O'Shea: Feds Flubbed Statute of Limitations

Last week, John O'Shea asked a federal court in Houston to dismiss the FCPA case against him. He said the government didn't indict him within the statute of limitations period.

For FCPA offenses, the deadline to indict a defendant is normally five years from when the offense occurred. But it can be stretched under 18 U.S.C. § 3292 to as much as eight years when the DOJ has to gather evidence from other countries.

In O'Shea's case, the DOJ needed evidence from Mexico and Germany, so it asked the court for an extension of the statute of limitations.

The tolling begins after an official request by the DOJ to the foreign government (and a ruling by the U.S. court on the presence of the foreign evidence). It ends when the foreign authority takes 'final action' on the request.

If the 'final action' by the foreign country occurs before the normal statute of limitations expires (five years), then the suspension period can't be more than six months. If the 'final action' happens after the normal statute of limitations, then the suspension can stretch up to three years.

Who determines when the foreign government has taken 'final action?' That's the question O'Shea and the DOJ are arguing about.

In a filing last week, he said the date of 'final action' under 18 U.S.C. §3292 can be determined only by the foreign government and not the DOJ. But in his case, he said, the DOJ tried to establish by itself that the Mexican and German governments hadn't taken any 'final action.'

[The DOJ] -- instead of the Mexican or German authorities -- represented that no final action occurred but failed to provide any supporting documentation that it had not yet received a dispositive response by the Mexican and German authorities.

. . .  As a result, Mr. O’Shea has no way of knowing when or if the government received a notice of final action from the Mexican and German authorities within the five-year statute of limitations period. This information is material because if the government received notice of final action during the normal five-year statute of limitations period, then it may have filed the indictment in an untimely manner.

There was a similar argument in the Esquenazi (Haiti telco) case. The defendants lost and were convicted earlier this month.

The date for a hearing on O'Shea's motion to dismiss hasn't been set. His trial is scheduled to start in October.

Download John O'Shea's motion to dismiss the indictment for failure to properly toll the statute of limitations under 18 U.S.C. § 3292 here.

Ripe For Challenge

Attorney General Eric HolderA reader sent a thoughtful comment about our post, FCPA Conspiracy Theories.

If you missed it, Larry from DC (probably not his or her real name) said:

This is an important post, due to the abundant prosecutorial advantages of bringing conspiracy FCPA charges vis-a-vis substantive FCPA charges. We've seen this time and time again in major FCPA enforcement matters over the past several years.

It would be interesting to find out who the DOJ prosecutor referenced by "Pete from DC" actually is. The Department typically doesn't advertise on the conspiracy issue, as this is one area (at least in terms of certain statute of limitations (SOL) and jurisdictional nuances) that could potentially make for a ripe judicial challenge, under the right circumstances.

Whatever the case, the Snamprogetti matter is a fascinating example of FCPA conspiracy, but also a relatively complex one, as it involved both conspiracy and aiding and abetting charges. As the Information states, the Department alleged that employees and agents of Snamprogetti were causing wire transfers to be sent to U.S. accounts in New York.

As such, Snamprogetti may have been vulnerable to substantive FCPA jurisdiction, standing alone, under jurisdiction established by the 1998 FCPA amendments for non-domestic concerns/issuers, as codified at 78dd-3 (although it appears that the Department had SOL concerns to contend with in the case, given the time frame of the bulk of the activity in question, which may have necessitated the conspiracy route).

That aside, the Snamprogetti case also highlights (or perhaps cautions) just how easy it can be for the Department to tack on an FCPA "aiding and abetting" charge in what is essentially a conspiracy enforcement action against a foreign, non-issuer (involved in a joint venture with a US domestic concern).

As the FCPA Blog has noted on multiple occasions, an aider and abettor is punishable as a principal, meaning the entity is subject to the same FCPA penalties for the crime committed by its agent, as though the aider and abettor committed the crime itself. The case is loaded with academic and practical FCPA nuggets!

-- Larry from DC

FCPA Conspiracy Theories

Enforcement actions by the DOJ against companies and individuals are often resolved by the defendant pleading guilty to a conspiracy count. We had assumed the DOJ used conspiracy instead of substantive FCPA offenses solely to give cooperating defendants a break.

But that might be wrong.

Pete from DC, a source of much FCPA knowledge, said a member of the DOJ's FCPA enforcement team talked a few weeks ago about the conspiracy statute ( 18 U.S.C. § 371). The prosecutor said it's sometimes used to avoid jurisdictional problems that come up with substantive FCPA charges.

For example, if an FCPA defendant is neither an issuer nor a domestic concern, establishing jurisdiction requires a territorial nexus. See 15 U.S.C. §§ 78dd-1(a), 78dd-2(a). But under the conspiracy statute, the territorial nexus doesn't need to be proved.

Case in point, according to the DOJster, is Snamprogetti. In July, the Dutch unit of Italian parent company ENI agreed to pay a $240 million criminal fine after pleading guilty to one count of conspiracy to violate the FCPA and one count of aiding and abetting. The charges arose from Snamprogetti's role in the TSKJ-Nigeria joint venture.

(Snamprogetti and ENI also agreed with the SEC to pay $125 million in disgorgement to settle civil charges that they violated the FCPA's anti-bribery and recordkeeping and internal controls provisions in Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934 and Rule 13b2-1.)

Although Pete from DC didn't mention it, we've said before that while the statute of limitations for substantive FCPA offenses is five years, the period for FCPA-related conspiracies can reach back to criminal behavior that's much older. The U.S. Attorneys Criminal Resource Manual puts it this way: 

Conspiracy is a continuing offense. For statutes such as 18 U.S.C. § 371, which require an overt act in furtherance of the conspiracy, the statute of limitations begins to run on the date of the last overt act. See Fiswick v. United States, 329 U.S. 211 (1946); United States v. Butler, 792 F.2d 1528 (11th Cir. 1986).

Prosecutors might also use the conspiracy statute when their evidence of a substantive violation has gaps. Under U.S. v. Pinkerton, 328 U.S. 640 (1946), if a member of a criminal conspiracy does at least one overt act, then all of the members of the conspiracy are considered to have committed the crime ("the hand of one is the hand of all to the conspiracy"). That can make conspiracy charges easier to prove.

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Download the July 7, 2010 criminal information in U.S. v. Snamprogetti Netherlands B.V. here.

Download Snamprogetti's July 7, 2010 deferred prosecution agreement here.

See our posts on jurisdiction here, and aiding and abetting here.

CCI Judge Limits Discovery From Feds

A ruling this week in the Foreign Corrupt Practices Act prosecution of four former executives of Control Components Inc. (CCI) could have implications for defendants in other FCPA and white collar cases. The U.S. District Court in Santa Ana, California on Tuesday rejected the defendants' motion to obtain discovery of CCI's internal investigation through the Department of Justice.

Stuart Carson, Hong Rose Carson, Paul Cosgrove, and David Edmonds had argued that due to CCI's plea agreement with the DOJ, which required CCI to produce all records related to foreign bribery, the government had "constructive possession" of CCI's documents even though it took physical delivery of only a small portion. The volume of material was enormous -- 5.6 million documents, equating to 75 million pages. Because of the government's "constructive possession," the defendants argued, they could obtain all the material through the DOJ instead of CCI (thereby short-circuiting any objections to discovery CCI might have). But the court disagreed.

The defendants had relied on Judge Kaplan's decision in the KPMG case in the Southern District of New York. It tended to support the defendants' motion. But Judge James Selna rejected the motion and said the former CCI executives couldn't obtain discovery from CCI through the DOJ. His ruling took a narrower view of Judge Kaplan's order in the Stein case, which has been seen as an important help to white-collar defendants. Judge Selna said:

At the end of the day, Carson’s argument rests on the district court decision in United States v. Stein, 488 Supp. 2d 350 (S.D. N.Y. 2007). There are many reasons not to follow Stein’s lead. First, the terms of the Deferred Prosecution Agreement executed by KPMG in Stein were sweeping and open ended:

"8. KPMG agrees that its continuing cooperation with the Office's investigation shall include, but not be limited to, the following:

(a). Completely and truthfully disclosing all information in its possession to the Office and the IRS about which the Office and the IRS may inquire, including but not limited to all information about activities of KPMG, present and former partners, employees, and agents of KPMG . . ."

(Id. at 353; emphasis supplied; internal quotation marks deleted.) By no stretch of the imagination did CCI enter into an agreement allowing the Government to request anything in the possession of CCI. The KPMG agreement is devoid of the subject matter and comprehensive privilege strictures for which CCI bargained. (Plea Agreement, ¶¶ 6.) Even if Stein were taken at face value, it would not justify the blanket production of much of what Carson requests, including most specifically CCI’s Electronic Database.

Judge Selna also issued a separate order rejecting the defendants' motion to dismiss several counts of the indictment. The order included a nice discussion of the FCPA's statute of limitations and what the government needs to do to protect its tolling. That's the same issue that came up in the prosecution of Viktor Kozeny and his co-defendants.

The discovery ruling is a big win for the government. In April this year, the four former CCI executives had accused the Justice Department of playing "a game of hide and seek" with its evidence against them. They said the government had identified only 30 of the 236 illegal payments alleged in the indictment -- not enough for them to plan their defense. They wanted access through the DOJ of everything it had received as a result of CCI's self-reporting. Their discovery request included the electronic database collected during CCI's internal investigation and audit documents, among other things.

CCI designs and manufactures service control valves for use in the nuclear, oil and gas, and power generation industries. It's owned by British-based IMI plc, which trades on the London Stock Exchange under the symbol IMI.L.

The four former executives were charged with two others in a nine-year conspiracy to win contracts by bribing officials at foreign state-owned companies. The indictment alleged bribery "in over thirty countries" with "approximately 236 payments" totaling "approximately $6.85 million" to secure a series of projects that "resulted in net profits to [their employer, CCI] of approximately $46.5 million." In addition to cash, the government said the bribes consisted of "overseas holidays," "extravagant vacations," "lavish sales events," and "expensive gifts."

Their trial was supposed to start on Tuesday this week. But Judge Selna moved the start all the way to November 2, 2010. He said both sides need extra time to prepare due "to the nature of the prosecution, the volume of discovery, the international issues, and the number of defendants . . . ."

A copy of Judge Selna's December 8, 2009 Order Granting in Part and Denying in Part Defendants’ Motion to Compel in US v. Carson et al can be downloaded here. 

A copy of Judge Selna's December 8, 2009 Order Denying Defendants’ Motion to Dismiss Counts 9-11 can be downloaded here. 

Guilty Plea In (Old) Panama Bribes Case

A Virginia man pleaded guilty on Friday, November 13th to being part of an overseas bribery conspiracy that began in 1996 and ended in 2003. Charles Paul Edward Jumet, 53, was charged in federal court in Richmond, Virginia under a two-count criminal information. He admitted conspiring with others to violate the Foreign Corrupt Practices Act by making corrupt payments to government officials in Panama and giving a false statement to the FBI about how he paid some of the bribe money.

Jumet, an American citizen, was an officer of Ports Engineering Consultants Corporation (PECC), an affiliate of Virignia Beach-based Overman Associates. In December 1997, the Panamanian government awarded PECC a no-bid, 20-year contract to maintain lighthouses and buoys along Panama’s waterway. In exchange, Jumet and others authorized corrupt payments to Panamanian officials. By 2003, he and his co-conspirators had paid more than $200,000 to the former administrator and deputy administrator of Panama’s National Maritime Ports Authority and to a former, high-ranking elected official of Panama.

The bribery plot started in 1996 and was first uncovered by the U.S. Department of Homeland Security in 2004. The FBI later joined the investigation.

As in Frederic Bourke's case, the DOJ charged Jumet not with a substantive FCPA offense but under the conspiracy statute, 18 U.S.C. § 371. For conspiracy, the statute of limitations can reach back to criminal behavior more than five years old if the conspiracy ended within the past five years. Here's what the U.S. Attorneys Criminal Resource Manual says: 

Conspiracy is a continuing offense. For statutes such as 18 U.S.C. § 371, which require an overt act in furtherance of the conspiracy, the statute of limitations begins to run on the date of the last overt act. See Fiswick v. United States, 329 U.S. 211 (1946); United States v. Butler, 792 F.2d 1528 (11th Cir. 1986).

Jumet is scheduled to be sentenced February 12, 2010. The FCPA conspiracy count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the scheme. The false statement count carries a maximum penalty of five years in prison and a fine of $250,000.

A copy of the DOJ's November 13, 2009 release is here.

Download the November 10, 2009 criminal information in U.S. v. Charles Paul Edward Jumet  here.

Download the DOJ's statement of facts here.

Download the plea agreement here.

Our thanks to Matthew Reinhard and Cody Worthington for helping us with this post.