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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

Entries in Shu Quan Sheng (11)

Monday
Aug152016

Jessica Tillipman: The Ten Longest FCPA-Related Prison Sentences

The DOJ's Yates Memo is nearly a year old. The anti-corruption and compliance communities are still wondering what impact it will have on individual responsibility for white collar crimes. That in turn has brought more interest about past prison sentences for FCPA offenses and what future defendants might expect when sentenced.

Click to read more ...

Tuesday
Oct122010

Greens Can't Afford Fines; U.S. Appeals Their Sentences

The DOJ is appealing the six-month prison sentences imposed in August on Gerald Green and his wife Patricia.

The government wanted them to serve at least ten years in prison. Their six-month sentences are among the most lenient in recent FCPA cases.

Gerald Green is 78 and suffers from emphysema. His wife is 53. Judge Wu delayed their sentencing five times. In addition to six months in prison, the judge ordered supervised release for three years and restitution from the Greens jointly and severally of $250,000.

The Hollywood movie producers were convicted in September 2009 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.

Despite their short prison terms, the Greens didn't get off easy. At the government's request, the judge ordered forfeiture of their property. Their bank accounts, West Hollywood home and most of what's in it, BMW 740, their company, and their pension assets were all seized.

Judge Wu then addressed the Greens as indigents. "All fines are waived," he ruled as to each of them, "as it is found that the defendant does not have the ability to pay."

He asked them to settle the $250,000 restitution they jointly owe by paying $50 a month. That means they'll be square in 5,000 months -- about 416 years.

In April this year, Charles Jumet 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. 

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. He's appealing his conviction.

And 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' surrender date to the U.S. Marshals in LA, for transport to federal prison, is November 29, 2010.

_________________

Download a copy of the August 13, 2010 forfeiture order against Gerald and Patricia Green here.

Download a copy of the government's October 8, 2010 notice of appeal in US v. Green here.

Monday
Sep132010

The Enforcement Rap Sheet

If the DOJ and SEC are prosecuting corporations instead of individuals for FCPA violations -- an idea raised in another post -- the numbers should show it. So let's take a look.

Click to read more ...

Friday
Aug132010

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. 

Tuesday
May112010

The Hard Timers

Compliance officers will want to keep a copy of the table below close at hand. What better way to answer those who insist that the FCPA is small potatoes, after all, when you look at the relatively few enforcement actions over the past 33 years.

Here are the 22 men (no women so far), most of them former company executives, who've spent time in prison for FCPA-related convictions. Each name that follows represents a terrible tragedy, often with permanent damage extending to families. As the compiler of the list said: "By my count there have been 187 people charged with violating the FCPA. This list will look a little different at the end of the year."

We'd like to thank the generous individual responsible for this post, but that's not possible. He or she has asked to remain anonymous, making this contribution pro bono publico.

The information is compiled from the Federal Bureau of Prisons' inmate locator. Readers with suggestions and corrections are welcome to let us know.

 

Name

Related Company

Register #

Age Race Sex

Release Date

Location

FERNANDO MAYA BASURTO

ABB Ltd

39135-177

48-White-M

UNKNOWN

HOUSTON FDC

CHARLES PAUL EDWARD JUMET

Ports Engineering Consultants Corporation

75638-083

53-White-M

UNKNOWN

NOT IN BOP CUSTODY

SULEIMAN A NASSAR

Lockheed

45723-019

73-White-M

11/19/1996

RELEASED

DAVID H MEAD

Saybolt

79529-079

72-White-M

7/21/1999

RELEASED

HERBERT STEINDLER

General Electric

02423-061

71-White-M

3/13/2000

RELEASED

HERBERT LAWRENCE TANNENBAUM

Tanner Management Corp

82537-054

85-White-M

4/20/2000

RELEASED

RICHARD G PITCHFORD

Central Asia American Enterprise Fund

26036-016

75-White-M

12/4/2003

RELEASED

ROBERT RICHARD KING

Owl Securities and Investments

14447-045

76-White-M

6/30/2006

RELEASED

STEVEN LYNWOOD HEAD

Titan

95321-198

63-White-M

9/29/2008

RELEASED

YAW OSEI AMOAKO

ITXC Corporation

60267-050

58-Black-M

12/17/2008

RELEASED

PAUL GRAYSON NOVAK

Willbros

43505-279

43-White-M

12/19/2008

RELEASED

ROGER MICHAEL YOUNG

ITXC Corporation

29574-016

49-White-M

4/10/2009

RELEASED

STEVEN JOSEPH OTT

ITXC Corporation

60540-050

50-White-M

6/17/2009

RELEASED

RAMENDRA BASU

World Bank

29254-016

47-White-M

8/7/2009

RELEASED

FAHEEM MOUSA SALAM

 

28567-016

32-White-M

1/7/2010

RELEASED

MISAO HIOKI

Bridgestone

90290-111

56-Asian-M

11/23/2010

LOMPOC USP

DAVID KAY

American Rice

13749-179

58-White-M

1/27/2011

TEXARKANA FCI

JIM BOB BROWN

Willbros

66158-179

48-White-M

1/29/2011

ATLANTA USP

CHRISTIAN SAPSIZIAN

Alcatel SA

78172-004

63-White-M

3/18/2011

NE OHIO CORR CTR CI

JASON EDWARD STEPH

Willbros

36444-177

40-White-M

3/28/2011

EL RENO FCI

DOUGLAS MURPHY

American Rice

13987-179

53-White-M

12/31/2012

EL RENO FCI

SHU QUAN-SHENG

AMAC International

58250-083

69-Asian-M

2/18/2013

LA TUNA FCI

 

Thursday
Jan282010

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.

*   *   *

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.

Tuesday
Jun302009

Enforcement Report For Q2 '09

During the second quarter there were, by our count, eleven Foreign Corrupt Practices Act enforcement actions. They involved four companies -- three firms resolved criminal or civil charges, or both, and one disclosed an investigation -- and 13 individuals who were either indicted, put on trial, pleaded guilty or sentenced. Here's the rundown:

Joseph T. Lukas (June 29, 2009) Guilty plea to a two-count criminal indictment.

Lukas, 60, a partner in Nexus Technologies Inc. until 2005, was indicted in September 2008 on one count of conspiracy to bribe Vietnamese public officials in violation of the Foreign Corrupt Practices Act and one substantive count of violating the FCPA. He admitted in his guilty plea that from 1999 to 2005, he and other Nexus employees agreed to pay, and knowingly paid, bribes to Vietnamese government officials in exchange for contracts with the officials' agencies. At his sentencing scheduled for April 2010, he faces up to 10 years in prison and a possible $350,000 fine.

The 2008 indictment also charged Nexus and alleged co-conspirators Nam Nguyen, Kim Nguyen and An Nguyen, all U.S. citizens, with similar violations. Their cases are still pending.

William Jefferson (June 9, 2009) The start of his federal criminal trial in Alexandria, Virginia.

It's the first time a former member of congress has been prosecuted under the Foreign Corrupt Practices Act. Jefferson, 62, faces up to 20 years in prison. He's accused of violating the FCPA by arranging bribes to African officials to win contracts for his family's companies, and with soliciting and accepting bribes, wire fraud, money laundering and obstruction of justice. He lost an election last year for a 10th term in the House of Representatives from a district that includes New Orleans.

Frederic Bourke (June 1, 2009) The start of his federal criminal trial in Manhattan.

The co-founder of luxury handbag brand Dooney & Bourke is accused of investing in a deal in Azerbaijan in 1998 that he knew involved paying bribes to officials there. He faces up to 30 years in jail for conspiring to violate the FCPA, money laundering and lying to federal investigators. Bourke says he didn't know about the bribery. His co-defendant Viktor Kozeny is a fugitive in the Bahamas.

United Industrial Corporation (UIC) (May 29, 2009) Civil enforcement action resolved.

The Securities and Exchange Commission filed a settled enforcement action against UIC, an aerospace and defense systems contractor. UIC agreed to pay $337,679.42 in disgorgement and prejudgment interest. (See also Thomas Wurzel below.)

Thomas Wurzel (May 29, 2009) Civil enforcement action resolved.

The SEC filed a settled enforcement action against Thomas Wurzel, the former president of UIC's one-time subsidiary, ACL Technologies, Inc.. He agreed to pay a $35,000 civil penalty. The SEC said Wurzel authorized illegal payments to Egyptian Air Force officials in 2001 and 2002 through an agent in return for business related to a military aircraft depot in Cairo.

Wurzel and UIC were charged with violating the antibribery, books and records and internal controls provisions of the Foreign Corrupt Practices Act; Wurzel also faced aiding and abetting violations.

Novo Nordisk A/S (May 11, 2009) Criminal and civil enforcement actions resolved.

Denmark-based Novo Nordisk agreed to pay a $9 million criminal penalty and enter into a deferred prosecution agreement with the DOJ for illegal kickbacks paid to the former Iraqi government under the U.N. oil-for-food program. It also agreed to pay $3,025,066 in civil penalties and $6,005,079 in disgorgement of profits, including pre-judgment interest, to the SEC.

The DOJ charged Novo with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA. In the civil enforcement action, the SEC charged Novo with violating the FCPA's books and records and internal controls provisions.

Sun Microsystems (May 7, 2009) Investigation disclosed.

Sun said in an SEC filing that it may have violated the FCPA. It didn't reveal where the payments might have occurred or how much the bribes amounted to. But it said the potential offenses, which it has reported to U.S. and other authorities, "could possibly have a material effect on our business."

Juan Diaz and Antonio Perez (April 27, 2009) Guilty pleas to a one-count criminal information.

Diaz and Perez, both 51 of Miami, pleaded guilty to a one-count criminal information. They were charged with conspiracy to violate the FCPA by making corrupt payments to officials from Telecommunications D'Haiti. Diaz paid and concealed $1,028,851 in bribes while acting as an intermediary for three private telecommunications companies. Perez arranged bribes of $674,193 to the Haitian officials while he worked as a controller at one of the companies from March 1998 to January 2002.

Stuart Carson, Hong (Rose) Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim (April 9, 2009) Indicted by a federal grand jury.

The six former executives of Control Components Inc., an Orange County, Calif.-based valve company, were charged with conspiracy to violate the FCPA and the Travel Act, violating the FCPA, and as to Hong (Rose) Carson, one count of obstruction. It was the biggest multi-party indictment of individuals yet under the FCPA.

Earlier this year, two other former executives from Control Components admitted paying bribes to foreign officials and have been cooperating with authorities. Richard Morlok, 55, the former finance director, and Mario Covino, 44, the company's former director of worldwide factory sales, pleaded guilty to one count of conspiracy to violate the FCPA. They're sentencing is set for July 20, 2009.

Shu Quan-Sheng (April 7, 2009) Sentenced to prison.

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, 68, a native of China and naturalized U.S. citizen, pleaded guilty in November 2008 to one count of violating the FCPA and two counts of violating the Arms Export Control Act. Shu had already forfeited $386,740 to the federal government before being sentenced to prison.

Latin Node Inc. (April 7, 2009) Criminal enforcement action resolved.

The former privately held Florida telecommunications company pleaded guilty to a one-count criminal information and agreed to pay a fine of $2 million over the next three years. It was charged with violating the FCPA's antibribery provisions by making improper payments in Honduras and Yemen.
_______________

Click on the party names for the original posts, with links to the charging documents, plea agreements, and news and litigation releases.

View our enforcement report for Q1 '09 here.

View our 2008 enforcement index here.
.

Wednesday
Apr082009

Rocket Scientist Sentenced To Prison

The Virginia-based physicist who sold controlled space-launch technology to China by bribing government officials there has been sentenced to 51 months in prison. Shu Quan-Sheng (left), 68, a native of China, naturalized U.S. citizen and PhD physicist, 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. Shu had already forfeited $386,740 to the federal government before being sentenced to prison.

Shu is the President, Secretary and Treasurer of AMAC International Inc., a high-tech company based in Newport News, with another office in Beijing. AMAC performs research through grants funded by the Small Business Research program on behalf of the Department of Energy and the National Aeronautics and Space Administration (NASA).

Shu violated the FCPA by offering "percentage points" in 2006 worth a total of $189,300 to officials at a research institute affiliated with the China Academy of Launch Vehicle Technology. He was trying to land a contract to develop a liquid hydrogen tank system for a heavy payload launch facility located on Hainan Island in the PRC. In January 2007, the $4 million hydrogen liquefier project was awarded to a French company that Shu represented.

Shu violated the Arms Export Control Act by willfully exporting a defense service from the United States to the PRC without first obtaining the required export license or written approval from the State Department. He provided the PRC with assistance in the design and development of a cryogenic fueling system for space launch vehicles to be used at the heavy payload launch facility on Hainan.

The investigation involved the FBI, U.S. Immigration and Customs Enforcement, and the U.S. Department of Commerce, Office of Export Enforcement.

In a prior post we noted that Shu's arrest in September 2008 was similar to arrests earlier that month of U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies (see our post here). They were charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and four substantive counts of violating the FCPA. They're accused of bribing government officials in Vietnam to secure contracts to supply high-tech items -- including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. That case doesn't yet involve charges under U.S. export laws.

Download the DOJ's April 7, 2009 release here.
.

Thursday
Jan152009

China Notebook

This is the first deep economic downturn most Chinese have experienced, so fear and anger are in the air. A Bloomberg report yesterday quoted an editor of a state-run magazine in the southwestern city of Chongqing as saying, “We’re entering the peak of mass incidents. In 2009, Chinese society may face more conflicts and clashes that will test even more the governing capabilities of all levels of the party and government.”

* * *
Even in prosperous times, corruption undermines governments. But add severe financial stress to the mix and people look for someone to blame. It's no surprise, then, that fighting corruption emerged as a top priority at the Chinese Communist Party's 17th National Congress this week in Beijing. “The principle that everyone is equal before the law must be enforced and no corrupt official should be able to escape punishment under the law," the official Xinhua News Agency reported, quoting a communiqué from the Party's internal anti-graft body, the Central Commission for Discipline Inspection.

* * *
China punished 4,960 officials above county-head level between November 2007 and November 2008 for involvement in corruption, bribery or other law-breaking activity, the communiqué trumpeted. Of those, 801 were prosecuted.

* * *
In May last year, the Sichuan earthquake killed about 100,000 people, including nearly 20,000 school children crushed in their classrooms. There were allegations then, denied by the government, that corrupt officials had allowed sub-par construction of school buildings. Then in September, in the afterglow of the Olympics, came news that Chinese milk and infant formula were contaminated with melamine, a chemical added to create fake levels of protein content. Nearly 300,000 kids became sick, many with kidney stones, and at least six infants died. Other product scandals last year involved tainted cough syrup, toys, seafood, toothpaste and dog food, among others. In July 2007, China executed the former top food and drug regulator for accepting nearly a million dollars in bribes in exchange for approving an antibiotic that killed at least ten people.

* * *
In the six months ended November 2008, there were more than 550 publicly-funded overseas trips. The authorities banned almost 4,000 Party and government officials from traveling abroad during the same period, and will crack down more in the year ahead, according to the above-mentioned communiqué said.

Last month we told about the three-week study tour to the U.S. by 23 officials from the eastern Chinese city of Wenzhou. In between beach days in Hawaii and sex shows in San Francisco, they spent just five days on government business. On the way to running up a bill of $94,000, the road-trippers crashed for two nights in $700 suites at the Sahara Hotel & Casino in Las Vegas.

* * *
This year's Wall Street Journal / Heritage Foundation Index of Economic Freedom ranks China 132nd (behind Indonesia and above Nepal). It says the country's corruption "is perceived as widespread. China ranks 72nd out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. [The 2008 CPI is available here.] Corruption limits foreign direct investment and affects banking, finance, government procurement, and construction most severely, and there is a lack of independent investigative bodies and courts."

What country ranks first on the 2009 Index of Economic Freedom? Hong Kong, a Chinese Special Administrative Region with local rule. Corruption? It's "perceived as minimal. Hong Kong ranks 14th out of 179 countries in Transparency International's Corruption Perceptions Index for 2007 [12th in the 2008 CPI], and foreign firms do not see corruption as an obstacle to investment."

* * *
Foreign Corrupt Practices Act enforcement actions in 2008 involving China included AGA Medical Corporation, Faro Technologies Inc., Shu Quan-Sheng and Siemens. Avon last year disclosed an internal investigation of its practices in China, and FCPA Opinion Procedure Release 08-03 also concerned the PRC.
.

Monday
Nov172008

Rocket Scientist Pleads Guilty

A Virginia-based scientist who sold controlled space-launch technology to China by bribing government officials there has pleaded guilty to violating the Foreign Corrupt Practices Act. Shu Quan-Sheng (left), 68, a native of China, naturalized U.S. citizen and PhD physicist, also pleaded guilty to two counts of violating the Arms Export Control Act by delivering defense articles and services to the PRC without first obtaining the required export license or written approval from the State Department.

In 2006, Shu offered "percentage points" worth a total of $189,300 to officials at a research institute affiliated with the China Academy of Launch Vehicle Technology. He was trying to land a contract to develop a liquid hydrogen tank system for a heavy payload launch facility located on Hainan Island in the PRC. In January 2007, the $4 million hydrogen liquefier project was awarded to a French company that Shu represented.

For violating the Foreign Corrupt Practices Act, Shu faces up to five years in prison and a fine of $250,000 or twice the gross gain resulting from the FCPA offense. He also faces up to 10 years in prison and a $1,000,000 fine for each of the two violations of the Arms Export Control Act. His sentencing is scheduled for April 6, 2009.

Shu's company, AMAC International Inc., is based in Newport News, Virginia and also has an office in Beijing. According to its website, AMAC is "a high tech company operating at the cutting edge of technology." The site says because of its accomplishments "in Research & Development of Superconducting RF Power Technologies, Magnetic Levitation and Cryogenics in space, AMAC has been awarded more than $2,000,000 of innovative research grants from the US Department of Energy (DOE) and National Aeronautics & Space Administration (NASA)."

We noted in a prior post that Shu's arrest in September was similar to arrests earlier that month of U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies (see our post here). They were charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and four substantive counts of violating the FCPA. They're accused of bribing government officials in Vietnam to secure contracts to supply high-tech items -- including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. That case doesn't yet involve charges under U.S. export laws.

View the Justice Department's November 17, 2008 release here.

.

Wednesday
Sep242008

Rocket Scientist Arrested Under FCPA

The U.S. Department of Justice reported the arrest in Virginia on Wednesday of a physicist accused of bribing Chinese government officials in exchange for contracts to supply space-launch technology that he illegally exported to China.

The DOJ said Shu Quan-Sheng, 68, a native of China, naturalized U.S. citizen, and PhD physicist, was arrested in Newport News by FBI agents. Shu controls AMAC International, a high-tech company based in Newport News with an office in Beijing. He appeared in U.S. District Court for the Eastern District of Virginia, Norfolk Division.

Shu has been charged with bribing and attempting to bribe a foreign government official in violation of the Foreign Corrupt Practices Act. He's also charged with violating the Arms Export Control Act by unlawfully exporting a defense service and a defense article to foreign persons without prior approval. He faces up to 10 years in prison for each violation of the Arms Export Control Act, and five years in prison for violating the FCPA.

The complaint alleges that Shu offered bribes to government officials in the PRC’s 101st Research Institute to induce the award of a $4 million contract for a hydrogen liquefier to a French company that Shu and AMAC represented. The 101 Institute, as it's known, is part of the China Academy of Launch Vehicle Technology. The French company received the contract in January 2007 and was obligated to pay Shu a success fee of ten to fifteen percent.

According to the complaint, beginning around January 2003, Shu worked with several PRC government entities involved in the development of a space launch facility on China's Hainan Island. The facility is designed to house liquid-propelled heavy payload launch vehicles to send space stations and satellites into orbit, as well as provide support for manned space flight and future lunar missions.

The DOJ says the liquefier contract was the first of perhaps five projects by AMAC and the French company related to ground-based support for launch vehicles at the new Hainan Island facility. According to the DOJ, Shu provided technical expertise and purchasing assistance for components critical to the use of liquefied hydrogen -- including cryogenic pumps, valves, transfer lines and refrigeration equipment. He was also instrumental in arranging for PRC officials to visit various European space launch facilities and hydrogen production / storage facilities.

The DOJ says Shu lacked "the required licenses or written approvals with respect to brokering, export of defense articles, or proposals to provide defense services to the PRC."

Shu was investigated by the FBI, with assistance from U.S. Immigration and Customs Enforcement, and the U.S. Department of Commerce, Office of Export Enforcement. The Counterespionage Section of the Justice Department’s National Security Division also assisted.

Shu's arrest is similar in many ways to arrests earlier this month of U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies (see our post here). They were charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and four substantive counts of violating the FCPA. They're accused of paying bribes to officials at Vietnam’s Ministries of Transport, Industry and Public Safety to secure contracts to supply high-tech items -- including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. That case, which doesn't yet involve charges under U.S. export laws, was also investigated by both the FBI and the U.S. Department of Commerce, Office of Export Enforcement.

Shu's company, AMAC, describes itself on its website as "a high tech company operating at the cutting edge of technology." The site says because of its accomplishments "in Research & Development of Superconducting RF Power Technologies, Magnetic Levitation and Cryogenics in space, AMAC has been awarded more than $2,000,000 of innovative research grants from the US Department of Energy (DOE) and National Aeronautics & Space Administration (NASA)."

In September 2002, according to its website, AMAC, in cooperation with the Virginia Economic Development Partnership, the U.S. Department of Commerce, and the Small Business Development Center of Hampton Roads, hosted a workshop "for Virginia's business owners interested in exporting to China."

Charges in a criminal complaint, as the DOJ says, are mere allegations and defendants are presumed innocent unless and until proven guilty in a court of law.

View the DOJ's Sept. 24, 2008 release here.

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