ICE Appeals 'Victim' Ruling

The Costa Rican state-owned utility that lost a bid earlier this month to become the first 'victim' compensated under federal law in an FCPA case has appealed the lower court's decision.

Instituto Costarricense de Electricidad S.A. (ICE) asked the United States Court of Appeals for the Eleventh Circuit to overturn District Court Judge Marcia G. Cooke's ruling that ICE wasn't a victim of Alcatel-Lucent's bribery and not entitled to restitution.

In the appeal filed Wednesday, ICE said the district court was wrong to conclude it was a co-conspirator and therefore could not have been a victim for purposes of U.S. federal law. That conclusion, ICE said in its brief, "is not supported by record evidence or the law."

When she made her ruling at the June 1 hearing in Miami, Judge Cooke said the issues were too intertwined as to whether ICE was a victim or an offender, and that corruption was rampant at ICE.

Her decision cleared the way for Alcatel-Lucent's $137 million settlement with the DOJ and SEC.

ICE had argued that just three of its directors and three employees out of 16,000 personnel benefited from Alcatel-Lucent's bribery.

Alcatel-Lucent's former top executive in Costa Rica, Edgar Valverde Acosta, said in a sworn statement filed in U.S. federal court last month that no one at ICE knew about Alcatel's bribery except those directly involved. Acosta, 63, is serving a year in prison in Costa Rica for corruption.

ICE was the first party to ask a U.S. court to grant it victim's status in an FCPA enforcement action.

The DOJ has opposed ICE's petition. "The evidence gathered during the investigation," the DOJ said in an earlier filing, "suggests that corruption at ICE was pervasive in the tender process and occurred at the highest reaches of ICE."

Even if ICE is a victim, the DOJ said, restitution is limited to the victim’s "provable actual loss." And that loss can't be established for ICE within any reasonable time, if at all. So blocking resolution of the Alcatel-Lucent enforcement action wouldn't serve justice, according to the DOJ.

Download a copy of ICE's June 15, 2011 petition for a writ of mandamus under the victim's rights act here.

From Costa Rican Jail, Ex Alcatel Boss Supports ICE's 'Victim' Claim

A Costa Rican citizen serving jail time there has said in a sworn statement filed in U.S. federal court that no one at the Instituto Costarricense de Electricidad S.A. (ICE) knew about Alcatel's bribery except those directly involved.

Edgar Valverde Acosta, 63, was Alcatel’s president in Costa Rica. In his sworn statement, Acosta said:

I am a citizen of Costa Rica and currently incarcerated and serving twelve months of preventive detention as a result of my recent conviction in criminal court in Costa Rica. My conviction was related to allegations of corruption in connection with the sale of products and services to [ICE] by Alcatel-Lucent S.A. . . . .

The DOJ indicted Acosta in June 2007. He has been an FCPA fugitive since then.

His May 31 declaration was filed by ICE, a Costa Rican state-owned enterprise trying to gain victim's status and receive restitution under U.S. law. ICE intervened in the DOJ's enforcement action against Alcatel-Lucent. Settlement of that case still needs final approval by a federal judge in Florida.

ICE's petition is the first time a U.S. court has been asked to grant victim's status to an overseas government-linked institution in an FCPA enforcement action.

The DOJ is opposing ICE, arguing it isn't a victim. In a court filing last month the DOJ said, "The evidence gathered during the investigation suggests that corruption at ICE was pervasive in the tender process and occurred at the highest reaches of ICE."

In his sworn statement, Acosta said in 2004 the Costa Rican press exposed Alcatel-Lucent's corrupt payments. "Prior to that time," he wrote, "no one at ICE, other than the individuals who were receiving the payments had knowledge of these matters, nor, do I believe, they could have known of these matters. . . . ."

In other court filings, ICE said only three of its directors and three other employees knew about Alcatel-Lucent's bribery.

In September 2008, former Alcatel executive Christian Sapsizian, now 65, was sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing ICE employees. He pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act. He and Acosta were named in a joint superceding indictment.

Sapsizian admitted to conspiring with Acosta to arrange the bribes. He was released from prison in the U.S. on March 18 this year, according to federal records.

Alcatel-Lucent agreed with the DOJ and SEC in December last year to resolve FCPA-related charges by paying $137 million -- $92 million for criminal charges with the DOJ and $45 million in disgorgement to the SEC. In addition to the bribery in Costa Rica, the company admitted making corrupt payments in Honduras, Malaysia, and Taiwan. The settlement isn't final until it's approved in federal court.

Download a copy of Edgar Valverde Acosta's May 31, 2011 sworn statement here.

Costa Rican 'Victim' Objects To Alcatel-Lucent Settlement

[Editor's note:This post exceeds our normal word count. But because the issues raised are new in an FCPA case, we wanted the first impression to be accurate and complete.]

A state-owned company that awarded Alcatel-Lucent more than $300 million in bribe-tainted contracts has asked a federal court in Florida to block Alcatel's FCPA settlement with the U.S. government, saying the terms violate a federal victim's rights law.

Costa Rica's Instituto Costarricense de Electricidad (ICE), which provides electric power and telecommunication services, filed a petition this week for relief and objections to Alcatel-Lucent's plea agreement and proposed deferred prosecution agreement, along with a detailed memorandum of law.

In December last year, Paris-based Alcatel-Lucent S.A. agreed to pay $137 million for bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan. The company and three subsidiaries will pay $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC.

By agreeing to plead guilty, Alcatel-Lucent escaped substantive bribery charges. In a two-count criminal information, the DOJ charged the company with violating the internal controls and books and records provisions of the FCPA.

A subsidiary in Costa Rica, the DOJ said, wired about $18 million to two consultants. More than half of the money was then passed to Costa Rican government officials, including five employees at ICE. In Costa Rica alone, the bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.

But Costa Rica's ICE said the settlement "provides no sanctions against any officer, executive director, or employee of Alcatel-Lucent and provides that the illegal proceeds obtained from victims be distributed to the [U.S.] federal government." Additionally, the settlements seek to waive the routine pre-sentence investigation and report, which would allow the court to order restitution. Under the Mandatory Victims Restitution Act (18 U.S.C. § 3663A), restitution is mandatory to the victim of a Title 18 crime. Because Alcatel is pleading guilty to conspiracy, a Title 18 crime, ICE says, restitution is mandatory.

In sum, according to ICE's petition,

the deal between Alcatel Lucent and the government allows the company to conceal the information relating to its criminal conduct; resolve all criminal exposure through the payment of a fine below the legal required minimum; provides immunity for the companies from prosecution beyond paying these insufficient fines; avoid required presentence procedures; avoid a criminal conviction for Alcatel Lucent S.A. and thereby appropriate administrative restrictions applicable to convicted criminals; and further avoid legally required restitution.

The SEC denied without explanation ICE's requests for a Fair Fund -- recovered money paid into the court registry for potential victims. And the DOJ, according to ICE, "has indicated it did not consider ICE a victim, apparently taking a position that companies where employees are bribed are culpable or that ICE is not autonomous and entities that are related to governments cannot be victims."

ICE said it's entitled to the benefit of several federal statutes that provide rights to victims of federal crimes, including the Crime Victims’ Rights Act (18 U.S.C. § 3771) and the Mandatory Victims Restitution Act.  Based on these laws, ICE asked the court to reject Alcatel-Lucent's plea agreements and deferred prosecution agreement. It asked the court to enter an order declaring that ICE is a victim of the criminal conduct of Alcatel-Lucent and its subsidiaries, and "directing that ICE is entitled to all rights of a victim, including restitution."

ICE said it was never contacted by the DOJ or SEC prior to the announcement of the Alcatel-Lucent settlement. "Neither the [DOJ] nor the SEC sought to gather or verify any facts from ICE nor make inquiry with respect to the damages that the company had suffered."

That's the same charge made by defense lawyers in the Lindsey case. As we reported last week, cross examination of an FBI agent heading the investigation revealed that the FBI and prosecutors from the DOJ's FCPA Unit never contacted CFE, the Mexican utility and purported victim of the alleged bribery, or spoke with anyone at CFE about the Lindsey investigation, until nearly four months after the Lindsey indictment was returned.

ICE also alleged that Alcatel-Lucent has already violated both the express terms of the deferred prosecution agreement and the spirit and intent of the plea agreements. Under the terms of the deferred prosecution agreement, Alcatel-Lucent is prohibited from making any public statement in any litigation or otherwise contradicting its acceptance of responsibility for the allegations behind its plea.

But according to ICE, two months after Alcatel-Lucent entered its plea, its lawyer Alejandro Batalla appeared in court in Costa Rica "and flatly denied any criminal responsibility by Alcatel-Lucent companies, claiming instead that all responsibility for the bribery and corruption that occurred in Costa Rica was the responsibility of Christian Sapsizian and Edgar Valverde."

Yet, as ICE points out, this conduct is at odds with the favorable sentencing enhancements given to Alcatel-Lucent, which included a sentencing reduction for acceptance of responsibility for its criminal conduct.
 
Along with the rejection of the plea agreements and deferred prosecution agreement, ICE also seeks the preparation of a pre-sentence report, an order that it is a victim of Alcatel-Lucent’s crimes, and recognition of its rights under the Crime Victims’ Rights Act.

In September 2008, former Alcatel executive Christian Sapsizian, 62, was sentenced to 30 months in U.S. federal prison, three years of supervised release, and forfeiture of $261,500 for bribing ICE employees. He had pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act.

Sapsizian admitted to conspiring with Edgar Valverde Acosta, a citizen of Costa Rica who was Alcatel’s senior country officer there, to arrange the bribes. Acosta was indicted with Sapsizian in June 2007 but since then has been an FCPA fugitive.

ICE is represented by Burton W. Wiand at Tampa's Wiand Guerra King

Download a copy ICE's May 2, 2011 petition for relief pursuant to 18 U.S.C. §3771(d)(3) and objection to plea agreements and deferred prosecution agreement in U.S. v. Alcatel-Lucent S.A. here.

Download ICE's memorandum of law here.

_____________

Download the criminal information in US v. Alcatel-Lucent, S.A. here.

Download the deferred prosecution agreement in US v. Alcatel-Lucent, S.A. here.

Download the criminal information in US v. Alcatel-Lucent France, S.A. et al here.

Download the plea agreement in US v. Alcatel Centroamerica, S.A. (Costa Rica) here.

View the SEC's Litigation Release No. 21795 (dated December 27, 2010) in SEC v. Alcatel Lucent, S.A., Civil Action No. 1:10-CV-24620-GRAHAM (S.D. FL.) here.

Download the SEC's civil complaint here.

Ex Head of State Jailed For Alcatel Bribes

Miguel Angel Rodriguez, ex-president of Costa Rica, was sentenced to five years in prison for briberyThe former president of Costa Rica who took bribes from French telecoms company Alcatel was sentenced to five years in prison this week.

Miguel Angel Rodriguez, 71, was convicted by a court in Costa Rica of accepting at least $800,000 in bribes from Alcatel, according to an AFP report.

Rodriguez was president of the Central American country from 1998 to 2002. He was Secretary General of the Organization of American States in 2004 when the Alcatel scandal forced him to resign.

In December last year, Paris-based Alcatel-Lucent S.A. paid $137 million in an FCPA settlement. The company admitted bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan. In a  two-count criminal information, the DOJ charged the company and three subsidiaries with violating the internal controls and books and records provisions of the FCPA.

It paid $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC. The settlement ranks eighth on list of the biggest FCPA settlements of all time and sixth on the list of FCPA disgorgements.

Alcatel-Lucent -- which provides telecommunications equipment and services -- was formed in 2006 after U.S.-based Lucent Technologies merged with Alcatel, a French company. The new company is headquartered in Paris, France.

In Costa Rica, a subsidiary wired about $18 million to two consultants. More than half of the money, the DOJ said, was then passed to Costa Rican government officials. The bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.

In September 2008, former Alcatel executive Christian Sapsizian, 62, was sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing employees of the state-owned telecommunications authority in Costa Rica. He had pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act.

Sapsizian, a French citizen, was a 20-year Alcatel employee and served as the company's deputy vice president for Latin America. Before being fired in 2004, he caused Alcatel to wire $14 million in “commission” payments to a consultant, who then transferred $2.5 million to a government official in Costa Rica.

Sapsizian admitted to conspiring with Edgar Valverde Acosta, a citizen of Costa Rica who was Alcatel’s senior country officer there, to arrange the bribes. Acosta was indicted with Sapsizian on June 14, 2007. He's an FCPA fugitive and was last seen in Costa Rica.

Alcatel-Lucent also paid $10 million in January 2010 to settle corruption charges brought by the government of Costa Rica.

The Fugitive Report 2010

Frerik Pluimers, the only FCPA fugitive with his own wanted poster.About a year ago, we compiled our original list of fugitives -- people facing FCPA-related criminal charges but still at large.

Since then, one of the twelve was extradited back to the U.S. and has pleaded guilty, three are still fighting extradition, one was reportedly arrested abroad and his status is unclear, and the rest are still at large.

There are two new names -- one of whom has been extradited and is facing trial, and one who's at large.

They're all men. And only one -- Ken Tillery -- has held a U.S. passport.

Here they are:

Extradited:

• Ousama Naaman, Canadian and Lebanese, agent for U.S. chemical company Innospec. Indicted August 2008; arrested July 30, 2009 in Frankfurt, Germany; extradited to the U.S. He pleaded guilty in June to criminal FCPA and conspiracy charges. He's scheduled to be sentenced in federal court in Washington, D.C. on December 19, 2010. He faces up to ten years in prison but hopes to serve his time in a Canadian jail.

• Flavio Ricotti, Italian, a former executive for Control Components Inc. Indicted April 2009; extradited in July 2010 from Germany. He's charged with one count of conspiracy to violate the FCPA and the Travel Act, one count of violating the FCPA, and three counts of violating the Travel Act.

Fighting extradition:

• Jeffrey Tesler, British, intermediary for Kellogg Brown & Root (KBR). Indicted February 2009; arrested March 5, 2009 in London, England. Now in the U.K. A judge in London in March ruled that Tesler should be extradited to the U.S. to face trial. His lawyers said he plans to appeal, which involved a lengthy process.

• Wojciech Chodan, British, salesman for a KBR affiliate. Indicted 2009. Now in the U.K. A judge in London said in April that he should be extradited to Texas to face trial.

• Viktor Kozeny, Czech-born, Irish passport, president and chairman of Oily Rock Group Ltd. Indicted 2005. Now in the Bahamas. In January this year, the Bahamas court of appeal continued to block his extradition to the U.S.

At large:

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

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

• 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.

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

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

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

• Enrique Faustino Aguilar Noriega, Mexican, charged in an eight-count superseding indictment in 2010 with conspiracy to violate the Foreign Corrupt Practices Act, four substantive FCPA violations, money laundering conspiracy, and money laundering. Last known location: Mexico.

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

Status unclear:

• James "Ken" Tillery, American, executive of Willbros International. Indicted 2008. Nigerian news sources in August said Tillery was seized by the American FBI in Lagos and would be returned to the U.S. Reports then said the Nigerian high court had halted the extradition for an indeterminate period because due process wasn't followed. Tillery has allegedly gained Nigerian citizenship. Last known location: presumed to be Nigeria.