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The Akim Of Nookat, Lots Of Nigerian Customs Officials, The Congo Merchant Marine, And Lots Of Telecom Employees – The “Foreign Officials” Of 2010

A “foreign official”.

Without one, there can be no FCPA anti-bribery violation (civil or criminal).

Besides the fake Gabonese “foreign official” in the Africa Sting cases, who where the “foreign officials” of 2010?

This post describes the categories of “foreign officials” from 2010 corporate FCPA enforcement actions.

By my count, there were 21 corporate FCPA enforcement actions in 2010 (DOJ and SEC). (See here for my SEC FCPA Enforcement Year in Review – stay tuned for a similar DOJ FCPA Enforcement Year in Review).

I excluded from the tally, the General Electric SEC enforcement action as it related only to Iraqi Oil for Food conduct (and alleged kickback payments to the Iraqi government – not to any specific “foreign official) and thus resulted in FCPA books and records and internal controls charges only. There were other Iraqi Oil for Food cases in 2010, including Innospec, Daimler, and ABB, but these enforcement actions stayed on the list because the allegations related to other conduct as well.

In addition to the GE action, there were two additional FCPA books and records and internal controls only cases in 2010 – Natco Group and Veraz Networks. However, these enforcement actions stayed on the list because, let’s face it, if an employee from either of these companies consistently entertained their brother-in-law in the corporate suite and sought reimbursement for “client entertainment” you wouldn’t be reading about it – even if such conduct would nevertheless likely constitute an FCPA books and records and internal control violation. In other words, Natco Group and Veraz Networks, even if only FCPA books and records and internal controls cases, remain very much about the “foreign officials” in those cases.

Of the 20 corporate enforcement actions, 12 enforcement actions (60%) involved (in whole or in part) employees of alleged state-owned or state-controlled enterprises (“SOE”). In these cases, the enforcement agencies generally allege that such enterprises are “instrumentalities” of a foreign government and that such employees are therefore “foreign officials” under the FCPA. However, as I noted in my prepared Senate testimony (here) this central feature of FCPA enforcement contradicts the intent of Congress in enacting the FCPA.

The 60% figure from 2010 FCPA enforcement is similar to the 66% figure I calculated from 2009 FCPA enforcement (see here pages 410-414). As in 2009, the impact of this dubious “foreign official” interpretation extends beyond corporate FCPA enforcement actions as this interpretation is also at the core of several individual FCPA prosecutions – most notably in 2010, the many individual prosecutions (Lindsey, Lee, Aguilars, O’Shea, and Basurto) involving officials of Comision Federal de Electricidad – an alleged Mexican SOE.

Not only did SOE employees comprise the bulk of “foreign officials” in 2010, but so too did individuals with apparent ministerial or clerical duties.

Of the 20 corporate enforcement actions, 10 enforcement actions (50%) – including most notably all the Panlapina-related enforcement actions – involved (in whole or in part) officials with apparent ministerial or clerical duties such as customs, immigration and tax matters

Why is this noteworthy?

The FCPA’s original definition of “foreign official” was as follows. “… any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of such government or department, agency or instrumentality. Such terms does not include any employee of a foreign government or any department, agency, or instrumentality thereof whose duties are essentially ministerial or clerical.”

This last sentence was the FCPA’s original (albeit indirect) facilitating payment or grease exception. The relevant House Report states in pertinent part as follows: “… a gratuity paid to a customs official to speed the processing of a customs document would not be reached by this bill. Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must be performed in any event.”

When Congress amended the FCPA in 1988 it, among other things, amended the definition of foreign official by removing this indirect facilitating payment exception from the “foreign official” definition by creating a stand-alone facilitating payment exception currently found in the statute.

The relevant House Report indicates that Congress did not seek to disturb Congress’s original intent. “The policy adopted by Congress in 1977 remains valid, in terms of both U.S. law enforcement and foreign relations considerations. Any prohibition under U.S. law against this type of petty corruption would be exceedingly difficult to enforce, not only by U.S. prosecutors but by company officials themselves. Thus while such payments should not be condoned, they may appropriately be excluded from the reach of the FCPA. U.S. enforcement resources should be devoted to activities have much greater impact on foreign policy.”

The remainder of this post describes (as per DOJ/SEC allegations) the “foreign officials” of 2010. As apparent from the descriptions below, in certain instances the enforcement agencies describe the “foreign official” with reasonable specificity; in other instances with virtually no specificity.

Natco Group

Kazakhstan immigration authorities; employees of the Kazakh Ministry of Labor

Innospec

Iraqi Ministry of Oil and its component oil refineries (MoO) officials;

Official X of the Indonesian Ministry of Energy and Mineral Resources who later became a senior official at BP Migas, an Indonesian state owned oil and gas company; officials at Pertamina, another state owned oil company related to BP Migas.

Daimler

Russian government officials employed at Russian government customers (Russian Ministry of Internal Affairs, the Russian military, the City of Moscow, the City of Ufa, and the City of Novi Urengoi); Machinoimport and Dorinvest, both Russian government purchasing agents for the City of Moscow; Russian government officials employed by state-owned customers; Russian military officials; official with the Department of Communal Economy and Town Improvements for the City of Ufa, a Russian municipal government official; a senior municipal government official with the city of Novi Urengoi.

Chinese government customers – including principally the Bureau of Geophysical Prospecting, a division of the China National Petroleum Corporation, a Chinese state-owned oil company and Sinopec, a Chinese state owned energy company; Changqing Petroleum – a Chinese state-owned or controlled entity in the energy sector.

Saigon Passenger Transport Company a government entity in Vietnam; government official with the government owned Saigon High Tech Park; officials of a Vietnamese government office associated with import licensing; Ministry of Public Security official.

High-level executive official of Turkmenistan’s government; various officials of the Turkmenistan government.

Nigerian government officials; Nigerian officials to secure a State House (Nigerian Presidential Complex) contract; high-level executive branch official of Nigeria; chief buyer for the State House contract; Savannah Sugar Company Ltd – a Nigerian sugar company that was then majority owned by the Nigerian government; Nigerian police force; government official with the Ministry of Industry and an employee of the Ministry; Comite d’ Organisation de Jeux Africains – a state controlled agency organization committee for the All-Africa games; a senior Nigerian diplomat in Brazil.

Government officials at customers in the Ivory Coast and elsewhere in West Africa.

Ghanaian army officials.

Senior executive branch official in Liberia.

Members of the Riga City Council; members of the political party in control of the Riga City council; members of a different political party that was in control of the Riga City Council.

Volanbusz – a state owned regional public transport company in Budapest.

An executive of Mangyong Trading Corporation, an instrumentality of the North Korean government.

E.S.H.O.T. – a public transport agency for the municipality of Izmir in Turkey; Turkish police through the Ministry of Interior.

Perum Damri – an Indonesian state-owned bus company; tax officials in Indonesia.

Croatian government officials; Croatian Ministry of the Interior official; IM Metal – a Croatian government controlled and partially owned former weapons manufacturer and an instrumentality of the Croatian government.

Technip

“The Nigerian National Petroleum Corporation (“NNPC”) was a
Nigerian government-owned company charged with development of Nigeria’s oil and gas wealth and regulation of the country’s oil and gas industry. NNPC was a shareholder in certain joint ventures with multinational oil companies. NNPC was an entity and instrumentality of the Government of Nigeria and officers and employees of NNPC were “foreign officials” within the meaning of the FCPA.” “Nigeria LNG Limited (‘NLNG’) was created by the Nigerian government to develop the Bonny Island Project and was the entity that awarded the related EPC contracts. The largest shareholder of NLNG was NNPC, which owned 49% of NLNG. The other owners of NLNG were multinational oil companies. Through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the ability to block the award of EPC contracts. NLNG was an entity and instrumentality of the Government of Nigeria and its officers and employees were “foreign officials.”

Nigerian government officials, including officials of the executive branch of the government of Nigeria; a political party in Nigeria; a senior official of the Ministry of Petroleum.

Eni / Snamprogetti

Same as Technip described above.

Veraz Networks

Employees of government-controlled telecommunications companies in China and Vietnam

Alliance One

“… The government of Kyrgyzstan established the Kyrgyz Tamekisi an agency and instrumentality of the government, to manage and control the government-owned share of the tobacco processing facilities throughout Kyrgyzstan. Kyrgyz Official A served as the General Director of the Tamekisi and as such was a foreign official within the meaning of the FCPA.” “In Kyrgyzstan, each municipal, district or provincial government unit was headed by a public official known as an “akim” who was appointed to the post by the President of Kyrgyzastan on the advice of the Prime Minister. Accordingly, the Akims were ‘foreign officials’ within the meaning of the FCPA. Each Akim could exercise authority over the sale of tobacco by the growers within the local geographical area.”

The following Akims are referenced: the Akim of Nookat; the Akim of Alabuka; the Akim of Alafuko; and the Akim of Chilik. Kyrgyz tax inspection police foreign officials.

“The government of Thailand established the Thailand Tobacco Monopoly as an agency and instrumentality of the government, to manage and control the government-owned tobacco industry in Thailand. The TTM supervised the cultivation of domestic tobacco crops, purchased imported tobacco and manufactured cigarettes and other tobacco products in Thailand. The TTM was headed by a managing director appointed by the Finance Ministry, who reported through a board of directors directly to the Minster of Finance of Thailand and, as such, was a ‘foreign official’ within the meaning of the FCPA.”

Universal

Same TTM officials as Alliance One.

Five Mozambiquen government officials and/or their family members; wife of an official in the Mozambique Ministry of Agriculture and Fisheries; brother of an official in Ministry of Agriculture and Fisheries; Governor in Mozambique.

High-ranking Malawian government officials; political opposition leader.

ABB

“Comision Federal de Electricidad was an electric utlility company owned by the United Mexican states and responsible for supplying electricity to all of Mexico other than Mexico City. CFE officials N, J, C, and G held official positions a CFE and had influence over decisions concerning ABB’s contracts with CFE. CFE officials N,J,C and G, were “foreign officials” as that term is defined in the FCPA.”

Panalpina

“Officials of the Nigerian Customs Service [NCS], a Nigieran government agency within the Ministry of Finance of the Federal Republic of Nigeria. The NCS was responsible for assessing and collecting duties and tariffs on goods imported into Nigeria. The NCS was an agency and instrumentality of the government of Nigiera and its employees were foreign officials within the meaning of the FCPA”; Nigerian government officials, most of the payments were paid to NCS officials; Nigeria Port Authority officials; Maritime Authority officials, police officials, Department of Peteroleum officials, immigration authority officials, and National Authority for Food and Drug Control officials;

“Nigerian National Petroleum Investment Management Services [NAPIMS] officials. NAPIMS is a component of Nigeria National Petroleum Corporation [NNPC], a Nigerian government owned oil company, that supervises and manages Nigeria’s investment in the oil and gas industry. NNPC was an agency and instrumentality of the government of Nigiera and its employees were foreign officials within the meaning of the FCPA. As part of its oversight authority, NAPIMS officials had the authority to approve or disapprove logistics contracts awarded for joint venture projets. NAPIMS employees were foreign officials.”

Angolan government officials responsible for customs and immigration matters; Angolan government officials responsible for Angolan oil and gas operations; customs officials, Economic Police, Port Authority officials, and other Angolan officials; Angolan immigration and/or Ministry of Petroleum officials; Angolan military officials.

Azeri government officials responsible for assessing and collecting duties and tariffs on imported goods; Azeri tax officials.

Brazilian government officials responsible for assessing and collecting duties and tariffs on imported goods.

Kazakh government officials, including officials responsible for assessing and collecting duties and tariffs on imported goods and officials responsible for administering and enforcing Kazakh tax policy.

Russian government officials responsible for assessing and collecting duties on imported goods.

Turkmen government officials responsible for assessing and collecting duties and tariffs on imported goods to expedite the release of shipments and undocumented shipments and to cirucumvent the official Turkmen customs and immigration regulations; Turkmen government officials responsible for auditing, assessing, and collecting taxes on economic activity in Turkmenistan; and Turkmen government officials responsible for enforcing Turkmenistan labor, health, and safety laws.

Pride International

Same NCS officials as described above.

“Petroleos de Venezuela S.A. [PDVSA] was a Venezuelan state-owned oil company. In 1975, the government of Venezuela established PDVSA, an agency and instrumentality of the government, to manage and control the exploration, production, refinement, and transport of oil as well as the exploration and production of natural gas in Venezuela. Officals and members of the board of directors of PDVSA were foreign officials within the meaning of the FCPA.”

“The customs, excise and gold appellate tribunal [CEGAT] in India was an administrative judicial tribunal. Judges who were members of the CEGAT were ‘foreign officials’ within the meaning of the FCPA.”

“The Mexico customs official was a customs administrator operations assistant for the Mexican Customs Service. The Mexico customs official was a foreign official within the meaning of the FCPA.”

Kazakh customs officials; Kazakh tax officials; Nigerian tax officials; Saudi customs officials; Congo Merchant Marine official; officials of Libya’s social security agency, INAS.

Tidewater

Same NCS officials as described above.

“The general state tax inspection office within the Ministry of Finance for the Republic of Azerbaijian (later renamed the Ministry of Taxes for the Republic of Azerbaijan – collectively referred to as the Azeri Tax Authority) was responsible for administering and collecting tax assessments and duties for the Republic of Azerbaijan. The Azeri Tax authority was an agency and instrumentality of the Republic of Azerbaijan and its employees, including tax inspectors, were foreign officials.

Transocean

Same NCS officials as described above.

GlobalSantaFe

Same NCS officials as described above.

“Government officials in Gabon, Angola, and Equitorial Guinea.”

Noble

Same NCS officials as described above.

Royal Dutch Shell

Same NCS officials as described above.

RAE Systems

“A significant number of RAE-KLH’s and RAE Fushun’s customers were [China] government departments and bureaus and large state-owned agencies and instrumentalities.”

“The Lanzhou City Honggu Mining Safety Bureau, for example, was a government customer. Other government clients included regional fire departments, emergency response departments, and entities under the supervision of the provincial environmental agency.”

“officials of a state-owned enterprise doing business in the Dagang Oil Field.”

“Deputy Director of a state-owned chemical plant.”

Alcatel Lucent

“Instituto Costarricense de Electricidad S.A. was a wholly state-owned telecommunications authority in Costa Rica responsible for awarding and administering public tenders for telecommunications contracts. ICE was governed by a seven member board of directors that evaluated and approved, on behalf of the government of Costa Rica, all bid proposals submitted by telecommunications companies. The board of directors was led by an executive president, who was appointed by the President of Costa Rica. The other members of the board of directors were appointed by the President of Costa Rica and the Costa Rican cabinet. Accordingly, officers, directors and employees of ICE were foreign officials.”

“High ranking official in the Costa Rican executive branch. Legislator in the legislative assembly.”

“Empresa Hondurena de Telecomunicaciones [Hondutel] a wholly state-owned telecommunications authority in Honduras, established under Honduran law, and it was responsible for providing telecommunications services in Honduras which until late 2002, included evaluating and awarding telecommunications contracts on behalf of the government of Honduras. Several senior government officials sat on Hondutel’s board of directors. Hondutel’s operations were overseen by another Honduran government entity, Comision Nacional de Telecomunicaciones. Profits earned by Hondutel belonged to the government of Honduras, though part of the profit was permitted to be used by Hondutel for its operations. Accordingly, employees of Hondutel were “foreign officials.”

“Comision Nacional de Telecomunicaciones [Contal] was the Honduran government agency that regulated the telecommunications sector in Honduras. Contal was part of the Honduran executive branch under the Secretariat of Finance. Conatel’s commissioners were appointed by the President of Honduras. Accordingly, officers, commissions and employees were foreign officials.”

“High ranking government officials in the Honduran executive branch.”

“Telekom Malaysia Berhad (‘Telekom Malaysia’) was a state-owned and controlled telecommunications provider in Malaysia. Telekom Malaysia was responsible for awarding telecommunications contracts during the relevant time period. The Malaysian Ministry of Finance owned approximately 43% of Telekom Malaysia’s shares, had veto power over all major expenditures, and made important operational decisions. The government owned its interest in Telekom Malaysia through the Minister of Finance, who had the status of a ‘special shareholder.’ Most senior Telekom Malaysia officers were political appointees, including the Chairman and Director, the Chairman of the Board of the Tender Committee, and the Executive Director. Accordingly, officers, directors and employees of Telekom Malaysia were ‘foreign officials’ within the meaning of the FCPA.”

“Taiwan Railway Administration was the wholly state-owned authority in Taiwan responsible for managing, maintaining and running passenger freight service on Taiwan’s railroad lines. It was responsible for awarding and administering all public tenders in connection with Taiwan’s railroad lines, including contracts to design, manufacture, and install an axle counting system to control rail traffic. TRA was an agency of Taiwan’s Ministry of Transportation and Communications, a cabinet level governmental body responsible for the regulation of transportation and communications networks and operations. Accordingly, officers and employees of TRA were foreign officials.”

“Members of the Legislative Yuan, the unicameral legislative assembly of the Republic of China.”

“Kenyan government officials who had played a role in awarding the original contract to French telecom.”

Government officials in Nigeria including the Nigerian police, a former Nigerian Ambassador to the United Nations to arrange a meeting with Nigerian Senior Government Official 1 – a high-ranking official in the Nigerian executive branch, and People Democratic Party officials.

“Bangladesh Telegraph and Telephone Board” – the state-controlled telecommunications services provider.

“Andinatel, Pacifictel, and Empressa Muncipal de Telecomunicaciones, Agua Potable, Alcantarillados y Saneamiento – all state-owned telecommunications companies.”

Empresa Nicaraguense de Telecomunicaciones S.A., state owned during the relevant time period

Angolan telecommunications company with close ties to Angolan senior government official – a high-ranking Angolan executive branch official.

An Ivory Coast company – registered in the Ivory Coast with ooperations in Ivory Coast and Burkina Faso. Company was owned by an Ivory Coast government official. Government official ran Ivory Coast Company’s operations from his government office and was a close advisor to a high-ranking official in the Ivory Coast excecutive branch.

Uganda company registered in Uganada with operations in that country. One of the owners was a close friend of an advisor to a high-ranking official in the Uganadan executive.

Senior executive of the state controlled celluar telephone company in Mali.

Lindsey Manufacturing

“Comision Federal de Electricidad [CFE] was an electric utlity company owned by the government of Mexico. During the time period relevant to this indictment, CFE was responsible for supplying electricity to all of Mexico other than Mexico City.”

“Official 1 was a Mexican citizen who held a senior level position at CFE. Official 1 became the sub-director of generation for CFE in 2002 and the Director of operations in 2007. Officials 1’s position at CFE made him a foreign official.”

“Official 2 was a Mexican citizen who also held a senior level position at CFE. Official 2 was the Director of Operations at CFE until that position was taken over by Offical 1 in 2007. Officials 2’s position at CFE made him a foreign official.”

Mercator Corp.

“three senior officials of the Kazakh Government”

Friday Roundup

FCPA enforcement down 100% and some items for the weekend watch/read list.

Enforcement Down 100%

Last year at this time there were already 23 FCPA enforcement actions (22 defendants in the Africa Sting case and the Natco Group enforcement action).

So far this year there have been 0.

Thus, FCPA enforcement is down 100%.

I don’t expect you to take this statistic seriously and I don’t intend it to be. Rather, it is meant as a commentary on the often times odd obsession some have with FCPA enforcement statistics (misleading as they may be in many cases).

On to more meaningful commentary by others.

For Your Viewing Pleasure

Two titans of the FCPA bar, Homer Moyer (here) and Martin Weinstein (here) were recently the focus of separate interviews on the BulletProofBlog as to various FCPA topics.

Informative views here and here.

For Your Reading Pleasure

Gary Stein (here – Schulte Roth & Zable) has an informative overview (here) of “Sentencing of Individuals in FCPA Cases.”

I’ve been documenting the growing trend of judges significantly rejecting DOJ sentencing recommendations in FCPA cases (see here) and Stein “hits the nail on the head” with this paragraph:

“The DOJ exercises virtually unlimited discretion in deciding who gets charged in FCPA cases and, for all practical purposes, in deciding the amount of the financial penalty imposed against corporate violators. But sentencing of individual defendants, particularly after U.S. v. Booker, is ultimately a matter of judicial, not prosecutorial discretion. And it has become apparent that there is a wide and growing rift between the views of the DOJ and the courts as to the appropriate sentences for individual violators in FCPA cases.”

Tired of all the “are you ready” hysteria surrounding the U.K. Bribery Act?

If so, you will want to read “Keep Calm and Carry On” (here) by Alexandra Wrage (President of Trace) recently published by In Compliance Magazine. Among other things, Wrage states that “the argument that companies that have navigated FCPA waters for a decade or more are unprepared for the new UK Act is unfounded.”

See here for my “bold” prediction that implementation of the U.K. Bribery Act (whenever that occurs) is not that big of deal for most companies and that U.K. enforcement of the Bribery Act is likely to be measured and disciplined.

*****

A good weekend to all.

Friday Roundup

FCPA enforcement down 100% and some items for the weekend watch/read list.

Enforcement Down 100%

Last year at this time there were already 23 FCPA enforcement actions (22 defendants in the Africa Sting case and the Natco Group enforcement action).

So far this year there have been 0.

Thus, FCPA enforcement is down 100%.

I don’t expect you to take this statistic seriously and I don’t intend it to be. Rather, it is meant as a commentary on the often times odd obsession some have with FCPA enforcement statistics (misleading as they may be in many cases).

On to more meaningful commentary by others.

For Your Viewing Pleasure

Two titans of the FCPA bar, Homer Moyer (here) and Martin Weinstein (here) were recently the focus of separate interviews on the BulletProofBlog as to various FCPA topics.

Informative views here and here.

For Your Reading Pleasure

Gary Stein (here – Schulte Roth & Zable) has an informative overview (here) of “Sentencing of Individuals in FCPA Cases.”

I’ve been documenting the growing trend of judges significantly rejecting DOJ sentencing recommendations in FCPA cases (see here) and Stein “hits the nail on the head” with this paragraph:

“The DOJ exercises virtually unlimited discretion in deciding who gets charged in FCPA cases and, for all practical purposes, in deciding the amount of the financial penalty imposed against corporate violators. But sentencing of individual defendants, particularly after U.S. v. Booker, is ultimately a matter of judicial, not prosecutorial discretion. And it has become apparent that there is a wide and growing rift between the views of the DOJ and the courts as to the appropriate sentences for individual violators in FCPA cases.”

Tired of all the “are you ready” hysteria surrounding the U.K. Bribery Act?

If so, you will want to read “Keep Calm and Carry On” (here) by Alexandra Wrage (President of Trace) recently published by In Compliance Magazine. Among other things, Wrage states that “the argument that companies that have navigated FCPA waters for a decade or more are unprepared for the new UK Act is unfounded.”

See here for my “bold” prediction that implementation of the U.K. Bribery Act (whenever that occurs) is not that big of deal for most companies and that U.K. enforcement of the Bribery Act is likely to be measured and disciplined.

*****

A good weekend to all.

The FCPA Was Not Hastily Enacted

“Enacted hastily in the post-Watergate Era’s ethical fever the Foreign Corrupt Practices Act …”

So begins an otherwise solid lawyer written piece on the FCPA.

Say what you want about the FCPA, but one thing that can not be said is that the FCPA was “enacted hastily.”

Beginning in the Spring of 1975, Congress held numerous hearings in the aftermath of news and disclosures of questionable foreign corporate payments to a variety of sources and for a variety of reasons.

What to do was an issue that occupied both the 94th Congress and the 95th Congress. What to do was also an issue of focus for the Gerald Ford administration as he appointed a Cabinet level “Task Force on Questionable Corporate Payments Abroad” in March 1976.

Between June 1975 and September 1977, approximately twenty bills were introduced in the Senate or House to address foreign corporate payments from a variety angles.

Between June 1975 and September 1977, Congress held eight hearings on the issue of foreign corporate payments and testimony was given by, among others, representatives from the State Department, the Defense Department, the Department of Justice, the Commerce Department, the Treasury Department, and the Securities and Exchange Commission. Congress also heard from lawyers, law professors, the American Bar Association, other bar association committees, industry groups, and public interest groups.

The 94th Congress came close to enacting what would become the FCPA in Fall 1976, but was unable to do so prior to adjourning for the 1976 elections in which Jimmy Carter defeated Gerald Ford.

When the 95th Congress began in January 1977, the legislative efforts begun in the 94th Congress resumed.

Jimmy Carter signed the Foreign Corrupt Practices Act on December 20, 1977.

Against this backdrop, was the FCPA “enacted hastily”?

I guess it depends on your definition of hastily, but I submit the answer is no.

Africa Sting – Year Two

One year ago today, the DOJ announced (here) the unsealing of 16 indictments (here) charging 22 “executives and employees of companies in the military and law enforcement products industry” for engaging in a scheme to “pay bribes to the minister of defense for a country in Africa.”

It was not the first time the DOJ had used undercover tactics in an FCPA enforcement action (see here), but it was certainly the most dramatic as nearly all the defendants were arrested while attending a trade show (here) in Las Vegas.

I provided an overview of the allegations (here) in what I called the Africa Sting case – a case involving: individuals employed by large companies and small companies; private companies and publicy-trade companies; chief executives, sales managers, and even a general counsel; U.S. citizens, U.K. citizens, an Israeli citizen, and a pair of siblings.

A lot has happened in the Africa Sting cases over the past year.

What has occured?

For starters, we learned that there was never a real “foreign official” looking to do business with the defendants. Rather, FBI agents posed as representatives of an imaginery Minister of Defense of an African country – later identified as Gabon. (See here for analysis).

Assisting the FBI was “Individual 1” a person described as a business associate of certain of the defendants and a “former Vice President of International Sales for a company that manufactured and supplied law enforcement and military equipment to law enforcement and military customers around the world.”

Individual 1 was soon identified as Richard Bistrong, a former employee of Armor Holdings. (See here). Bistong was soon criminally charged, but in a separate case (see here) – one largely involving United Nations body armor contracts and conduct in the Netherlands and Nigeria.

When Bistong was assisting the FBI in its undercover operations of the Africa Sting defendants, we learned that he had already pleaded guilty to the charges against him. (See here).

Given these circumstances, the defendants are likely to eventually assert entrapment – among other legal defenses. (See here).

In February, the defendants pleaded not guilty.

Judge Richard Leon (Federal District Court – Washington D.C.) appeared skeptical of the government’s assertion that all 22 defendants were in one grand conspiracy. Defense lawyers were troubled by the lack of evidence turned over by the government concerning Bistrong. (See here).

With so many individual defendants indicted, and the motivations for pleading under the Sentencing Guidelines, it seemed inevitable that one or more defendants would “flip” and cooperate with the government.

In March, the DOJ filed a superceding information (here) against defendant Daniel Alvirez and speculation was that Alvirez would soon plead guilty. (See here). The superceding information contained allegations not found in the orignal charges concerning the Republic of Georgia – allegations that did not mention any involvement by FBI agents.

Judge Leon indicated that it was highly unlikely that the cases would go to trial in 2010 and the DOJ and defense counsel soon battled as to discovery and evidentiary issues – particularly as to the FBI’s relationship with and use of Bistrong.

In April, the DOJ filed a superceding indictment (here) charging the individual defendants in one big conspiracy to violate the FCPA. Judge Leon said that he would not try 22 individuals together in one case, and in response, the DOJ proposed tried the defendants in 4 groups.

The documents began to pile up: “615 audio and video recordings of more than 150 meetings;” “5,287 recorded telephone calls between the defendants and [Bistrong], and between the defendants and undercover FBI agents;” “recordings of telephone calls between [Bistrong] and FBI agents;” “in excess of 5,000 pages of documents relating to [Bistrong], including reports, expense paperwork, bank statements, quotes, emails, notes, drug tests results, payment receipts, and Skype text messages, among others;” “emails from the accounts of [Bistrong] and the undercover FBI agents;” “nearly 3,000 pages of text messages from the telephone [Bistrong] used in connection with the undercover operation;” and “materials seized during the 13 search warrants executed in connection with the undercover investigation relating to the defendants.” (See here).

The companies impacted by their employee’s conduct began to lawyer up and over the summer Smith & Wesson and Allied Defense Group – the two public companies indirectly implicated made disclosures in connection with the case. (See here and here).

In December, certain defendants filed a motion “for an evidentiary hearing requiring the testimony of Richard Bistrong and federal law enforcement agents responsible for managing him in connection with the investigation resulting in the indictment.”

The defense claims that Bistrong assured various defendants that the fake Gabon deal had been approved by the U.S. State Department, was not illegal, was not in violation of the FCPA, and that Bistrong “angrily admonished one Defendant who indicated that he was going to tell other defendants that his lawyer had advised that the Gabon deals might be illegal.”

The DOJ says that the defense has “presented the Court with selective and misleading facts about this case” and that many of the defendants, wholly apart from the Gabon deal, were involved in paying bribes to foreign officials in other countries. Further, the DOJ argues, pretrial resolution of factual issues is not warranted. (See here for additional analysis).

That brings one to the present, year 2 of the Africa Sting case.

On the one hand much has happened.

On the other hand, much is still yet to occur and the defendants are presumed innocent until proven otherwise.

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