FCPA Defendants Face Long Odds

In Los Angeles this week, the trial of Lindsey Manufacturing, Dr. Keith Lindsey, Steve K. Lee, and Angela Aguilar opened in federal court.

(On Friday, they lost their motion to dismiss the case when the judge ruled that officers of the Mexican electric utility CFE, who the defendants allegedly bribed, are foreign officials under the FCPA.)

Later this year, more FCPA trials are set to happen. In California, six defendants from Control Components Inc. will go on trial, and in Houston, John O'Shea of ABB will face a jury.

What are the prospects for this year's FCPA defendants? It's an uphill fight.

In 2009, another jury in LA convicted Gerald Green and his wife Patricia on FCPA and related charges in just hours. There are also lessons from Frederic Bourke, William Jefferson, David Kay, Douglas Murphy, and David Mead, who in recent times all lost FCPA-related jury trials.

Here are some reasons why fighting FCPA charges is so tough. Not all the reasons apply to all defendants.

Juries hate graft. FCPA cases are about bribes to corrupt foreign officials. They're about sophisticated and often wealthy people looking for shortcuts, hoping to subvert foreign governments for personal or corporate gain. Wheeling and dealing in exotic places. Flashing cash and pulling strings. Juries lap it up. We've said before that even if the government's evidence isn't rock solid on all the elements of an FCPA offense, the jury will still get the picture that people stepped over the line of acceptable business behavior. And they'll convict.

There are lots of witnesses. Forget lone wolves and rogue employees. Foreign bribery is usually a team effort. When the government gets a whiff of the plot, it hauls in everyone -- from those who might have had a hand in it to anyone who could have overheard talk at the water cooler. If it's early in the investigation, the bit players can be persuaded to turn, to become the government's cooperating witnesses or confidential informants. Supporting actors are given immunity or offered the hope of lighter sentences. So they sing about their bosses, colleagues, clients, and friends.

Two former CCI execs -- Mario Covino and Richard Morlok -- already pleaded guilty and are helping prosecutors. And Fernando Basurto, ABB's former agent in Mexico, will testify against John O'Shea. He may also turn up in the Lindsey trial. And both CCI and ABB have also pleaded guilty and have been cooperating with the feds.

Evidence is everywhere. Bribes have to be planned, funded, paid, and covered up. There's always someone on the receiving end, so the complications multiply. It usually leaves behind a trail that's easy to find and follow. Phony contracts and dummy invoices, hot money bouncing from bank to bank, fake agents and distributors, shell companies as fronts, two sets of books, and so on.

Prosecutors show and tell. These days the government is likely to show up for trial with audio tapes of the accused discussing the bribes or videos showing the actual handover of cash. "Wearing a wire" once meant strapping to your torso an awkward piece of electronic gear the size of a croissant. Not any more. A cell phone on the table can be an open mic. A spy pen in the breast pocket can capture or broadcast sound and pictures.

Related charges grow like mushrooms. With foreign bribery, there's usually a conspiracy, money laundering, traveling to commit the offense, fraud and obstruction in the cover-up, and tax-cheating to boot. Prosecutors stack the charges and drop weak ones later, plowing ahead with the rest. 

In addition to substantive FCPA charges, the Lindsey defendants face conspiracy counts; Angela Aguilar at first faced FCPA charges, later replaced with money laundering and aiding and abetting. On top of his FCPA counts, O'Shea faces conspiracy, money-laundering, and falsification of records. The CCI defendants are charged with FCPA violations and conspiracy, Travel Act, and aiding and abetting offenses.

Frederic Bourke, incidentally, was convicted not for violating the FCPA but of conspiracy and a Travel Act offense. William Jefferson beat a substantive FCPA charge but was found guilty of conspiracy to violate the FCPA and other corruption counts. Gerald Green beat the obstruction rap -- the government ended up dropping the charge -- but he and his wife were convicted of conspiracy to violate the FCPA, eight violations of the FCPA and seven counts of money laundering. Mrs. Green was also found guilty of two counts of falsely subscribing a U.S. tax return.

Forfeiture -- the government's WMD. An FCPA defendant can win acquittal on every FCPA-related count but one and still lose a forfeiture action. Any assets derived from proceeds traceable to a violation of the FCPA, or a conspiracy to violate the FCPA, can be forfeited. The Greens were only sentenced to six months in federal prison. But through forfeiture they lost their home, bank accounts, car, companies, and pensions. The Lindsey defendants all face forfeiture, as does O'Shea. The CCI defendants don't.

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

The Hard Timers

Compliance officers will want to keep a copy of the table below close at hand. What better way to answer those who insist that the FCPA is small potatoes, after all, when you look at the relatively few enforcement actions over the past 33 years.

Here are the 22 men (no women so far), most of them former company executives, who've spent time in prison for FCPA-related convictions. Each name that follows represents a terrible tragedy, often with permanent damage extending to families. As the compiler of the list said: "By my count there have been 187 people charged with violating the FCPA. This list will look a little different at the end of the year."

We'd like to thank the generous individual responsible for this post, but that's not possible. He or she has asked to remain anonymous, making this contribution pro bono publico.

The information is compiled from the Federal Bureau of Prisons' inmate locator. Readers with suggestions and corrections are welcome to let us know.

Name	Related Company	Register #	Age Race Sex	Release Date	Location
FERNANDO MAYA BASURTO	ABB Ltd	39135-177	48-White-M	UNKNOWN	HOUSTON FDC
CHARLES PAUL EDWARD JUMET	Ports Engineering Consultants Corporation	75638-083	53-White-M	UNKNOWN	NOT IN BOP CUSTODY
SULEIMAN A NASSAR	Lockheed	45723-019	73-White-M	11/19/1996	RELEASED
DAVID H MEAD	Saybolt	79529-079	72-White-M	7/21/1999	RELEASED
HERBERT STEINDLER	General Electric	02423-061	71-White-M	3/13/2000	RELEASED
HERBERT LAWRENCE TANNENBAUM	Tanner Management Corp	82537-054	85-White-M	4/20/2000	RELEASED
RICHARD G PITCHFORD	Central Asia American Enterprise Fund	26036-016	75-White-M	12/4/2003	RELEASED
ROBERT RICHARD KING	Owl Securities and Investments	14447-045	76-White-M	6/30/2006	RELEASED
STEVEN LYNWOOD HEAD	Titan	95321-198	63-White-M	9/29/2008	RELEASED
YAW OSEI AMOAKO	ITXC Corporation	60267-050	58-Black-M	12/17/2008	RELEASED
PAUL GRAYSON NOVAK	Willbros	43505-279	43-White-M	12/19/2008	RELEASED
ROGER MICHAEL YOUNG	ITXC Corporation	29574-016	49-White-M	4/10/2009	RELEASED
STEVEN JOSEPH OTT	ITXC Corporation	60540-050	50-White-M	6/17/2009	RELEASED
RAMENDRA BASU	World Bank	29254-016	47-White-M	8/7/2009	RELEASED
FAHEEM MOUSA SALAM		28567-016	32-White-M	1/7/2010	RELEASED
MISAO HIOKI	Bridgestone	90290-111	56-Asian-M	11/23/2010	LOMPOC USP
DAVID KAY	American Rice	13749-179	58-White-M	1/27/2011	TEXARKANA FCI
JIM BOB BROWN	Willbros	66158-179	48-White-M	1/29/2011	ATLANTA USP
CHRISTIAN SAPSIZIAN	Alcatel SA	78172-004	63-White-M	3/18/2011	NE OHIO CORR CTR CI
JASON EDWARD STEPH	Willbros	36444-177	40-White-M	3/28/2011	EL RENO FCI
DOUGLAS MURPHY	American Rice	13987-179	53-White-M	12/31/2012	EL RENO FCI
SHU QUAN-SHENG	AMAC International	58250-083	69-Asian-M	2/18/2013	LA TUNA FCI

No Hollywood Ending

An LA jury needed not days but hours to convict the husband-and-wife movie producers of violating the Foreign Corrupt Practices Act. They were also found guilty on related charges, including conspiracy, money laundering, and tax cheating. Gerald Green, 77, and Patricia, 52, are facing at least ten years behind bars and maybe a lot more for bribing a Thai official in exchange for contracts to produce the Bangkok Film Festival.

The trial's tragic outcome shouldn't surprise anyone. There hasn't been an acquittal in an FCPA prosecution since 1991. Not one. That's why comments from Patricia Green's lawyer are hard to understand. Marilyn Bednarski told the LA Times here, "To me it’s a case of circumstantial evidence . . . the people of Thailand were not victimized in any way" because the Greens provided "top notch services." Really?

Gerald Green's lawyer, Jerome Mooney, was more in touch. The DOJ used the case, he said, partly to send a warning to the entertainment industry: clean up the way you deal with "community relations" in foreign countries, or else. "We understand the government taking a shot across the bow of Hollywood," Mooney said. "We just wish the shell hadn't landed on our clients' boat."

From the convictions this year of the Greens, Frederic Bourke and William Jefferson, and those from prior years of David Kay, Douglas Murphy and David Mead, and all the prosecutions and guilty pleas in between, here are some things that every FCPA defendant should keep in mind before their trial starts:

Juries hate graft. FCPA cases are about bribes to corrupt foreign officials. They're about sophisticated and often wealthy people looking for shortcuts, hoping to subvert foreign governments for personal or corporate gain. Wheeling and dealing in exotic places. Flashing cash and pulling strings. Juries lap it up. As we've said before, even if the government's evidence isn't rock solid on all the elements of an FCPA offense, the jury will still get the picture that people stepped over the line of acceptable business behavior. And they'll convict.

There are clouds of witnesses. Forget lone wolves and rogue employees. Foreign bribery is usually a team effort. When the government gets a whiff of the plot, it hauls in everyone -- from those who might have had a hand in it to anyone who could have overheard talk at the water cooler. If it's early in the investigation, the bit players can be persuaded to turn, to become the government's cooperating witnesses or confidential informants. Supporting actors are given immunity or offered the hope of lighter sentences. So they sing about their bosses, colleagues, friends. They have extra incentive if they blame the aforementioned for dragging them into the criminal activity.

Evidence is everywhere. Bribes have to be planned, funded, paid, and covered up. There's always someone on the receiving end, so the complications multiply. It all takes a lot of work and usually leaves behind a trail that's easy to find and follow. Phony contracts and dummy invoices, hot money bouncing from bank to bank, fake agents and distributors, shell companies as fronts, two sets of books, and so on.

Show and tell. These days the government is likely to show up for trial with audio tapes of the accused discussing the bribes or videos showing the actual handover of cash. "Wearing a wire" once meant strapping to your torso an awkward piece of electronic gear the size of a croissant. Not any more. A cell phone on the table can be an open mic. A spy pen in the breast pocket can capture or broadcast sound and pictures. Scary stuff. And once the feds have tapes, they may not even need the cooperating witnesses or informants at the trial.

Related charges a-plenty. In foreign bribery cases, the government might start with FCPA charges. But remember: bribes to foreign officials need to be planned, funded, paid, and covered up. So there's usually a conspiracy, money laundering, traveling to commit the offense, fraud and obstruction in the cover-up, and tax-cheating to boot. What a mess. The government can throw a lot of mud at the wall. If some doesn't stick, so what? Prosecutors can drop weak charges later and plow ahead with the rest.

Examples: Frederic Bourke was convicted of conspiracy to violate the FCPA and a Travel Act offense, but not the FCPA itself. William Jefferson was acquitted of a substantive FCPA charge but found guilty of conspiracy to violate the FCPA, soliciting and taking bribes, depriving citizens of honest services, money laundering and racketeering, and conspiracy to solicit bribes. Gerald Green beat the obstruction rap -- the government ended up dropping the charge -- but he and his wife were convicted of conspiracy to violate the FCPA, eight violations of the FCPA and seven counts of money laundering. Mrs. Green was also found guilty of two counts of falsely subscribing a U.S. tax return.
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Not everyone accused of violating the FCPA is guilty. And certainly those accused and awaiting trial are presumed innocent unless and until found guilty in a court of law. But with no acquittals in an FCPA trial since 1991, defendants and their counsel should have their eyes wide open about their chances in court.

View prior posts about the Greens here.
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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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Catching Corrupt Lawyers, Part II

A lawyer with his briefcase can steal more than a hundred men with guns. -- Mario Puzo

With that street-smart aphorism in mind, we went looking for Foreign Corrupt Practices Act-related cases where lawyers were alleged to be on the wrong side of the law.

Turns out there aren't many. Here's the rundown:

Jeffrey Tesler -- indicted by a Houston grand jury in February. Prosecutors say he was a middleman who handled or arranged corrupt payments from KBR to Nigerian officials. The London lawyer was arrested by British police in March at the request of American authorities, who are trying to extradite him to stand trial in the U.S.

Two American law firms were mentioned in November 2008 during an anti--corruption sweep in China. Avon had disclosed possible FCPA violations involving payments to Chinese regulators. Authorities there were reported to be reviewing foreign investment cases in which the two U.S. firms with offices in Hong Kong and Beijing played a role. The firms (and their lawyers) haven't been named.

J. Bryan Williams, a lawyer in Virginia, was an executive at Mobil Oil. He was also a friend of James H. Giffen, an American businessman arrested in New York in 2003 for paying $78 million in bribes to an adviser of Kazakhstan's president and former oil and gas minister. Williams took a $2 million kickback from Giffen for helping negotiate a deal involving Kazakhstan's Tengiz oil field. Williams pleaded guilty in September 2003 to tax charges and was sentenced to 46 months in prison. Giffen is awaiting trial.

Hans Bodmer, a Swiss lawyer, represented Viktor Kozeny, the Czech-born fugitive charged with Frederic Bourke with bribing government officials in Azerbaijan. Bodmer was indicted by a New York federal grand jury in August 2003 on single counts of conspiracy to violate the FCPA and to launder money. The court dismissed the FCPA charge, ruling that before being amended in 1998, the FCPA didn't apply to non-U.S.-resident foreign nationals who served as agents of domestic concerns. Bodmer then pleaded guilty to conspiracy to launder money. He's never been sentenced.

Attorney Philippe S.E. Schreiber represented Saybolt Inc. It's president, David Mead, said during his 1998 trial that he paid a $50,000 bribe to government officials in Panama only after Schreiber said it wouldn't violate the FCPA. That advice was wrong. Saybolt and Mead were charged with violating the FCPA. Mead was convicted and sentenced to four months in prison, home detention and probation, and a $20,000 fine; Saybolt's FCPA offenses resulted in five-years probation and a $1,500,000 fine. And Schreiber? Saybolt's shareholders sued him for legal malpractice (the case was settled in 2005); and the government never indicted him.

Alfredo Duran, a Miami lawyer, was charged in 1989 with arranging a bribe to officials in the Dominican Republic. The government said a $20,000 to $30,000 payment was intended to secure release of an airplane confiscated in a drug case. Duran's co-defendant jumped bail and returned to the Dominican Republic. At Duran's federal trial in Florida on FCPA charges, the court excluded evidence concerning the fugitive co-defendant, resulting in Duran's acquittal.

In 1994, attorney Harold Katz was indicted for bribing an Israeli Air Force officer to induce the purchase and maintenance of GE aircraft engines worth $300 million. The bribes, paid into Swiss bank accounts, totaled $7.8 million. A co-defendant was charged under the FCPA, while Katz faced mail and wire fraud and money laundering charges. He was never apprehended and remains a fugitive.

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That's it, then. Pretty thin record, isn't it? So the verdict on Mr. Puzo's wisdom about that briefcase? Well, either he's wrong when it comes to the FCPA and lawyers aren't the culprits after all. Or he's right and they don't get caught.
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