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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

Wednesday
Jan272010

Kozeny's Extradition Blocked Again

Victor Kozeny: The most famous FCPA fugitive is wanted by U.S. authorites for conspiracy to bribe Azeri leaders.Victor Kozeny, the Czech-born fugitive wanted in the United States for conspiracy to violate the Foreign Corrupt Practices Act, won a decision this week in the Bahamas court of appeal that continues to block his extradition to the U.S.

Kozeny, 46, is the best known FCPA fugitive. He has lived in the Bahamas for about ten years. He was arrested there at the request of the U.S. government in October 2005 and held in prison until granted bail in April 2007. Although a judge ordered his extradition, his lawyers were able to convince another judge to block it (here). The U.S. then pushed the case to the court of appeals. The three-judge panel held hearings in December and issued a 26-page ruling Tuesday.

A federal grand jury in Manhattan indicted Kozeny in May 2005 for a plot to bribe Azeri leaders to gain control of the state oil company. His co-defendant, Frederic Bourke, was convicted in July of conspiracy to violate the FCPA and lying to FBI agents. Bourke was sentenced to a year and a day in prison. His appeal is pending.

Others involved in the Azeri scheme have pleaded guilty. Waiting to be sentenced are Thomas Farrell, a director of one of Kozeny's companies, Kozeny's Swiss lawyer Hans Bodmer, and Clayton Lewis, a partner in Omega Advisors, Inc., a hedge fund that invested and lost about $126 million in Kozeny's Azeri plot.

Kozeny was also indicted in 2003 in a New York state criminal case for stealing $182 million from investors, including Omega, AIG, and Bourke.

The Bahamas decision dismissed all six grounds of appeal by the U.S. government. A lower court judge found it had acted in bad faith in the extradition process by failing "to disclose certain pertinent information in law and fact." In letting that part of the lower court judgment stand, Justice Longley, writing for the appeal panel, said:

The extradition process, because it involves the depravation of liberty, requires the exercise of good faith on the part of the requesting state and that must mean that it has a duty to disclose in a timely manner and with its request if the information is known at that time, any information that would not only be adverse to its request but would inform a prudent court in the exercise of its function that might lead to a relevant trial of inquiry. Whether the failure to comply with its obligation in any particular case is bad faith depends on all circumstances of the case. There certainly was material before the learned judge to reach the conclusion which he did and I see no reason to interfere with that decision.

The Bahamas attorney general and the U.S. government can request a final appeal to London’s Privy Council. They haven't said what they plan to do.

Download a copy of the judgment by the Bahamas court of appeal in Government of the United States et al, Appellants and Victor Kozeny, Appellee (January 26, 2010) here.

Bloomberg's David Glovin, who has reported Kozeny's legal battles, filed a report here.

Tuesday
Jan262010

The Good Bribes

Lawyer and Fulbright Scholar Andy Spalding: The idea that deterring bribery must always be good is too simple.Yesterday's post about corruption's positive influence in poor, unfree countries brought the following comment from Andy Spalding. He's a lawyer on a year-long Fulbright Research Grant in Mumbai, India whose own view of anti-corruption laws has caused a stir.

Here's what he said:

Dear FCPA Blog,

I was delighted to read yet another article in our field written in the ever-important vein of constructive criticism.  For those of us who support the FCPA, it is tempting to categorically dismiss the suggestion that in some economies, some of the time, bribery may actually promote development.  But I'm not sure that this is the right response, for at least two good reasons:

1.  This idea has been around for a very long time.  As Carden and Verdon readily admit, theirs is a new permutation on an idea that has circulated in mainstream economics and political science for over forty years.  It grew out of the study of Soviet bureaucracy, and many of us lawyers who took undergrad majors in poli sci, econ, or history, may at least vaguely recognize names like Samuel P. Huntington.  This idea is not new, and it's not radical.  We would do well to see the FCPA, and the problem of corruption, in a broader context of human experience and intellectual inquiry.

2.  Hasn't the FCPA community understood this since 1988?  That was the year that we amended the FCPA to include the affirmative defense -- which some find counter-intuitive, or worse -- for facilitating payments.  How many of us have had the experience of describing this defense to non-lawyers in a compliance seminar, a meeting with clients, or around the dinner table, only to be met with chuckles of astonishment? The non-FCPA world believes that "a bribe's a bribe," and so did we when we originally drafted the FCPA in the mid-70s.  But ten years of experience taught us otherwise.  For those of us today who endorse the affirmative defense -- who do not believe it is a "loophole" that should be abolished, but instead strikes an important balance -- haven't we tacitly accepted at least some version of Carden and Verdon's thesis? 

We may tend to assume, perhaps unconsciously, that if bribery is bad, then deterring bribery must always be good; the logic is seductive in its simplicity.  But as Holmes taught, "the life of the law has not been logic; it has been experience."  Experience in bribery-prone countries, with all its irony and tragedy, teaches us that though bribery is indeed bad, the alternative may sometimes be worse.  Those who amended the FCPA in 1988, and myriad observers of the human condition dating much further back, understood this regrettable fact.  In today's prosecutorial zeal we may try to ignore it, but those who live and work under corrupt and inefficient regimes cannot escape it. 

With thanks,
Andy Spalding

Monday
Jan252010

Graft Is Good, Sometimes

Profs Art Carden of Rhodes College and Lisa Verdon of Florida State, both economists, asked: When is corruption bad for economic growth? When is corruption good for economic growth? (It wouldn't occur to us to ask the second question; that's why we read what smart people have to say.)

Carden and Verdon surveyed the literature, analyzed studies and examples that might reveal clues -- there's not much meaningful data about corruption because it usually happens in secret -- and came to some thoughtful, if unpleasant, conclusions.

In their August 2009 paper, they argue that in some circumstances, graft can actually create beneficial change. In a healthy economy, they say, corruption is bad -- it's like sand in the gears of society. But in poor and undemocratic countries, corruption can be oil in the gears. It can help bring change and economic progress. It can be a substitute for freedom by allowing entrepreneurs to beat red tape and get things done.

Here's what they say:

In relatively poor, un-free countries, corruption can overcome some of the barriers presented by formal and informal institutions that would otherwise restrict trade. Bureaucracies and regulators are in a position to exercise veto power over mutually beneficial trades—they can prevent people from picking up the bills left on the sidewalk, so to speak, and thereby reduce specialization, trade, and growth. When this is the case, corruption can increase economic growth by allowing trade.

They cite others who, looking at data from countries such as Zaire, South Korea, and the Philippines, conclude: Corruption is always detrimental in countries where institutions are effective, but it may be positively associated with efficiency in countries where institutions are ineffective.

Does it mean the Foreign Corrupt Practices Act is bad for those places that are the worst off? Are we missing what Carden and Verdon and other scholars would call the "cultural context" of corruption? Do anti-corruption laws like the FCPA and other OECD versions promote suffering in the least developed countries by preserving a miserable status quo? Is America making a cosmic mistake with the FCPA?

The paper is "Corruption Creates Growth When People Aren't Free" by Art Carden and Lisa Verdon (August 20, 2009). It's available at SSRN here.

Readers -- you're invited to give us your two cents. You might also want to look at what Andy Spalding had to say in this space last year.

Sunday
Jan242010

High-Velocity FCPA

There's been more FCPA action in the past month than in most prior years since enactment in 1977. What's the rest of 2010 going to bring? Photo by Patrick BourThe FCPA-related news just keeps coming -- faster and faster. Even before last week's head-spinning mega bust, there was enough news from the past month to keep us busy till summer. The hard part has been keeping it all straight.

So let's take some quiet time to gather our thoughts about what's happened over the past 30 days:

1. Oh Crikey! In late December, the D.C. federal appeals court affirmed the dismissal of a shareholder derivative suit against some current and former directors and executives of U.K.-based BAE Systems PLC. The complaint alleged BAE's payment of more than $2 billion in bribes and kickbacks to Prince Bandar Bin Sultan of Saudi Arabia. The suit claimed the defendants breached their fiduciary duties and wasted corporate assets.

The U.S. federal courts applied English law to the case. A fossilized 1843 case they unearthed called Foss v. Harbottle, 2 Hare 461, 67 E.R. 189 said "the company, not a shareholder, is the proper plaintiff in a suit seeking redress for wrongs allegedly committed against the company."

The appeals court saw no reason to create an exception to promote the U.S. public policy of protecting shareholders and the company itself from law-breaking directors and executives. It gave the BAE directors even more comfort by noting that under English law, paying bribes isn't necessarily an ultra vires act “beyond the corporate capacity of a company.”

Our take: Even in civil courts, shouldn't directors of foreign companies that do business in and from the U.S. be held to the same standards as U.S.-company directors?

2. Others have said so what. But we thought this was a nifty piece of news: A U.S. company with no securities traded on an exchange but that files periodic reports with the Securities and Exchange Commission disclosed an internal investigation into possible Foreign Corrupt Practices Act violations and said it had self-disclosed to the SEC and DOJ.

Tampa-based PBSJ Corporation is a "domestic concern" subject to the anti-bribery provisions. It has no publicly traded securities but because it has so many shareholders -- about 4,000 mainly current and former employees -- it files periodic reports with the SEC. That makes it an "issuer" subject to the books and records and internal controls provisions. We think it's the first "issuer" without shares traded on an exchange to announce an FCPA investigation self-reported to the feds.

OK, it's not momentous. But we're amazed that apparently fresh FCPA enforcement scenarios are still popping up more than 30 years after the law's enactment.

 3. Your money or your HR director. The SEC kicked off the FCPA-enforcement year with civil books and records and internal controls charges against Texas-based oil and gas services firm NATCO Group Inc. The company was hit with a $65,000 civil penalty because its subsidiary, TEST Automation & Controls, Inc., "created and accepted false documents while paying extorted immigration fines and obtaining immigration visas in the Republic of Kazakhstan."

Extorted is the important word.

Companies and expat employees regularly face demands for cash from foreign police, bureaucrats and regulators that are backed by threats. The case is a reminder that extorted payments may not violate the FCPA's antibribery provisions but can be the basis for accounting offenses if not accurately recorded.

Our take: Although technically correct, the SEC looked petty dinging Natco for $65K. A warning letter about the accounting lapses (with some sympathy for the extortion) would have been fine.

4.  Directors 2, Plaintiffs 0. In dismissing a shareholder deriviative suit that alleged Dow Chemical's directors failed to prevent bribery in Kuwait, a Delaware chancery court said Dow's corporate compliance program was evidence the board had met its fiduciary duty of supervision.

Tucked in a footnote, the court's important message said: "Plaintiffs cannot simultaneously argue that the Dow board 'utterly failed' to meet its oversight duties yet had 'corporate governance procedures' in place without alleging that the board deliberately failed to monitor its ethics policy or its internal procedures."

Our take: Spot-on decisions like this are what make the Delaware chancery court so respected.

5, 6, 7 And that brings us to  . . . last week's FCPA mega bust. Which was immediately followed by a one-count criminal information against "Individual 1" from the mega-bust indictments -- revealed to be Richard T. Bistrong. For a nice account of his first court appearance in D.C. on Friday, take a look at this dispatch from Christopher Matthews at Main Justice.

And let's not forget last week's indictment of the Thai official and her daughter who allegedly took bribes from Gerald and Patricia Green. Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, becomes one of the few foreign officials charged in the U.S. for a corruption-related offense. As for the Greens, their sentencing on FCPA and related charges was postponed last week until March 11.

*   *   *

Not long ago, it would have taken a year or more to rack up this much FCPA-type action. That makes us wonder what the rest of 2010 will look like. It's going to be a wild ride.

Friday
Jan222010

Another Military Equipment Exec Charged In Bribe Case

Representatives of the United Nations are "foreign officials" under the Foreign Corrupt Practices Act. The key intermediary identified as “Individual 1” in this week's historic bribery indictment of 22 people from the military and police-equipment industry has been charged with conspiracy (18 U.S.C. § 371).

In a one-count criminal information filed in federal court in the District of Columbia, the DOJ accused Richard T. Bistrong of conspiring with others to violate the Foreign Corrupt Practices Act's antibribery provisions, 15 U.S.C. §78dd-1, its books and records provisions, 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5) and 78ff(a), and the Commerce Department's export license rules, 50 U.S.C. §§ 1701-1706 and 15 C.F.R. §§ 736.2, 764.2, and 774. The information was released on Friday.

Bistrong was a vice president for international sales at Armor Holdings, a former publicly traded military equipment manufacturer in Jacksonville, Florida. Amor became a subsidiary of BAE Systems after the British firm acquired it in 2007.

According to a report in the New York Times Friday by Diana Henriques, John Suttle, senior vice president for corporate communications at BAE's U.S. unit, confirmed that Bistrong had worked at Armor Holdings but was fired before BAE's acquisition. He said Armor had self-disclosed to the DOJ and SEC and that "all of these events occurred before BAE bought the company."

The New York Times also said sources confirmed that Bistrong -- or “Individual 1” as he's referred to in the earlier indictments -- introduced undercover FBI agents to senior executives in the arms and security-equipment business.

Tuesday's indictment of 22 people, including four Israelis and three Britons, was the first big undercover sting used in connection with alleged violations of the Foreign Corrupt Practices Act. It was also the biggest mass indictment in FCPA history. An FBI undercover agent posed as a military-equipment buyer for an African country. He told the sellers they would have to pay 20% commissions to an African government official for the sales. "Individual 1," according to the indictments, played a key role by introducing the undercover FBI agent to the various sellers.

In its charges against Bistrong, the DOJ alleged that from 2001 through 2006, he and others concealed about $4.4 million in payments to agents and other intermediaries who helped Armor Products obtain business from "foreign government customers" in Nigeria and the Netherlands. Payments for sales to the United Nations for its mission in Iraq were also involved.

The DOJ said in the information that an official of a "public international organization" is a "foreign official" under the FCPA. 15 U.S.C. §§ 78dd-l(f)(l)(A) and 78dd-l(f)(I)(B). The United Nations is a "public international organization;" therefore its offcials are "foreign officials" under the FCPA. 22 U.S.C. § 288; Exec. Order No. 9698, 11 Fed. Reg. 1809 (Feb. 20,1946).

The information also alleged that in March 2004, Bistrong and another employee authorized the export from the U.S. to the United Arab Emirates for further shipping to Iraq of vests and helmets "without obtaining a required license from the Commerce Department to do so."

Download a copy of the information in U.S. v. Richard T. Bistrong here.

Special thanks to Marc Bohn in the District of Columbia for help with this post.

Thursday
Jan212010

It's In The Bag

The mail is always fun around here (when we're not in any sort of hot water). Here's a message from a curious reader who asks a great question. It's about one of the defendants indicted in this week's FCPA mega bust.

We think he's right but we'd like to hear from other readers too.

 

From: sundar narayanan
Date: January 21, 2010
To: The FCPA Blog
Subject: Re: Lee Allen Tolleson

Dear FCPA Blog,

I believe the recently indicted Lee Allen Tolleson, 25, is the youngest indivual ever indicted for an FCPA offense.

I'd like to know if there are any people younger than him indicted in the past for violating the FCPA.

Regards
Sundar. N

*   *   *

Still on the subject of the mega bust. Peter Henning, a professor at Wayne State Law School and formerly of the White Collar Crime Prof Blog, has a terrific post on the New York Times White Collar Watch. He talks about the tactics used to nail the 22 FCPA defendants:

. . . Undercover stings in white-collar cases are controversial because the defendants are generally law-abiding citizens, unlike those dealing in drugs or stolen property who can hardly complain that they are unwary innocents. After Abscam, Congress considered legislation to require prior approval for undercover operations as a means to limit the discretion of prosecutors and investigative agencies to use a sting to cases in which there was some basis to believe the target was willing to engage in criminal activity before the investigation began. The legislation never advanced, and undercover stings have been used successfully in public corruption cases, like Operation Greylord in Chicago, which resulted in the conviction of a number of judges and lawyers working in the Cook County courts. . . .

*   *   *

Hard words for the president. From Mort Zuckerman, the chairman and editor in chief of U.S. News & World Report and publisher of the New York Daily News. Writing this week in the Daily Beast:

He’s misjudged the character of the country in his whole approach. There’s the saying, “It’s the economy, stupid.” He didn’t get it. He was determined somehow or other to adopt a whole new agenda. He didn’t address the main issue.

This health-care plan is going to be a fiscal disaster for the country. Most of the country wanted to deal with costs, not expansion of coverage. This is going to raise costs dramatically.

In the campaign, he said he would change politics as usual. He did change them. It’s now worse than it was. I’ve now seen the kind of buying off of politicians that I’ve never seen before. It’s politically corrupt and it’s starting at the top. It’s revolting. . . .

I’m very disappointed. We endorsed him. I voted for him. I supported him publicly and privately.

Thursday
Jan212010

Sentencing Respite For The Greens

Judge Wu: He wasn't ready this week to sentence Hollywood producers Gerald and Patricia Green. They face as much as 20 years or more in prison for violating the Foreign Corrupt Practices Act and other U.S. laws.Sentencing for Gerald Green and his wife Patricia, the Hollywood movie producers convicted last year of paying kickbacks to a Thai official in exchange for contracts, has been postponed until March 11.

The Greens were scheduled to learn their sentences at a hearing in federal court in Los Angeles on Thursday. Judge George Wu instead asked for more information from the parties. He said he wants Gerald Green's lawyers to provide a summarized medical report and he asked prosecutors for an official statement from the Thai government declaring that Thailand was harmed by the Greens’ bribery.

In a signal that he may be uncomfortable with the long sentences requested by the government under the federal guidelines, he also asked both sides for research showing prison terms from similar bribery cases.

A report of the hearing appears in the Wrap here.

Gerald Green, 78, appeared in court on Thursday "with a small oxygen tank slung over his shoulder," the report said. His lawyers argue that he needs constant medical care. In their sentencing memo they said:

Not only does Mr. Green suffer from extremely severe emphysema, his condition is progressive. He has already lost so much lung function that he has none left to spare. At his current capacity every breath is a struggle. At the core of the issue is that ANY lung function lost due to any delay or interruption in his regime of treatment is permanent. This was clearly illustrated during the early period of this case when Mr. Green could not utilize steam therapy because of the monitoring device. During that period of time there was a decrease in lung function.

During Thursday's hearing, the Wrap said Assistant U.S. Attorney Bruce Searby "was visibly perplexed" by Judge Wu's requests:

“Don’t you like the give and take of argument?” Wu asked, smiling at Lopez. “Don’t you get this in Washington D.C.?”

All Lopez could say to Wu’s concern was, “It shouldn’t be that you can go out and bribe someone just as long as the host country profits from the bribe.”

Gerald Green faces 20 to 25 years under the federal sentencing guidelines; the government has asked that he be jailed for life. His wife Patricia, 55, could be sentenced to between 19 and 24 years.

A jury convicted them in September of conspiring to violate the FCPA and money laundering laws, nine counts of violating the FCPA and seven counts of money laundering. Patricia Green was found guilty of two counts of subscribing to a U.S. income tax return knowing it contained false statements.

The Thai official named in the Greens' prosecution has been indicted with her daughter. The indictment unsealed Tuesday in Los Angeles charges Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, and her daughter, Jittisopa Siriwan, with one count of conspiracy, seven counts of transporting funds to promote unlawful activity (bribery), and one count of aiding and abetting. If convicted, Siriwan and her daughter each face up to 20 years in prison. Siriwan has said she is innocent.

A copy of the indictment in U.S. v. Juthamas Siriwan in the U.S. District Court for the Central District of California (Case No.: CR 09 00081) can be downloaded here.

Wednesday
Jan202010

Big Shot In Vegas

The Justice Department's Big Show: It arrested 21 of 22 defendants who were in Las Vegas for the firearms-related industry's biggest annual event, in the presence of 1,400 journalists from the U.S. and abroad.One stunning aspect of this week's giant FCPA bust was the DOJ's stage management. Defendants from three countries and five states were swept up at the same time, all but one in the same city. The feds were like an infantry waiting to see the whites of their eyes -- waiting, waiting, waiting -- until the defendants had walked into the trap. It was law enforcement as art, choreographed at the biggest law enforcement-related confab on the planet, in the presence of the world's media.

Twenty-one of the 22 defendants were arrested in Las Vegas. (One of them, Stephen Gerard Giordanella, was arrested in Miami.) None lived in Vegas; they were in town for the Shot Show.

The annual Shooting, Hunting & Outdoor Trade Show is a colossal event. Founded 32 years ago for the firearms, munitions and shooting-related industry, the general public isn't invited. It's for professionals only and draws around 60,000 people from all 50 states and 75 countries. They come to see the 1,800 exhibitors -- if you're not part of the Shot Show, you're not part of the industry. This year's venue at the Sands Expo & Convention Center covers 700,000 square feet.

The FCPA arrests were bound to receive maximum attention. They happened on the eve of the Shot Show's opening; some defendants were from well-known exhibitors. According to the Shot Show website, around 1,400 journalists would have been there -- flying in from all over the U.S. and beyond. The FCPA arrests gave them a special reward -- hard news to send back home.

*   *  *

The Shot Show, which runs through January 22nd, features appearances by most celebrities in the shooting-sports field -- Clint Smith from the Thunder Ranch shooting school, Tom Gresham from Gun Talk radio, and big game hunter Wayne Van Den Bergh, among others. 

Wider-known personalities are there too. Mixed martial arts champ Brock Lesnar is on the appearance list, along with baseball players Willie Robertson, Chipper Jones, Adam LaRoche, Matt Duff, Ryan Langerhans and Tombo Martin. One of the legendary Statler Brothers -- Jimmy Fortune -- is there. So is Kristy Lee Cook, a top ten American Idol finalist.

The best-known attendee this year may be Hollywood actor Steven Seagal. He's plugging his line of "Steven Seagal Tactical Gear" -- body armor, battle and sniper rifles, and other equipment for military and police. Here he is:

Wednesday
Jan202010

Report: Charges Against Thai Official In Green Case

The AP reports the indictment in LA of Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, and her daughter, Jittisopa Siriwan, with conspiracy and eight other counts. They were named in the FCPA prosecution of Gerald and Patrcia Green.We haven't seen the indictment yet or read any news directly from the DOJ. But the Associated Press has reported that the Thai official named in the FCPA prosecution of Hollywood movie producers Gerald and Patricia Green has been indicted with her daughter "on charges that they accepted bribes from" the Greens in exchange for running the Bangkok International Film Festival.

The AP report said: "An indictment unsealed Tuesday in Los Angeles charges Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, and her daughter, Jittisopa Siriwan, with conspiracy and eight other counts. If convicted, they each face up to 20 years in prison."

Bribe-takers are not subject to the Foreign Corrupt Practices Act and it's unclear what charges are contained in the indictment.

The Greens are scheduled to be sentenced on January 21 in Los Angeles. They were convicted in September of conspiring to violate the FCPA and money laundering laws, 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.

Gerald Green, 78, faces 20 to 25 years under the federal sentencing guidelines; the government has asked that he be jailed for life. His wife Patricia, 55, could be sentenced to between 19 and 24 years.

The DOJ said during the prosecution against the Greens that Siriwan accepted about $1.8 million in bribes between 2002 and 2007, when she was governor of the Tourism Authority of Thailand. She was also in charge of the Bangkok film festival. She awared the Greens contracts worth about $13.5 million, the DOJ said. She has denied any wrongdoing.

The AP said it was unclear if Siriwan and her daughter are in U.S. custody.

We'll update this story as it develops.

[Added January 22: The indictment charges Juthamas Siriwan and her daughter, Jittisopa Siriwan with one count of conspiracy, seven counts of transporting funds to promote unlawful activity (bribery), and one count of aiding and abetting. If convicted, Siriwan and her daughter each face up to 20 years in prison. A copy of the indictment in U.S. v. Juthamas Siriwan, U.S. District Court for the Central District of California (Case No.: CR 09 00081) can be downloaded here.]

Wednesday
Jan202010

The FCPAscam 22: Who Do They Work For?

Helmie Ashiblie: One of 22 people from the law enforcement and military equipment supply industry arrested this week for violating the Foreign Corrupt Practices Act.The Justice Department didn't name them. But here's what we've learned so far about the employers of those arrested in Tuesday's FCPA mega-bust:

•    Daniel Alvirez, 32, and Lee Allen Tolleson, 25, the president and director of acquisitions and logistics at ALS Technologies Inc., a company in Bull Shoals, Ark., that manufactures and sells law enforcement and military equipment;

•    Helmie Ashiblie, 44, the vice president and founder of i-Shot, a company in Woodbridge, Va., that supplies tactical bags and other security-related articles for law enforcement agencies and governments worldwide;

•    Andrew Bigelow, 40, the managing partner and director of government programs for  The Gun Search.com LLC in Sarasota, Fla. (dba/ machinegun.com), a company that sells machine guns, grenade launchers and other small arms and accessories;

•    R. Patrick Caldwell, 61, and Stephen Gerard Giordanella, 50, the current and former chief executive officers of Protective Products of America Inc, Sunrise, Fla., a company that designs and manufactures concealable and tactical body armor;

•    Yochanan R. Cohen, a/k/a Yochi Cohen, 47, the chief executive officer of High Com Security, a San Francisco company that manufactures security equipment, including body armor and ballistic plates;

•    Haim Geri, 50, the president of High Tech USA, a North Miami Beach, Fla., company that serves as a sales agent for companies in the law enforcement and military products industries;

•    Amaro Goncalves, 49, the vice president of sales for Smith & Wesson Holding Corp, Springfield, Mass., a company that designs and manufactures firearms, firearm safety/security products, rifles, firearms systems and accessories;

•    John Gregory Godsey, a/k/a Greg Godsey, 37, and Mark Frederick Morales, 37, the owner and agent of a Decatur, Ga., company that sells ammunition and other law enforcement and military equipment;

•    Saul Mishkin, 38, the owner and chief executive officer of Orkil International LLC, an Aventura, Fla., company that sells law enforcement and military equipment;

•    John M. Mushriqui, 28, and Jeana Mushriqui, 30, the director of international development and general counsel/U.S. manager of Mushriqui Consulting LLC, an Upper Darby, Penn., company that manufactures and exports bulletproof vests and other law enforcement and military equipment;

•    David R. Painter, 56, and Lee M. Wares, 43, the chairman and director of a United Kingdom company that markets armored vehicles;

•    Pankesh Patel, 43, the managing director of a United Kingdom company that acts as sales agent for companies in the law enforcement and military products industries;

•    Ofer Paz, 50, the president and chief executive officer of Paz Logistics, an Israeli company that acts as sales agent for companies in the law enforcement and military products industries;

•    Jonathan M. Spiller, 58, the owner and president of Jm Spiller & Assoc Inc, a Ponte Vedra Beach, Fla., company that markets and sells law enforcement and military equipment;

•    Israel Weisler, a/k/a Wayne Weisler, 63, and Michael Sachs, 66, owners and co-chief executive officers of U.S. Cavalry Store Inc., Stearns, Ky., company that designs, manufactures and sells armor products, including body armor;

•    John Benson Wier III, 46, the president of SRT Supply Inc., a St. Petersburg, Fla., company that sells tactical and ballistic equipment.

Politico posted some background about the defendants here.

Readers are welcome to help us fill in the gaps.

See related posts here.

Tuesday
Jan192010

Lessons From FCPAscam 

That's a Smith and Wesson and you've had your six.

        ~ James Bond to an out-of-ammo assailant in "Dr. No"

Twenty-two people from military and law-enforcement supply companies -- including the vice president of sales for American gun-maker Smith & Wesson -- were arrested Tuesday on charges of violating the Foreign Corrupt Practices Act, and conspiracy to violate the FCPA and launder money.

Our six shots. Here's an early look at what the case means:

1. The feds' new playbook. It was an undercover sting operation, the first big one in FCPA history. There was no real foreign official, only an FBI agent posing as "a sales agent who the defendants believed represented the minister of defense for a country in Africa." Can you have an FCPA violation without an actual foreign official? We'll find out.

2. Five plus five plus twenty (years that is). Even if the FCPA charges don't stick, the feds also charged the defendants with conspiracy to violate the FCPA and to commit money laundering. Conspiracy can be easier for the government to prove than substantive FCPA offenses. Just ask William Jefferson and Frederic Bourke. The FCPA count carries a 5-year penalty, as does the FCPA conspiracy charge. But the conspiracy to commit money laundering packs a 20-year punch.

3. Who squeals first, squeals best. When the government indicts en masse, the defendants who offer early cooperation usually make out best, often with much lighter sentences. Having cooperating witnesses makes life a lot easier for the prosecutors. The tactic has been used for years by the Justice Department in price-fixing and antitrust cases.

4. They're everywhere. The DOJ said "approximately 150 FBI agents executed 14 search warrants in locations across the country." How many agents were involved in the actual investigation and sting, we aren't told. Whatever the number, this was a big operation. 

5. The Brits are in the game. The DOJ said the City of London Police "executed seven search warrants in connection with their own investigations" into companies involved in the DOJ busts. The U.K. authorities snoozed for decades on overseas bribery. But lately they've also arrested Jeffrey Tesler at the DOJ's request, launched an investigation into Halliburton, look set to charge BAE, charged a former Johnson & Johnson / DePuy executive, and banned some Kenyan kleptocrats.

 6. Low-hanging fruit. White collar types aren't used to being targeted by investigators. Unlike drug dealers and Mafioso, they haven't had much practice being careful not to get caught. What's that mean for the FCPA? More of the same on the way. As Assistant Attorney General Lanny A. Breuer said Tuesday: "From now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent."

Tuesday
Jan192010

Massive FCPA Indictment Unsealed

The Justice Department announced the biggest FCPA indictment ever; 22 from arms and security industry charged in FBI sting.First Large-Scale FCPA-Related FBI Sting

From the Justice Department's January 19, 2010 release:

 WASHINGTON – Twenty-two executives and employees of companies in the military and law enforcement products industry have been indicted for engaging in schemes to bribe foreign government officials to obtain and retain business.

Twenty-one defendants were arrested in Las Vegas yesterday. One defendant was arrested in Miami. The indictments stem from an FBI undercover operation that focused on allegations of foreign bribery in the military and law enforcement products industry.

The 16 indictments unsealed today represent the largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the Foreign Corrupt Practices Act (FCPA), a law that prohibits U.S. persons and companies, and foreign persons and companies acting in the United States, from bribing foreign government officials for the purpose of obtaining or retaining business.

The indictments unsealed today were returned on Dec. 11, 2009, by a grand jury in Washington, D.C.

In connection with these indictments, approximately 150 FBI agents executed 14 search warrants in locations across the country, including Bull Shoals, Ark.; San Francisco; Miami; Ponte Vedra Beach, Fla.; Sarasota, Fla.; St. Petersburg, Fla.; Sunrise, Fla.; University Park, Fla.; Decatur, Ga.; Stearns, Ky.; Upper Darby, Penn.; and Woodbridge, Va. Additionally, the United Kingdom’s City of London Police executed seven search warrants in connection with their own investigations into companies involved in the foreign bribery conduct that formed the basis for the indictments.

“This ongoing investigation is the first large-scale use of undercover law enforcement techniques to uncover FCPA violations and the largest action ever undertaken by the Justice Department against individuals for FCPA violations,” said Assistant Attorney General Lanny A. Breuer. “The fight to erase foreign bribery from the corporate playbook will not be won overnight, but these actions are a turning point. From now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent.”

The indictments allege that the defendants engaged in a scheme to pay bribes to the minister of defense for a country in Africa. In fact, the scheme was part of the undercover operation, with no actual involvement from any minister of defense. As part of the undercover operation, the defendants allegedly agreed to pay a 20 percent “commission” to a sales agent who the defendants believed represented the minister of defense for a country in Africa in order to win a portion of a $15 million deal to outfit the country’s presidential guard. In reality, the “sales agent” was an undercover FBI agent.

The defendants were told that half of that “commission” would be paid directly to the minister of defense. The defendants allegedly agreed to create two price quotations in connection with the deals, with one quote representing the true cost of the goods and the second quote representing the true cost, plus the 20 percent “commission.” The defendants also allegedly agreed to engage in a small “test” deal to show the minister of defense that he would personally receive the 10 percent bribe.

The indictments charge the following executives and employees of the various companies in the military and law enforcement product industries:

•    Daniel Alvirez, 32, and Lee Allen Tolleson, 25, the president and director of acquisitions and logistics at ALS Technologies Inc., a company in Bull Shoals, Ark., that manufactures and sells law enforcement and military equipment;

•    Helmie Ashiblie, 44, the vice president and founder of a company in Woodbridge, Va., that supplies tactical bags and other security-related articles for law enforcement agencies and governments worldwide;

•    Andrew Bigelow, 40, the managing partner and director of government programs for a Sarasota, Fla., company that sells machine guns, grenade launchers and other small arms and accessories;

•    R. Patrick Caldwell, 61, and Stephen Gerard Giordanella, 50, the current and former chief executive officers of Protective Products of America Inc, Sunrise, Fla., a company that designs and manufactures concealable and tactical body armor;

•    Yochanan R. Cohen, a/k/a Yochi Cohen, 47, the chief executive officer of a San Francisco company that manufactures security equipment, including body armor and ballistic plates;

•    Haim Geri, 50, the president of a North Miami Beach, Fla., company that serves as a sales agent for companies in the law enforcement and military products industries;

•    Amaro Goncalves, 49, the vice president of sales for Smith & Wesson Holding Corp, Springfield, Mass., a company that designs and manufactures firearms, firearm safety/security products, rifles, firearms systems and accessories;

•    John Gregory Godsey, a/k/a Greg Godsey, 37, and Mark Frederick Morales, 37, the owner and agent of a Decatur, Ga., company that sells ammunition and other law enforcement and military equipment;

•    Saul Mishkin, 38, the owner and chief executive officer of an Aventura, Fla., company that sells law enforcement and military equipment;

•    John M. Mushriqui, 28, and Jeana Mushriqui, 30, the director of international development and general counsel/U.S. manager of an Upper Darby, Penn., company that manufactures and exports bulletproof vests and other law enforcement and military equipment;

•    David R. Painter, 56, and Lee M. Wares, 43, the chairman and director of a United Kingdom company that markets armored vehicles;

•    Pankesh Patel, 43, the managing director of a United Kingdom company that acts as sales agent for companies in the law enforcement and military products industries;

•    Ofer Paz, 50, the president and chief executive officer of an Israeli company that acts as sales agent for companies in the law enforcement and military products industries;

•    Jonathan M. Spiller, 58, the owner and president of a Ponte Vedra Beach, Fla., company that markets and sells law enforcement and military equipment;

•    Israel Weisler, a/k/a Wayne Weisler, 63, and Michael Sachs, 66, owners and co-chief executive officers of a Stearns, Ky., company that designs, manufactures and sells armor products, including body armor;

•    John Benson Wier III, 46, the president of a St. Petersburg, Fla., company that sells tactical and ballistic equipment.

All of the defendants except Giordanella were arrested yesterday by FBI agents in Las Vegas. Giordanella was arrested in Miami, also by FBI agents.

Each of the indictments allege that the defendants conspired to violate the FCPA, conspired to engage in money laundering, and engaged in substantive violations of the FCPA. The indictments also seek criminal forfeiture of the defendants’ ill gotten gains.

The maximum prison sentence for the conspiracy count and for each FCPA count is five years. The maximum sentence for the money laundering conspiracy charge is 20 years in prison.

The DOJ's release is here.

The indictments can be downloaded from the links below: