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Entries in Smith and Wesson (70)

Thursday
Feb182010

Mega-Bust Judge Doesn't See Grand Conspiracy

Photo by Willie LunchmeatThe U.S. district court judge overseeing the trial of the 22 defendants indicted in the shot show mega-bust said at a hearing Wednesday he doubts they were part of a single conspiracy, as the government has asserted.

Reuters quoted Judge Richard Leon as saying: "I read all 16 indictments and I didn't see it. I have zero sense that there was an omnibus grand conspiracy."

If the judge doesn't find evidence of a common conspiracy by the defendants, the government would be forced to try them separately. Prosecutors, however, said they are already talking with lawyers for some defendants about plea deals. "We're in discussions with a number of counsel right now about possible dispositions," the DOJ's Matthew Solomon said. "We don't think there are going to be 16 trials."

According to Reuters, the government's evidence includes "5,287 taped phone calls, more than 800 hours of video and audio recordings and 231 recordings of meetings between undercover agents and the defendants."

Among the defendants are Amaro Goncalves, 49, a vice president of gun-maker Smith & Wesson and Patrick Caldwell, 61, a former secret service agent and current CEO of body armor manufacturer Protective Products of America Inc.

Each of the 16 indictments allege that the defendants conspired to violate the Foreign Corrupt Practices Act, conspired to engage in money laundering, and committed substantive FCPA offenses. The indictments also seek criminal forfeiture of the defendants’ ill gotten gains.

Prosecutors allege that the defendants were all part of a common plot to pay bribes to the minister of defense of an African country. In fact, the scheme was part of the undercover sting with no actual involvement by a foreign official. The government alleges the defendants agreed to pay a 20 percent “commission” to a sales agent who the defendants believed represented the African defense minister. In reality, the “sales agent” was an undercover FBI agent.

The government's cooperating witness was Richard Bistrong. Identified in the indictments as “Individual 1,” he introduced the defendants to undercover FBI agents. Bistrong was himself indicted in a separate case in January. He was charged in federal court in the District of Columbia with conspiracy to violate the Foreign Corrupt Practices Act's antibribery provisions, 15 U.S.C. §78dd-1, its books and records provisions, 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5) and 78ff(a), and the Commerce Department's export license rules, 50 U.S.C. §§ 1701-1706 and 15 C.F.R. §§ 736.2, 764.2, and 774.

Bistrong was a vice president for international sales at Armor Holdings, a former publicly traded military equipment manufacturer in Jacksonville, Florida. Amor became a subsidiary of BAE Systems after the British firm acquired it in 2007.

In its charges against Bistrong, the DOJ alleged that from 2001 through 2006, he and others concealed about $4.4 million in payments to agents and other intermediaries who helped Armor Products obtain business from "foreign government customers" in Nigeria and the Netherlands. Payments for sales to the United Nations for its mission in Iraq were also involved.

See all our posts on the shot show mega-bust here.

Thursday
Feb112010

Mega-Bust Is Only The Beginning

The shot-show arrests (see our posts here) have raised lots of questions about FCPA enforcement and prosecution. In a post here, for example, we wondered if the government's argument that the 22 defendants were part of a single conspiracy might open the door for the entrapment defense, particularly because some defense counsel in the case have said their clients didn't know each other.

Law professor Dru StevensonIn response, Dru Stevenson, a professor at the South Texas College of Law, said it wasn't entrapment but maybe an "overdone" conspiracy charge. He wrote:

" . . . The federal courts use the 'subjective' rule for entrapment, which focuses on the defendant's predisposition and not on the government's conduct. It does not matter if the 'conspiracy' itself was really a huge sting operation -- each conspirator can still be guilty of conspiring with the government agent(s). Entrapment always has a sting operation as its origin, but most sting operations -- even grandiose ones -- do not run afoul of the rules for entrapment or provide the basis for the defense. . . .

"Regarding conspiracies, courts have upheld them where the members of the conspiracy did not know how big the conspiracy was or who all the other members were (in fact, most criminal conspiracies keep all the members on a 'need to know' basis so they can't rat out all the others if they bail out on the plot). On the other hand, courts have refused to entertain conspiracy charges where there was really one criminal making dirty deals with lots of criminal clients. Each person might be guilty of a conspiracy regarding the single transaction in which they participated, but not the transactions of others, unless it was reasonably apparent that their transaction was merely part of a larger scheme."

His full comment is here.

Michael Volkov, a former federal prosecutor and now a white-collar criminal defense lawyer at Dickinson Wright's Washington, D.C. office, thinks the entrapment defense might appear. He also talked about the government's FCPA investigation techniques and trial tactics.

He said:Michael Volkov: Former Assistant U.S Attorney and current white-collar criminal defense lawyer

"You mentioned in one entry the fact that the FBI undercover posed as a foreign official and was not an actual foreign official. While there is no caselaw directly on point, one thing is clear -- undercover agents can pose as persons for purposes of a violation -- e.g. an FBI agent acting as a minor, under 14 on the internet, for purposes of criminal solicitation etc. I suspect that principle will carry the day.

"I am much more interested, as a defense counsel, in the decision to prosecute the cases in D.C., where entrapment defenses normally get more traction. On the other hand, given the nature of the defendants and their origin, D.C. juries are less sympathetic. But my understanding of D.C. juries (based on 17 years as AUSA) is that they have difficulty understanding the instruction, thinking it means only 'trapped' as opposed to the legal definition of 'entrapped.'

"Finally, the most important aspect of this case is that DOJ and the FBI have now decided to use traditional law enforcement techniques typically reserved for drug traffickers, gang members and terrorists. Under these circumstances, I would expect the government to use a wiretap, undercover officers, etc, as they try to bring in more and more defendants. This is just the beginning and compliance will be incredibly important for corporate defendants -- big and small."

Wednesday
Feb032010

Common Conspiracy Or Big-Time Entrapment?

Image by DemonDeLuxe (Dominique Toussaint) licensed under Creative Commons Attribution ShareAlike 3.0.In Washington on Wednesday, 19 of the 22 defendants named in the FCPA mega-bust pleaded not guilty. The remaining three defendants are in custody and expected to appear in court soon. Here's a report from Reuters

The defendants face charges of violating the Foreign Corrupt Practices Act and conspiracy to violate the FCPA and launder money.

During the hearing, the government said the defendants were part of a single conspiracy to win arms contracts by bribing someone they thought was the defense minister of an African country.

The single-conspiracy theory should streamline the government's case. Prosecutors can argue to the judge that all the defendants should be tried together (even if he doesn't agree, there aren't likely to be 22 separate trials). Then the government can tell the jury one story and cast each defendant in a role in that story. And when some defendants cop pleas and cooperate with the government -- which will happen -- their evidence will be relevant to all other alleged co-conspirators.

As we said right after news of the mega-bust broke, the DOJ's stage management was stunning. It rounded up all but one defendant on the same day at the Las Vegas Shot Show. Now we learn that before the arrests, the Justice Department had stitched the defendants together in an alleged grand conspiracy. That probably couldn't have happened without lots of help from the DOJ's inside man, known in the mega-bust indictments as “Individual 1" and identified since then as Richard T. Bistrong. He was charged last month in a separate case with conspiracy to violate the FCPA.

But will the single-conspiracy approach set up the entrapment defense? Reuters quoted two defense attorneys as saying "they believed their clients barely knew each other beyond perhaps an occasional handshake when their paths happened to cross in the industry." That suggests some defendants might argue they were a group of strangers recruited into an illegal conspiracy promoted and run entirely by the feds and their mole.

Reuters said the prosecutor's statement that the defendants were part of a single conspiracy "clearly surprised U.S. District Judge Richard Leon and many of the defense lawyers, who raised questions about consolidating the cases into one." During the hearing's afternoon session, the judge "made it clear there were limits to case consolidation. 'I'm not going to try a case, no judge can try a case with 22 defendants,' Leon said."

Sunday
Jan242010

High-Velocity FCPA

There's been more FCPA action in the past month than in most prior years since enactment in 1977. What's the rest of 2010 going to bring? Photo by Patrick BourThe FCPA-related news just keeps coming -- faster and faster. Even before last week's head-spinning mega bust, there was enough news from the past month to keep us busy till summer. The hard part has been keeping it all straight.

So let's take some quiet time to gather our thoughts about what's happened over the past 30 days:

1. Oh Crikey! In late December, the D.C. federal appeals court affirmed the dismissal of a shareholder derivative suit against some current and former directors and executives of U.K.-based BAE Systems PLC. The complaint alleged BAE's payment of more than $2 billion in bribes and kickbacks to Prince Bandar Bin Sultan of Saudi Arabia. The suit claimed the defendants breached their fiduciary duties and wasted corporate assets.

The U.S. federal courts applied English law to the case. A fossilized 1843 case they unearthed called Foss v. Harbottle, 2 Hare 461, 67 E.R. 189 said "the company, not a shareholder, is the proper plaintiff in a suit seeking redress for wrongs allegedly committed against the company."

The appeals court saw no reason to create an exception to promote the U.S. public policy of protecting shareholders and the company itself from law-breaking directors and executives. It gave the BAE directors even more comfort by noting that under English law, paying bribes isn't necessarily an ultra vires act “beyond the corporate capacity of a company.”

Our take: Even in civil courts, shouldn't directors of foreign companies that do business in and from the U.S. be held to the same standards as U.S.-company directors?

2. Others have said so what. But we thought this was a nifty piece of news: A U.S. company with no securities traded on an exchange but that files periodic reports with the Securities and Exchange Commission disclosed an internal investigation into possible Foreign Corrupt Practices Act violations and said it had self-disclosed to the SEC and DOJ.

Tampa-based PBSJ Corporation is a "domestic concern" subject to the anti-bribery provisions. It has no publicly traded securities but because it has so many shareholders -- about 4,000 mainly current and former employees -- it files periodic reports with the SEC. That makes it an "issuer" subject to the books and records and internal controls provisions. We think it's the first "issuer" without shares traded on an exchange to announce an FCPA investigation self-reported to the feds.

OK, it's not momentous. But we're amazed that apparently fresh FCPA enforcement scenarios are still popping up more than 30 years after the law's enactment.

 3. Your money or your HR director. The SEC kicked off the FCPA-enforcement year with civil books and records and internal controls charges against Texas-based oil and gas services firm NATCO Group Inc. The company was hit with a $65,000 civil penalty because its subsidiary, TEST Automation & Controls, Inc., "created and accepted false documents while paying extorted immigration fines and obtaining immigration visas in the Republic of Kazakhstan."

Extorted is the important word.

Companies and expat employees regularly face demands for cash from foreign police, bureaucrats and regulators that are backed by threats. The case is a reminder that extorted payments may not violate the FCPA's antibribery provisions but can be the basis for accounting offenses if not accurately recorded.

Our take: Although technically correct, the SEC looked petty dinging Natco for $65K. A warning letter about the accounting lapses (with some sympathy for the extortion) would have been fine.

4.  Directors 2, Plaintiffs 0. In dismissing a shareholder deriviative suit that alleged Dow Chemical's directors failed to prevent bribery in Kuwait, a Delaware chancery court said Dow's corporate compliance program was evidence the board had met its fiduciary duty of supervision.

Tucked in a footnote, the court's important message said: "Plaintiffs cannot simultaneously argue that the Dow board 'utterly failed' to meet its oversight duties yet had 'corporate governance procedures' in place without alleging that the board deliberately failed to monitor its ethics policy or its internal procedures."

Our take: Spot-on decisions like this are what make the Delaware chancery court so respected.

5, 6, 7 And that brings us to  . . . last week's FCPA mega bust. Which was immediately followed by a one-count criminal information against "Individual 1" from the mega-bust indictments -- revealed to be Richard T. Bistrong. For a nice account of his first court appearance in D.C. on Friday, take a look at this dispatch from Christopher Matthews at Main Justice.

And let's not forget last week's indictment of the Thai official and her daughter who allegedly took bribes from Gerald and Patricia Green. Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, becomes one of the few foreign officials charged in the U.S. for a corruption-related offense. As for the Greens, their sentencing on FCPA and related charges was postponed last week until March 11.

*   *   *

Not long ago, it would have taken a year or more to rack up this much FCPA-type action. That makes us wonder what the rest of 2010 will look like. It's going to be a wild ride.

Friday
Jan222010

Another Military Equipment Exec Charged In Bribe Case

Representatives of the United Nations are "foreign officials" under the Foreign Corrupt Practices Act. The key intermediary identified as “Individual 1” in this week's historic bribery indictment of 22 people from the military and police-equipment industry has been charged with conspiracy (18 U.S.C. § 371).

In a one-count criminal information filed in federal court in the District of Columbia, the DOJ accused Richard T. Bistrong of conspiring with others to violate the Foreign Corrupt Practices Act's antibribery provisions, 15 U.S.C. §78dd-1, its books and records provisions, 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5) and 78ff(a), and the Commerce Department's export license rules, 50 U.S.C. §§ 1701-1706 and 15 C.F.R. §§ 736.2, 764.2, and 774. The information was released on Friday.

Bistrong was a vice president for international sales at Armor Holdings, a former publicly traded military equipment manufacturer in Jacksonville, Florida. Amor became a subsidiary of BAE Systems after the British firm acquired it in 2007.

According to a report in the New York Times Friday by Diana Henriques, John Suttle, senior vice president for corporate communications at BAE's U.S. unit, confirmed that Bistrong had worked at Armor Holdings but was fired before BAE's acquisition. He said Armor had self-disclosed to the DOJ and SEC and that "all of these events occurred before BAE bought the company."

The New York Times also said sources confirmed that Bistrong -- or “Individual 1” as he's referred to in the earlier indictments -- introduced undercover FBI agents to senior executives in the arms and security-equipment business.

Tuesday's indictment of 22 people, including four Israelis and three Britons, was the first big undercover sting used in connection with alleged violations of the Foreign Corrupt Practices Act. It was also the biggest mass indictment in FCPA history. An FBI undercover agent posed as a military-equipment buyer for an African country. He told the sellers they would have to pay 20% commissions to an African government official for the sales. "Individual 1," according to the indictments, played a key role by introducing the undercover FBI agent to the various sellers.

In its charges against Bistrong, the DOJ alleged that from 2001 through 2006, he and others concealed about $4.4 million in payments to agents and other intermediaries who helped Armor Products obtain business from "foreign government customers" in Nigeria and the Netherlands. Payments for sales to the United Nations for its mission in Iraq were also involved.

The DOJ said in the information that an official of a "public international organization" is a "foreign official" under the FCPA. 15 U.S.C. §§ 78dd-l(f)(l)(A) and 78dd-l(f)(I)(B). The United Nations is a "public international organization;" therefore its offcials are "foreign officials" under the FCPA. 22 U.S.C. § 288; Exec. Order No. 9698, 11 Fed. Reg. 1809 (Feb. 20,1946).

The information also alleged that in March 2004, Bistrong and another employee authorized the export from the U.S. to the United Arab Emirates for further shipping to Iraq of vests and helmets "without obtaining a required license from the Commerce Department to do so."

Download a copy of the information in U.S. v. Richard T. Bistrong here.

Special thanks to Marc Bohn in the District of Columbia for help with this post.

Thursday
Jan212010

It's In The Bag

The mail is always fun around here (when we're not in any sort of hot water). Here's a message from a curious reader who asks a great question. It's about one of the defendants indicted in this week's FCPA mega bust.

We think he's right but we'd like to hear from other readers too.

 

From: sundar narayanan
Date: January 21, 2010
To: The FCPA Blog
Subject: Re: Lee Allen Tolleson

Dear FCPA Blog,

I believe the recently indicted Lee Allen Tolleson, 25, is the youngest indivual ever indicted for an FCPA offense.

I'd like to know if there are any people younger than him indicted in the past for violating the FCPA.

Regards
Sundar. N

*   *   *

Still on the subject of the mega bust. Peter Henning, a professor at Wayne State Law School and formerly of the White Collar Crime Prof Blog, has a terrific post on the New York Times White Collar Watch. He talks about the tactics used to nail the 22 FCPA defendants:

. . . Undercover stings in white-collar cases are controversial because the defendants are generally law-abiding citizens, unlike those dealing in drugs or stolen property who can hardly complain that they are unwary innocents. After Abscam, Congress considered legislation to require prior approval for undercover operations as a means to limit the discretion of prosecutors and investigative agencies to use a sting to cases in which there was some basis to believe the target was willing to engage in criminal activity before the investigation began. The legislation never advanced, and undercover stings have been used successfully in public corruption cases, like Operation Greylord in Chicago, which resulted in the conviction of a number of judges and lawyers working in the Cook County courts. . . .

*   *   *

Hard words for the president. From Mort Zuckerman, the chairman and editor in chief of U.S. News & World Report and publisher of the New York Daily News. Writing this week in the Daily Beast:

He’s misjudged the character of the country in his whole approach. There’s the saying, “It’s the economy, stupid.” He didn’t get it. He was determined somehow or other to adopt a whole new agenda. He didn’t address the main issue.

This health-care plan is going to be a fiscal disaster for the country. Most of the country wanted to deal with costs, not expansion of coverage. This is going to raise costs dramatically.

In the campaign, he said he would change politics as usual. He did change them. It’s now worse than it was. I’ve now seen the kind of buying off of politicians that I’ve never seen before. It’s politically corrupt and it’s starting at the top. It’s revolting. . . .

I’m very disappointed. We endorsed him. I voted for him. I supported him publicly and privately.

Wednesday
Jan202010

Big Shot In Vegas

The Justice Department's Big Show: It arrested 21 of 22 defendants who were in Las Vegas for the firearms-related industry's biggest annual event, in the presence of 1,400 journalists from the U.S. and abroad.One stunning aspect of this week's giant FCPA bust was the DOJ's stage management. Defendants from three countries and five states were swept up at the same time, all but one in the same city. The feds were like an infantry waiting to see the whites of their eyes -- waiting, waiting, waiting -- until the defendants had walked into the trap. It was law enforcement as art, choreographed at the biggest law enforcement-related confab on the planet, in the presence of the world's media.

Twenty-one of the 22 defendants were arrested in Las Vegas. (One of them, Stephen Gerard Giordanella, was arrested in Miami.) None lived in Vegas; they were in town for the Shot Show.

The annual Shooting, Hunting & Outdoor Trade Show is a colossal event. Founded 32 years ago for the firearms, munitions and shooting-related industry, the general public isn't invited. It's for professionals only and draws around 60,000 people from all 50 states and 75 countries. They come to see the 1,800 exhibitors -- if you're not part of the Shot Show, you're not part of the industry. This year's venue at the Sands Expo & Convention Center covers 700,000 square feet.

The FCPA arrests were bound to receive maximum attention. They happened on the eve of the Shot Show's opening; some defendants were from well-known exhibitors. According to the Shot Show website, around 1,400 journalists would have been there -- flying in from all over the U.S. and beyond. The FCPA arrests gave them a special reward -- hard news to send back home.

*   *  *

The Shot Show, which runs through January 22nd, features appearances by most celebrities in the shooting-sports field -- Clint Smith from the Thunder Ranch shooting school, Tom Gresham from Gun Talk radio, and big game hunter Wayne Van Den Bergh, among others. 

Wider-known personalities are there too. Mixed martial arts champ Brock Lesnar is on the appearance list, along with baseball players Willie Robertson, Chipper Jones, Adam LaRoche, Matt Duff, Ryan Langerhans and Tombo Martin. One of the legendary Statler Brothers -- Jimmy Fortune -- is there. So is Kristy Lee Cook, a top ten American Idol finalist.

The best-known attendee this year may be Hollywood actor Steven Seagal. He's plugging his line of "Steven Seagal Tactical Gear" -- body armor, battle and sniper rifles, and other equipment for military and police. Here he is:

Wednesday
Jan202010

The FCPAscam 22: Who Do They Work For?

Helmie Ashiblie: One of 22 people from the law enforcement and military equipment supply industry arrested this week for violating the Foreign Corrupt Practices Act.The Justice Department didn't name them. But here's what we've learned so far about the employers of those arrested in Tuesday's FCPA mega-bust:

•    Daniel Alvirez, 32, and Lee Allen Tolleson, 25, the president and director of acquisitions and logistics at ALS Technologies Inc., a company in Bull Shoals, Ark., that manufactures and sells law enforcement and military equipment;

•    Helmie Ashiblie, 44, the vice president and founder of i-Shot, a company in Woodbridge, Va., that supplies tactical bags and other security-related articles for law enforcement agencies and governments worldwide;

•    Andrew Bigelow, 40, the managing partner and director of government programs for  The Gun Search.com LLC in Sarasota, Fla. (dba/ machinegun.com), a company that sells machine guns, grenade launchers and other small arms and accessories;

•    R. Patrick Caldwell, 61, and Stephen Gerard Giordanella, 50, the current and former chief executive officers of Protective Products of America Inc, Sunrise, Fla., a company that designs and manufactures concealable and tactical body armor;

•    Yochanan R. Cohen, a/k/a Yochi Cohen, 47, the chief executive officer of High Com Security, a San Francisco company that manufactures security equipment, including body armor and ballistic plates;

•    Haim Geri, 50, the president of High Tech USA, a North Miami Beach, Fla., company that serves as a sales agent for companies in the law enforcement and military products industries;

•    Amaro Goncalves, 49, the vice president of sales for Smith & Wesson Holding Corp, Springfield, Mass., a company that designs and manufactures firearms, firearm safety/security products, rifles, firearms systems and accessories;

•    John Gregory Godsey, a/k/a Greg Godsey, 37, and Mark Frederick Morales, 37, the owner and agent of a Decatur, Ga., company that sells ammunition and other law enforcement and military equipment;

•    Saul Mishkin, 38, the owner and chief executive officer of Orkil International LLC, an Aventura, Fla., company that sells law enforcement and military equipment;

•    John M. Mushriqui, 28, and Jeana Mushriqui, 30, the director of international development and general counsel/U.S. manager of Mushriqui Consulting LLC, an Upper Darby, Penn., company that manufactures and exports bulletproof vests and other law enforcement and military equipment;

•    David R. Painter, 56, and Lee M. Wares, 43, the chairman and director of a United Kingdom company that markets armored vehicles;

•    Pankesh Patel, 43, the managing director of a United Kingdom company that acts as sales agent for companies in the law enforcement and military products industries;

•    Ofer Paz, 50, the president and chief executive officer of Paz Logistics, an Israeli company that acts as sales agent for companies in the law enforcement and military products industries;

•    Jonathan M. Spiller, 58, the owner and president of Jm Spiller & Assoc Inc, a Ponte Vedra Beach, Fla., company that markets and sells law enforcement and military equipment;

•    Israel Weisler, a/k/a Wayne Weisler, 63, and Michael Sachs, 66, owners and co-chief executive officers of U.S. Cavalry Store Inc., Stearns, Ky., company that designs, manufactures and sells armor products, including body armor;

•    John Benson Wier III, 46, the president of SRT Supply Inc., a St. Petersburg, Fla., company that sells tactical and ballistic equipment.

´╗┐Politico posted some background about the defendants here.

Readers are welcome to help us fill in the gaps.

See related posts here.

Tuesday
Jan192010

Lessons From FCPAscam 

That's a Smith and Wesson and you've had your six.

        ~ James Bond to an out-of-ammo assailant in "Dr. No"

Twenty-two people from military and law-enforcement supply companies -- including the vice president of sales for American gun-maker Smith & Wesson -- were arrested Tuesday on charges of violating the Foreign Corrupt Practices Act, and conspiracy to violate the FCPA and launder money.

Our six shots. Here's an early look at what the case means:

1. The feds' new playbook. It was an undercover sting operation, the first big one in FCPA history. There was no real foreign official, only an FBI agent posing as "a sales agent who the defendants believed represented the minister of defense for a country in Africa." Can you have an FCPA violation without an actual foreign official? We'll find out.

2. Five plus five plus twenty (years that is). Even if the FCPA charges don't stick, the feds also charged the defendants with conspiracy to violate the FCPA and to commit money laundering. Conspiracy can be easier for the government to prove than substantive FCPA offenses. Just ask William Jefferson and Frederic Bourke. The FCPA count carries a 5-year penalty, as does the FCPA conspiracy charge. But the conspiracy to commit money laundering packs a 20-year punch.

3. Who squeals first, squeals best. When the government indicts en masse, the defendants who offer early cooperation usually make out best, often with much lighter sentences. Having cooperating witnesses makes life a lot easier for the prosecutors. The tactic has been used for years by the Justice Department in price-fixing and antitrust cases.

4. They're everywhere. The DOJ said "approximately 150 FBI agents executed 14 search warrants in locations across the country." How many agents were involved in the actual investigation and sting, we aren't told. Whatever the number, this was a big operation. 

5. The Brits are in the game. The DOJ said the City of London Police "executed seven search warrants in connection with their own investigations" into companies involved in the DOJ busts. The U.K. authorities snoozed for decades on overseas bribery. But lately they've also arrested Jeffrey Tesler at the DOJ's request, launched an investigation into Halliburton, look set to charge BAE, charged a former Johnson & Johnson / DePuy executive, and banned some Kenyan kleptocrats.

 6. Low-hanging fruit. White collar types aren't used to being targeted by investigators. Unlike drug dealers and Mafioso, they haven't had much practice being careful not to get caught. What's that mean for the FCPA? More of the same on the way. As Assistant Attorney General Lanny A. Breuer said Tuesday: "From now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent."

Tuesday
Jan192010

Massive FCPA Indictment Unsealed

The Justice Department announced the biggest FCPA indictment ever; 22 from arms and security industry charged in FBI sting.First Large-Scale FCPA-Related FBI Sting

From the Justice Department's January 19, 2010 release:

 WASHINGTON – Twenty-two executives and employees of companies in the military and law enforcement products industry have been indicted for engaging in schemes to bribe foreign government officials to obtain and retain business.

Twenty-one defendants were arrested in Las Vegas yesterday. One defendant was arrested in Miami. The indictments stem from an FBI undercover operation that focused on allegations of foreign bribery in the military and law enforcement products industry.

The 16 indictments unsealed today represent the largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the Foreign Corrupt Practices Act (FCPA), a law that prohibits U.S. persons and companies, and foreign persons and companies acting in the United States, from bribing foreign government officials for the purpose of obtaining or retaining business.

The indictments unsealed today were returned on Dec. 11, 2009, by a grand jury in Washington, D.C.

In connection with these indictments, approximately 150 FBI agents executed 14 search warrants in locations across the country, including Bull Shoals, Ark.; San Francisco; Miami; Ponte Vedra Beach, Fla.; Sarasota, Fla.; St. Petersburg, Fla.; Sunrise, Fla.; University Park, Fla.; Decatur, Ga.; Stearns, Ky.; Upper Darby, Penn.; and Woodbridge, Va. Additionally, the United Kingdom’s City of London Police executed seven search warrants in connection with their own investigations into companies involved in the foreign bribery conduct that formed the basis for the indictments.

“This ongoing investigation is the first large-scale use of undercover law enforcement techniques to uncover FCPA violations and the largest action ever undertaken by the Justice Department against individuals for FCPA violations,” said Assistant Attorney General Lanny A. Breuer. “The fight to erase foreign bribery from the corporate playbook will not be won overnight, but these actions are a turning point. From now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent.”

The indictments allege that the defendants engaged in a scheme to pay bribes to the minister of defense for a country in Africa. In fact, the scheme was part of the undercover operation, with no actual involvement from any minister of defense. As part of the undercover operation, the defendants allegedly agreed to pay a 20 percent “commission” to a sales agent who the defendants believed represented the minister of defense for a country in Africa in order to win a portion of a $15 million deal to outfit the country’s presidential guard. In reality, the “sales agent” was an undercover FBI agent.

The defendants were told that half of that “commission” would be paid directly to the minister of defense. The defendants allegedly agreed to create two price quotations in connection with the deals, with one quote representing the true cost of the goods and the second quote representing the true cost, plus the 20 percent “commission.” The defendants also allegedly agreed to engage in a small “test” deal to show the minister of defense that he would personally receive the 10 percent bribe.

The indictments charge the following executives and employees of the various companies in the military and law enforcement product industries:

•    Daniel Alvirez, 32, and Lee Allen Tolleson, 25, the president and director of acquisitions and logistics at ALS Technologies Inc., a company in Bull Shoals, Ark., that manufactures and sells law enforcement and military equipment;

•    Helmie Ashiblie, 44, the vice president and founder of a company in Woodbridge, Va., that supplies tactical bags and other security-related articles for law enforcement agencies and governments worldwide;

•    Andrew Bigelow, 40, the managing partner and director of government programs for a Sarasota, Fla., company that sells machine guns, grenade launchers and other small arms and accessories;

•    R. Patrick Caldwell, 61, and Stephen Gerard Giordanella, 50, the current and former chief executive officers of Protective Products of America Inc, Sunrise, Fla., a company that designs and manufactures concealable and tactical body armor;

•    Yochanan R. Cohen, a/k/a Yochi Cohen, 47, the chief executive officer of a San Francisco company that manufactures security equipment, including body armor and ballistic plates;

•    Haim Geri, 50, the president of a North Miami Beach, Fla., company that serves as a sales agent for companies in the law enforcement and military products industries;

•    Amaro Goncalves, 49, the vice president of sales for Smith & Wesson Holding Corp, Springfield, Mass., a company that designs and manufactures firearms, firearm safety/security products, rifles, firearms systems and accessories;

•    John Gregory Godsey, a/k/a Greg Godsey, 37, and Mark Frederick Morales, 37, the owner and agent of a Decatur, Ga., company that sells ammunition and other law enforcement and military equipment;

•    Saul Mishkin, 38, the owner and chief executive officer of an Aventura, Fla., company that sells law enforcement and military equipment;

•    John M. Mushriqui, 28, and Jeana Mushriqui, 30, the director of international development and general counsel/U.S. manager of an Upper Darby, Penn., company that manufactures and exports bulletproof vests and other law enforcement and military equipment;

•    David R. Painter, 56, and Lee M. Wares, 43, the chairman and director of a United Kingdom company that markets armored vehicles;

•    Pankesh Patel, 43, the managing director of a United Kingdom company that acts as sales agent for companies in the law enforcement and military products industries;

•    Ofer Paz, 50, the president and chief executive officer of an Israeli company that acts as sales agent for companies in the law enforcement and military products industries;

•    Jonathan M. Spiller, 58, the owner and president of a Ponte Vedra Beach, Fla., company that markets and sells law enforcement and military equipment;

•    Israel Weisler, a/k/a Wayne Weisler, 63, and Michael Sachs, 66, owners and co-chief executive officers of a Stearns, Ky., company that designs, manufactures and sells armor products, including body armor;

•    John Benson Wier III, 46, the president of a St. Petersburg, Fla., company that sells tactical and ballistic equipment.

All of the defendants except Giordanella were arrested yesterday by FBI agents in Las Vegas. Giordanella was arrested in Miami, also by FBI agents.

Each of the indictments allege that the defendants conspired to violate the FCPA, conspired to engage in money laundering, and engaged in substantive violations of the FCPA. The indictments also seek criminal forfeiture of the defendants’ ill gotten gains.

The maximum prison sentence for the conspiracy count and for each FCPA count is five years. The maximum sentence for the money laundering conspiracy charge is 20 years in prison.

The DOJ's release is here.

The indictments can be downloaded from the links below:

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