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Entries in Fernando Maya Basurto (12)

Saturday
Aug142010

Arrest In ABB Mexico Case

The Houston Chronicle reported the arrest Friday of a Mexican businesswoman on charges of violating the FCPA.

Angela Gomez, 55, is accused of serving as an intermediary between ABB and another U.S. firm for Nestor Moreno, chief of operations for Mexico's Federal Electric Commission.

The report said prosecutors alleged that Moreno received a yacht, Ferrari, and perhaps millions of dollars in cash in exchange for awarding contracts. At her hearing Friday, an FBI agent testified that "Gomez's signature was on a $297,000 check to Ferrari Beverly Hills, for a Spider sports car, as well payments totaling $1.8 million to the now-defunct South Shore Yacht Sales, in Chula Vista, Calif." 

Gomez and her husband own Global Financial Services, a Houston brokerage firm they allegedly used to pass some of the bribes to the Mexican official. She was arrested when she came to Houston to attend a civil arbitration hearing, the Chronicle report said. The paper said she appeared in federal court Friday in shackles and handcuffs.

In November 2009, the general manager of a Sugar Land, Texas-based ABB subsidiary was arrested for his alleged role in a conspiracy to bribe Mexican government officials. Prosecutors said the bribes were allegedly intended to secure contracts with Mexico's Federal Electric Commission, known in Spanish as the CFE.

John Joseph O'Shea, 57, of Pleasanton, California, was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. § 371), 12 counts of violating the FCPA (15 U.S.C. § 78dd-2 et seq), four counts of international money laundering (18 U.S.C. § 1956), and one count of falsifying records in a federal investigation (18 U.S.C. § 1519).

O'Shea allegedly hired Fernando Maya Basurto, 47, of Mexico City, to act as the ABB Texas unit's sales agent in Mexico. In December 1997, the CFE awarded the Texas business unit a contract, known as the SITRACEN contract, to upgrade the backbone of Mexico's electrical network system. The SITRACEN contract generated more than $44 million dollars in revenue for ABB's Texas unit. In October 2003, the CFE also awarded it a multi-year contract for maintenance and upgrades of the SITRACEN contract that generated more than $37 million in revenue.

ABB discovered the alleged bribery and fraud during an internal investigation. It self-disclosed the payments and related activities to the Justice Department and the Securities and Exchange Commission and helped with their investigations. In late 2008, the Swiss-based engineering company said it reserved about $850 million for possible resolution of U.S. and European corruption charges.

Basurto was first arrested in Dallas in April 2009 on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements. As part of his plea deal, the DOJ filed a superseding criminal information charging him with one count of conspiracy to violate the FCPA, to launder money, and to falsify records. The information said jurisdiction over Basurto was based on his being "an agent of a domestic concern, as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(1)."

He pleaded guilty in November 2009 in Houston and has been cooperating in the investigation. He faces up to five years in prison. The Justice Department hasn't announced his sentencing date.

Download the indictment in U.S. v. John Joseph O'Shea here.

Download Fernando Maya Basurto's plea agreement with the Justice Department here.

Monday
Nov232009

Ex-ABB Manager Arrested, Mexican Agent Pleads Guilty

The Justice Department announced on Monday (November 23) the arrest of the former general manager of a Sugar Land, Texas-based ABB subsidiary for his alleged role in a conspiracy to bribe Mexican government officials. The bribes were allegedly intended to secure contracts with the Comisión Federal de Electricidad (CFE), a Mexican state-owned utility company. The DOJ also said a Mexican citizen who acted as a middleman pleaded guilty in the case and is cooperating in the investigation.

The DOJ charged John Joseph O'Shea, 57, of Pleasanton, California, in an 18-count indictment returned by a federal grand jury in Houston on November 16. He was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. § 371), 12 counts of violating the FCPA (15 U.S.C. § 78dd-2 et seq), four counts of international money laundering (18 U.S.C. § 1956), and one count of falsifying records in a federal investigation (18 U.S.C. § 1519).

Although not named in the DOJ release or charging documents, ABB has confirmed that O'Shea was its employee. Fortune carried this statement from the company: "The individual is a former employee of an ABB unit in Texas. He was terminated in the fall of 2004. ABB continues to cooperate with U.S. authorities."

O'Shea hired Fernando Maya Basurto, 47, of Mexico City, to act as the Texas unit's sales agent in Mexico. Under his contract, Basurto received a percentage of sales as his commission. In December 1997, CFE awarded the Texas business unit a contract, known as the SITRACEN contract, to upgrade the backbone of Mexico's electrical network system. The SITRACEN contract generated more than $44 million dollars in revenue for ABB's Texas business unit. In October 2003, CFE also awarded it a multi-year contract for maintenance and upgrades of the SITRACEN contract that generated more than $37 million in revenue.

According to the indictment, O'Shea and Basurto agreed to pay 10 percent of the revenues from the SITRACEN contract to officials at CFE. And for the Evergreen contract, O'Shea authorized more than $900,000 in bribes to CFE officials. He also took a kickback of 1 percent. The indictment alleges that O'Shea, Basurto and others covered up the bribery after ABB fired O'Shea. They fabricated documents that "purported to be evidence of a legitimate business relationship between the Texas business unit and the Mexican companies that provided the false invoices." The indictment described emails between Basurto and O'Shea in which they discussed creating fake correspondence and a phony contract.

ABB discovered the alleged bribery and fraud during an internal investigation. It self-disclosed the payments and related activities to the Justice Department and the Securities and Exchange Commission and helped with their investigations.

Basurto was first arrested in Dallas in April on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements. He was later indicted on the same charges on June 10, 2009. As part of his plea deal, the DOJ filed a superseding criminal information charging him with one count of conspiracy to violate the FCPA, to launder money, and to falsify records. The information said jurisdiction over Basurto was based on his being "an agent of a domestic concern, as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(1)."

He pleaded guilty on November 16 in Houston. He faces up to five years in prison and a fine of $250,000 or twice his gain or the victim's loss caused by his crimes. The Justice Department hasn't announced his sentencing date.

Basurto's indictment gave details of the bribes. It said, for example:

Basurto would maintain control over all of these funds [from the Texas business unit] and would, at CFE Official C's instruction, wire funds from these accounts to a Merrill Lynch brokerage account. CFE Official C would then cause some of these funds to be further transferred to the son-in-law of CFE Official N and to the brother of CFE Official C. Basurto would follow additional instructions from CFE Official C concerning the "Good Guys" funds, including giving CFE Official C approximately $20,000 in cash.

For O'Shea, the conspiracy and falsification of records counts each carry a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost. Each of the 12 substantive FCPA counts carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The four international money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The indictment also gives notice of criminal forfeiture.

 The DOJ said German authorities assisted in the investigation. Payments allegely were made to the CFE officials through German banks and accounts there.

In July 2004, ABB and two subsidiaries disgorged $5.9 million and paid a $10.5 million penalty for FCPA violations involving Nigeria, Angola and Kazakhstan. In a 2007 earnings release, ABB said it disclosed to the DOJ and SEC "suspect payments made by employees of company subsidiaries in Asia, South America and Europe, in particular Italy. These suspect payments were discovered as a result of ABB's internal audit and compliance program." See our post here.

As the DOJ says, an indictment is merely an accusation, and O’Shea is presumed innocent until and unless proven guilty beyond a reasonable doubt.

View the DOJ's November 23, 2009 release here.

Download the November 16, 2009 criminal indictment in US v. John Joseph O'Shea here.

Download the November 16, 2009 superseding criminal information in US v. Fernando Maya Basurto here.

Download Basurto's plea agreement with the Justice Department here.

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