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FCPA Blog Daily News

Entries in Pacific Consolidated Industries (2)

Thursday
Sep032009

Guilty Plea In UK Bribe Case

The former director of sales and marketing for Pacific Consolidated Industries (PCI) admitted yesterday that he bribed an official from the U.K. Ministry of Defense (MOD) in return for equipment orders. Leo Winston Smith, 73, pleaded guilty in the U.S. federal district court for central California to conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. §371) and corruptly obstructing and impeding the due administration of the internal revenue laws (26 U.S.C. §7212(a)).

Smith, along with PCI's former president and part owner, Martin Eric Self, 51, paid at least $70,000 in bribes to the MOD official. The money was funneled through a sham marketing agreement PCI created in 1999 with a relative of the official. In return, PCI was awarded MOD contracts worth around $11 million. Smith also admitted under-reporting income on his 2003 U.S. federal tax return and failing to file a 2003 corporate return for his Nevada company, Design Smith Inc.

Sentencing in Smith's case 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.

His co-conspirator, Martin Eric Self, pleaded guilty in May 2008 to violating the FCPA (here). Although Self faced up to five years in prison on each of two FCPA counts, his plea agreement contemplated a prison term of eight months. He was finally sentenced in November 2008 to two years probation. The MOD official, Michael Hale, pleaded guilty in the United Kingdom to accepting nine separate payments from PCI totaling more than $300,000. He was sentenced in April 2007 to two years in prison.

Privately-held PCI manufactures Air Separation Units (ASUs) and other equipment for the military, medical, and oil and gas markets. ASUs generate oxygen in remote, extreme, and confined locations. The Justice Department said that in late 2003, after the alleged illegal conduct occurred, a group of private investors bought California-based PCI. They referred the case to U.S. prosecutors and "fully cooperated in the government’s investigation."

Download a copy of the DOJ's September 3, 2009 release here.

Download a copy of the plea agreement in U.S. v. Leo Winston Smith (Case No.: CR 07-69(A) - AG) here.
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Friday
May092008

FCPA Guilty Plea For Bribing UK Official

A former co-owner and executive of California-based Pacific Consolidated Industries (PCI) pleaded guilty yesterday to violating the Foreign Corrupt Practices Act. Martin Eric Self, 51, of Orange, California pleaded guilty to a two-count information charging him with violating the FCPA by paying more than $70,000 in bribes to a U.K. Ministry of Defence official. The bribes were intended to secure equipment contracts with the U.K. Royal Air Force.

In October 1999, Self, a U.S. citizen, and Leo Winston Smith, then PCI’s executive vice president and director of sales and marketing, had PCI enter into a marketing agreement with a relative of a U.K. Ministry of Defence official. According to the DOJ, Self -- a signatory on PCI's marketing agreements and bank accounts -- admitted that he didn't know of any genuine services provided by the official’s relative. Instead, Self believed the payments probably were benefiting the official in exchange for obtaining and retaining the equipment-supply contracts.

Self is scheduled to be sentenced in federal court on September 29, 2008. Although he faces a maximum sentence of five years in prison per count, his plea agreement contemplates a prison term of eight months, subject to the court's final determination at sentencing.

For his role in the scheme, former marketing head Smith, a co-founder of PCI, was indicted in April 2007. The government says he conspired to bribe the U.K. Ministry of Defence official in order to obtain equipment contracts worth more than $11 million dollars. In addition to the FCPA violations, the indictment also charges Smith with money laundering and tax offenses. He's scheduled to stand trial in July 2008. Self, as part of his plea agreement, will presumably testify against his former colleague. Evidence against Smith is also likely to come from U.K. authorities. Their investigation of the U.K. Ministry of Defence official resulted in his guilty plea in the United Kingdom for accepting bribes from PCI. He was sentenced to two years in prison.

Privately-held PCI manufactures Air Separation Units (ASUs) and other equipment for the military, medical, and oil and gas markets. ASUs generate oxygen in remote, extreme and confined locations. The DOJ said that in late 2003, after the alleged illegal conduct occurred, PCI was acquired by a group of investors who referred the case to U.S. prosecutors and "fully cooperated in the government’s investigation."

Assistant Attorney General for the Criminal Division Alice S. Fisher, who departs from the DOJ later this month, said, “Individuals who resort to bribery and other fraudulent means to secure contracts with foreign governments not only corrupt legitimate bidding processes, but they also damage the integrity of the global marketplace. Furthermore, using an intermediary to make bribe payments will not insulate individuals from prosecution."

Referring to the collaboration by prosecutors in the U.S. and U.K., Ms. Fisher also said, "The coordinated international law enforcement efforts of this case exemplify the type of cooperation needed to fight crime in the 21st century, where physical borders are not boundaries for criminal activity. I would like to thank our colleagues in the United Kingdom for their efforts and assistance in prosecuting this case as well as the FBI and IRS for their investigatory assistance.”

View the DOJ's May 8, 2008 news release here.