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FCPA Blog Daily News


Nigeria's Crooked Blue Line

A new report from Human Rights Watch, Everyone's in on the Game, describes the enormous challenges police face every day in Nigeria. Despite that, many officers serve with honesty and full merit, it says.

But there's institutionalized corruption at every level. Innocent people are regularly detained and a fee demanded for their release. Rank-and-file police officers are often forced to pay their senior officers a share of the money they extort from the public. 

Human Rights Watch interviewed 145 Nigerians from 2008 until last month -- including market traders, commercial bus drivers and passengers, okada (commercial motorcycle) drivers, sex workers, criminal suspects, and victims of common crimes. It also talked with rank-and-file and senior police officers, federal government and anti-corruption officials, judges, prosecutors, lawyers, religious and civil society leaders, journalists, diplomats, and members of an armed vigilante group.

"People who are assigned to lucrative posts such as roadblocks or working traffic are given monetary targets that they must meet and then give back to their superiors," lead researcher Eric Guttschuss said. Police officers said punishment for failing to meet monetary targets was a transfer to a less lucrative post.

Guttschuss said, "I interviewed a father in Anambra State, whose only son, a 16-year-old boy, was arrested by the police. They detained him and tortured him over an extended period and then demanded money from the father in order for his release."

The father paid, but not everyone can afford to. "Unfortunately we also interviewed people who were unable to pay the money and who's loved ones were then found later to be in a hospital morgue, dead," he said.

*     *     *

Here's how Everyone's in on the Game begins:

Countless ordinary Nigerians attempting to make precarious ends meet as taxi drivers, market traders, and shopkeepers are accosted on a daily basis by armed police officers who demand bribes and commit human rights abuses against them as a means of extorting money. Those who fail to pay are frequently threatened with arrest and physical harm. Far too often these threats are carried out.

Meanwhile, victims of crime are obliged to pay the police from the moment they enter a police station to file a complaint until the day their case is brought before a court. In the shadows, high-level police officials embezzle staggering sums of public funds meant to cover basic police operations. Senior police officers also enforce a perverse system of “returns” in which rank-and-file officers are compelled to pay up the chain of command a share of the money they extort from the public.

Those charged with police oversight, discipline, and reform have for years failed to take effective action, thereby reinforcing impunity for police officers of all ranks who regularly perpetrate crimes against the citizens they are mandated to protect.


Tillery's 'Extraction'

A report this week from Nigeria said FCPA fugitive James "Ken" Tillery has been seized by the FBI in Lagos and is being held by American authorities. But another report on Wednesday said the Nigerian high court had halted the extradition at least until the end of the month because due process wasn't followed.

Tillery, 51, was the managing director of Willbros in Nigeria. He was indicted in 2008 along with Willbros' consultant Paul G. Novak. They were charged with one count of conspiracy to violate the FCPA, two counts of violating the FCPA in connection with the authorization of specific corrupt payments to officials in Nigeria and Ecuador, and one count of conspiring to launder the bribe payments through companies controlled by Novak.

Novak, 43, pleaded guilty in November 2009 to paying $6 million in bribes to officials who worked in the Nigerian government, in government-owned companies, and in a political party there. He hasn't been sentenced.

Tillery has been at large since his indictment. If convicted of all charges, he faces up to 35 years in prison.

One report from Nigeria said the next hearing on Tillery's extradition will be on August 30.

In May 2008, Willbros Group Inc. and Willbros International Inc. entered into a deferred prosecution agreement and agreed to pay a $22 million criminal penalty for the illegal payments to government officials in Nigeria and Ecuador. 

In January this year, two former Willbros executives were jailed for bribery. Jim Bob Brown, 48, was sentenced in federal court in Houston to one year and one day in prison and fined $17,500; Jason Edward Steph, 40, was sentenced to 15 months and fined $2,000. Brown had pleaded guilty in 2006 and Steph in 2007.

An African press report said Tillery is "an American by birth, who had since naturalized as a Nigerian." It  said normal extradition procedures weren't followed and characterized Tillery's arrest as an "extraction" and a "forceful extradition."

The U.S. Justice Department hasn't publicly commented.


Defending The Defense

By Thomas Fox

I want to thank Kyle Sheahen for his recent post and paper arguing that the promotional expenses defense under the FCPA is illusory. His work has stimulated a useful debate.

From a perspective different than previous commenters (here), I'd like to state the case for the value of the defense.

Generally, enforcement actions that discuss promotional expenses -- including those Kyle cited in his paper -- involve expenses that were neither bona fide nor reasonable as required by the FCPA. The cases include:

Lucent Technologies - $10 million in trips, primarily to vacation destinations in the U.S., including $34,000 for five days of sightseeing, wrapped onto a three day trip of business activity.

Ingersoll Rand - holiday excursion to Florence after visiting the company’s facilities in Vigante, Italy. The excursion to Florence included payment of $1000 in “pocket money”.

Metcalf & Eddy - first-class travel to the U.S. for foreign officials and per diem cash payments equivalent to 150% of estimated daily expenses.

Syncor -the SEC said payments for promotional expenses came “mostly came in the form of sponsorships for the doctors' attendance at educational seminars, including payments for registration fees, travel, lodging, and meals” but also included “gifts of computer equipment, software, office furniture, and medical supplies to doctors and their hospitals; sponsorships of social functions and fundraisers at the hospitals; funds provided to cover the cost of temporary employees at the hospitals; and payments made for outside testing when a particular hospital's laboratory equipment was not functioning properly.”

Titan Corporation - there's a reference to an authorization for a $20,000 payment for promotional travel expenses, with the notation that it was unclear if the payment was made. However this was in the context of at least $2 million paid in bribes to government officials. Even if the $20,000 was not paid, there were other  facts on which to base the enforcement action.

I would argue that none of the above enforcement actions involved promotional expenses which were either bona fide or reasonable. Based on the foregoing, I think companies subject to the FCPA have sufficient guidance on what constitutes a bona fide or reasonable promotional expense. I also believe the cases cited in the article can be used as solid teaching points on what is not bona fide or reasonable without having to try and ascertain the intent to corrupt.

Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. His blog can be found here and he can be reached at


The Law Ain't Broke

On Monday, Kyle Sheahen told us how useless the FCPA's two affirmative defenses are. He suggested that Congress fix the local-law and promotional-expenses defenses.

But at least two readers, one from the private sector and another from the DOJ (apparently), dissented. Both believe the defenses work, just not at trial. Here's what they had to say.

From Compliance Officer, August 16:

While the promotional expenses defense might not be useful at trial, it is the underpinning for a lot of companies' compliance programs around gifts. Companies must give gifts when operating internationally; it is simply too much a part of a lot of cultures to avoid. When operating in the public sector, however, these gifts present FCPA issues.

Companies use the promotional expenses defense to justify their permissive gift-giving policies.

From a compliance perspective, the problem with the defense isn't its utility---or lack thereof---at trial, but rather that it permits gifts during the course of the contracting process. When I'm analyzing a gift, I look at the potential for corrupt intent, and the affirmative defense. During the contracting process, you're more squarely under the defense, but to my mind, the optics are worse when looking at potentially corrupt intent. It looks like you're giving the gift to get the contract.

But if the gift is just to "maintain the relationship" (a phrase I hear quite often), you're less covered by the defense, but there's less chance that you're trying to get a quid pro quo.

And from Federal Prosecutor, August 17:

One cannot deduce from the lack of successful uses of statutory defenses at trial the conclusion that those defenses are meaningless.

In practice, trials take place in but a small subset of cases brought, cases brought are but a small subset of investigations, investigations look at but a small subset of real-life situations, and only a small subset of real-life situations are going to raise these particular factual issues in the first place. The ability of these statutory defenses to steer behavior within acceptable limits and to ward off prosecution cannot be judged by how many trial defendants get off on them. There is no need for a legislative fix just to even the odds for trial defendants.

That the law ain't broke is best exemplified by the author's dismissive discussion of OECD's suppression of affirmative defenses based on extortion. This is a considered policy choice to flush out corruption by giving no quarter to businessmen who wittingly profit from it. Permitting a defense based on extortion would simply take the heat off of businessmen to comply with the law, to report corrupt officials squeezing them, and to blow the whistle on their competitors who take the easy way. The end result of such a defense -- more corruption. Admittedly, though, there may be more exciting trials for law students to follow.


Watching For Whistleblowers

In its quarterly report released August 9, SciClone Pharmaceuticals, Inc. said it received an SEC subpoena and a letter from the DOJ investigating the "sale, licensing and marketing of its products in foreign countries, including China."

According to SciClone, the DOJ said it was looking at FCPA issues in the pharmaceutical industry generally, and had received information about SciClone's practices suggesting possible violations.

A reader was curious about the timing of SciClone's announcement. Less than a month ago, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. It authorizes payments of 10% to 30% for recoveries of at least a million dollars based on information about violations of the securities laws, including the FCPA.

So we asked SciClone if the FCPA investigation was triggered by a recent whistleblower complaint. Ana Kapor, the firm's director of investor relations and corporate communications, answered quickly but said only: "We are not able to comment on this topic beyond what we included in our filings earlier this week."

Is this the first FCPA-related whistleblower case under the new reward program? Or is it, as most assume, part of the year-old investigation of drug makers that already targeted GlaxoSmithKline, AstraZeneca, and Merck? Or is it both? There's no way to tell until someone involved goes on the record.

SciClone Pharmaceuticals, Inc. trades on NASDAQ under the symbol SCLN.

*     *     *

A slice of the FCPA pie. In his August 16 article about FCPA-related civil suits, Forbes' Nathan Vardi correctly says there's no private right of action under the FCPA. So plaintiff lawyers look for other ways to sue directors and officers for their company's overseas bribery.

Results of the suits have been mixed but some have produced big settlements. He lists Faro Technologies, which paid $6.9 million; Nature’s Sunshine, which paid $6 million; Immucor, $2.5 million; and Syncor, $15.5 million. And he says plaintiff lawyers are prowling for more targets by following SEC and DOJ leads -- including Weatherford International, Parker Drilling, Avon Products, and Pride International.

Ther article is Plaintiff Lawyers Join The Bribery Racket.


'I'm Not Going To Disney Land'

There's provocative new FCPA scholarship from Kyle Sheahen, left, UCLA Law '10 and an incoming associate at the New York office of King & Spalding.

He told us about it in this note:

*     *     *

Dear FCPA Blog,

It’s no secret that FCPA defendants fare poorly at trial.  There are many reasons for that, but I wanted to look at the factor most amenable to legislative fix – the hollow nature of the FCPA’s affirmative defenses.

I recently finished an article analyzing the two affirmative defenses under the FCPA. Partly in response to the FCPA Blog’s post Calling All Pundits, I assess the promotional expenses defense in detail and also cover the local law defense (including the Southern District of New York’s decision in United States v. Kozeny).

The article concludes that after over twenty years as part of the FCPA, the two affirmative defenses added to the statute in the 1988 amendments have provided little meaningful protection for FCPA defendants. Neither defense has ever been successfully invoked by an FCPA defendant at trial.

I go on to recommend that if the right to trial by jury is to mean anything in today’s world, individual and corporate defendants must have the actual ability to raise the affirmative defenses contemplated by the statutory scheme. If Congress wants FCPA defendants to have any chance at all, it must take action to ensure that the defenses are meaningful.

The article is slated to appear in the Wisconsin International Law Journal in early 2011.  In the meantime, I welcome any comments or suggestions from your readers. I can be reached at

The current working version of the article -- titled "I'm Not Going to Disneyland: Illusory Affirmative Defenses Under the Foreign Corrupt Practices Act" -- can be downloaded from SSRN.

Thank you very much,
Kyle Sheahen


Arrest In ABB Mexico Case

The Houston Chronicle reported the arrest Friday of a Mexican businesswoman on charges of violating the FCPA.

Angela Gomez, 55, is accused of serving as an intermediary between ABB and another U.S. firm for Nestor Moreno, chief of operations for Mexico's Federal Electric Commission.

The report said prosecutors alleged that Moreno received a yacht, Ferrari, and perhaps millions of dollars in cash in exchange for awarding contracts. At her hearing Friday, an FBI agent testified that "Gomez's signature was on a $297,000 check to Ferrari Beverly Hills, for a Spider sports car, as well payments totaling $1.8 million to the now-defunct South Shore Yacht Sales, in Chula Vista, Calif." 

Gomez and her husband own Global Financial Services, a Houston brokerage firm they allegedly used to pass some of the bribes to the Mexican official. She was arrested when she came to Houston to attend a civil arbitration hearing, the Chronicle report said. The paper said she appeared in federal court Friday in shackles and handcuffs.

In November 2009, the general manager of a Sugar Land, Texas-based ABB subsidiary was arrested for his alleged role in a conspiracy to bribe Mexican government officials. Prosecutors said the bribes were allegedly intended to secure contracts with Mexico's Federal Electric Commission, known in Spanish as the CFE.

John Joseph O'Shea, 57, of Pleasanton, California, was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. § 371), 12 counts of violating the FCPA (15 U.S.C. § 78dd-2 et seq), four counts of international money laundering (18 U.S.C. § 1956), and one count of falsifying records in a federal investigation (18 U.S.C. § 1519).

O'Shea allegedly hired Fernando Maya Basurto, 47, of Mexico City, to act as the ABB Texas unit's sales agent in Mexico. In December 1997, the CFE awarded the Texas business unit a contract, known as the SITRACEN contract, to upgrade the backbone of Mexico's electrical network system. The SITRACEN contract generated more than $44 million dollars in revenue for ABB's Texas unit. In October 2003, the CFE also awarded it a multi-year contract for maintenance and upgrades of the SITRACEN contract that generated more than $37 million in revenue.

ABB discovered the alleged bribery and fraud during an internal investigation. It self-disclosed the payments and related activities to the Justice Department and the Securities and Exchange Commission and helped with their investigations. In late 2008, the Swiss-based engineering company said it reserved about $850 million for possible resolution of U.S. and European corruption charges.

Basurto was first arrested in Dallas in April 2009 on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements. As part of his plea deal, the DOJ filed a superseding criminal information charging him with one count of conspiracy to violate the FCPA, to launder money, and to falsify records. The information said jurisdiction over Basurto was based on his being "an agent of a domestic concern, as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(1)."

He pleaded guilty in November 2009 in Houston and has been cooperating in the investigation. He faces up to five years in prison. The Justice Department hasn't announced his sentencing date.

Download the indictment in U.S. v. John Joseph O'Shea here.

Download Fernando Maya Basurto's plea agreement with the Justice Department here.


Greens Get Six Months In Jail

Patricia Green, with her husband Gerald The husband-and-wife Hollywood movie producers convicted of bribing a Thai government official were each sentenced to six months in jail and six months home confinement yesterday by a federal judge in Los Angeles.

Gerald Green, 78, and Patricia Green, 53, were also ordered to each pay $250,000 in restitution.

Judge George H. Wu had delayed the Greens' sentencing five times. Prosecutors first argued that the federal guidelines called for sentences of around 20 years in prison. In a brief filed this week, they asked for ten-year jail terms. The Greens' lawyers had argued for no jail time.

The Greens were convicted last year after a jury trial of paying $1.8 million in bribes from 2003 to 2007 to Juthamas Siriwan, governor of the Tourism Authority of Thailand and the president of the Bangkok film festival. In exchange, prosecutors said, the Greens obtained contracts worth about $13.5 million to produce the film festival.

The couple's six-month prison terms are the most lenient in recent FCPA cases.

In April this year, a Virginia man was sentenced to 87 months in prison after pleading guilty to conspiring to violate the FCPA 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. Charles Jumet's sentence is the longest FCPA-related prison term ever imposed.

Jumet's co-conspirator, John Warwick, was sentenced in June to 37 months in prison. He also received two years of supervised release following his prison term and forfeited $331,000 in proceeds of the crime.

In April last year, the Virginia-based physicist who sold controlled space-launch technology to China by bribing government officials there was sentenced to 51 months in prison. Shu Quan-Sheng pleaded guilty in 2008 to one count of violating the Foreign Corrupt Practices Act and two counts of violating the Arms Export Control Act.

Frederic Bourke was sentenced to a year and a day in prison and fined $1 million for investing in a bribe-tainted deal in Azerbaijan and then lying to FBI agents about it. He was convicted in 2009 by a Manhattan jury of conspiracy to violate the FCPA.

And last month, Juan Diaz, a Miami businessman at the center of the Haiti telco bribery case, was sentenced to 57 months in prison followed by three years of supervised release. He pleaded guilty in 2009 to a one-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and money laundering.

The Greens were found guilty of conspiring to violate the Foreign Corrupt Practices Act, nine counts of violating the FCPA, and seven counts of money laundering. Patricia Green was also found guilty of two counts of signing a false U.S. income tax return. The conspiracy and FCPA charges were each punishable by up to five years in prison, the money laundering counts by 20 years in prison, and the tax charges against Patricia Green each carried a maximum penalty of three years in prison.

The Thai official involved in the case, Juthamas Siriwan, and her daughter were indicted by a federal grand jury in LA in January this year. They were charged with one count of conspiracy, seven counts of transporting funds to promote unlawful activity (bribery), and one count of aiding and abetting. If convicted, they each face up to 20 years in prison.

Gerald Green has emphysema and has appeared in court with an oxygen bottle to help him breathe. The judge had ordered production of his medical records. At a series of post-trial hearings, Judge Wu had also asked prosecutors and defense lawyers to talk about penalties handed out in similar cases. 


Is The Giffen Case America's BAE?

We're always happy to hear from lawyer Andy Spalding, left. He recently returned from a year-long Fulbright Research Grant in Mumbai, India, and is now on the faculty at the Chicago-Kent College of Law.

He's been thinking about the extraordinary case of James Giffen, the former middleman to U.S. oil companies doing business in Kazakhstan. He writes:

Dear FCPA Blog,

With James Giffen's plea on Friday to a mere misdemeanor, the case is drawing to an anti-climatic and curious close. In an era of ever-increasing fines and penalties for FCPA violations, Giffen's modest settlement seems an aberration; even more peculiar, some have commented on how the otherwise highly-capable Southern District prosecutors fumbled through this case with atypical awkwardness.  

All of this gives rise to speculation that the case was subject to political pressures -- namely, that either the agencies that were asked to produce documents and stonewalled, or outside agencies that may have bore down on the Southern District, determined that the foreign policy implications of this case, involving delicate relations with resource-rich Kazakhstan, were so sensitive as to outweigh any public interest in Giffen's fulsome prosecution.

If political forces did indeed compromise the prosecution (and few of us can know for sure), does this scenario seem familiar to anyone?

Let's recall the similarly strange prosecution of BAE, the British defense contractor who allegedly paid more than $2 billion in bribes and kickbacks to a Saudi Arabian prince. The U.K.'s Serious Fraud Office opened an investigation, which it suddenly closed.  We would learn that pressure to terminate the investigation came from outside (or perhaps, above) the SFO: the Blair government apparently insisted on the file's closure in response to Saudi threats to cease cooperation with the UK's anti-terrorism efforts.  

The High Court in London berated the SFO for capitulating, and on appeal the House of Lords declared SFO's handling of the matter "extremely distasteful"; the SFO director resigned shortly thereafter. In apparent protest of the the SFO's decision, our DOJ opened its own investigation, and the SFO eventually reopened its file. The result? BAE settled with the DOJ for $400 million, the third-highest amount in FCPA history. But the SFO fined BAE a relative pittance -- £30 million. The parallel is unmistakable, and striking: in a case with heightened foreign policy sensitivities, allegations that seem to otherwise warrant a substantial settlement resulted in something far less.

In fairness to the DOJ, this may not be their fault: whether due to an uncooperative client, or irresistible political pressure, they may have wanted to push further but were hamstrung. Still, it raises a compelling question: Is the Giffen case America's BAE?

Andy Spalding


Stranded By Graft

Last week Eurasianet reported that tens of thousands of  Uzbeks are trying to leave southern Kyrgyzstan. They were caught in ethnic rioting earlier this year. Now, crooked bureacrats are using red tape to extract bribes from those wanting to escape, making it expensive for everyone and impossible for some.

During the latest violence, many of the Uzbeks were burned out of their homes. The fires left them without documents. “When they appeal to the authorities to get new ones, they face deliberate obstacles,” a local human rights lawyer said.

The cost of obtaining the right documents has gone up 500%, according to the story. Many can't afford the bribes and are trapped in the country, sometimes separated from family members in Russia or other countries. 

This type of petty corruption -- extortion, really -- shows why fighting graft is always the right thing to do. And why foreign investors should try to raise the bar wherever they do business. All corruption, petty and grand, home-grown and imported, strips local residents of their rights, and the poorest suffer most.

After Siemens pleaded guilty to global bribery violations in December 2008, the DOJ's Matthew Friedrich summed up the moral obligation this way:

For let there be no doubt that corruption is not a victimless offense. Corruption is not a gentlemen's agreement where no one gets hurt. People do get hurt. And the people who are hurt the worst are often residents of the poorest countries on the face of the earth . . . .

And as Elizabeth Spahn has said about corruption:

It frustrates efforts to achieve very basic human rights. Bribery skews purchasing decisions making a mockery of any hope of a rational market. If the economists are to be believed, bribery significantly exacerbates the growing global gap between the unimaginably rich and the desperately poor.

Whoever doubts the value of the FCPA and laws like it should consider the victims of bribery. Then the fight against international public corruption makes sense.


SEC Charges Second Pride Exec

The former country manager in Venezuela for Pride International, Inc. last week settled civil FCPA charges with the SEC.

Joe Summers, a U.S. citizen who lives in John Day, Oregon, agreed to pay a civil penalty of $25,000.

From 2003 to 2005, Summers arranged payments of about $384,000 to third-party companies, "believing that all or a portion of the funds would be given to an official of Venezuela's state-owned oil company in order to secure extensions of three drilling contracts." Summers also approved a $30,000 payment through an intermediary to an employee of Venezuela's state-owned oil company to obtain the payment of receivables.

Summers' former employer, Pride International, said in February this year it has set aside $56.2 million for an expected settlement with the DOJ and SEC of FCPA offenses. The Houston-based oil-rig operator first disclosed potential compliance problems in 2006.

In December last year, the SEC accused a former Pride vice president, Bobby Benton, of violating the FCPA. The civil complaint against Benton alleged among other things that he deleted references in Pride's audits to about $384,000 in payments made by “the manager of the Venezuelan branch of a French subsidiary of Pride” to third-party companies. Pride self-disclosed the payments and cover-up after it learned about them through its internal investigation. The SEC's complaint against Summers included details about the Venezuelan bribes.

Pride has also disclosed that it found evidence of illegal payments from 2001 through 2006 directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, India, Nigeria, Libya, Angola, and the Republic of the Congo. The payments related to clearing rigs and equipment through customs, resolving customs disputes, immigration, tax, licensing, and merchant marine issues.

The SEC's complaint against Summers charged him with violating Sections 13(b)(5) and 30A of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78m(b)(5) and 78dd-1] and Rule 13b2-1 [17 C.F.R. § 240.13b2-1], and aiding and abetting Pride's violations of Sections 13(b)(2)(A), 13(b)(2)(B), and 30A of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78m(b)(2)(B), and 78dd-1].

Pride International, Inc. trades on the NYSE under the symbol PDE.

View the SEC's Litigation Release No. 21617 and Accounting and Auditing Enforcement Release No. 3169 (both dated August 5, 2010) in SEC v. Joe Summers, Civil Action No. 4:10-cv-02786 (S.D. Texas, August 5, 2010) here.

Download the SEC's civil complaint against Summers here.


An FCPA Snow Job

Last Friday in federal court in Manhattan, oil consultant James Giffen, the seven-year target of one of history's biggest individual FCPA prosecutions, was allowed to plead guilty to a misdemeanor -- failing to report a foreign bank account in a 1996 tax return. His now-dormant firm, Mercator Corporation, pleaded guilty to one count of violating the Foreign Corrupt Practices Act by giving two snowmobiles to officials in Kazakhstan in 1999.

Giffen now faces not more than a year in prison when he's sentenced on November 19, but he may not serve any jail time at all.

We called the plea deal a sputtering end for such a high-profile prosecution. The DOJ, which may have been caught flat-footed in the case by undisclosed and still-classified maneuverings in the 1990s by other three-letter U.S. agencies, put a different spin on things.

Here's what the Justice Department said in its August 6 release:

WASHINGTON – The Mercator Corporation, a merchant bank with offices in New York, pleaded guilty today in federal court in Manhattan, N.Y., to one count of making an unlawful payment to a senior government official of the Republic of Kazakhstan, in violation of the Foreign Corrupt Practices Act (FCPA), announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Preet Bharara for the Southern District of New York. Additionally, James H. Giffen, 69, of Mamaroneck, N.Y., and Mercator’s chairman, pleaded guilty today in federal court in Manhattan to one count of failing to disclose control of a Swiss bank account on his income tax return. Both pleas were before U.S. District Judge William H. Pauley III.

According to court documents, Mercator advised Kazakhstan in connection with various transactions related to the sale of portions of Kazakhstan’s oil and gas wealth. Three senior officials in the government of Kazakhstan had the power to substantially influence whether Mercator obtained and retained lucrative business, as well as the authority to pay Mercator substantial success fees if certain oil transactions closed, as well as to decide whether or not those transactions would close. According to court documents, Mercator was therefore dependent upon the goodwill of those senior officials, and in an effort to maintain its lucrative position, Mercator caused the purchase of two snowmobiles in November 1999. The snowmobiles were shipped to Kazakhstan for delivery to one of the officials.

According to the criminal information to which Giffen pleaded guilty, Giffen filed a U.S. Individual Income Tax Return, Form 1040, on March 27, 1997, for himself for the calendar year 1996, which failed to report that he maintained an interest in, and a signature and other authority over, a bank account in Switzerland in the name of Condor Capital Management, a British Virgin Islands corporation he controlled.

In 2007, the United States brought a separate, related civil forfeiture action in U.S. District Court in Manhattan against approximately $84 million on deposit in Switzerland.  The civil complaint alleged that the funds were traceable to unlawful payments to senior Kazakh officials in connection with oil and gas transactions arranged by Mercator for Kazakhstan. According to a 2007 agreement between the United States, Switzerland and Kazakhstan, the funds are being used by a non-governmental organization in Kazakhstan, independent of the Kazakh Government, to benefit underprivileged Kazakh children.

Mercator faces a maximum fine of the greater of $2 million or twice the gross gain or loss resulting from the offense. Giffen faces a maximum sentence of one year in prison and a fine of up to $25,000.