How Much Prison Time For Lindsey and Lee?

They're facing up to 30 years behind bars.

The government isn't likely to ask for jail terms of that length. But prosecutors will want long sentences -- probably more like 10 or 12 years.

It will be up to Judge Matz to decide how long Keith Lindsey and Steve K. Lee will serve.

Lindsey, 66, and Lee, 60, were convicted last week of one count of conspiracy to violate the FCPA and five counts of violating the FCPA. Each count is punishable by a maximum of five years in prison.

Sentencing is set for September 16.

How have other FCPA defendants done? Some judges have shown a lot of sympathy.

Bobby Jay Elkin Jr., a former manager in Kyrgyzstan for a tobacco company, avoided prison after pleading guilty last year to one count of conspiracy to violate the FCPA. The government had asked for a 38-month prison term. The judge thought Elkin, 50, was a hero for protecting his company's people during a civil uprising.

Leo Winston Smith received another short sentence. He pleaded guilty in 2009 to bribing an official from the U.K. Ministry of Defense. On an FCPA conspiracy count and tax-related charge, he received just six months in prison followed by six months of home confinement. The government had asked for a 37-month sentence. He's 76 and had suffered three heart attacks before being sentenced.

Gerald Green and his wife Patricia each got just six months in prison after an LA jury found them guilty of conspiring to violate the FCPA, nine counts of violating the FCPA, and seven counts of money laundering. Patricia Green was also found guilty on two counts of falsely subscribing to a U.S. income tax return. The government wanted them each to serve ten years in prison. Gerald Green was 78 when sentenced last year, and suffering from emphysema.

On the other end of the range, here are the longest sentences in FCPA cases. Charles Jumet and Jack Stanley may serve less time than shown in return for their cooperation with the government.

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Chart courtesy of Michael Volkov of Mayer Brown LLP in Washington, D.C.

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

Frederic Bourke's Big Bet

While we're watching the teletype (left) for news about William Jefferson's sentencing Friday morning (see our post here), let's talk about Mr. Bourke. He was sentenced Tuesday to a year and a day in jail and fined a million dollars for conspiring to violate the FCPA and lying to FBI agents. People in the courtroom said when he was convicted, Bourke was shocked. So apparently he never expected the jury to find him guilty. But when he was sentenced, he was happy and relieved. So he must have been expecting a lot worse. And that probably means the DOJ never offered him a deal with so little jail time.

Why was Bourke shocked by the verdict? Because he had good facts and good law and good lawyers. He didn't pay any bribes himself; he was one of Viktor Kozeny's victims; he'd blown the whistle on Kozeny's fraud and testified to a state grand jury that indicted Kozeny; he thought he'd have the local law defense (he didn't; Judge Scheindlin ruled against it); George Mitchell was his friend, co-investor and character witness; he had smart, active lawyers, and so on. So let's face it. As a defendant, Bourke had a lot going for him. That's why he was shocked by the verdict.

But should he have been? We don't think so. Defendants haven't done well with juries in FCPA-related cases. There hasn't been a full acquittal -- Mr. Jefferson's split decision notwithstanding -- since 1991. Why? For two main reasons.

Before we get to reason number one, we acknowledge that there are lots of legal arguments you can raise about the words of the FCPA -- about the business nexus element, the meaning of "foreign official," and others. And those are good arguments on paper. But judges haven't wanted to hear much about them. In the Kay and Murphy case, for example, the Fifth Circuit even warned against defendants who try "splitting hairs" (they were talking about the meaning of "obtaining or retaining business"). So that's reason number one why defendants don't do well in court. Judges don't welcome a lot of legal argument about the FCPA. Bourke's trial also illustrated the point. Judge Scheindlin didn't allow the local law defense. That surprised us and it dented Bourke's chances of acquittal.

Reason number two: Juries hate graft. That's what we said when the Greens were convicted in September. There's no other conclusion to draw from the trial record in FCPA-related prosecutions stretching back eighteen years. We'll say it again: 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. That's how the prosecutors tell it and juries lap it up. So 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 who should know better stepped over the line. And they'll convict.

Coming back to Bourke, we'd have to say he took a big risk going to trial, even though he had a lot going for him. But he was fortunate. Judge Scheindlin was on the bench. She said he was at least partly a victim so she gave him a break on the jail time. That's how justice should work (and why no one is sorry the federal sentencing guidelines aren't compulsory anymore).

One more thing. Bourke still has an appeal to the Second Circuit. Defendants who plea bargain can't appeal but those who go to trial can. That's a reason to go to trial, although it can't be nice to sit in a jail cell hoping your appeal will work (they rarely do). Still, Bourke's chances with the Second Circuit aren't too bad.

Our conclusion: If the government never offered Bourke less than a year in prison as part of a plea deal, he came out ahead by going to trial. And he may do even better after his appeal. But his decision to go to trial in the first place was against the odds. And he ended up lucky.

How Appealing Are Bourke's Chances?

On the subject of Frederic Bourke -- the wealthy entrepreneur convicted in July of conspiring to violate the Foreign Corrupt Practices Act and lying to FBI agents -- we now know what issues his lawyers plan to raise on appeal. Most relate to what Bourke knew and intended -- his mens rea. In a recent pleading arguing for his release pending the appeal, his lawyers said:

[T]he issues Bourke intends to raise on appeal relate closely to each other and, in turn, to the critical disputed aspects of the case. A series of issues—the conscious avoidance instruction, the good faith instruction, the absence of an instruction on "willfully and corruptly," and the exclusion of the Dresner testimony, for example—bear directly on Bourke's mens rea, which was the central battleground at trial. The assessment of Bourke's mens rea, in turn, depends heavily on the weight given the testimony of Bodmer and Farrell. . . .

The mens rea argument didn't work for Bourke in his motion for acquittal or a new trial (see here). Nor did it work for David Kay and Douglas Murphy in the Fifth Circuit or with the Supreme Court. See our posts here and here.

But it might work for Bourke on appeal. He's got deep pockets and good facts. And the timing is right. There are more questions these days about the criminalization of business mistakes and mere negligence. Under the influence of thoughtful commentators such as Ellen Podgor at the White Collar Crime Prof Blog and Tom Kirkendall at Houston's Clear Thinkers, more appellate justices must be wondering if the vague elements that are part of so many white-collar prosecutions are fair -- including the ever-more elusive mens rea element. Last month, the Supreme Court agreed to review whether the honest-services statute used to prosecute Jeffrey Skilling and Conrad Black (18 U.S.C. § 1346) is too vague to meet constitutional standards. If that's a signal of wider judicial discomfort with some of the push-the-envelope white-collar prosecutions, mens rea could be in play, and that could help Bourke.

His prosecution didn't include a substantive FCPA charge. Bourke was tried and convicted for conspiracy to violate the FCPA. On appeal, some of his arguments will probably relate exclusively to the conspiracy elements -- such as whether there needs to be an overt act. So he could still win on appeal without us learning anything new about the FCPA itself.

Bourke is scheduled to be sentenced on November 10, 2009. He faces up to ten years in prison.

View a copy of the October 16, 2009 Reply Memorandum in Support of Defendant Frederic Bourke, Jr.'s Motion For Release Pending Appeal here.

Read all our posts about the prosecution of Frederic Bourke here.
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