Today’s post is from Gregory Paw (a partner in Pepper Hamilton’s white collar practice group, and a senior consultant to Freeh Group International Solutions). Paw has spent much of the past 18 months working on an extended project in New Orleans and enjoying the rich cultural heritage of the city. He lives in New Jersey, and has a great deal of empathy for those who must endure corruption jokes about the place they call home.
White collar practitioners from around the nation are gathering in New Orleans this week for the annual ABA White Collar Crime meetings.
Visitors with some spare time may wish to tour some local attractions that have played unique roles in FCPA and other corruption cases from Louisiana, a state where populist governor Earl Long once noted that his constituents “don’t want good government, they want good entertainment.” In fact, among its fascinating local history, New Orleans can stake a credible claim to being the birthplace of the FCPA, as is made clear on the first stop of the Crescent City “Corruption Trail”:
321 St. Charles Avenue, New Orleans — Home of The Octopus
A few blocks from the hotel hosting the ABA meetings sits an ornate building of unique importance to the FCPA. Behind the fruit-filled cornucopia carved into the doorway, the United Fruit Company built a lucrative early 20th century empire trading in tropical fruit grown on Latin American plantations and sold in the United States and Europe. Called “El Pulpo” (“the Octopus”) for having its “tentacles into everything,” the company came to control vast territories and transportation networks in Central and South America as it turned the banana into a mass-market product. United Fruit altered both the physical and social landscapes – deemed “la hojarasca” or “the leaf storm” by García Márquez – of the nations where the company harvested. In the process, the company developed a virtual monopoly in what O. Henry called the “banana republics,” and even managed Guatemala’s postal service and its Tropical Radio & Telegraph Company. The company moved its fruits on a “Great White Fleet” of steamships, which called the New Orleans port its home and even offered luxurious tourist accommodations to several Caribbean destinations. The fleet’s flag can still be seen today on a popular taxi cab line operating in town.
United Fruit was rumored to have been involved in the 1954 coup in Guatemala, with the story fanned in part because Secretary of State John Foster Dulles had negotiated land deals for the company while practicing law, and CIA Director Allen Dulles did legal work for United Fruit and sat on its board. Walter Bedell Smith, CIA director until 1953 and Under Secretary of State at the time of the coup, also later served on the board.
Corporate raider Eli Black targeted United Fruit in the late 1960s with a $40 million open market purchase of 733,000 shares of company stock. Black later merged United Fruit into a conglomerate, renamed United Brands. Already hurting from tight competition, the company suffered further loss when Hurricane Fifi destroyed the Honduras banana crop in 1974. The next year, Black committed suicide by jumping from his office on the 44th floor of New York’s Pan Am Building, as the Securities & Exchange Commission was investigating a scheme by the company to bribe Honduran officials in exchange for a tariff reduction.
United Brands later argued that the Honduran payment “had been agreed to by prior top management of the company” and was a “unique aberration” rather than part of a pattern. A federal judge in Manhattan imposed a $15,000 fine against the company. Yet the publicity of the incident, combined with similar issues unfolding at other American corporations, caught the attention of a post-Watergate Congress. As explained by Professor Koehler’s excellent 2012 article, in 1975, Congress began a series of hearings on foreign bribery by U.S. companies that culminated two years later with the passage of the Foreign Corrupt Practices Act.
130 Roosevelt Way, New Orleans — The Kingfish’s Deduct Box
Lined with Art Deco murals and mahogany panels, the lobby bar in the Roosevelt Hotel is named for the Sazerac, one of New Orleans’ most beloved concoctions. But it was another famous New Orleans drink — the Ramos Gin Fizz — that inspired Governor Huey P. Long in 1935 to fly a Roosevelt bartender to the New Yorker Hotel to teach the staff to properly execute and shake his favorite blend. After sampling the mix to make sure Manhattanites were getting the “real thing,” Long is alleged to have proclaimed, “And this, gentlemen, my gift to New York.”
Long converted the Roosevelt Hotel into the hub of Louisiana politics in the late 1920s and early 1930s. From an opulent 12th-floor suite that served as his unofficial governor’s residence and Senate office, Long befriended a one-time hotel barbershop manager, Seymour Weiss, who was rising rapidly in the hotel’s operations and would later become its owner. Weiss grew to become a trusted Long advisor. Long made legendary use of state patronage during his tenure, and is said to have required some beneficiaries of bureaucratic employment to return a portion of their salary back to Long’s political machine. Payments were to be placed in a brass “deduct box” safeguarded by Weiss and said to hold as much as the modern equivalent of a million dollars at a time. Before Long left the Roosevelt for Baton Rouge on the September 1935 day that he was assassinated, Weiss was rumored to ask about the location of the deduct box. “I’ll tell you later, Seymour,” Long said as he departed the hotel. The deduct box purportedly was never found, but a replica sits today in the Roosevelt lobby.
Some say that the Sazerac Bar’s wood panels still bear bullet fragments from a stray shot originating from one of Long’s bodyguards. While this story has dubious historical support, the Roosevelt has confirmed that its basement contains a “mysterious jail cell” inside of a steel vault. The cell allegedly no longer locks, which may be good news for conference goers who wish to sample some of the “real thing” at the Sazerac Bar.
1922 Marengo Street, New Orleans — William Jefferson and Cold Cash
Former U.S. Representative William “Dollar Bill” Jefferson, the first U.S. public official charged with an FCPA violation, represented Louisiana’s Second Congressional District, which includes a large portion of the greater New Orleans area. Perhaps best remembered for storing $90,000 in cash from an FBI sting in the freezer of his home outside of Washington, Jefferson also holds a unique place in New Orleans history.
Rising from the poverty of one of Louisiana’s poorest parishes, Jefferson went on to earn a Harvard law degree and become Louisiana’s first black Congressman since Reconstruction. In the House, he came to occupy a key position on the Ways and Means Committee.
A month before Hurricane Katrina devastated New Orleans, the FBI searched Jefferson’s Virginia home. The same day, agents also searched Jefferson’s residence in New Orleans’ Garden District. As later revealed at Jefferson’s criminal trial, an FBI agent testified that the nine-term Congressman tried to hide some documents during this search of his home on Marengo Street. The agent said Jefferson asked for a copy of the subpoena, which she watched him take and fold in with “other papers” and then tuck under his elbow. The agent later confronted Jefferson, who is said to have then turned over the papers, which included a fax from a person whose name also was listed on the government search warrant. But Jefferson also cooperated with the FBI agents while they searched his home, and even went so far as to find a locksmith to help open a safe for which he had lost the combination. He learned from the agents that day that the cash in his freezer had come from the FBI, and even watched a video of himself carrying a red bag filled with the marked bills from a government cooperator’s car trunk.
A month later, Jefferson was in New Orleans during the chaos following Katrina. Jefferson sought to tour the affected portions of his district, and a National Guard unit prepared a military truck to accompany him on the trip through the flooded and dangerous streets. Troops later said that Jefferson asked that the truck take him to Marengo Street to see his home, where water still reached the steps. Sources said Jefferson went into his home and later emerged with a laptop computer, three suitcases, and a box “about the size of a small refrigerator,” all of which were loaded onto the military truck.
Asked if he received a privilege not available to most, Jefferson told local reporters, “If you were an elected or appointed official, you would have been escorted around town.” Jefferson also said the items he retrieved belonged to his children, and had no connection to the search warrant. The National Guard noted that they had provided assistance getting around the New Orleans area to a wide range of officials, including President Bush.
After a 2009 trial in federal court in Virginia, a jury acquitted Jefferson on the obstruction of justice charge arising from his alleged acts at his New Orleans home in August 2005. The jury also acquitted Jefferson on the FCPA charge arising from the transfer of the cash recovered from his freezer. But the jury convicted Jefferson on 11 other counts, including conspiracy to solicit bribes and money laundering. He was sentenced to 13 years in prison.
The stop on Marengo Street leaves the visitor within a few blocks of Commander’s Palace, a New Orleans landmark and former home to chefs Paul Prudhomme and Emeril Lagasse. The restaurant is a perfect place to have a drink, observe the pace of the city and reflect on the unique history of this special place in America. Enjoy, and make sure to keep away from the jail cell at the Roosevelt!