarski, Patricia Green's lawyer, shot down Lopez's contention that the couple profited heavily from the contracts. She showed jurors tax returns from 2000 — before the couple ran the film festival — and from 2006, the festival's most successful year. The difference was only about $100,000, she said.

"In this case, you will be able to follow every penny that went into the Greens' account," Bednarski told jurors. "There is no sleight of hand here."

The Greens were arrested in December 2007 based on the FBI's affidavit here. Investigators said at least two former insiders gave evidence against the couple. Prosecutors are also trying to subpoena the billing records of the California lawyer who represented several of the Greens' companies. He's claiming the bills are protected by attorney-client privilege. A copy of the government's motion to compel production can be downloaded here.
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