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James Giffen Update

The FCPA enforcement action against James Giffen goes back a long way.

April 2003 to be precise (see here).

The case concerns allegations that Giffen made approximately $80 million in payments to senior Kazakhstan officials in connection with numerous deals in which American companies acquired oil and gas rights in Kazakhstan. In defense, Giffen has implicated the CIA and much of the delay in prosecuting this case revolves around access to classified documents.

The case is still active as documented in this recent Main Justice piece by Lisa Brennan.

Few have been following the Giffen case closer than Steve LeVine (see here). LeVine is author of The Oil and the Glory (see here).

A key figure in LeVine’s book is James Giffen.

In this guest post, LeVine profiles next Monday’s hearing in the Giffen case.

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Next week, James Giffen — the former chief oil adviser to Kazakhstan President Nursultan Nazarbayev — returns to court in New York for the longest-running U.S. foreign bribery case in history. His strategy — to gum up the works in the hope of getting all or most of the charges dropped — has thus far appeared ingenious: Seven years after being led away in handcuffs from JFK Airport, Giffen appears none-too-close to trial. But will it ultimately pay off?

If the strategy does prevail, the Giffen case could send an important signal to bribers with financial wherewithal — you can wait out the Department of Justice.

A key question at the moment is whether Giffen’s lawyers — in the vein of their already-bold, go-for-broke approach — can plausibly, and as early as next Monday, successfully motion for dismissal of the charges on the basis of his Sixth Amendment right to a speedy trial.

William Schwartz, Giffen’s chief lawyer and a former assistant U.S. Attorney in the Southern District where Giffen’s case is being heard, declined to comment on the question of a Sixth Amendment motion when I emailed him. But I rang up lawyers specializing in the Foreign Corrrupt Practices Act — the law applied to foreign bribery cases — and they made the across-the-board observation that Giffen’s strategy may not be strong enough to achieve such a straight-forward victory.

In his defense, Giffen asserts that the Central Intelligence Agency either knew or should have known all along that he was diverting millions of dollars from U.S. oil companies — a total of some $80 million — to Nazarbayev and other powerful Kazakhs. When he advanced the strategy, it was exquisitely timed — in among the strongest periods of the George W. Bush Administration, with its hyper-sensitivity about the release of even unclassified documents — under the premise that the CIA was unlikely to disgorge cables and what-not that would validate Giffen’s claims. And if the CIA did refuse to so cooperate, Giffen could claim compellingly that he couldn’t receive a fair trial.

Up to this point, Giffen has proven correct — the CIA has been as slow as molassas, and has consequently tested the patience of federal Judge William Pauley. Yet, that doesn’t necessarily add up to a successful Sixth Amendment motion, experts tell me. To win, Giffen would have to show an outside reason why the long delay has occurred, and that he is being harmed by it. But as a former U.S. prosecutor who didn’t want to be identified told me, “When much of the litigation is instigated by the defendant, the defense would be hard-pressed to claim that it’s been denied a speedy trial.” As for hardship or harm, Giffen hasn’t been sitting in jail, but rather whiling away his time at home in Westchester County near the Winged Foot Golf Club.

Even so, said Richard N. Dean, a Washington-based FCPA lawyer with long experience in the former Soviet Union, that doesn’t mean that Giffen won’t prevail. He sees a more fundamental issue at stake — “I just don’t know if [the prosecution] has a case or not,” says Dean, who is a partner at Baker & McKenzie.

That is, it’s true that the CIA has dragged its heels, but so has the prosecution itself — it hasn’t seemed at all in a rush to bring the case to trial. That makes Dean wonder “how strong they think their case is, whether they believe they can overcome the defense’s assertion” of the CIA defense.

Schwartz, in other words, probably can’t abbreviate the current snail’s-pace pre-trial process: Judge Pauley is unlikely to grant a Sixth Amendment motion.

There’s always the chance that government prosecutors will demonstrate renewed spine in Monday’s hearing, and make it plain that they intend to go to trial soon — the Justice Department certainly doesn’t wish to give bribe-givers or their lawyers the idea that they can use delaying tactics to wiggle out of an FCPA case. In that event, Schwartz would need to prepare for a knock-down, drag-out jury trial that would reveal embarrassing details about his client’s luxurious, heavy-partying life abroad.

Yet, given the case thus far, one gets the impression that one or both sides wish the case would simply go away. If this is in Schwartz’s thinking, he must patiently hope that the prosecution elects to save face by dropping at least some of the more onerous charges, and perhaps then persuade Giffen to plead to lesser violations of the law.

Quiz Time Answer

In a prior post (here), I noted that in 2009 there were three FCPA trials – Frederic Bourke, William Jefferson, and Gerald and Patricia Green.

I then posted the question – what is the common thread in these three FCPA enforcement actions – a fact which speaks to the great difficulty individual FCPA defendants generally have in mounting a legal defense?

Before the answer, the background.

Individual FCPA defendants tend to work for companies. Under respondeat superior theories of liability, the company is going to have a very difficult time “distancing” itself from its employees conduct.

Thus, all corporate FCPA enforcement actions tend to be resolved through a non-prosecution agreement, a deferred prosecution agreement, or a plea. Entering into one of these resolution vehicles is often easier, more cost efficient, and more certain than actually mounting a legal defense based on the FCPA’s statutory elements. Further, because these resolution vehicles are subject to little or no judicial scrutiny and are entered into the context of the DOJ possessing certain “carrots” and “sticks” they do not necessarily reflect the triumph of one party’s legal position over the other.

While these resolution vehicles may indeed avert “another Arthur Anderson” here is the problem.

A key feature of each resolution vehicle is a statement along the following lines:

“[company] admits, accepts, and acknowledges responsibility for the conduct set forth in [the statement of facts] and agrees not to make any public statement contradicting [the statement of facts]” (see UTStarcom NPA here);

“[company] admits, accepts and acknowledges that it is responsible for the acts of its officers, employees and agents as set forth in the Statement of Facts […] and that the facts described […] are true and accurate […] and that should the DOJ initiate prosecution that is deferred by this agreement [company] agrees that it will neither contest the admissibility of, nor contradict, in any such proceeding, the Statement of Facts” (see AGA Medical DPA here); or

“Defendant admits,agrees and stipulates that the factual allegations set forth in the Statement of Facts […] are true and correct, that it is responsible for the acts of its former officers and employees described in the Statement of Facts, and that the Statement of Facts accurately reflects CCI’s criminal conduct” (see Control Components Inc. Plea Agreement here).

So what can you do if you are the targeted employee of such a company?

More likely than not, your employee has already terminated you (even before all the facts may be known) to demonstrate to the DOJ that it is implementing “prompt remedial actions” – a factor DOJ will consider when making its charging decision (see here).

Then, because of the resolution vehicle your employer entered into to make the DOJ go away, you are stuck with your employer admitting and accepting responsibility for your misconduct, even though there has been no finding that your conduct was even misconduct.

Against this backdrop, it is no surprise that nearly all FCPA individual defendants plead. What choice do they really have?

So that brings us back to the quiz answer.

Perhaps it was pure coincidence, perhaps not, but the three individual FCPA trials all occurred in the context of there being no parallel NPA, DPA or plea with a corporate entity.

Jefferson Jurors Speak

In August 2009, former Congressman William Jefferson (D-LA) was found guilty by a federal jury of a variety of charges (solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy).

The jury found Jefferson not guilty of a substantive FCPA charge, a charge principally based on allegations that Jefferson attempted to bribe Nigerian officials (including the former Nigerian Vice President) to assist himself and others obtain or retain business for a Nigerian telecommunications joint venture. The famous “cash in the freezer” was allegedly part of the bribery scheme. (See here for prior post).

Just what conspiracy charge the jury found Jefferson guilty of was unclear.

The indictment charged conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA.

Problem is, the jury was instructed, that to convict on this charge, it only needed to find Jefferson guilty on two out of three of those counts.

In announcing the jury verdict, the court did not specify which counts the jury agreed on (see here and here).

A recent article in the New Orleans Times-Picayune (here) contains statements by “three jurors who spoke to The Times-Picayune on the condition they remain anonymous to avoid angering federal Judge T.S. Ellis III, who advised against talking to the news media.”

These anonymous juror statements, while clearly not official in any sense, may shed some light on Jefferson’s FCPA verdict.

For instance, why didn’t the jury convict Jefferson of the substantive FCPA offense?

According to the article, “because two members of the 12-member panel believed that the congressman planned to keep the money for himself rather than to bribe the vice president of Nigeria as alleged by federal prosecutors.”

The article states: “Two of the jurors explained the jury’s decision to return an innocent verdict on a single charge of violating the Foreign Corrupt Practices Act. Jefferson was the first elected official ever charged with violating the law, which is intended to block payments of bribes by U.S. citizens to foreign officials. According to the interviews, two jurors expressed doubts that Jefferson actually intended to use the $100,000 in cash given to him by Mody to bribe Atiku Abubakar, then the vice president of Nigeria, as he said he would in the taped conversations. ‘I think there was some thought he intended to keep the money himself, and that’s not the crime he was accused of,’ said one juror who added that the remaining 10 jurors eventually went along with the sentiments of their two colleagues.”

What about the conspiracy conviction – did that conviction include conspiracy to violate the FCPA?

According to the jurors comments – yes.

The article states: “But jurors decided that his discussion about wanting to keep Abubakar happy was enough to support a charge of conspiracy to violate the Foreign Corrupt Practices Act.”

As the article notes: “The question about whether the jury found Jefferson guilty of conspiracy to solicit bribes domestically or internationally is important because, as part of Jefferson’s appeal, his attorneys contend that influencing foreign officials isn’t part of a congressional member’s official duties and therefore can’t be prosecuted under federal bribery laws.”

In November 2009, Jefferson was sentenced to 13 years in federal prison. He remains free on bail while his appeal is pending.

Jefferson Sentenced / When a Jury Verdict is Relegated to a Footnote

[Please scroll down, there are three posts today]

Today, former Congressman William Jefferson was sentenced to 13 years in federal prison. He was convicted in early August of a variety of charges (solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy)(see here for the DOJ release).

However, he was acquitted on the substantive FCPA antibribery charge.

As mentioned above, Jefferson was convicted of conspiracy, but what conspiracy was unclear as the indictment charged conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA.

Problem is, the jury was instructed that to convict it only needed to find Jefferson guilty on two out of three of those counts.

In announcing the jury verdict, the court did not specify which counts the jury agreed on … the jury may have concluded that Jefferson conspired to violate the FCPA or it may have not. (See here for my prior post). See here for what others have said.

This uncertainty / ambiguity, it would seem, matters little to the DOJ as its sentencing memorandum in the Jefferson case says that “… as egregious and illegal as [Jefferson’s] bribe solicitations were, Congressman Jefferson further compounded his criminal culpability by conspiring with others to pay a bribe to the then-sitting Vice President of Nigeria.” (p. 6).

Given the above, this statement would seem to be a bit of a stretch based on the jury’s verdict.

Sure, the DOJ sentencing memorandum mentions the jury’s verdict on this issue, but it relegates the verdict to a mere footnote. Here is the footnote in its entirety:

“The government recognizes that the jury returned a verdict of “not guilty” to the charge contained in Count 11 of the indictment, a substantive violation of the Foreign Corrupt Practices Act. The government believes that the jury found Congressman Jefferson not guilty on Count 11, at least in part, because he ultimately failed to deliver the $100,000.00 in cash to the Nigerian Vice President before the Vice President departed the United States on July 31, 2005. However, the evidence fully supports the proposition that the jury, nevertheless, found that the defendant conspired to bribe the Vice President of Nigeria, an object of the conspiracy charged in Count 1, a count on which the jury returned a guilty verdict. Such a verdict would not require proof of the actual delivery of the cash to the Vice President (front end) or actual payment of the percentage of the proceeds of the joint venture (back end). The government believes that the evidence supports such a split finding by the jury as to Counts 1 and 11. Although delivery of the cash to the Vice President of Nigeria was not a legal pre-requisite to finding Congressman Jefferson guilty of Count 11, it offers a compelling explanation for the jury’s split verdict. Finally, the government recognizes that such a split verdict can never be completely confirmed because the conspiracy charged in Count 1 contained three objects, one of them being the charge related to the bribe of the Vice President of Nigeria. The verdict form completed by the jury on August 5, 2009 did not require the jury to delineate which, if not all, of the objects charged in the conspiracy in Count 1 were found to have been proved, only that at least one of the objects was proven by the government beyond a reasonable doubt.”

As if relegating a jury verdict to a footnote is not unsettling enough, yesterday Assistant Attorney General Breuer in his speech (see here for the post) was so bold as to say this:

“In the past few months, we have the completed the trials of the Greens in California, of Mr. Bourke in New York and of former Congressman William Jefferson in Virginia. In each of these cases, individuals were found guilty of FCPA violations and face jail time.”

Verdict In … Greens Found Guilty

The third FCPA trial of the summer has concluded and Gerald and Patricia Green (two Los Angeles area film executives) have been found guilty by a federal jury of conspiracy to violate the FCPA, substantive FCPA violations, and other charges (see here for the DOJ New Release).

According to the DOJ release, evidence introduced at trial showed that “beginning in 2002 and continuing into 2007, the Greens conspired with others to bribe the former governor of the [Tourism Authority of Thailand] in order to get lucrative film festival contracts as well as other TAT contracts.” According to the release, the evidence also established that the Green’s attempted to disguise the bribe payments by labeling them “sale commissions” and by making the payments “for the benefit of the former governor through the foreign bank accounts of intermediaries, including bank accounts in the name of the former governor’s daughter and friend.”

Reacting to the verdict, Assistant Attorney General Breuer stated that the DOJ “will not waiver in its fight against corruption, whether perpetrated within our borders or abroad” and that the FCPA “is a powerful tool that the [DOJ] will continue to use in an effort to stop individuals like the Greens who seek to further their own business interests through bribes paid to foreign officials.”

The Greens are to be sentenced in December and the conspiracy and FCPA charges each carry a maximum penalty of five years in prison.

As mentioned, the Green trial was the third FCPA trial of the summer.

The other two were the Bourke matter (see here) and the Jefferson matter (see here).

Leading up to these trials, the FCPA bar and the enforcement officials themselves, predicted that one result of these trials would be greater clarity of some of the FCPA’s murky elements.

While the verdicts were, on balance, pro-DOJ verdicts, the verdicts reached in these trials were not exactly uniform.

Bourke was convicted of conspiracy to violate the FCPA (the case did not proceed to trial on a substantive FCPA violation).

Jefferson was also convicted of conspiracy (although it is not entirely clear if the jury found him guilty of conspiracy to violate the FCPA). However, Jefferson was found not guilty on the substantive FCPA charge (the charge predicated on the “cash in the freezer” allegations).

Have these trials provided any greater clarity as to various FCPA elements as widely predicted?

I think it is far to say that as a result of the Bourke verdict (even though it was not a substantive FCPA trial), the FCPA’s knowledge standard has never been broader, and can be satisfied even when an investor, like Bourke, does not actually pay a bribe, but is merely aware that others may be making bribe payments in a widely viewed corrupt country for the potential benefit of an entity in which he is an investor (see here and here).

Beyond this, I’m not sure that any further clarity as to substantive FCPA elements has resulted from these trials, but I would be interested to hear what others have to say.

Will these trials and the largely pro-DOJ verdicts send a “proceed with caution” message to any individual or corporation faced with an FCPA enforcement action and stiffle legitimate defense theories based on the FCPA’s elements?

I expect so, yet that is indeed unfortunate as a significant portion of FCPA enforcements are based largely on DOJ/SEC’s untested and unchallenged interpretations of the law.

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