Measuring Naaman's Jail Time

How does the thirty-month prison term Ousama Naaman received last week compare with other FCPA sentences?

It's near the middle.

Here are some shorter sentences:

In January this year, Antonio Perez received two years in prison in the Haiti Telco case. He admitted paying $36,375 in bribes.

Leo Winston Smith was given just six months jail time in December 2010. The former salesman for Pacific Consolidated Industries was 75 and in poor health.

In October 2010, Bobby Jay Elkin Jr., a country manager in Kyrgyzstan for tobacco company Dimon Inc, copped just three years probation. The judge called him a hero for helping his subordinates during local rioting.

In September 2010, Nam Nguyen was sentenced to sixteen months in prison. His brother, An Nguyen, received nine months, and their sister, Kim Nguyen, was sentenced to two years probation.

Joseph Lukas, a co-defendant with the Nguyens, was let off with two years probation.

In August 2010, Hollywood couple Gerald and Patricia Green got six months in jail. Gerald Green, 78, was suffering from emphysema.

Frederic Bourke was sentenced in 2009 to a year and a day in prison. The judge said, “After years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”

In all those cases, as in Naaman's, the DOJ had asked for more jail time.

Some longer FCPA-related prison terms are shown below. Five of those defendants, including Joel Esquenazi, were sentenced in the U.S. District Court for the Southern District of Florida (Miami), known as a tough sentencing venue.

In October, Esquenazi received a fifteen-year prison term -- the longest in an FCPA-related case. A jury convicted him on multiple related charges -- one count of conspiracy to violate the FCPA and commit wire fraud, seven substantive FCPA counts, one count of money laundering conspiracy, and twelve counts of money laundering. Each money laundering-related count carried a maximum twenty-year sentence.

Chart courtesy of Michael Volkov of Mayer Brown LLP in Washington, D.C. Volkov is the primary contributor to the Corruption, Crime & Compliance Blog.

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.

Enforcement Report For Q1 '11

During the first quarter of 2011, two earlier FCPA-related indictments were disclosed. And there were four corporate actions, four guilty pleas, including two shot-show defendants and the former KBR middleman Jeffrey Tesler, who was hit with the biggest forfeiture order in FCPA history, and two sentencings of individuals to prison. Three issuers announced declinations (decisions not to bring enforcement actions) by the DOJ and SEC.

Here's what happened:

Indicted / Arrested

Jorge Granados, 54, LatiNode's s former CEO, and Manuel Caceres, 64, a former vice president, were indicted on December 14 by a federal grand jury. They face one count of conspiracy to violate the FCPA, 12 counts of violating the FCPA, five counts of money laundering, and one count of conspiracy to commit money laundering. The indictment also asks for criminal forfeiture. Their trial is set to start in September. (Revealed by unsealed court record on January 11.)

DOJ / SEC Enforcement Resolutions

Paul W. Jennings (January 24) a former CFO and CEO at Innospec, Inc. disgorged $116,092 plus prejudgment interest of $12,945 and paid a civil penalty of $100,000 to settled civil charges with the SEC. He was charged with falsely certifying to auditors from 2004 through 2009 that he had complied with Innospec's Foreign Corrupt Practices Act compliance policy. The SEC said he also "signed annual and quarterly personal certifications pursuant to the Sarbanes-Oxley Act of 2002 in which he made false certifications concerning the company's books and records and internal controls.

Maxwell Technologies Inc. (January 31) paid an $8 million criminal penalty to the DOJ and $6.3 million in disgorgement and prejudgment interest to the SEC to resolve bribery that occurred in China. The DOJ gave the company a three-year deferred prosecution agreement. Maxwell can pay the $8 million criminal penalty in three installments over two years.

Tyson Foods Inc. (February 10) paid a $4 million criminal penalty to the DOJ and $1.2 million in disgorgement and pre-judgment interest to the SEC to resolve charges related to illegal payments by company representatives to government-employed inspection veterinarians in Mexico and a cover-up of the payments.

IBM (March 18) disgorged $5.3 million and paid prejudgment interest of $2.7 million, and a $2 million civil penalty to resolve civil charges brought by the SEC for violating the books and records and internal control provisions of the Foreign Corrupt Practices Act. The company admitted making improper cash payments to government officials in South Korea and China, and giving gifts and paying travel and entertainment expenses that violated the FCPA. 

Ball Corporation (March 24) paid a $300,000 penalty to settle civil FCPA books and records and internal control charges brought by the the SEC for bribes in Argentina.

Guilty Pleas

Manuel Salvoch ( January 11) the former CFO of Latin Node Inc. was arrested and pleaded guilty (January 12) to one count of conspiracy to violate the FCPA. 

Daniel Alvirez (March 1), a shot-show defendant, pleaded guilty to two counts of conspiracy to violate the FCPA.

Jeffrey Tesler (March 11) pleaded guilty after extradition from the U.K. of one count of conspiracy and one count of violating the FCPA. Tesler also agreed to forfeit $149 million. He was released on $50,000 cash bond and required to live in the Houston area until he is sentenced on June 22.

Jonathan Spiller (March 29), a shot-show defendant, pleaded guilty to one count of conspiracy to violate the FCPA.

Sentenced

Leo Winston Smith (sentenced in December, not announced by the DOJ or reported until January 7), 75, was sentenced in December to just six months in prison followed by six months of home confinement. The former director of sales and marketing for Pacific Consolidated Industries pleaded guilty in 2009 to conspiracy to violate the FCPA and to a tax charge. He admitted bribing an official from the U.K. Ministry of Defense in return for equipment orders. The government had asked for a 37-month sentence.

Antonio Perez (January 21), 52, of Miami, was sentenced to two years in prison and ordered to forfeit $36,375. He pleaded guilty in April 2009 to conspiring to making corrupt payments to officials of Haiti’s state-owned national telecommunications company, Telecommunications D’Haiti, in violation of Foreign Corrupt Practices Act and money laundering laws.

Declinations (decisions not to bring enforcement actions) by the DOJ / SEC

Bristow Group

CB Richard Ellis

Golden Minerals Corp

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Our 2010 FCPA Enforcement Index is here, the 2009 can be found here, and our 2008 index here.

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Special thanks to a reader in D.C. for research assistance in creating this post.

Smith Sentence: Age, Health, And Time Served?

The former director of sales and marketing for Pacific Consolidated Industries (PCI) who pleaded guilty in 2009 to bribing an official from the U.K. Ministry of Defense (MOD) in return for equipment orders was sentenced in December to just six months in prison followed by six months of home confinement.

Leo Winston Smith, 75, faced up to five years in prison on an FCPA conspiracy charge and three years on a tax-related charge. The government had asked for a 37-month sentence.

Mike Koehler's account of the sentencing is here.

Why the short sentence? When Smith pleaded guilty, he reserved the right to argue for a shorter sentence based on his age and poor health -- he's had three heart attacks. And he's already spent years on supervised release. From June 2007 to May 2008, he was on home confinement with electronic monitoring. After that, he had a curfew from 7 pm to 9 am, with continued electronic monitoring. The curfew and electronic monitoring ended after a few months but he continued on "intensive pretrial supervision for another 26+ months," according to a sentencing memo he filed.

Smith's co-conspirator, Martin Eric Self, pleaded guilty in May 2008 to violating the FCPA. Although Self faced up to five years in prison on each of two FCPA counts, his plea agreement contemplated a prison term of just eight months. He was finally sentenced in November 2008 to two years probation. The MOD official, Michael Hale, pleaded guilty in the United Kingdom to accepting nine separate payments from PCI totaling more than $300,000. He was sentenced in April 2007 to two years in prison.

The DOJ rolled out lots of arguments to support a longer sentence for Smith. Here's an excerpt from the government's sentencing memo:

As the Court is well aware, this is a case about corruption, a crime with serious consequences. These consequences are not only to the other competitors, who were denied a fair shot, or the UK government, which might have gotten a better deal had it not been for the defendant and Michael Hale’s misconduct, but society at large. Corruption degrades the rule of law, the efficiency of the market, and citizens’ trust in their government. And, in this case, it is a crime for which the defendant does not even proffer an excuse.

In many FCPA cases involving places very different than the United States, defendants often claim that, in the culture in which they operated, they had no other option and that bribes were extorted from all who wished to do business. Some claim they were ordered to pay the bribes by their superiors or claim confusion about the propriety of their actions. To be clear, none of these excuses excuse anything. However, none of these arguments are even plausibly available to the defendant.

The defendant paid bribes in the United Kingdom, a country in which bribery is unmistakably illegal and, fortunately, rare. The defendant himself handled the relationship with the corrupt official. The bribery was his and Hale’s idea. No one made him do it. The defendant should be sentenced just as if he paid bribes to an officer of the U.S. Air Force. Nothing less will be commensurate with his offense.

As Mike Koehler noted, "Just as it did not issue a release in connection with the Elkin and Green sentences, the DOJ did not issue a release in connection with Smith's sentence."

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Download a copy of the plea agreement in U.S. v. Leo Winston Smith (Case No.: CR 07-69(A) - AG) here.

Download a copy of Leo Winston Smith's sentencing memo here.

Download a copy of the government's reply to Smith's sentencing memo here.

Sentencing Watch List

Let's update the list of individuals waiting to be sentenced for violating or conspiring to violate the Foreign Corrupt Practices Act. Since October, Frederic Bourke and William Jefferson have been sentenced and come off the list. Charles Jumet, Paul Novak, and Fernando Maya Basurto have entered guilty pleas are are added to it. Juan Diaz was to be sentenced on November 13 but the court reset his date. A reader also let us know that Si Chan Wooh, the former head of Schnitzer Steel's international subsidiary, who pleaded guilty in June 2007 to conspiracy to violate the FCPA, is scheduled to be sentenced next year in federal court in Oregon. So the list now stands at 18. 

Here they are:

Fernando Maya Basurto -- no date given.

Jim Bob Brown -- January 28, 2010

Joshua Cantor -- no date given.

Mario Covino -- January 25, 2010

Juan Diaz -- January 29, 2010

Thomas Farrell -- no date given.

Gerald and Patricia Green -- December 17, 2009

Charles Paul Edward Jumet -- February 12, 2010

Clayton Lewis -- no date given.

Joseph T. Lukas -- April 6, 2010

Richard Morlok -- January 25, 2010

Paul G. Novak -- February 19, 2010

Antonio Perez -- October 6, 2009. [No sentencing reported and no resetting of the sentencing date shown in the court docket.]

Si Chan Wooh -- April 26, 2010

 Leo Winston Smith -- December 18, 2009

Albert "Jack" Stanley -- February 24, 2010

Jason Edward Steph -- January 28, 2010

Let us know if we're still missing anyone or if other sentencing dates have changed.

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Words we like.  From Abraham Lincoln, October 1858:

It is the eternal struggle between these two principles — right and wrong — throughout the world. They are the two principles that have stood face to face from the beginning of time; and will ever continue to struggle. The one is the common right of humanity, and the other the divine right of kings. It is the same principle in whatever shape it develops itself. It is the same spirit that says, "You toil and work and earn bread, and I'll eat it." No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle.