Tesler Fights Extradition; Jefferson Appeals

The London lawyer accused by the U.S. of being a middleman in KBR's bribery of Nigerian officials appeared in court last week to fight extradition. Jeffrey Tesler, 61, a U.K. citizen, was indicted in February by a federal grand jury in Houston. He was charged with one count of conspiring to violate the Foreign Corrupt Practices Act and ten substantive FCPA offenses. If convicted on all counts, he faces up to 55 years in prison. U.K. police, acting at the request of U.S. authorities, arrested Tesler in March.

According to a Press Association report, Tesler argued in the City of Westminster Magistrates' Court that his case is already under investigation by the U.K.'s Serious Fraud Office and shouldn't be duplicated by American prosecutors.

Tesler's lawyer, Bill Clegg QC, also said Tesler's case isn't linked to the U.S. "No person who was alleged to have received a bribe was promised a bribe in the U.S.A. No money to pay any bribes originated from any U.S. bank account. Mr Tesler, who it is alleged arranged the bribes, had never visited the U.S. in relation to the alleged conspiracy." The alleged bribes, Clegg said, were handled by a Gibraltar company and paid through Swiss bank accounts.

The U.S. indictment charged Tesler with using his Gibraltar company, Tri-Star Investments, to funnel about $132 million in bribes to Nigerian officials. The payments were intended to secure contracts worth more than $6 billion to build liquefied natural gas facilities on Nigeria's Bonny Island. The DOJ said Tesler was acting for a joint venture known as TSKJ, equally owned by KBR, Technip, SA of France, Snamprogetti Netherlands B.V. (a subsidiary of Saipem SpA of Italy) and JGC of Japan.

The Crown's lawyer, David Perry QC, said U.S.-based companies were involved and money had been channelled through U.S. bank accounts. According to a report in the Guardian, Perry said the allegations against Tesler could be criminal offenses "in Britain as well as the U.S., so extradition could take place under normal legal rules."

In the indictment, the U.S. made this claim of jurisdiction:

At all times relevant to this Indictment, Tesler was an "agent" of an "issuer" within the meaning of the FCPA, Title 15, United States Code, Section 78dd- 1, an "agent" of a "domestic concern" within the meaning of the FCPA, Title 15, United States Code, Section 78dd-2, and an "agent" of a "person" within the meaning of the FCPA, Title 15, United States Code, Section 78dd-3.

The London court continued Tesler's extradiction hearing.

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Down But Not Out. Former congressman William Jefferson, sentenced last month to 13 years in prison for corruption and conspiring to violate the Foreign Corrupt Practices Act, managed to file his notice of appeal on time. It was touch-and-go after Jefferson, 62, filed for bankruptcy in August, saying he owes his criminal defense lawyers more than $5.7 million. But two of the lawyers are sticking with him.

The Times Picayune reported that attorneys Robert Trout and Amy Jackson received approval last week from the trial judge, T.S. Ellis III, for the court to pay Jefferson's legal fees for the appeal. The lawyers won't get their full rates but a lower amount equivalent to court-appointed public defenders. Ellis also approved their request for the court to pay for a transcript of the six-week trial, probably about $26,000.

Jefferson is free on bail pending his appeal. It's expected to take at least a year. Judge Ellis said he released Jefferson because his defense raised an argument that's untested in the appellate courts. Jefferson says he was acting as a private citizen, while a corruption statute he was convicted under applies only to public acts by elected officials. The judge also said he regretted not making the jury's verdict form more specific. (See our post here.)

Jefferson was convicted on 11 charges -- conspiracy, soliciting and taking bribes, depriving citizens of honest services, money laundering and racketeering. He was acquitted of five charges, including Count 11 of the indictment -- the only substantive FCPA charge he faced.

Giving Thanks Once Again

During this season of Thanksgiving, the folks at Norway's Statoil ASA will be celebrating the end of the company's three-year deferred prosecution agreement -- and the Justice Department's public announcement about it here. In 2006, Statoil (which trades on the NYSE under the symbol STO) was charged with violating the anti-bribery and accounting provisions of the Foreign Corrupt Practices Act. It had paid more than $5 million through a middleman to an Iranian official for access to the South Pars natural gas field, one of the world’s largest. In settling with the DOJ, it agreed to pay a $10.5 million penalty and enter into the three-year deferred prosecution agreement. It also agreed with the SEC to pay $10.5 million in disgorgement and retain a monitor.

The case made waves in '06. Statoil's was the earliest criminal enforcement action against a foreign company. The financial penalties the DOJ and SEC imposed set that year's record for an FCPA case. And Statoil had already been punished in Norway for the bribery and fined about $3 million. The U.S. government evidently deemed that inadequate but, in an act of comity, allowed Statoil to deduct the Norwegian fine from the U.S. criminal penalty.

U.S. Attorney Prett Bharara got it right when he said yesterday: "This case shows that deferred prosecution agreements against corporations can work as an important middle ground between declining prosecution and obtaining the conviction of a corporation. The deferred prosecution agreement . . . helped restore the integrity of Statoil's operations and preserve its financial viability while at the same time ensuring that it improved what was obviously a failed compliance and anti-corruption program."

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Frederic Bourke and William Jefferson will be thankful to be out on bail pending their appeals. The DOJ may have put too much zeal into Bourke's prosecution, and may have botched part of Jefferson's trial. But both men will have second chances on appeal. Bourke to argue that he never intended to break the law, and that being a criminal in the United States still requires some mens rea. And Jefferson that he was convicted for private acts under a law governing public acts, that he never had a chance to confront the main witness against him -- the government's informant, that her relationship with an FBI agent working on his investigation was evidence the jury should have heard, that the "honest services" statute he was convicted under is too vague to understand, and that the jury's verdict on the conspiracy count should have been tossed. 

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We're thankful, as always, for the rule of law. Our system of justice isn't perfect. It can't be. But as we said a few weeks ago, when it works as it should, the guilty are usually punished and the innocent usually go free. And that's a rare blessing at any time and place. We're thankful too for the freedom we and others have to praise the system when it works and criticize it when it doesn't.

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We're thankful so many people are at work right now trying to spread the rule of law around the world. People in governments, in NGOs, in universities and private institutions, and on their own. Wherever it goes, the rule of law helps people escape from fear and poverty.

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We're thankful for everyone who supported the FCPA Blog during the past year -- our readers, sponsors, contributors, fellow bloggers, and kibitzers. They all help keep us honest and cheerful.

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Finally, we give thanks for these words from Walden, written in 1854 by Henry David Thoreau, one of the most thankful and sanest Americans who ever lived:

At length the winter set in good earnest, just as I had finished plastering, and the wind began to howl around the house as if it had not had permission to do so till then. Night after night the geese came lumbering in the dark with a clangor and a whistling of wings, even after the ground was covered with snow, some to alight in Walden, and some flying low over the woods toward Fair Haven, bound for Mexico. . . . The snow had already covered the ground since the 25th of November, and surrounded me suddenly with the scenery of winter. I withdrew yet farther into my shell, and endeavored to keep a bright fire both within my house and within my breast.

Jefferson And Bourke Are Released On Bail

Surprising news from the federal courthouse in Alexandria, Virginia. William Jefferson, left, is free pending appeal of his conviction in August on 11 corruption counts. Last week U.S. District Court Judge T.S. Ellis III sentenced him to 13 years in prison. But the judged ruled on Wednesday that the former congressman can remain free during his appeal, which will likely take at least a year.

The Times Picayune said Judge Ellis didn't expect to be reversed on appeal. But he said "a key element of the case, whether Jefferson's effort to influence African leaders on behalf of business officials in return for payments and promised payments constituted official acts, had not been tested in the appellate courts." Jefferson has argued he was acting as a private citizen and not in his official capacity as a member of congress.

Judge Ellis also said he regretted not making the jury's verdict form more specific. Jefferson was acquitted on Count 11 of the indictment -- the only substantive Foreign Corrupt Practices Act charge he faced. But the jury convicted him on Count 1. It alleged three separate illegal conspiracies -- to solicit bribes, deprive citizens of honest services, and violate the FCPA. The verdict form didn't require the jury to specify which of the three illegal conspiracies it believed he engaged in. So Jefferson's conviction on Count 1 may or may not have included a finding that he conspired to violate the FCPA. See our post "Toss Jefferson's FCPA Conspiracy Count" here.

Meanwhile, Frederic Bourke is also free. He was allowed bail of $10 million until the Second Circuit decides his appeal --  probably in 12 to 15 months. He was convicted in July in federal court in Manhattan of conspiracy to violate the FCPA and lying to federal investigators.

Why are Bourke and Jefferson free while they appeal? Although their cases are very different, all decisions about release pending appeal are governed by 18 U.S.C. § 3143(b) here. The law requires jail unless the judge finds by clear and convincing evidence that the defendant isn't likely to flee or pose a danger to the community, didn't appeal for purposes of delay, and the appeal raises a "substantial question of law or fact likely to result" in reversal, a new trial, a sentence without jail time, or a reduced sentence that is less than time served plus the expected duration of the appeal.

Bourke's lawyers nicely described the application of the judicial guidelines in their October 16, 2009 memo supporting his release here. They said:

The government concedes that Bourke is not a danger to the community; it grudgingly acknowledges that he does not pose "a serious risk of flight,"and it tacitly accepts (by not addressing the point) that his appeal "is not for the purpose of delay." Thus, the government focuses, as it should, on whether Bourke's appeal raises a substantial question of law or fact likely to result in reversal or a new trial or, if Count One [conspiracy to violate the FCPA] alone is reversed, a sentence on Count Three [misstatement] that either does not include imprisonment or includes a reduced sentence "to a term of imprisonment less than . . . the expected duration of the appeal process." 18 U.S.C. § 3143(b)(1)(B)(iii), (iv).

Both Bourke and Jefferson have met the test for release pending appeal by clear and convincing evidence.

Dateline Washington

Here's a dispatch from Cody Worthington:

Dear FCPA Blog,

I attended the opening day of ACI's 22nd National Conference on the Foreign Corrupt Practices Act in D.C. yesterday [November 17].

Among the many people there were representatives of the DOJ and SEC. Mark Mendelsohn [left, DOJ Deputy Chief, Fraud Section, Criminal Division] said a new industry-wide FCPA probe of the pharmaceutical companies was underway (which we heard about last week from Assistant Attorney General Lanny A. Breuer). He also said he was "cautiously optimistic" that prosecutions in 2009 would exceed 2008. He pointed out that right now according to his statistics they stand at 9. Last year's total was 17. He said the DOJ has 130 cases open at the moment. He further predicted a large increase in FCPA cases over the next several years due to the recent worldwide recession.

Lanny Breuer gave a luncheon speech. He said how much the DOJ will miss Mark Mendelsohn, who's exploring other opportunities, and how they were searching for a replacement to fill his big shoes. He called Mark "an exceptional public servant and a visionary steward of the FCPA program." He also mentioned the pharmaceutical probe and said other industry-wide investigations will be forthcoming. [Full remarks here.]

Anyway, good stuff and many other great speakers.

I believe there were about 500 people in attendance. A lot of what I call "The Legends of the FCPA" including: Dan Newcomb, Homer Moyer, Roger Whitten, Martin Weinstien, Richard Dean, Lucinda Low, William "Billy" Jacobson, Tim Dickinson, and others. If there is ever an FCPA Hall of Fame, they are in on the first ballot.

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Jefferson Sentenced To 13 Years

Former nine-term congressman William Jefferson, 63, was sentenced on Friday to 13 years in prison. He was found guilty on 11 of 16 corruption charges, including one count of conspiracy to violate the Foreign Corrupt Practices Act. He was acquitted of the single substantive FCPA charge he faced.

Judge T.S. Ellis handed down the sentence in federal court in Alexandria, Virginia, where Jefferson had stood trial for six weeks in July and August. Prosecutors had asked that Jefferson be jailed for 27 to 33 years; Jefferson's lawyers wanted a sentence of less than 10 years. Next week the judge will decide when Jefferson must report to prison and whether he can remain free on bail pending his appeal.

Jefferson made FCPA history when he became the first and only U.S. public official to be charged under the law since it was enacted in 1977. But his case will always be remembered for the $90,000 in cash found in his freezer. The money was part of $100,000 given to him by a government informant. Prosecutors said Jefferson planned to use it to bribe Nigeria's then vice president, Atiku Abubakar.

But as we said before the trial began, "The money so spectacularly found in the freezer -- it was in the freezer; it was not in the bank account of a foreign official." Although the cash seemed to prove Jefferson's innocence on the substantive FCPA charge, it was also perfect evidence to prove his bad intentions. Honest money doesn't go into a congressman's kitchen freezer. So when Jefferson took the cash, and when the FBI found it hidden with the frozen food in veggie-burger boxes, prosecutors had to put the FCPA in the case even if it didn't belong there (see our post here). Without it, the cash may have become irrelevant and been excluded from the trial.

The Times Picayune said, "Jefferson's lawyers, who are owed more than $5.7 million by Jefferson, according to documents submitted in his and wife Andrea's recent bankruptcy filing, have 10 business days to file an appeal." The paper said an appeal is likely to challenge Judge Ellis' rulings about the definition of Jefferson's "official acts" and the judge's decision not to tell the jury that an FBI agent on the case had a sexual relationship with the government's informant when she was recording her conversations with Jefferson.

William Jefferson was born into back-woods poverty. He overcame impossibly long odds to graduate from Harvard Law School and become the first African-American elected to Congress from Louisiana since Reconstruction. Now he's disgraced, bankrupt, and heading for jail -- where he may live until his 76th birthday. It's a very sad turn in a life of wondrous achievement.

Read all our posts about William Jefferson here.

Toss Jefferson's FCPA Conspiracy Count

Before getting to William Jefferson, this reminder: Frederic Bourke is scheduled to be sentenced in Manhattan today (Tuesday, November 10) at 2:30 pm. He could be jailed for up to ten years for conspiracy to violate the Foreign Corrupt Practices Act and lying to federal investigators.

Now Jefferson: He'll learn his sentence this Friday in Alexandria, Virginia. Prosecutors want him jailed for 27 to 33 years. And once again there's a question whether the jury found Jefferson guilty of any FCPA-related offense. This time the answer could influence how long he'll spend behind bars. Here's the issue.

The former nine-term congressman was convicted in August on 11 of 16 corruption charges. He was acquitted on Count 11 of the indictment -- the only substantive FCPA charge he faced. But the jury convicted him on Count 1. It alleged three separate illegal conspiracies -- to solicit bribes, deprive citizens of honest services, and violate the FCPA. The jury's verdict form did not require it to specify which of the three illegal conspiracies the panel believed he engaged in. So Jefferson's conviction on Count 1 may or may not have included a finding that he conspired to violate the FCPA.

Since the verdict, many have wondered whether Jefferson was really convicted of an FCPA-related offense. Could he have been acquitted of the substantive charge and convicted on the conspiracy? Our view (here) was yes, the jury could have convicted Jefferson of conspiracy to violate the FCPA. The evidence supported it. And a guilty verdict recorded for Count 1 meant all three alleged conspiracies could be presumed proven, including the FCPA-related charge.

The government has now said the same thing in its sentencing memo: "The verdict form completed by the jury on August 5, 2009 did not require the jury to delineate which, if not all, of the objects charged in the conspiracy in Count 1 were found to have been proved, only that at least one of the objects was proven by the government beyond a reasonable doubt." Jefferson's lawyers argue that based on the facts, the jury couldn't have convicted him of the FCPA conspiracy once it acquitted him of the substantive FCPA offense.

Will Judge Ellis use the FCPA-related conspiracy element to calculate Jefferson's sentence? We hope not. Trying to read the jury's mind when imposing a sentence on any defendant is wrong. In Jefferson's case, not requiring the jury to declare which of the three conspiracy objects it voted to convict on was an error. Fundamental to a defendant's rights at trial and for appeal is jury accountability. That accountability was lacking as to Count 1. So the count should be tossed as to all three conspiracies it alleged, and none of them should be included in the sentencing computation.

William Jefferson is scheduled to be sentenced on November 13, 2009 at 9:00 am in the U.S. District Court for the Easter District of Virginia (Alexandria Division) by Judge T.S. Ellis, III.

Download a copy of the government's sentencing memorandum in U.S. v. Jefferson dated November 6, 2009 here.

Download a copy of William Jefferson's memorandum in aid of sentencing dated November 9, 2009 here.

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The D & O Diary reports the resolution of an FCPA-related civil suit on November 6, 2009 against Nature’s Sunshine Products. The company agreed to pay $6 million. The plaintiffs in the securities lawsuit had alleged the company lacked appropriate internal controls and that its books and records did not reflect the foreign transactions.

In late July, the SEC filed a settled enforcement action against Nature's Sunshine Products Inc. (NSP), its CEO Douglas Faggioli and its former CFO Craig D. Huff. The charges involved bribes by NSP's Brazilian subsidiary to customs officials and false accounting to conceal the payments. The SEC's complaint 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 bribes. See our post here.
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Their Days Are Numbered

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.

Here are the twelve men and one woman and their days of reckoning:

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.

Enforcement Report For Q3 '09

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.
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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.
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Found In Translation

As posted yesterday on the wrageblog here, the Foreign Corrupt Practices Act is now available in Spanish, Russian, Chinese and Arabic. The translations come from the U.S. Department of Commerce through a project headed by Senior Counsel Kathryn Nickerson. As the wrageblog pointed out, "Although the translations are marked 'unofficial' we’re told they’re accurate and that they read well. This is a great service to the compliance community." We agree.

Kudos to Kathryn Nickerson and the DOC.

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Too much love, Jefferson says. Federal Judge Tim Ellis this week denied former Congressman William Jefferson's request for a new trial. A copy of Judge Ellis' order can be downloaded here.

Jefferson argued that the jury should have heard evidence about an intimate relationship between an FBI agent working on Jefferson's case and Lori Mody. She was the government's informant who secretly taped her conversations with Jefferson about bribing Nigeria's vice president. Ellis, however, said disclosure to the jury wasn’t necessary because the government didn’t enter into evidence any of her statements about the contents of meetings that were not secretly recorded by the FBI. Mody herself didn't testify at the trial.

Four days before jury selection began, lead FBI agent Timothy Thibault disclosed that agent John Guandolo, who was the undercover driver for Lori Mody, had been involved in a sexual relationship with her during the FBI's investigation. Judge Ellis ruled that evidence of the relationship was not relevant to any issues at the trial and therefore would not have been admissible.

Presumably Jefferson will raise the issue again on appeal. He's saying evidence of the relationship goes to the credibility of the FBI and witnesses it interviewed. Whatever happens, there was at least the appearance of impropriety . . . .

Separately, some are asking whether Jefferson was convicted of violating the Foreign Corrupt Practices Act or acquitted. It's a good question. Here's what happened:

The jury acquitted him on Count 11 of the indictment -- the only substantive FCPA charge he faced. The jury convicted Jefferson on Count 1 of the indictment. It alleged three separate illegal conspiracies -- to solicit bribes, deprive citizens of honest services, and violate the FCPA. The jury's verdict form did not require it to specify which of the three illegal conspiracies the panel believed he engaged in. So Jefferson's conviction on Count 1 may or may not have included the jury's finding that he conspired to violate the FCPA. There's no way to tell without polling the jury and, as far as we know, that didn't happen.

So a guilty verdict will be recorded for Count 1 of the indictment. That means all three conspiracies alleged are presumed to be proven, including the FCPA-related charge.

Read prior posts about William Jefferson here.
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No Hollywood Ending

An LA jury needed not days but hours to convict the husband-and-wife movie producers of violating the Foreign Corrupt Practices Act. They were also found guilty on related charges, including conspiracy, money laundering, and tax cheating. Gerald Green, 77, and Patricia, 52, are facing at least ten years behind bars and maybe a lot more for bribing a Thai official in exchange for contracts to produce the Bangkok Film Festival.

The trial's tragic outcome shouldn't surprise anyone. There hasn't been an acquittal in an FCPA prosecution since 1991. Not one. That's why comments from Patricia Green's lawyer are hard to understand. Marilyn Bednarski told the LA Times here, "To me it’s a case of circumstantial evidence . . . the people of Thailand were not victimized in any way" because the Greens provided "top notch services." Really?

Gerald Green's lawyer, Jerome Mooney, was more in touch. The DOJ used the case, he said, partly to send a warning to the entertainment industry: clean up the way you deal with "community relations" in foreign countries, or else. "We understand the government taking a shot across the bow of Hollywood," Mooney said. "We just wish the shell hadn't landed on our clients' boat."

From the convictions this year of the Greens, Frederic Bourke and William Jefferson, and those from prior years of David Kay, Douglas Murphy and David Mead, and all the prosecutions and guilty pleas in between, here are some things that every FCPA defendant should keep in mind before their trial starts:

Juries hate graft. FCPA cases are about bribes to corrupt foreign officials. They're about sophisticated and often wealthy people looking for shortcuts, hoping to subvert foreign governments for personal or corporate gain. Wheeling and dealing in exotic places. Flashing cash and pulling strings. Juries lap it up. As we've said before, even if the government's evidence isn't rock solid on all the elements of an FCPA offense, the jury will still get the picture that people stepped over the line of acceptable business behavior. And they'll convict.

There are clouds of witnesses. Forget lone wolves and rogue employees. Foreign bribery is usually a team effort. When the government gets a whiff of the plot, it hauls in everyone -- from those who might have had a hand in it to anyone who could have overheard talk at the water cooler. If it's early in the investigation, the bit players can be persuaded to turn, to become the government's cooperating witnesses or confidential informants. Supporting actors are given immunity or offered the hope of lighter sentences. So they sing about their bosses, colleagues, friends. They have extra incentive if they blame the aforementioned for dragging them into the criminal activity.

Evidence is everywhere. Bribes have to be planned, funded, paid, and covered up. There's always someone on the receiving end, so the complications multiply. It all takes a lot of work and usually leaves behind a trail that's easy to find and follow. Phony contracts and dummy invoices, hot money bouncing from bank to bank, fake agents and distributors, shell companies as fronts, two sets of books, and so on.

Show and tell. These days the government is likely to show up for trial with audio tapes of the accused discussing the bribes or videos showing the actual handover of cash. "Wearing a wire" once meant strapping to your torso an awkward piece of electronic gear the size of a croissant. Not any more. A cell phone on the table can be an open mic. A spy pen in the breast pocket can capture or broadcast sound and pictures. Scary stuff. And once the feds have tapes, they may not even need the cooperating witnesses or informants at the trial.

Related charges a-plenty. In foreign bribery cases, the government might start with FCPA charges. But remember: bribes to foreign officials need to be planned, funded, paid, and covered up. So there's usually a conspiracy, money laundering, traveling to commit the offense, fraud and obstruction in the cover-up, and tax-cheating to boot. What a mess. The government can throw a lot of mud at the wall. If some doesn't stick, so what? Prosecutors can drop weak charges later and plow ahead with the rest.

Examples: Frederic Bourke was convicted of conspiracy to violate the FCPA and a Travel Act offense, but not the FCPA itself. William Jefferson was acquitted of a substantive FCPA charge but found guilty of conspiracy to violate the FCPA, soliciting and taking bribes, depriving citizens of honest services, money laundering and racketeering, and conspiracy to solicit bribes. Gerald Green beat the obstruction rap -- the government ended up dropping the charge -- but he and his wife were convicted of conspiracy to violate the FCPA, eight violations of the FCPA and seven counts of money laundering. Mrs. Green was also found guilty of two counts of falsely subscribing a U.S. tax return.
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Not everyone accused of violating the FCPA is guilty. And certainly those accused and awaiting trial are presumed innocent unless and until found guilty in a court of law. But with no acquittals in an FCPA trial since 1991, defendants and their counsel should have their eyes wide open about their chances in court.

View prior posts about the Greens here.
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