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Africa Sting – Alvirez Superseding Indictment and Expected Plea – New Charges Relating to the Republic of Georgia

When the Africa Sting indictments were first unsealed, I noted as follows:

“Given the number of individuals indicted, and the motivations for pleading under the Sentencing Guidelines, it would seem inevitable that one or more individuals will soon “flip” and cooperate with the government thereby potentially complicating the defenses of the remaining individuals.”

Christopher Matthew’s at Main Justice reports this evening (see here) that Daniel Alvirez, the President of ALS Technologies, Inc., is expected to plead guilty to charges of conspiracy to violate the FCPA set forth in a superseding indictment and cooperate in the government’s investigation.

The superseding indictment (here) contains two conspiracy charges. The superseding indictment drops the substantive FCPA violations and conspiracy to commit money laundering charges in the original indictment.

The first charge in the superseding indictment is substantively similar to the conspiracy charge and substantive FCPA charges in the original indictment (here) and involves the same core set of facts as in the original indictment, but with more detail. For instance, the superseding indictment specifically lists the names of the Africa Sting defendants and references specific telephone calls and e-mails. The superseding indictment also newly alleges that Alvirez and others were not in Las Vegas merely to attend the Shot Show, but also “for the purpose of attending a meeting between the suppliers” in the deal and the hypothetical “Minister of Defense of Country A.” According to the superseding indictment, at this meeting Alvirez and others “expected to receive a payment at that meeting amounting to 60% of the inflated sales price” of the goods initially sold in the deal.

The second conspiracy charge in the superseding indictment is new and contains facts not yet alleged in this case concerning the Republic of Georgia.

According to the superseding indictment, Alvirez participated in “conversations and meetings with sales agents who Alvirez knew were making corrupt payments to Ministry of Defense officials of the Republic of Georgia (‘Georgia’) in order to assist in obtaining business from the government of Georgia.” The superseding indictment alleges that “Alvirez would facilitate the sale of military and law enforcement equipment to the government of Georgia, with the assistance of corrupt sales agents, knowing that the sales agents would make corrupt payments to Georgian government officials to assist in obtaining and retaining business from the government of Georgia” and that Alvirez accepted “commission payments from the corrupt sales agents for facilitating the corrupt deals with the government of Georgia.”

The Republic of Georgia charge references an “Israeli sales agent” “an executive of a company that supplied ammunition to facilitate the Israeli sales agent’s purchase (“Co-Conspirator 1”) and “Miami sales agent.”

Unlike the original Africa Sting charge, the Republic of Georgia charge does not mention any involvement by FBI agents and/or a sting.

Matthews quotes an individual familiar with the case who says that “Alvirez is a key part of the widespread conspiracy because he introduced many of the defendants to the government’s cooperating witness, Richard Bistrong, who facilitated meetings between the defendants and the undercover FBI agents.” According to this source, “other defendants were likely to work out plea agreements and that the government is using the cases to go after other defense-industry companies” including “corrupt deals in several specific countries, including the Republic of Georgia and Guatemala.”

Clearly this new development complicates the defense of the remaining Africa Sting defendants and foreshadows a much larger government investigation seemingly not involving the entrapment defense at issue in the original charges.

BAE – The Circus Continues

Just when you think the final circus wagon has left the station, the BAE bribery, yet no bribery circus continues to keep on giving.

As I posted earlier this week (here), debarment issues clearly drove resolution of this prosecution as demonstrated by the DOJ’s sentencing memorandum. That post also noted that the U.S. Attorneys’ Manual specifically states that “where the corporation was engaged in fraud against the government […], a prosecutor may not negotiate away an agency’s right to debar or delist the corporate defendant” – a relevant fact given that both the DOJ release announcing resolution of the BAE matter, as well as the sentencing memorandum, expressly state that BAE “defrauded” the U.S.

Today’s circus act has to do with the magician’s uncanny ability to make things disappear and concerns the State Department’s treatment of BAE’s license applications.

The FCPA Blog today (see here) profiles a DefenseNews article (here) and notes that the” first debarment notice posted on the State Department’s website Monday was withdrawn and a second notice was changed at least once and then also withdrawn.”

Defense News quoted a Washington trade lawyer as saying:

One notice Monday, another one Tuesday, and now they’re both down. Which is it, guys? What State has done sends a terrible message. It makes it seem like State does not have a handle on what it wants to do – or that it’s being manipulated by outside interests.

***

For Christopher Matthews’ (Main Justice) first-hand account of how the judge, prosecution and defense all carefully avoided talking about the FCPA bribery element in the room at Monday’s hearing, see here. Matthews notes that BAE’s lawyer specifically requested “that the record reflect that BAE did not know payments would be used for bribes, only that there was a high probability they might be used in that fashion.”

Save the Date

On March 22nd, the Georgetown Journal of International Law will be hosting a symposium titled “Combating Global Corruption” (see here for details).

Panelists include a collection of FCPA practitioners, industry representatives, academics and enforcement officials. I will be participating on the “Enforcement by U.S. Government Agencies” panel and will be presenting my paper “The Facade of FCPA Enforcement” at this conference.

The event, at Georgetown Law, is free, open to the public, and CLE accreditation has been requested.

BAE – U.K. Court to SFO … Not So Fast!

Yesterday’s post concerned the final act in the BAE circus in the U.S. (see here). As promised, today we venture across the Atlantic to the U.K., a country which has played host to many acts in the BAE bribery, yet no bribery circus.

Yesterday, a U.K. High Court prohibited (see here) the Serious Fraud Office (“SFO”) “from taking any steps in its prosecution of BAE” “until the determination of the application for permission to apply for judicial review or further order.” For press coverage (see here).

Here is the relevant background.

In mid-February, Corner House Research and Campaign Against Arms Trade, two British non-profits, wrote to Richard Alderman, the Director of the SFO, asking him to revoke the plea bargain agreement it had entered into with BAE. (See here and here).

The groups argue “that the Director of the SFO has acted unlawfully as the guidance under which the Director must operate makes clear that once the decision to prosecute has been taken, the charges agreed in any plea agreement must reflect the seriousness of the offending concerned.”

The letter details the SFO’s statements leading up to its February 5th settlement with BAE as well as SFO guidance “specifically designed to apply to plea discussions of the type engaged in by the SFO with BAE” and argues that the SFO’s decision to resolve the BAE matter in the way it did was both “unlawful” and “irrational.”

The SFO guidance relevant to plea negotiations identified in the letter is similar to the factors U.S. prosecutors are to consider in resolving corporate criminal issues pursuant to the Principles of Federal Prosecution of Business Organizations found in the U.S. Attorneys’ Manual (see here).

The SFO refused to reconsider its decision and on February 26th, the groups (see here) “lodged papers at the High Court asking for an injunction (see here) to delay the [SFO] from seeking court approval for its controversial plea bargain settlement with BAE Systems pending the outcome of a Judicial Review.” The groups also “lodged papers requesting the Judicial Review (see here) at the same time.”

By way of summary, the groups:

“contend that the proposed settlement is unlawful because the SFO did not follow the correct prosecution guidance (including its own guidance) on plea bargain;”

“argue that the agreement does not reflect the seriousness and extent of BAE’s alleged corruption, and does not provide the court with adequate sentencing powers; and

“hold that the SFO unlawfully concluded that the factors weighing against prosecuting BAE on bribery and corruption charges outweighted those in favor of prosecution.”

The groups also requested judicial review of the “SFO’s decision to discontinue its prosecution of [BAE’s agent] Count Alfons-Mensdorff-Pouilly.”

As indicated in a prior post (here), the SFO withdrew its filed criminal charges against BAE’s agent days after criminally charging him (presumably based on evidence that the following did indeed occur) with “conspiracy to corrupt” and for “conspiring with others to give or agree to give corrupt payments […] to unknown officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc.”

The Statement of Facts and Grounds in support of the request for judicial review is substantively similar to the above referenced initial letter in that it details the SFO’s statements leading up to its February 5th settlement as well as the SFO guidance “specifically designed to apply to plea discussions of the type engaged in by the SFO with BAE” and argues that the SFO’s decision to resolve the BAE matter in the way it did was both “unlawful” and “irrational.”

According to this release, “[t]he injunction is in force until the Court has decided whether or not to give permission to Campaign Against Arms Trade and The Corner House to apply for a judicial review of the settlement. It will make this decision by March 20, 2010.”

Clearly the “standing” requirements for challenging an agency action in the U.K. are different than in the U.S. Under U.S. law, mere taxpayer status is generally not enough to challenge an agency action, rather a plaintiff must allege unique, personal injury fairly traceable to the conduct at issue. If anyone is conversant on the U.K. standing rules relevant to the SFO challenge, please consider this an invitation for a guest post.

BAE – Every Circus Has A Final Act

Today in a Washington D.C. courtroom, U.S. District Judge John D. Bates had authority, pursuant to Rule 11 of the Federal Rules of Criminal Procedure, to reject the BAE plea agreement (see here).

However, as district court judges often do, Judge Bates “rubber-stamped” the plea agreement according to this first-hand account by Christopher Matthews at Main Justice.

In allowing the BAE “bribery yet no bribery” circus to leave town, Judge Bates reportedly said that the plea agreement was “fully reflective” of BAE’s crimes. This is surely subject to debate and for prior acts in this circus (see here).

According to the DOJ’s Release (see here), BAE pleaded guilty today to “conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its FCPA compliance program, and to violate the Arms Export Control Act and International Traffic in Arms Regulations” and was sentenced to “pay a $400 million criminal fine, one of the largest criminal fines in the history of DOJ’s ongoing effort to combat overseas corruption in international business and enforce U.S. export control laws.”

The DOJ’s release continues to reference BAE’s non-bribery, bribery allegations. See here for a prior post.

So too does the government’s sentencing memorandum (see here). Should you be wondering whether national security and/or debarment issues drove resolution of this prosecution, you may want to check it out.

One immediately sees that the National Security Division (“NSD”) played a role in the BAE case. According to its website: “[t]he mission of the National Security Division is to carry out the Department’s highest priority: to combat terrorism and other threats to national security.” (see here).

Among other things, the Sentencing Memorandum repeats the government’s non-bribery, bribery allegations.

Relevant quotes include: “BAE made some third party payments while aware that there was a high probability that part of the funds would be passed on to a foreign government official to influence a decision in favor of BAES” and that “BAES made other payments aware that there was a high probability that the payments would be used to influence government decision makers in the purchase of defense materials.”

In addressing relevant factors under the Principles of Federal Prosecution of Business Organizations (see here), the government notes that these payments: were “a major and longstanding business strategy replete with corruption risk; “were pervasive across the Company, covered numerous markets, and lasted for decades; “were tolerated or condoned up to the highest corporate levels; and that “corporate leadership created the structures” for the payments “in order to frustrate investigations and avoid identification of those payments to and through marketing advisers.”

And then there is this relevant paragraph regarding collateral consequences:

– “Europen Union Directive 2004/18/EC, which has recently been enacted in all EU countries through implementing legislation, provides that companies convicted of corruption offenses shall (emphasis in original) be mandatorily excluded from government contracts.”

– “BAES’s business is primarily from government contracts, including with several EU customers.”

– “Mandatory exclusion under EU debarment regulations is unlikely in light of the nature of the charge to which BAES is pleading. Discretionary debarment will presumably be considered and determined by various suspension and debarment officials.”

– “The Department will communicate with U.S. debarment and regulatory authorities, and relevant foreign authorities, if requested to do so, regarding the nature of the offense of which BAES has been convicted, the conduct engaged in by BAES, its remediation efforts, and the facts relevant to an assessment of whether BAES is presently a responsible government contractor.”

The Sentencing Memorandum also notes that “[i]ndividuals responsible for criminal activities may be beyond reach of U.S. authorities based on U.S. statute of limitations or jurisdictional limitations.”

Now that the curtain has closed on this circus and the elephants and monkeys are back in their cages, it is worthwhile to take a step back and analyze how DOJ prosecutors are supposed to resolve corporate criminal liability through plea agreements.

The Principles of Prosecution, part of the U.S. Attorneys’ Manual, state: “[i] negotiating plea agreements with corporations, as with individuals, prosecutors should generally seek a plea to the most serious, readily provable offense charged.”

Additional commentary states that a “corporation should generally be required to plead guilty to the most serious, readily provable offense charged;” that a “corporation should be made to realize that pleading guilty to criminal charges constitutes an admission of guilt and not merely a resolution of an inconvenient distraction from it business;” and that “where the corporation is a government contractor, permanent or temporary debarment may be appropriate” and “where the corporation was engaged in fraud against the government […], a prosecutor may not negotiate away an agency’s right to debar or delist the corporate defendant.”

This last clause, part of the U.S. Attorneys’ Manual, seems particularly relevant here given that the DOJ release and the Sentencing Memorandum both expressly state that BAE “defrauded” the U.S.

Sections 9-27.400-530 of the U.S. Attorneys’ Manual supplement the above corporate specific provisions by setting forth information relevant to “Selecting Plea Agreement Charges.”

Among other things, this section notes: “the defendant should be required to plead to a charge or charges” “that is the most serious readily provable charge consistent with the nature and extent of his/her criminal conduct” and “that has an adequate factual basis.” Commentary notes that “except in unusual circumstances, this charge will be the most serious one.”

It sure seems, per the government’s own evidence, that there was a more serious readily provable charge against BAE. But all things, even the circus, must come to an end, so perhaps this was one of those “except in unusual circumstances” type of cases.

The BAE circus is still playing out across the Atlantic and the next post will discuss how various public interest organizations, subject to less restrictive “standing” rules than here in the U.S. for challenging agency decisions, are challenging the SFO’s plea agreement with BAE.

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