Wife Charged in New Haiti Telco Indictment

Sam Rubenfeld of the Wall Street Journal reported Friday that the wife of a current defendant in the Haiti telco case has been indicted.

A second superseding indictment filed in Miami federal court named Cecilia Zurita, a former vice president of Cinergy Telecommunications Inc., as the seventh co-defendant in the case. She allegedly wrote checks for funds later used to bribe officials in Haiti, and covered up the payments with false documentation.

Her lawyer, Joel Hirschhorn, above, told the WSJ he was 'shocked because evidence of criminal conduct is nonexistent. Dismayed because the government tried to blackmail a responsible businessman by trying to indict his wife.'

'You would think the U.S. government has better things to do than chase after legitimate businesspeople,' Hirschhorn said.

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This is the fourth time the DOJ has indicted a husband and wife in an FCPA case.

The first spousal co-defendants were Gerald and Patricia Green. They were convicted and jailed for six months. Stuart Carson and Hong "Rose" Carson of Control Components Inc. are facing trial this summer in California. And Enrique Faustino Aguilar Noriega and Angela Gomez Aguilar were charged in the Lindsey prosecution. She pleaded guilty to money laundering but her plea was vacated after the judge dismissed the indictments against her co-defendants. Her husband didn't appear for trial and was a fugitive in Mexico.

Indicting husbands and wives creates enormous pressure for one of them to cut a plea deal that will make things easier for the other.

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In October,  a defendant in the Haiti telco case, Joel Esquenazi, was sentenced to 15 years in prison -- the longest FCPA-related prison term in history.

A second defendant, Carlos Rodriguez, received an 84-month sentence.

They were convicted by a jury in Miami of bribing officials at state-owned Telecommunications D’Haiti S.A.M. 

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Four other individuals have been convicted and sentenced for their roles in the Haiti telco case.

In 2009, Antonio Perez, a former controller at Terra, and Juan Diaz, the president of J.D. Locator Services, pleaded guilty to one count of conspiracy to violate the FCPA and money laundering. Last year Perez was sentenced to 24 months in prison and Diaz to 57 months. Both are now serving their jail terms.

In February last year, Jean Fourcand, the president and director of Fourcand Enterprises Inc., pleaded guilty in the case to one count of money laundering for receiving and transmitting bribes. He was sentenced to six months in prison.

Also last year, Robert Antoine, a former director of international affairs for Haiti Telco, pleaded guilty to one count of conspiracy to commit money laundering. He admitted taking more than $1 million in bribes from Miami-based telecommunications companies. He was sentenced to 48 months in prison, which he's now serving.

Other defendants indicted in the case are Washington Vasconez Cruz, Amadeus Richers, Cinergy Telecommunications Inc., Patrick Joseph, Jean Rene Duperval, and Marguerite Grandison. They're charged in a related scheme to commit foreign bribery and money laundering from 2001 through 2006. Their trial is set to start next month.

Are Stuart And Rose Carson Planning To Plead?

There could be a lot of reasons for the latest order in the Carson case.

Stuart and Rose Carson asked for new conditions of release. The married couple had secured their million dollar appearance bonds with two homes -- one in California and the other in Florida. This month, the married couple asked the judge to cut their bonds in half and remove the encumbrance on the Florida home.

The prosecutors agreed and the judge signed the order.

Why did the Carsons ask? And why did the government agree? 

We don't know.

But in Florida, there's an unlimited homestead exemption. That means houses aren't subject to forced sale, either before or after death. It's the ultimate protection against creditors -- the best in the nation.

In May, the Carsons' lost their motion to dismiss the case against them based on the definition of 'foreign official.'

They're accused of bribing employees at state-owned companies in Korea, China, the UAE, and Malaysia.

They have another motion to dismiss that's pending. It argues that the Travel Act is unconstitutional and didn't apply to their conduct. (We'll discuss that motion in another post.)

After that, their jury trial on FCPA and Travel Act charges is set to open on June 5, 2012.

The Carsons are presumed innocent, of course. But their former employer CCI and a couple of ex-colleagues, Mario Covino and Richard Morlok, pleaded guilty in the case more than two years ago. Evidence and testimony against the Carsons will come from them.

As we've said, the odds are always against FCPA defendants. So if the Carsons lose their latest motion to dismiss, will they be ready to cut a plea deal with the DOJ?

And is their use of the Florida homestead exemption advance planning -- protection against claims and civil litigation that might follow a guilty plea?

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Download a copy of the stipulation and proposed order to amend pretrial conditions of release for Stuart and Hong 'Rose' Carson here. 

'Foreign Official' Challenge Fails Again

Judge James V. Selna yesterday denied the Carson defendants motion to dismiss ten FCPA-related counts in the indictment against them based on the definition of "foreign official" in the FCPA.

Stuart Carson, his wife Hong “Rose” Carson, Paul Cosgrove, and David Edmonds -- all former executives of California-based Control Components Inc. -- had argued that employees of state-owned enterprises aren't "foreign officials," as the DOJ contends.

The defendants said the state-owned companies where officials were allegedly bribed -- Korea Hydro and Nuclear Power, PetroChina, China Petroleum Material and Equipment Corporation, China National Offshore Oil Corporation, National Petroleum Construction Company, Dongfang Electric Corporation, Guohua Electric Power, Petronas -- aren't covered by the FCPA.

Judge Selna disagreed. He said it's a question of fact.

In making his decision, he declined to review the legislative history of the FCPA, saying:

The Court finds that the statutory language of the FCPA is clear, that the statutory scheme is coherent and consistent, and that resort to the legislative history of the FCPA is unnecessary.

 He then said in a footnote,

Defendants include a comprehensive review of the legislative history of the FCPA with their motion. (See Decl. of Prof. Michael J. Koehler, Feb. 2, 2011, ECF No. 305.) The Government argues that “nowhere in the vast review of legislative history can the defendants point to a single quote that supports the position that the FCPA should not apply to employees of [state-owned enterprises].” (Opp’n at 35.) Defendants reply that “the inverse is equally true, that is, the Government ‘cannot point to a single quote’ from a member of Congress that supports the position that the FCPA should apply to employees of [state-owned enterprises].”

The judge also disagreed with the defendants’ argument that the FCPA's definition of "foreign official" is void for vagueness. The meaning of “instrumentality” in the FCPA, he said, is sufficiently definite that an ordinary person can understand what conduct is prohibited.

Given the Government’s substantial evidentiary burden to establish that a business entity constitutes a government instrumentality, and the scienter requirement mentioned above, the definition of a “foreign official” does not encourage arbitrary or discriminatory enforcement.

Judge Selna mentioned the same challenges to the meaning of "foreign official" in the Haiti Telco and Lindsey cases, which both also failed. He said: "The Court reaches the same conclusion as these district courts: state-owned companies may be considered 'instrumentalities' under the FCPA, but whether such companies qualify as 'instrumentalities' is a question of fact."

A jury trial of the Carson defendants including Han Yong Kim is now set for June 5, 2012.

The case is U.S. v. Carson, (U.S.District Court, Central District of California, Southern Division - Santa Ana) Case #: 8:09-cr-00077-JVS-1.

Download a copy of Judge Selna's May 18, 2011 Order Denying Defendants’ Motion to Dismiss Counts 1 though 10 of the Indictment here.

Download a copy of the indictment in U.S. v. Carson here.

View Mike Koehler's declaration in support of the defendants' motion to dismiss in U.S. v. Carson et al here.

Italian Citizen Pleads Guilty

Former fugitive Flavio Ricotti pleaded guilty yesterday in federal court in Santa Ana, California to a single count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act. 

Ricotti, 51, of Bientina, Italy, was a vice president for sales of Control Components Inc. (CCI). He was arrested in February last year in Frankfurt, Germany and extradited to the United States.

He faces up to five years in prison.

In 2009, Ricotti and five other former executives of CCI were named in a 16-count indictment. Also charged were Stuart Carson, CCI's former president, his wife Hong (Rose) Carson, the former director of sales for China and Taiwan, Paul Cosgrove, former director of worldwide sales, David Edmonds, CCI’s former vice president of worldwide customer service, and Han Yong Kim, the former president of CCI’s Korean office. Their trial is scheduled to start on October 4 this year.

As the DOJ says, an indictment is merely an accusation and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Ricotti admitted conspiring with other CCI employees to bribe an official of Saudi Aramco, the Saudi Arabian state-owned oil company, and an employee of a private company in Qatar. The bribes were to help win contracts for CCI, which makes valves for the nuclear, oil and gas, and power industries. The conspiracy charge under the Travel Act related to the bribe to the employee at the private company.

Two other former CCI employees pleaded guilty in 2009 to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI.

Mario Covino, an Italian citizen, was CCI's former director of worldwide factory sales. He pleaded guilty to one count of conspiracy to violate the FCPA. Covino admitted arranging bribes of about $1 million to officers and employees of several foreign state-owned companies.

Richard Morlok, CCI’s former finance director, pleaded guilty to one count of conspiracy to violate the FCPA and admitted arranging about $628,000 in bribes to officers and employees of several foreign state-owned companies.

Covino and Morlok are scheduled to be sentenced in February next year. They face up to five years in prison.

In July 2009, CCI pleaded guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act (15 U.S.C. §78dd-2) and the Travel Act (18 U.S. C. §1952). It admitted bribing foreign officials in a decade-long scheme to secure contracts in about 36 countries. CCI's three-year plea agreement imposed a criminal fine of $18.2 million and required appointment of a compliance monitor and cooperation with the DOJ's investigation.

CCI is owned by British-based IMI plc, which trades on the London Stock Exchange under the symbol IMI.L.

View the DOJ's April 29, 2011 release here.

You're Grounded

An Italian citizen extradited from Germany in July last year to face FCPA charges was released from jail two weeks after his arraignment in California. But he can't leave home.

Flavio Ricotti was granted pre-trial bail of $500,000 and placed under "home incarceration." He can only go out for medical treatment, religious services, and court appearances -- and only then with the fed's pre-approval.

Ricotti, 49, was indicted in April 2009 with five other former executives of California-based valve-maker Control Components Inc. (CCI). He was a fugitive until his arrest in Germany and extradition to the U.S. The federal court in California denied the government's request that he be jailed until his trial.

His home incarceration includes "active electronic monitoring," paid for by Ricotti himself.

Under "intensive pretrial supervision," the U.S. is holding his passport, his travel is restricted to central California, he's not allowed to go inside any airport, seaport, railroad, or bus terminal that allows travel outside the U.S., and his place of residence must be approved by the government and can't be changed without further approval.

Ricotti and his co-defendants are 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. They face up to five years in prison for each count.

The others from CCI indicted with Ricotti are Stuart Carson, former chief executive officer; Hong (Rose) Carson, former director of sales for China and Taiwan; Paul Cosgrove, former director of worldwide sales; David Edmonds, former vice president of worldwide customer service; and Han Yong Kim, the former president of CCI’s Korean office. They and Ricotti are scheduled to go on trial on October 4 this year.

In July 2009, valve-maker CCI pleaded guilty to violating the anti-bribery provisions of the FCPA and the Travel Act. It admitted bribing foreign officials in a decade-long scheme to secure contracts in about 36 countries. CCI's three-year plea agreement imposed a criminal fine of $18.2 million.

The government alleges that Ricotti, who was CCI’s vice president and head of sales for Europe, Africa, and the Middle East from 2001 through 2007, arranged bribes of at least $750,000 to officers and employees of state-owned companies, and bribes of about $380,000 to officers and employees of private companies. The payments allegedly related to projects in the United Arab Emirates, Kazakhstan, India and Qatar.

In pre-trial motions, the defendants have challenged whether officers and employees of state-owned companies are "foreign officials" under the FCPA. A hearing on their motion to dismiss is set for May 9.

Two former CCI employees pleaded guilty last year to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI. In January 2009, Mario Covino, the company's former director of worldwide factory sales, pleaded guilty to one count of conspiracy to violate the FCPA. He admitted arranging bribes of about $1 million.

In February last year, Richard Morlok, CCI’s former finance director, pleaded guilty to one count of conspiracy to violate the FCPA. He admitted arranging about $628,000 in bribes.

Covino and Morlok are cooperating with prosecutors and won't be sentenced until at least February 6, 2012.

Download the minutes of the July 16, 2010 detention hearing in U.S. v. Flavio Ricotti here.