Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor

FCPA Blog Daily News


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."


Jack Grynberg Battles On

Jack Grynberg: "I have been pursuing fraud in the energy industry for the past 15 years."Colorado-based independent oilman Jack Grynberg filed a 311-page complaint in December with the European Commission. He's asking for an investigation into alleged bribery and tax evasion in Kazakhstan by several oil companies he once partnered with. His claims relate to oil and gas developments dating back to the early 1990s -- the same ones at the center of the U.S. prosecutions of James Giffen and Brian Williams. See our post James Giffen And America's Secrets.

Grynberg, 78, who speaks six languages including Russian, is alleging "wholesale bribery and corruption of top Kazakh government officials." He claims the corruption led to his company's loss of rights in the Greater Kashagan and Karachaganak Oil Fields -- estimated to hold more than 9 billion barrels of recoverable oil and 25 trillion cubic feet of natural gas.

His complaint names BP plc, StatoilHydro A.S.A., Total S.A., Royal Dutch Shell plc, ENI S.p.A., ExxonMobil, ConocoPhillips, and Inpex.

In a release he sent to the FCPA Blog, he said:

My lawsuit in Brussels will attempt to open the window on this large scale bribery, tax evasion and corruption scheme, obtain subpoena power, and finally answer . . . questions which have remained unanswered for too long. It is unfortunate that the U.S. Department of Justice is attempting to prosecute the messengers, namely Mr. James H. Giffen and Mr. Brian J. Williams, instead of the main criminals and their cheif executives. My hope is that the European Commission will take a more balanced and assertive approach.

The complaint to the EC asserts that the alleged bribery infringed Articles 81 and 82 of the EEC Treaty (antitrust and abusive behavior).

Why the European Commission? Grynberg says he's exhausted his potential U.S. remedies and hasn't been able to subpoena the witnesses he needs (he deposed Giffen, who asserted his 5th Amendment privilege). Grynberg's civil fraud and Rico suit in the District Of Columbia against BP, Statoil, British Gas, and their top executives was bounced last year. The court ordered private arbitration in Canada under agreements Grynberg had signed for the projects.

Grynberg has a rich history of litigation, some of it productive. According to his own documents, he has been "pursuing fraud in the energy industry for the past 15 years." He cites these examples:

  • In 1995, he filed one of the first False Claim Act qui tam lawsuits against 60 natural gas pipeline companies in the U.S., listing "13 ways condensate (light oil) and natural gas are stolen from federal and Native American lands."
  • In 2007, Congresswoman Carolyn Maloney of New York introduced H.R. 435 (reintroduced this year as H.R. 1462), intended to stop the theft of condensate on federal and Native American lands in ways Grynberg identified.
  • In September last year, he was awarded $5.66 million in a federal suit in the District of Columbia against the Central African Republic's President, Minister of Mines and Energy, and former Ambassador to the U.S. His suit claimed they demanded a $2 million bribe for an exclusive oil and gas development concession that Grynberg was ready to develop under previously signed agreements. He has also filed a complaint about the bribe demand in the International Centre for Settlement of Investment Disputes of the World Bank. A hearing is scheduled in Paris later this month.
  • He's pushing amendments to the Foreign Corrupt Practices Act in Congress through H.R. 6188, which would create a private right of action under the FCPA.

Download the executive summary of Jack Grynberg's complaint to the European Commission here.


Former BAE Agent Charged For Bribes

Austrian national Alfons Mensdorff-Pouilly: BAE's agent has been charged in Britain with corruption but his prosecution still needs approval from the U.K.'s attorney general.The U.K.'s Serious Fraud Office on Friday charged one of BAE's former middlemen, Count Alfons Mensdorff-Pouilly, with bribery in connection with arms sales to countries in Eastern and Central Europe. He was formally accused of "conspiracy to corrupt, contrary to section 1 of the Criminal Law Act 1977."

The SFO alleged that Mensdorff-Pouilly, 56, conspired with others from 2002 though 2008 to bribe government officials and representatives from the Czech Republic, Hungary, and Austria. The bribes were intended to secure contracts from those governments for the sale of SAAB/Gripen fighter jets marketed by BAe Systems plc.

David Leigh and Rob Evans, the investigative journalists from the Guardian who first reported BAE's alleged corrupt selling practices nearly five years ago, said Friday that Mensdorff-Pouilly's prosecution still needs approval from Britain's attorney general, Lady Scotland. Mensdorff-Pouilly lives in Luising, Austria and is an Austrian citizen. The attorney general hasn't yet agreed to let the case proceed, the SFO's lawyers said, and they asked the court for a month-long adjournment while she decides. 

These are the first criminal charges arising from the investigation of BAE's practices.

The SFO dropped an investigation in December 2006 into allegations the company bribed members of the Saudi Arabian government in exchange for the sale of Typhoon jet fighters. The SFO said it had to abandon the case after Saudi Arabia threatened to end anti-terrorism cooperation with the British government.

The U.S. Justice Department is reportedly still investigating BAE's payments of about $2 billion to Saudi Prince Bandar bin Sultan. He was formerly ambassador to the United States and some of the payments allegedly passed through U.S. bank accounts he controlled.

The SFO on Friday said its current investigation of BAE has involved collaboration with the Vienna (Austria) Prosecution Office (Staatsanwaltschaft Wien) and police (Bundeskriminalamt) and was coordinated with help from Eurojust. The SFO said it also had help from Czech, Hungarian and Swiss authorities.

View a copy of the Serious Fraud Office's January 29, 2010 release here.


Hearing From Others

Lowell Bergman's Frontline has produced a nice profile of Nuhu Ribadu. He chaired Nigeria's Economic and Financial Crimes Commission between 2003 and 2007. When he did too good of a job, he made enemies in high places and was targeted for assassination. We've written about him here.

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PEPs and their pros. Here's an item from a regular reader:

Dear FCPA Blog,

Thought this would be of interest to you:

Keeping Foreign Corruption Out of the United States: Four Case Histories

Permanent Subcommittee on Investigations
Thursday, February 4, 2010
09:30 AM

Dirksen Senate Office Building, room 342

The Permanent Subcommittee on Investigations will examine how some politically powerful foreign officials, their relatives, or close associates – referred to in international agreements as “Politically Exposed Persons” or PEPs – have used the services of U.S. professionals and U.S. financial institutions to bring millions of dollars in suspect funds into the United States to advance their interests.

Four case histories will illustrate how some PEPs have used U.S. lawyers, realtors, escrow agents, lobbyists, bankers, and others to circumvent U.S. anti-money laundering and anti-corruption safeguards. It will also look at how some U.S. professionals have actively helped PEPs avoid bank scrutiny or facilitated suspect transactions with no questions asked.

The hearing will also examine whether U.S. policies and practices to combat foreign corruption and money laundering need strengthening.

Witnesses will include government agencies, including the State Department, Immigration & Customs Enforcement (ICE), and Financial Crimes Enforcement Network (FinCEN), as well as lawyers, a realtor, and representatives of financial institutions.

A witness list will be available Tuesday, February 2, 2010.

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Who did they work for? Christopher Matthews on Main Justice posted the names of the employers of most of the 22 individuals arrested in the mega-bust in Las Vegas. The indictments didn't name the employers but reports in the press, here and other sites have identified most of the companies involved.


Prison For Ex-Willbros Execs

FCPA violations: The Justice Department is targeting individuals who pay bribes to foreign officials. Photo by Ken MayerTwo former Willbros managers on Thursday were given jail time for conspiracy to violate the Foreign Corrupt Practices Act. They bribed foreign government officials and employees of state-owned firms to win pipeline work and gain other advantages.

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.

Steph, who once served as general manager of on-shore operations for Willbros International, pleaded guilty in November 2007. He said in his plea that in 2005 he, Brown, and others arranged to pay about $1.8 million in cash to Nigerian officials.

Brown pleaded guilty in September 2006 to conspiracy to violate the FCPA. He and Steph cooperated with the government’s investigation.

Brown said from 1996 to 2004, he and others plotted to negotiate lower Nigerian federal and state taxes in exchange for bribes to revenue officials. And he admitted conspiring to make corrupt payments to officials in the Nigerian court system in exchange for favorable treatment on pending cases. Brown also paid at least $300,000 in bribes to Ecuadorian government officials from PetroEcuador and PetroCommercial in exchange for contracts. The DOJ said all the payments violated the FCPA's antibribery provisions.

In May 2008, Willbros Group and its subsidiary Willbros International paid $22 million and entered into a deferred prosecution agreement with the DOJ to settle criminal FCPA charges in connection with corrupt payments to Nigerian and Ecuadorian officials. Willbros Group also paid $10.3 million (disgorgement of $8.9 million, plus prejudgment interest of $1.4 million) to resolve the SEC's civil enforcement action.

In December 2008, another former executive and an ex-consultant of Willbros International Inc. were charged in the case. Consultant Paul G. Novak, 43, pleaded guilty in November 2009 to conspiracy to violate the FCPA. He's scheduled to be sentenced on February 19. James K. Tillery, 49, a former Willbros International executive, was also charged but remains at large.

In May 2008, the Securities and Exchange Commission charged Steph and former employees Gerald Jansen, Lloyd Biggers, and Carlos Galvez with aiding and abetting Willbros Group's violation of the antibribery, books and records, and internal controls provisions of the FCPA, and knowingly circumventing the FCPA's internal controls and books and records provisions. All four consented to permanent injunctions, with Jansen and Galvez ordered to pay civil penalties of $30,000 and $35,000 respectively. Determination of Steph's civil penalty was deferred pending his sentencing in the criminal case.

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Substantive FCPA violations and conspiracy to violate the FCPA both carry a maximum sentence of five years in prison. Here are some recent FCPA-related sentences:

  • In November last year, Frederic Bourke, who was convicted at trial, was sentenced to a year and day in jail for conspiracy.
  • David Kay and Douglas Murphy started serving their sentences last year for substantive FCPA violations. They were convicted at trial and sentenced to 37 months and 63 months respectively.
  • In April 2009, Virginia-based physicist Shu Quan-Sheng was sentenced to 51 months in prison. He pleaded guilty in November 2008 to one count of violating the Foreign Corrupt Practices Act and two counts of violating the Arms Export Control Act.
  • In September 2008, two former executives from telecoms company ITXC Corporation avoided prison. Roger Michael Young was sentenced to five years probation with three months home confinement after he pleaded guilty in July 2007 to violating the FCPA and the Travel Act. Steven J. Ott also pleaded guilty and was sentenced to five years probation with six months in a community confinement center and six months home confinement.
  • Also in September 2008, Albert "Jack" Stanley, KBR's former CEO, pleaded guilty to a two-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to commit mail and wire fraud. He agreed to a seven year jail term with a chance for reduction based on his cooperation. 
  • In  April 2008, a former World Bank employee, Ramendra Basu, received 15 months in prison for conspiring to award World Bank contracts to consultants in exchange for kickbacks and for helping a contractor bribe a foreign official. He pleaded guilty to conspiring to commit wire fraud and to violating the FCPA.

A copy of the DOJ's January 28, 2010 release is here.

See our prior posts about Willbros and its personnel here.


Kozeny's Extradition Blocked Again

Victor Kozeny: The most famous FCPA fugitive is wanted by U.S. authorites for conspiracy to bribe Azeri leaders.Victor Kozeny, the Czech-born fugitive wanted in the United States for conspiracy to violate the Foreign Corrupt Practices Act, won a decision this week in the Bahamas court of appeal that continues to block his extradition to the U.S.

Kozeny, 46, is the best known FCPA fugitive. He has lived in the Bahamas for about ten years. He was arrested there at the request of the U.S. government in October 2005 and held in prison until granted bail in April 2007. Although a judge ordered his extradition, his lawyers were able to convince another judge to block it (here). The U.S. then pushed the case to the court of appeals. The three-judge panel held hearings in December and issued a 26-page ruling Tuesday.

A federal grand jury in Manhattan indicted Kozeny in May 2005 for a plot to bribe Azeri leaders to gain control of the state oil company. His co-defendant, Frederic Bourke, was convicted in July of conspiracy to violate the FCPA and lying to FBI agents. Bourke was sentenced to a year and a day in prison. His appeal is pending.

Others involved in the Azeri scheme have pleaded guilty. Waiting to be sentenced are Thomas Farrell, a director of one of Kozeny's companies, Kozeny's Swiss lawyer Hans Bodmer, and Clayton Lewis, a partner in Omega Advisors, Inc., a hedge fund that invested and lost about $126 million in Kozeny's Azeri plot.

Kozeny was also indicted in 2003 in a New York state criminal case for stealing $182 million from investors, including Omega, AIG, and Bourke.

The Bahamas decision dismissed all six grounds of appeal by the U.S. government. A lower court judge found it had acted in bad faith in the extradition process by failing "to disclose certain pertinent information in law and fact." In letting that part of the lower court judgment stand, Justice Longley, writing for the appeal panel, said:

The extradition process, because it involves the depravation of liberty, requires the exercise of good faith on the part of the requesting state and that must mean that it has a duty to disclose in a timely manner and with its request if the information is known at that time, any information that would not only be adverse to its request but would inform a prudent court in the exercise of its function that might lead to a relevant trial of inquiry. Whether the failure to comply with its obligation in any particular case is bad faith depends on all circumstances of the case. There certainly was material before the learned judge to reach the conclusion which he did and I see no reason to interfere with that decision.

The Bahamas attorney general and the U.S. government can request a final appeal to London’s Privy Council. They haven't said what they plan to do.

Download a copy of the judgment by the Bahamas court of appeal in Government of the United States et al, Appellants and Victor Kozeny, Appellee (January 26, 2010) here.

Bloomberg's David Glovin, who has reported Kozeny's legal battles, filed a report here.


The Good Bribes

Lawyer and Fulbright Scholar Andy Spalding: The idea that deterring bribery must always be good is too simple.Yesterday's post about corruption's positive influence in poor, unfree countries brought the following comment from Andy Spalding. He's a lawyer on a year-long Fulbright Research Grant in Mumbai, India whose own view of anti-corruption laws has caused a stir.

Here's what he said:

Dear FCPA Blog,

I was delighted to read yet another article in our field written in the ever-important vein of constructive criticism.  For those of us who support the FCPA, it is tempting to categorically dismiss the suggestion that in some economies, some of the time, bribery may actually promote development.  But I'm not sure that this is the right response, for at least two good reasons:

1.  This idea has been around for a very long time.  As Carden and Verdon readily admit, theirs is a new permutation on an idea that has circulated in mainstream economics and political science for over forty years.  It grew out of the study of Soviet bureaucracy, and many of us lawyers who took undergrad majors in poli sci, econ, or history, may at least vaguely recognize names like Samuel P. Huntington.  This idea is not new, and it's not radical.  We would do well to see the FCPA, and the problem of corruption, in a broader context of human experience and intellectual inquiry.

2.  Hasn't the FCPA community understood this since 1988?  That was the year that we amended the FCPA to include the affirmative defense -- which some find counter-intuitive, or worse -- for facilitating payments.  How many of us have had the experience of describing this defense to non-lawyers in a compliance seminar, a meeting with clients, or around the dinner table, only to be met with chuckles of astonishment? The non-FCPA world believes that "a bribe's a bribe," and so did we when we originally drafted the FCPA in the mid-70s.  But ten years of experience taught us otherwise.  For those of us today who endorse the affirmative defense -- who do not believe it is a "loophole" that should be abolished, but instead strikes an important balance -- haven't we tacitly accepted at least some version of Carden and Verdon's thesis? 

We may tend to assume, perhaps unconsciously, that if bribery is bad, then deterring bribery must always be good; the logic is seductive in its simplicity.  But as Holmes taught, "the life of the law has not been logic; it has been experience."  Experience in bribery-prone countries, with all its irony and tragedy, teaches us that though bribery is indeed bad, the alternative may sometimes be worse.  Those who amended the FCPA in 1988, and myriad observers of the human condition dating much further back, understood this regrettable fact.  In today's prosecutorial zeal we may try to ignore it, but those who live and work under corrupt and inefficient regimes cannot escape it. 

With thanks,
Andy Spalding


Graft Is Good, Sometimes

Profs Art Carden of Rhodes College and Lisa Verdon of Florida State, both economists, asked: When is corruption bad for economic growth? When is corruption good for economic growth? (It wouldn't occur to us to ask the second question; that's why we read what smart people have to say.)

Carden and Verdon surveyed the literature, analyzed studies and examples that might reveal clues -- there's not much meaningful data about corruption because it usually happens in secret -- and came to some thoughtful, if unpleasant, conclusions.

In their August 2009 paper, they argue that in some circumstances, graft can actually create beneficial change. In a healthy economy, they say, corruption is bad -- it's like sand in the gears of society. But in poor and undemocratic countries, corruption can be oil in the gears. It can help bring change and economic progress. It can be a substitute for freedom by allowing entrepreneurs to beat red tape and get things done.

Here's what they say:

In relatively poor, un-free countries, corruption can overcome some of the barriers presented by formal and informal institutions that would otherwise restrict trade. Bureaucracies and regulators are in a position to exercise veto power over mutually beneficial trades—they can prevent people from picking up the bills left on the sidewalk, so to speak, and thereby reduce specialization, trade, and growth. When this is the case, corruption can increase economic growth by allowing trade.

They cite others who, looking at data from countries such as Zaire, South Korea, and the Philippines, conclude: Corruption is always detrimental in countries where institutions are effective, but it may be positively associated with efficiency in countries where institutions are ineffective.

Does it mean the Foreign Corrupt Practices Act is bad for those places that are the worst off? Are we missing what Carden and Verdon and other scholars would call the "cultural context" of corruption? Do anti-corruption laws like the FCPA and other OECD versions promote suffering in the least developed countries by preserving a miserable status quo? Is America making a cosmic mistake with the FCPA?

The paper is "Corruption Creates Growth When People Aren't Free" by Art Carden and Lisa Verdon (August 20, 2009). It's available at SSRN here.

Readers -- you're invited to give us your two cents. You might also want to look at what Andy Spalding had to say in this space last year.


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.


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.


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.

Sundar. N

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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.


Sentencing Respite For The Greens

Judge Wu: He wasn't ready this week to sentence Hollywood producers Gerald and Patricia Green. They face as much as 20 years or more in prison for violating the Foreign Corrupt Practices Act and other U.S. laws.Sentencing for Gerald Green and his wife Patricia, the Hollywood movie producers convicted last year of paying kickbacks to a Thai official in exchange for contracts, has been postponed until March 11.

The Greens were scheduled to learn their sentences at a hearing in federal court in Los Angeles on Thursday. Judge George Wu instead asked for more information from the parties. He said he wants Gerald Green's lawyers to provide a summarized medical report and he asked prosecutors for an official statement from the Thai government declaring that Thailand was harmed by the Greens’ bribery.

In a signal that he may be uncomfortable with the long sentences requested by the government under the federal guidelines, he also asked both sides for research showing prison terms from similar bribery cases.

A report of the hearing appears in the Wrap here.

Gerald Green, 78, appeared in court on Thursday "with a small oxygen tank slung over his shoulder," the report said. His lawyers argue that he needs constant medical care. In their sentencing memo they said:

Not only does Mr. Green suffer from extremely severe emphysema, his condition is progressive. He has already lost so much lung function that he has none left to spare. At his current capacity every breath is a struggle. At the core of the issue is that ANY lung function lost due to any delay or interruption in his regime of treatment is permanent. This was clearly illustrated during the early period of this case when Mr. Green could not utilize steam therapy because of the monitoring device. During that period of time there was a decrease in lung function.

During Thursday's hearing, the Wrap said Assistant U.S. Attorney Bruce Searby "was visibly perplexed" by Judge Wu's requests:

“Don’t you like the give and take of argument?” Wu asked, smiling at Lopez. “Don’t you get this in Washington D.C.?”

All Lopez could say to Wu’s concern was, “It shouldn’t be that you can go out and bribe someone just as long as the host country profits from the bribe.”

Gerald Green faces 20 to 25 years under the federal sentencing guidelines; the government has asked that he be jailed for life. His wife Patricia, 55, could be sentenced to between 19 and 24 years.

A jury convicted them in September of conspiring to violate the FCPA and money laundering laws, nine counts of violating the FCPA and seven counts of money laundering. Patricia Green was found guilty of two counts of subscribing to a U.S. income tax return knowing it contained false statements.

The Thai official named in the Greens' prosecution has been indicted with her daughter. The indictment unsealed Tuesday in Los Angeles charges Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, and her daughter, Jittisopa Siriwan, with one count of conspiracy, seven counts of transporting funds to promote unlawful activity (bribery), and one count of aiding and abetting. If convicted, Siriwan and her daughter each face up to 20 years in prison. Siriwan has said she is innocent.

A copy of the indictment in U.S. v. Juthamas Siriwan in the U.S. District Court for the Central District of California (Case No.: CR 09 00081) can be downloaded here.