When Roger Clemens and FCPA defendants walk, should we only see failure by the DOJ?
Entries in Leo Winston Smith (12)
Last week in Houston the three KBR-related sentences ranged from 30 months in prison for Jack Stanley to just a year of unsupervised probation for Wojciech Chodan. Jeffrey Tesler was in the middle with 21 months in jail. How do their sentences compare?
How does the thirty-month prison term Ousama Naaman received last week compare with other FCPA sentences?
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.
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.
Leo Winston Smith faced up to eight years in prison. He'll serve just six months behind bars.
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:
Joshua Cantor -- no date given.
Thomas Farrell -- no date given.
Gerald and Patricia Green -- December 17, 2009
Charles Paul Edward Jumet -- February 12, 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
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.
We count at least thirteen people waiting to be sentenced for violating or conspiring to violate the Foreign Corrupt Practices Act. Both offenses carry a prison term of up to five years. And for substantive offenses the fine can be up to $250,000 or twice the gross gain produced by the bribes. Those on our list either pleaded guilty or were convicted at trial. Their names (linked to posts describing their guilty pleas or convictions) are followed by current sentencing dates. The dates often slip, so we'll try to stay on top of any changes.
Who are they? A former congressman, a famous entrepreneur, husband-and-wife movie producers, c-level executives and top managers. Real people who are probably going to jail. Yes, the FCPA is serious, and the consequences of not complying with it can be tragic.
Frederic Bourke -- November 10, 2009.
Jim Bob Brown -- January 28, 2010.
Mario Covino -- January 25, 2010.
Juan Diaz -- November 13, 2009.
Gerald and Patricia Green -- December 17, 2009.
William Jefferson -- November 13, 2009.
Joseph T. Lukas -- April 6, 2010.
Richard Morlok -- January 25, 2010.
Antonio Perez -- October 6, 2009. [No sentencing reported and no resetting of the sentencing date shown in the court docket.]
Leo Winston Smith -- December 18, 2009.
Albert "Jack" Stanley -- February 24, 2010.
Jason Edward Steph -- January 28, 2010.
Let us know if there are others who belong on the list.
During the third quarter, we counted Foreign Corrupt Practices Act enforcement actions involving nine individuals and five corporations. Among the developments: Three FCPA-related trials were completed, all ending badly for the defendants (Bourke, Jefferson and Green). For the first time, the SEC asserted control-person liability in an FCPA case (Faggioli and Huff). And the Justice Department used a California anti-corruption law as the basis for a federal Travel Act charge in an FCPA prosecution (CCI).
Here's what happened:
AGCO Corporation (September 30, 2009) Criminal and civil enforcement actions resolved. To settle charges that it paid kickbacks to the pre-war Iraqi regime under the U.N. oil for food program, agricultural equipment-maker AGCO Corporation agreed with the Justice Department to pay a criminal fine of $1.6 million and enter into a three-year deferred prosecution agreement. Its U.K. subsidiary was charged in a one- count criminal information with conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA.
In its settlement of civil charges with the Securities and Exchange Commission, AGCO Corporation agreed to disgorge $13,907,393 in profits and $2,000,000 in pre-judgment interest, and pay a civil penalty of $2,400,000. The SEC charged the company with failing to maintain an adequate system of internal controls to detect and prevent the corrupt payments and failing to properly record the payments.
Gerald and Patricia Green (September 14, 2009) Convicted of conspiracy to violate the FCPA and violating the FCPA. The Hollywood film executives were found guilty by a federal jury in LA of violating the FCPA by bribing a Thai official in exchange for contracts to manage and operate Thailand's yearly film festival.
Gerald Green, 77, and Patricia Green, 52, were convicted of conspiring to violate the FCPA and U.S. money laundering laws, nine counts of violating the FCPA, and seven counts of money laundering. Patricia Green was found guilty of two counts of falsely subscribing to a U.S. income tax return.
The conspiracy and FCPA charges each carry a statutory maximum penalty of five years in prison. Each of the money laundering counts carries a statutory maximum penalty of 20 years in prison. The tax charges against Patricia Green each carry a statutory maximum penalty of three years in prison. The Greens are scheduled to be sentenced by United States District Judge George H. Wu on December 17, 2009.
Leo Winston Smith (September 3, 2009) Guilty plea to a two-count indictment. The former director of sales and marketing for Pacific Consolidated Industries (PCI), admitted that he bribed an official from the U.K. Ministry of Defense (MOD) in return for equipment orders. Smith, 73, pleaded guilty in the U.S. federal district court for central California to conspiracy to violate the FCPA (18 U.S.C. §371) and corruptly obstructing and impeding the due administration of the internal revenue laws (26 U.S.C. §7212(a)).
Sentencing is scheduled for December 18, 2009. He faces a maximum five years in prison on the FCPA conspiracy charge and three years on the tax charge, and a fine of about $255,000.
Oscar H. Meza (August 28, 2009) Resolved civil enforcement action. Meza, the former sales director in Asia for Faro Technologies, Inc., was charged by the SEC with violating the FCPA's antibribery provisions (Section 30A of the Securities Exchange Act of 1934 [15 U.S.C. §78dd-1]), the books and records and internal control provisions (Section 13(b)(5) ofthe Exchange Act and Exchange Act Rule 13b21 [15 U.S.C. § 78m(b)(5) and 17 C.F.R. § 240.13b2-1]), and with aiding and abetting Faro's violations of the anti-bribery, books and records, and internal controls provisions. The complaint alleged that he "authorized bribery payments to employees of Chinese state-owned companies in order to obtain contracts, and that in order to conceal the bribes Meza instructed that account entries be altered."
Meza paid a $30,000 civil penalty and $26,707 in disgorgement and prejudgment interest.
William Jefferson (August 5, 2009) Convicted of conspiracy to violate the FCPA. The former nine-term congressman from Louisiana was found guilty by a federal jury in Alexandria, Virginia of 11 of 16 corruption charges. In addition to the conspiracy charge, he was also found guilty of soliciting and taking bribes, depriving citizens of honest services, money laundering and racketeering, and conspiracy to solicit bribes. He was acquitted of a substantive charge of violating the FCPA.
Jefferson's case started in 2005 when the FBI raided his congressional office. He then became the first elected U.S. official to be charged under the Foreign Corrupt Practices Act. The indictment alleged among other things that he conspired to bribe the then Nigerian vice president, Atiku Abubakar, to steer telecommunications contracts to companies controlled by Jefferson's family.
Nature's Sunshine Products Inc. (NSP), Douglas Faggioli, and Craig D. Huff (July 31, 2009) Civil enforcement actions resolved. The SEC filed a settled enforcement action against NSP, its CEO Faggioli, 54, and its former CFO Huff, 53. The charges related to cash payments made in 2000 and 2001 by the Brazilian subsidiary of NSP, a manufacturer of nutritional and personal care products, to import unregistered products into Brazil and the subsequent falsification of its books and records to conceal the payments. NSP was required to pay a civil penalty of $600,000; Faggioli and Huff each paid $25,000.
The SEC's civil complaint alleged thatNSP's Brazilian subsidiary made a series of cash payments to customs officials to import product into that country and then purchased false documentation to conceal the nature of the payments. The conduct violated the FCPA, and the antifraud, issuer reporting, books and records and internal controls provisions of the federal securities laws. The complaint also alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions of the securities laws in connection with the Brazilian cash payments. NSP also failed to disclose the payments to Brazilian customs agents in its filings with the SEC.
Control Components Inc. (July 31, 2009) Criminal enforcement action resolved. Valve-maker CCI of Rancho Santa Margarita, California pleaded guilty to violating the anti-bribery provisions of the FCPA (15 U.S.C. §78dd-2) and the Travel Act (18 U.S. C. §1952). It bribed foreign officials in a decade-long scheme to secure contracts in about 36 countries. CCI's plea agreement imposes a criminal fine of $18.2 million, a compliance monitor for three years, and a three-year term of organizational probation.
CCI designs and manufactures service control valves for use in the nuclear, oil and gas, and power generation industries. Its website is here. It's owned by British-based IMI plc, which trades on the London Stock Exchange under the symbol IMI.L.
The corrupt payments were made to foreign officials at state-owned entities including Jiangsu Nuclear Power Corp. (China), Guohua Electric Power (China), China Petroleum Materials and Equipment Corp., PetroChina, Dongfang Electric Corporation (China), China National Offshore Oil Corporation, Korea Hydro and Nuclear Power, Petronas (Malaysia) and National Petroleum Construction Company (United Arab Emirates).
Ousama Naaman (July 31, 2009) Arrested in Frankfurt, Germany. The Canadian citizen had been indicted in August 2008 for his alleged role in an eight-year conspiracy to defraud the United Nations Oil for Food Program (OFFP) and to bribe Iraqi government officials in connection with the sale of a chemical additive used in refining leaded fuel. Naaman, 60, of Abu Dhabi, United Arab Emirates, was charged with one count of conspiracy to commit wire fraud and to violate the FCPA and two counts of violating the FCPA. The Justice Department is trying to extradite him from Germany to the United States to stand trial. He faces a maximum prison sentence of 15 years.
Helmerich & Payne Inc. (July 30, 2009) Criminal and civil enforcement actions resolved. The Oklahoma-based oil and gas driller paid a $1 million criminal penalty to the Justice Department and entered into a two-year deferred prosecution agreement to settle FCPA violations related to improper payments to government officials in Argentina and Venezuela. It was also required to disgorge to the Securities and Exchange Commission $320,604 plus prejudgment interest of $55,077.22 for books and records and internal controls violations.
Avery Dennison Corporation (July 28, 2009) Civil enforcement action resolved. Label-maker Avery Dennison resolved civil and administrative charges brought by the SEC in the United States District Court for the Central District of California. Avery was charged with violating the FCPA's books and records and internal controls provisions. In the administrative action, the SEC ordered the company to disgorge $273,213 and $45,257 in prejudgment interest. In the federal civil action, Avery agreed to a final judgment requiring it to pay a civil penalty of $200,000.
From 2002 through 2005, the Reflectives Division of Avery (China) Co. Ltd. paid or authorized the payment of kickbacks, sightseeing trips, and gifts to Chinese government officials amounting to about $30,000. In one transaction, Avery China secured a sale to a state-owned end user by agreeing to pay a Chinese official a kickback of nearly $25,000 through a distributor. Avery China earned $273,213 in profit from the transaction, which it inaccurately booked as a sale to the distributor rather than to the end user.
Frederic Bourke (July 10, 2009) Convicted of conspiring to violate the FCPA, violating the Travel Act, and lying to FBI agents.
Bourke, 63, is co-founder of well-known handbag brand Dooney & Bourke. A federal jury in Manhattan found that he invested in Czech-born promoter Viktor Kozeny's unsuccessful attempt in 1998 to gain control of Azerbaijan's state oil company, Socar, despite knowing Kozeny planned to bribe Azeri leaders. Kozeny has also been charged in the case but is a fugitive living in the Bahamas. Bourke was acquitted of money-laundering charges.
Sentencing is scheduled for Oct. 13, 2009. Bourke faces a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss resulting from the alleged violations on each of the two counts on which he was convicted.
Click on the party names for the original posts, with links to charging documents, plea agreements, and news and litigation releases.
View our enforcement report for Q2 '09 here.
View our enforcement report for Q1 '09 here.
View our 2008 enforcement index here.
The former director of sales and marketing for Pacific Consolidated Industries (PCI) admitted yesterday that he bribed an official from the U.K. Ministry of Defense (MOD) in return for equipment orders. Leo Winston Smith, 73, pleaded guilty in the U.S. federal district court for central California to conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. §371) and corruptly obstructing and impeding the due administration of the internal revenue laws (26 U.S.C. §7212(a)).
Smith, along with PCI's former president and part owner, Martin Eric Self, 51, paid at least $70,000 in bribes to the MOD official. The money was funneled through a sham marketing agreement PCI created in 1999 with a relative of the official. In return, PCI was awarded MOD contracts worth around $11 million. Smith also admitted under-reporting income on his 2003 U.S. federal tax return and failing to file a 2003 corporate return for his Nevada company, Design Smith Inc.
Sentencing in Smith's case is scheduled for December 18, 2009. He faces a maximum five years in prison on the FCPA conspiracy charge and three years on the tax charge, and a fine of about $255,000.
His co-conspirator, Martin Eric Self, pleaded guilty in May 2008 to violating the FCPA (here). Although Self faced up to five years in prison on each of two FCPA counts, his plea agreement contemplated a prison term of 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.
Privately-held PCI manufactures Air Separation Units (ASUs) and other equipment for the military, medical, and oil and gas markets. ASUs generate oxygen in remote, extreme, and confined locations. The Justice Department said that in late 2003, after the alleged illegal conduct occurred, a group of private investors bought California-based PCI. They referred the case to U.S. prosecutors and "fully cooperated in the government’s investigation."
Download a copy of the DOJ's September 3, 2009 release here.
Download a copy of the plea agreement in U.S. v. Leo Winston Smith (Case No.: CR 07-69(A) - AG) here.
It's an annual event. Democrats in Congress have re-introduced a bill from last year to regulate the way monitors are selected, paid and held accountable. The Project on Government Oversight has a nice report here. The retitled "Accountability in Deferred Prosecution Act of 2009" can be downloaded here.
Two of the bill's sponsors are from New Jersey, where the big flap about monitors first started. In late 2007, New Jersey's U.S. Attorney Chris Christie used deferred prosecution agreements to settle domestic bribery charges against orthopedic device makers. To monitor their compliance, he selected former U.S. Attorney General John Ashcroft, former U.S. Attorney for the Central District of California Debra Yang, former New Jersey Attorney General David Samson, former U.S. Attorney for the Southern District of New York in Manhattan David N. Kelly, and former counsel to the Federal Trade Commission during the Reagan Administration John Carley.
Sticker shock. The monitors were seen as being close to Christie. On top of that, his ex-boss John Ashcroft's monitorship had a price tag of $28 million to $52 million for 18 months of work. Democratic lawmakers (and plenty of Republicans) were unhappy to learn that federal prosecutors, acting alone, could tap party big shots and friends for such lucrative (part-time) posts. In early 2008, Congress launched investigations into all aspects of the monitors -- their appointment, pay, oversight and reporting responsibilities -- and even whether deferred prosecution agreements make sense in the first place. The hearings ended without any action by the Congress.
Where are they now? The orthopedic device makers completed their deferred prosecution agreements a couple of weeks ago. In their September 2007 settlements, they together paid $310 million to resolve charges that they bribed U.S. doctors to buy their products. After that, the Justice Department and the Securities and Exchange Commission began investigating whether the companies also gave kick-backs to overseas doctors employed by government-owned hospitals. Such payments could violate the Foreign Corrupt Practices Act. Biomet Inc., Stryker Corp., Zimmer Holdings Inc., Smith & Nephew plc and Medtronic Inc. disclosed FCPA investigations during 2007 and Wright Medical reported a similar investigation in June 2008.
Christie, meanwhile, resigned as New Jersey's U.S. Attorney in November 2008 and is running for governor as a Republican. In recent days he's had to defend his anti-corruption image against charges concerning the monitor appointments. The AP's report is here. "At issue," the AP says, "is Christie's acceptance of campaign cash from Herbert Stern, a former monitor for the state's medical and dental school, and his choice of two other monitors with whom he had prior ties: John Ashcroft, the former U.S. attorney general and Christie's old Justice Department boss, and David Kelley, a former U.S. attorney in Manhattan who investigated a stock fraud case involving Christie's younger brother, Todd, but declined to prosecute him." Christie, 46, says he's done nothing wrong.
Don't need 'em, don't want 'em. The always-resourceful Corporate Crime Reporter has a neat story dated April 3, 2009 titled, Guess Which U.S. Attorney Doesn’t Do Corporate Deferred Prosecution Agreements? It's Philadelphia. Linda Dale Hoffa, the office's Criminal Division chief since 1984, said this:
We haven’t done [deferred prosecution agreements] because we think it’s better to make a clear bright line decision that we are prosecuting or not prosecuting. There is either sufficient evidence to prosecute or not to prosecute. A deferred prosecution agreement can be more of a gray area. If the crime is serious enough, and it is warranted, then we will bring a prosecution. It’s not a written policy. But it has been the practice in our office.She also said it's the same with non-prosecution agreements. Either the office makes a decision to prosecute or to decline to prosecute, in which case "we close our file.”
A former co-owner and executive of California-based Pacific Consolidated Industries (PCI) pleaded guilty yesterday to violating the Foreign Corrupt Practices Act. Martin Eric Self, 51, of Orange, California pleaded guilty to a two-count information charging him with violating the FCPA by paying more than $70,000 in bribes to a U.K. Ministry of Defence official. The bribes were intended to secure equipment contracts with the U.K. Royal Air Force.
In October 1999, Self, a U.S. citizen, and Leo Winston Smith, then PCI’s executive vice president and director of sales and marketing, had PCI enter into a marketing agreement with a relative of a U.K. Ministry of Defence official. According to the DOJ, Self -- a signatory on PCI's marketing agreements and bank accounts -- admitted that he didn't know of any genuine services provided by the official’s relative. Instead, Self believed the payments probably were benefiting the official in exchange for obtaining and retaining the equipment-supply contracts.
Self is scheduled to be sentenced in federal court on September 29, 2008. Although he faces a maximum sentence of five years in prison per count, his plea agreement contemplates a prison term of eight months, subject to the court's final determination at sentencing.
For his role in the scheme, former marketing head Smith, a co-founder of PCI, was indicted in April 2007. The government says he conspired to bribe the U.K. Ministry of Defence official in order to obtain equipment contracts worth more than $11 million dollars. In addition to the FCPA violations, the indictment also charges Smith with money laundering and tax offenses. He's scheduled to stand trial in July 2008. Self, as part of his plea agreement, will presumably testify against his former colleague. Evidence against Smith is also likely to come from U.K. authorities. Their investigation of the U.K. Ministry of Defence official resulted in his guilty plea in the United Kingdom for accepting bribes from PCI. He was sentenced to two years in prison.
Privately-held PCI manufactures Air Separation Units (ASUs) and other equipment for the military, medical, and oil and gas markets. ASUs generate oxygen in remote, extreme and confined locations. The DOJ said that in late 2003, after the alleged illegal conduct occurred, PCI was acquired by a group of investors who referred the case to U.S. prosecutors and "fully cooperated in the government’s investigation."
Assistant Attorney General for the Criminal Division Alice S. Fisher, who departs from the DOJ later this month, said, “Individuals who resort to bribery and other fraudulent means to secure contracts with foreign governments not only corrupt legitimate bidding processes, but they also damage the integrity of the global marketplace. Furthermore, using an intermediary to make bribe payments will not insulate individuals from prosecution."
Referring to the collaboration by prosecutors in the U.S. and U.K., Ms. Fisher also said, "The coordinated international law enforcement efforts of this case exemplify the type of cooperation needed to fight crime in the 21st century, where physical borders are not boundaries for criminal activity. I would like to thank our colleagues in the United Kingdom for their efforts and assistance in prosecuting this case as well as the FBI and IRS for their investigatory assistance.”
View the DOJ's May 8, 2008 news release here.