Nearly half of Vietnam’s companies said they have had to bribe officials in order to do business, according to a survey released last month by the Vietnam Chamber of Commerce and Industry.
Entries in Nexus Technologies (15)
CCI did it. So did Nexus Technologies, Inc, Nam Nguyen, Kim Nguyen, and An Nguyen. And now Flavio Ricotti has done it too. They've all pleaded guilty in FCPA cases to violating or conspiring to violate the Travel Act.
Attorney Thomas Fox looks back on 2010's most memorable enforcement actions.
A look behind the DOJ's tally of individual prosecutions under the FCPA.
The DOJ said today that three former employees and a partner of Nexus Technologies Inc., a Philadelphia-based company, were sentenced late yesterday for their roles in a conspiracy to bribe Vietnamese government officials.
If the DOJ and SEC are prosecuting corporations instead of individuals for FCPA violations -- an idea raised in another post -- the numbers should show it. So let's take a look.
The end came last month for a privately-held American company called Nexus Technologies. It pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act and the Travel Act. As part of its plea, Nexus admitted to operating "primarily through criminal means" -- and it agreed to cease operations.
After being indicted in 2008 with its owner and three other individuals, Nexus tried to mount a defense. In October 2009, the company and its owner and president Nam Nguyen sought more information about who the defendants allegedly bribed, and they filed a motion to dismiss the entire indictment.
An FCPA violation needs an offer, payment, or promise to pay anything of value to a “foreign official." The original indictment claimed that employees of six entities –- the Vung Tau Airport, the Southern Flight Management Center, an aviation industry business, a Vietsovpetro Joint Venture, the Petro Vietnam Gas Company, and the Tourism and Trading Company -– were "foreign officials" because the entities were controlled by Vietnamese government agencies.
The defendants said:
The instant indictment fails to state a criminal offense because it alleges that the recipients of the improper payments were “foreign officials” because they were employees of entities “controlled” by various Vietnamese ministries of the government. Such a definition of “foreign official” is unsupported by the text or the purpose of the FCPA. The FCPA is a public bribery statute which criminalizes improper payments to officials performing a public function. Mere control of an entity by a foreign government no more makes that entity’s employees “foreign officials” than control of General Motors by the U.S. Department of the Treasury makes all GM employees U.S. officials. [our emphasis]
They also said the FCPA’s definition of “foreign official” -- which includes employees of any foreign government “department, agency or instrumentality” -- is unconstitutionally vague. Especially in the context of socialist and communist states like Vietnam, they argued, defining a “foreign official” to include employees of entities solely based on government “control” of those entities would unfairly sweep nearly all economic activity within the scope of the statute.
The government responded two weeks later with a superseding indictment. It was directed to the "foreign official" issues and it escalated the charges from five to 28 counts -- one count of conspiracy, nine counts each of violating the FCPA, the Travel Act, and money-laundering.
The new indictment revised the descriptions of the six Vietnamese entities in question -- saying they were "agencies and instrumentalities" of the Vietnamese government instead of merely being “controlled” by departments, agencies or instrumentalities of the government.
In November 2009, the defendants filed a motion to dismiss the new indictment. They said it still didn't allege that the six entities performed government functions which would make their employees "foreign officials."
In December 2009, the judge denied the defendants’ motion to dismiss without addressing the substantive issue of who's a "foreign official" under the FCPA. After the motion failed, Nexus and the three remaining co-defendants reportedly started serious discussions with the DOJ about plea deals.
It was too late for Nexus; the company was forced out of existence.
What's the case mean?
First, that the government isn't going to budge on its view of who's a "foreign official."
Second, the cost of challenging an FCPA action in court can be enormous. Nexus and co-defendant Nguyen sought dismissal with a frontal assault on the government’s interpretation of a “foreign official.” The DOJ then reached into its arsenal, increasing the charges from five to 28 counts. The nine FCPA charges, nine Travel Act charges, and nine money laundering charges were all based on the same nine transactions. But they multiplied the risk of long-term jail sentences for the individual defendants if convicted.
Third, the trial judge, if he felt strongly about it, could have looked at the issue of who's a "foreign official." He side-stepped it instead, handing the government a victory and the defendants a defeat.
Download a copy of defendants' first motion to dismiss here.
Download a copy of the superseding indictment here.
Download a copy of defendants' second motion to dismiss here.
Download a copy of the government's memorandum in opposition to second motion to dismiss here.
The Justice Department said Philadelphia-based export company Nexus Technologies Inc. and three employees pleaded guilty today to bribing Vietnamese officials.
Nexus pleaded guilty to conspiracy, and to violating the Foreign Corrupt Practices Act, and the Travel Act in connection with commercial bribes and money laundering. Nam Nguyen, 54, of Houston and Vietnam, the president and owner of Nexus, and sibling An Nguyen, 34, of Philadelphia, each pleaded guilty to conspiracy, a substantive FCPA violation, a violation of the Travel Act, and money laundering. Kim Nguyen, 41, another sibling, pleaded guilty to conspiracy, a substantive FCPA violation, and money laundering.
They were arrested in September 2008, along with Joseph T. Lukas, 60, a partner in Nexus until 2005. He pleaded guilty in June 2009 to conspiracy and to violating the FCPA. The DOJ said he admitted in his plea that from 1999 to 2005, he and others at Nexus bribed Vietnamese officials in exchange for contracts with the officials' agencies. The bribes were falsely described in the company's books as "commissions."
Lukas now faces up to 10 years in prison and a possible $350,000 fine. His sentencing is scheduled for April 6, 2010.
Nexus and the Nguyens admitted that from 1999 to 2008 they paid bribes of more than $250,000 to Vietnamese government officials in exchange for contracts. Nexus sold third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems.
The DOJ said Nexus acknowledged as part of its guilty plea that "it operated primarily through criminal means and agreed to cease operations."
Sentencing is scheduled for July 13, 2010. Nexus still faces a maximum fine of $27 million. Nam and An Nguyen each face a maximum sentence of 35 years in prison. Kim Nguyen faces a maximum sentence of 30 years in prison.
The government hasn't released the plea agreements for Nexus and the Nguyens; the plea agreement in U.S. v. Lukas remains under court seal.
A copy of the Justice Department's March 16, 2010 release can be viewed here.
Download a copy of the October 29, 2009 superseding indictment in U.S. v. Nexus Technologies, Inc. et al here.
It's not just about corporations anymore. FCPA enforcement is now about individuals too -- and in a big way. Here's this year's FCPA roll call of real people: Gerald and Patricia Green, whose Foreign Corrupt Practices Act trial opened in LA this week. Frederic Bourke and William Jefferson went on trial in June; both were convicted of conspiracy to violate the FCPA.
Awaiting trial in California are six former employees of Control Components Inc. -- Stuart Carson and his wife Hong (Rose) Carson, along with Paul Cosgrove, David Edmonds, Flavio Ricotti and Han Yong Kim. Earlier this year, two other former CCI executives pleaded guilty to conspiring to violate the FCPA. Mario Covino and Richard Morlok are scheduled to be sentenced in January 2010.
FCPA prosecutions are also pending against former employees of Philadelphia-based Nexus Technologies Inc. -- Nam Nguyen, Kim Nguyen and An Nguyen. Joseph T. Lukas, also from Nexus, pleaded guilty in June to violating the FCPA. His sentencing is scheduled for April next year.
Juan Diaz and Antonio Perez of Miami pleaded guilty in April to a one-count criminal information charging them with conspiracy to violate the FCPA. They arranged bribes to Haitian officials in exchange for telecommunications contracts. They're waiting to be sentenced.
Jeffrey Tesler and Wojciech Chodan were arrested in March in the U.K. on U.S. indictments in connection with KBR's Nigerian bribery. And Ousama Naaman was arrested in July in Frankfurt, Germany, charged in a U.S. indictment with violating the FCPA under the oil-for-food program. All three are facing extradition to the U.S.
An indictment isn't evidence or proof of guilt, of course, and every accused individual is presumed innocent. But beyond being an "enforcement action," an indictment is a full-blown personal tragedy -- with emotional damage, family stresses, economic hardship, and professional wreckage. It takes a Scott Turow to imagine and describe the awful consequences.
* * *
Aside from the human cost, what happens when someone is indicted? First they're arrested and they formally become a defendant, and their indictment is (usually) unsealed and made public. Federal criminal cases can also begin without an indictment when the lead investigator swears out a criminal complaint called an "information."
Within hours of arrest, the defendant makes an initial court appearance. He hears the charges against him, the judge tells him his rights, and counsel is appointed if he can't afford to hire one. Stuart Carson's April 9, 2009 statement of constitutional rights can be downloaded here.
After the hearing, the defendant is remanded to the custody of the U.S. Marshals Service or released on conditions set by the court -- such as requiring a secured bond, forfeiture of a passport, electronic monitoring, home confinement, etc.* Stuart Carson's April 11, 2009 amended conditions of release can be downloaded here.
The last of the early hearings is arraignment, when the defendant's counsel is asked three questions:
Does the defendant waive a formal arraignment, at which the indictment would be read in its entirety? He usually does.If formal arraignment is waived the hearing might be over in five minutes.
How does the defendant plead, guilty or not guilty?
Does the defendant request a trial by jury? He usually does. If not, the case will be decided by the judge in what's known as a bench trial.
Under the Speedy Trial Act, criminal defendants are entitled to a trial that begins no later than 70 days from the date the indictment or information was filed, or from the date the defendant appears before a judge, whichever is later. White-collar defendants usually waive the right to a speedy trial; the judge can also waive the speedy-trial requirements in the interests of justice.
Then it's time for pre-trial motions. Common defense motions include change of venue, exclusion of certain pieces of evidence, and requests for access to evidence held by the prosecution.
What about the trial? Well, more than 90 percent of federal criminal defendants don't have one. They plead guilty during the pretrial phase as part of a plea bargain, in exchange for the prosecutors' dropping some charges or recommending a more lenient sentence.
* The Bail Reform Act of 1984 presumes the defendant should be released on personal recognizance or unsecured personal bond unless it will "not reasonably assure the appearance of the person as required or will endanger the safety of any other person or the community."
This description of federal criminal procedure is adapted from information provided by the Administrative Office of the U.S. Courts here.
A former executive of a Philadelphia-based export company pleaded guilty Monday to being part of a conspiracy to bribe Vietnamese government officials in violation of the Foreign Corrupt Practices Act.
Joseph T. Lukas, 60, a resident of New Jersey, was a partner in Nexus Technologies Inc. until 2005. He admitted that from 1999 to 2005, he and other Nexus employees agreed to pay, and knowingly paid, bribes to Vietnamese government officials in exchange for contracts with the officials' agencies. The bribes were falsely described in the company's books as "commissions."
Lukas now faces up to 10 years in prison and a possible $350,000 fine. His sentencing is scheduled for April 6, 2010.
He was arrested in September 2008, a day after being indicted by a federal grand jury in Philadelphia on one count of conspiracy to bribe Vietnamese public officials in violation of the Foreign Corrupt Practices Act and one substantive count of violating the FCPA. The indictment also charged the company and alleged co-conspirators Nam Nguyen, Kim Nguyen and An Nguyen, all U.S. citizens, with similar violations. Those cases are still pending.
According to the indictment, Nexus, a privately-held Delaware company with offices in Philadelphia, New Jersey and Vietnam, sold third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems to the government of Vietnam.
The indictment charged that the defendants paid at least $150,000 to officials at Vietnam’s Ministries of Transport, Industry and Public Safety to secure supply contracts. It said Nam Nguyen negotiated contracts and bribes with Vietnamese government officials while Lukas negotiated with vendors in the United States. Kim and An Nguyen allegedly arranged for the transfer of funds at Nam Nguyen’s direction.
The company's website (in English and Vietnamese) says:
Nexus specializes in supplying equipment and consulting / system integrating services for five high-growth, state-funded industries:The three other individual defendants in the case and Nexus are presumed innocent until and unless proven guilty at trial beyond a reasonable doubt.
* Power Generation, Transmission and Distribution
* Civil Aviation
* Marine & Sea Ports
* Other Heavy Industries
Doing business in Asia requires relationships, trust, and the time to build them. Nexus is proud to have established, through its consistent presence and reliable performance, trusted relationships with customers.
View the DOJ's June 29, 2009 release here.
The Virginia-based physicist who sold controlled space-launch technology to China by bribing government officials there has been sentenced to 51 months in prison. Shu Quan-Sheng (left), 68, a native of China, naturalized U.S. citizen and PhD physicist, pleaded guilty in November 2008 to one count of violating the Foreign Corrupt Practices Act and two counts of violating the Arms Export Control Act. Shu had already forfeited $386,740 to the federal government before being sentenced to prison.
Shu is the President, Secretary and Treasurer of AMAC International Inc., a high-tech company based in Newport News, with another office in Beijing. AMAC performs research through grants funded by the Small Business Research program on behalf of the Department of Energy and the National Aeronautics and Space Administration (NASA).
Shu violated the FCPA by offering "percentage points" in 2006 worth a total of $189,300 to officials at a research institute affiliated with the China Academy of Launch Vehicle Technology. He was trying to land a contract to develop a liquid hydrogen tank system for a heavy payload launch facility located on Hainan Island in the PRC. In January 2007, the $4 million hydrogen liquefier project was awarded to a French company that Shu represented.
Shu violated the Arms Export Control Act by willfully exporting a defense service from the United States to the PRC without first obtaining the required export license or written approval from the State Department. He provided the PRC with assistance in the design and development of a cryogenic fueling system for space launch vehicles to be used at the heavy payload launch facility on Hainan.
The investigation involved the FBI, U.S. Immigration and Customs Enforcement, and the U.S. Department of Commerce, Office of Export Enforcement.
In a prior post we noted that Shu's arrest in September 2008 was similar to arrests earlier that month of U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies (see our post here). They were charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and four substantive counts of violating the FCPA. They're accused of bribing government officials in Vietnam to secure contracts to supply high-tech items -- including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. That case doesn't yet involve charges under U.S. export laws.
Download the DOJ's April 7, 2009 release here.
Last month we reported the conviction in a Tokyo court of three Japanes executives and their company on charges of bribing a senior Vietnamese government official. The illegal payments of $820,000 were intended to secure contracts for road projects backed by Japanese aid money. In court, the recipient of the bribes was identified as Huynh Ngoc Sy, an official in Ho Chi Minh City.
Last week, the Vietnam News Agency reported the arrest of the same Mr. Sy, 56, for "abuse of power." He was the former deputy director of Ho Chi Minh City’s Department of Transport, and the former director of the East-West Highway and City Water Environment Improvement projects. After his arrest, investigators from the Ministry of Public Security’s Anti-corruption Department searched his house. Police also arrested Sy’s deputy, Le Qua, and searched his house.
In November last year, Sy was suspended from his job and banned from traveling outside Vietnam. That action came after the country's Prime Minister, Nguyen Tan Dung, directed his government to "co-operate with Japanese agencies investigating allegations that officials of a Japanese firm had bribed Vietnamese officials to get project contracts."
Vietnam's biggest aid provider is Japan. But the bribery scandal caused such a flap in Japan that it suspended aid, including low-interest loans for infrastructure projects. Vietnam's state television reported last week that following Sy's arrest, Vietnam's prime minister asked Japan to resume the loan program.
Japan has a low incidence of domestic public corruption -- it ranked 18th on the 2008 Corruption Perception Index, tied with Belgium and the United States. But until this case, it hadn't prosecuted any overseas bribery cases. In June 2008, the OECD criticized Japan for its "lagging" enforcement. We speculated that this case went to court only because it involved the misuse of Japanese taxpayer funds in the foreign aid program.
Vietnam is ranked 121st on the 2008 Corruption Perception Index, tied with Nepal, Nigeria, Sao Tome and Principe, and Togo. Despite Vietnam's corruption-prone reputation, it wasn't named in any Foreign Corrupt Practices Act enforcement actions until recently. In September 2008, U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies, were charged under the Foreign Corrupt Practices Act with bribing government officials in Vietnam. The alleged bribes were intended to secure contracts to supply high-tech items -- including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. Their trial is pending.
In December 2008, Siemens' guilty plea to FCPA books and records violations involved Vietnam. The Securities and Exchange Commission's complaint (download the pdf here) said Siemens' medical division "paid $183,000 in early 2005 and $200,000 in early 2006 in connection with the sale of approximately $6 million of medical devices on two projects involving the Vietnamese Ministry of Health." And in 2002, the complaint said, Siemens' communications division paid about $140,000 in bribes as "part of a much larger bribery scheme concocted by high-level managers at Siemens regional company in Vietnam, SLV, to pay bribes to government officials at Vietel and the Vietnamese Ministry of Defense in order to acquire Phase I of the Vietel GSM tender."