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DOJ Once Again Returns To Russia Nuclear Bribery Scheme As Transport Logistics International Resolves $2 Million Enforcement Action

As highlighted in this prior post [1], in August 2015 the DOJ announced a Foreign Corrupt Practices Act and related enforcement action against Daren Condrey (an owner and executive of Maryland-based Transport Logistics International – TLI) and Vadim Mikerin (an alleged Russian “foreign official”) in connection with a nuclear industry bribery scheme.

As highlighted in this prior post [2], Mikerin (a Maryland resident) worked for a Maryland corporation (TENAM Corporation [3]), but the DOJ considered him a Russian “foreign official” because TENAM was a wholly-owned subsidiary on TENEX – an entity “indirectly owned and controlled by, and performed functions of, the government of the Russian Federation.”

As highlighted in this prior post [4], in January 2018 the DOJ returned to the same core conduct to announce criminal charges against Mark Lambert (an executive of TLI and described as Co-Conspirator Two in the TLI enforcement action.

Earlier this week, the DOJ announced that TLI resolved an FCPA enforcement action based on the same core conduct by agreeing to pay a $2 million criminal penalty (reduced from $21.4 million based on inability to pay) . TLI is part of the DAHER Group.

The enforcement action consisted of this criminal information [5] charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through this deferred prosecution agreement [6].

Under the heading “Overview of the Corrupt Bribery Scheme,” the information alleges:

“In or around 2004, TLI and others, including Co-Conspirator One and Mikerin, agreed to enter into a corrupt bribery scheme, in which TLI would make corrupt bribery payments to offshore accounts, at the direction and for the benefit of Mikerin, in order for TLI to obtain an improper advantage and obtain and retain business with TENEX.

At some point thereafter, Condrey and Co-Conspirator Two learned that Co-Conspirator One had agreed with Mikerin to make corrupt bribe payments in order for TLI to obtain and retain business and contracts with TENEX. Co-Conspirator One explained that the amount of each corrupt payment was based on an agreement with Mikerin to kickback a percentage of certain contract awards that TENEX awarded to TLI, and that TLI would continue to win contract awards with TENEX if such corrupt payments were made. Soon after learning of the corrupt and fraudulent scheme, Condrey and Co-Conspirator Two agreed to enter into the conspiracy with Co-Conspirator One to make corrupt and fraudulent bribe and kickback payments to offshore bank accounts to benefit Mikerin in order to help TLI obtain and retain business with TENEX.

In order to conceal and further the scheme, TLI and others, including Condrey, Co-Conspirator One, and Co-Conspirator Two, used terms such as “remuneration” and “commission” when documenting the corrupt and fraudulent payments on an internal TLI spreadsheet and when communicating with unknowing TLI employees who unwittingly processed the corrupt and fraudulent payments to offshore accounts.

In order to justify TLI’s corrupt and fraudulent payments to offshore accounts to benefit Mikerin, and to generate the money to make the payments, TLI and others, including Condrey, Co-Conspirator One, Co-Conspirator Two, and Mikerin, caused fake invoices to be prepared, which purported to be from TENEX to TLI and fraudulently described services that were never provided by TENEX to TLI. TLI and others, including Condrey, Co-Conspirator One, and Co-Conspirator Two, caused TLI to make the corrupt payments after TLI received the fraudulent invoices.

Co-Conspirator One left TLI in early 2010, but continued to work as a consultant to TLI. Upon Co-Conspirator One’s departure from TLI, Condrey and Co-Conspirator Two became co-Presidents of TLI, and they continued conspiring with Co-Conspirator One to communicate with Mikerin and facilitate TLI’s corrupt bribe payments.

Co-Conspirator One died in or around August 2011. After Co-Conspirator One’s death and continuing through in or around October 2014, TLI and others, including Condrey and Co-Conspirator Two, continued the corrupt and fraudulent bribery scheme. Among other things, Condrey and Co-Conspirator Two communicated directly with Mikerin to obtain fraudulent invoices for TLI and facilitate TLI’s corrupt payments.”

[7]

As alleged in the information:

“[E]xecutives at TLI and others, including Condrey, Co-Conspirator One, and Co-Conspirator Two, used code words like “lucky figure,” “LF,” “lucky numbers,” “cake,” “remuneration,” and “commission” when communicating about the corrupt bribery scheme in order to conceal its true nature.

[…]

[E]xecutives at TLI and others, including Condrey, Co-Conspirator One, and Co-Conspirator Two, caused TLI to wire corrupt payments from TLI’s bank account in Maryland to offshore bank accounts associated with companies that had no legitimate business relationship with TLI, such as Shell Company A in the Republic of Cyprus, Shell Company B in Latvia, and Shell Company C in Switzerland, for the purpose of executing and concealing the corrupt payments.”

The three year DPA was based on the following “relevant considerations”:

a. the Company did not receive voluntary disclosure credit because it did not voluntarily and timely disclose to the [DOJ];

b. the Company received full credit for its substantial cooperation with the [DOJ’s] investigation, including interviewing and providing downloads of facts from the relevant witnesses, including a witness based in Russia to whom the [DOJ] did not have access; reviewing emails and financial records; voluntarily organizing, identifying, and producing documents that assisted the government’s prosecution of individuals;

c. the Company provided to the [DOJ] all relevant facts known to it, including information about the individuals involved in the misconduct;

d. the Company engaged in remedial measures, including terminating the employment of all employees who engaged in the misconduct;

e. the Company has instituted an enhanced compliance program and committed to continuing to enhance its internal controls, including by: (1) designating an individual to serve as TLI’ s Chief Compliance Officer; (2) instituting policies prohibiting (i) payments to bank accounts that are not in the name of the company/persons who is owed the payment, (ii) payments made in a country other than where the person/company resides or where the services are rendered, and (iii) payments for rebates, discounts, commission, or remuneration that are not specified in bids or contracts; (3) implementing payment controls, including requiring multiple reviews for payment requests and two signatures on check registers; and (4) committing to ensure that its compliance program satisfies the minimum elements set forth in Attachment C to [the DPA].

f. based on the Company’s remediation, the state of its compliance program, the Company’s relatively small size and risk profile, and the Company’s agreement to report to the [DOJ], the Fraud Section and the Office determined that an independent compliance monitor was unnecessary;

g. the nature and seriousness of the offense conduct, including a long-running scheme in which high-level executives at TLI agreed to pay over a million dollars in bribes at the direction of, and for the benefit of, a Russian official;

h. the [DOJ has] been able to prosecute individuals responsible for the illegal conduct;

i. the Company has no prior criminal history;

j. the Company has agreed to continue to cooperate with the [DOJ] in any ongoing investigation of the conduct of the Company, its subsidiaries and affiliates, and its officers, directors, employees, agents, business partners, and consultants relating to violations of the FCPA;

k. although the Company received full cooperation and remediation credit, and thus a penalty of 25 percent off the bottom of the applicable U.S. Sentencing Guidelines fine range, after the [DOJ], with the assistance of a forensic accounting expert, conducted an independent inability to pay analysis, it was determined that a penalty greater than $2 million would substantially jeopardize the continued viability of the Company;

l. accordingly, despite the seriousness of the offense and the fact that employees at the highest-level of the Company were responsible for the misconduct, due to the ability of the [DOJ] to prosecute culpable individual wrongdoers, the significant collateral consequences that a guilty plea by the Company would have on innocent employees and affiliates, the significant cooperation and remediation undertaken by the Company, including assisting the [DOJ] in prosecuting culpable individuals, the fact that a penalty greater than $2 million would substantially jeopardize the continued viability of the Company, and the other considerations outlined in (a) through (h) above, the [DOJ has] determined that a deferred prosecution agreement and a penalty of $2 million is sufficient but not greater than necessary to achieve the purposes described in 18 U.S.C. § 3553.”

The DPA sets forth an advisory sentencing guidelines range of $28.5 million to $57 million and states:

“The [DOJ] and the Company agree, based on the application of the Sentencing Guidelines, that the appropriate criminal penalty is $21,375,000. This reflects a 25 percent discount off the bottom of the applicable Sentencing Guidelines fine range.

The Company has made representations to the [DOJ] that the Company has an inability to pay a criminal penalty in excess of $2,000,000. Based on those representations, and an independent analysis verifying the accuracy of those representations conducted by the [DOJ] (with the assistance of a forensic accounting expert), the parties agree that a criminal penalty of $2,000,000 is appropriate (“Total Criminal Penalty”). Prior to the signing of this Agreement, the Federal Bureau of Investigation administratively forfeited $221,940.70 from three bank accounts controlled by the Company. Accordingly, in fulfilment of the criminal penalty, the Company agrees that the $221,940.70 will remain forfeited and, no later than ten (10) business days after the Agreement is fully executed and filed, the Company shall pay the remaining $1,778,059.30 to the United States Treasury.”

In this release [8], Acting Assistant Attorney General John Cronan stated:

“Bribery of foreign officials not only distorts markets and undermines democratic institutions; it can also pervert the incentives of those who are in a position to safeguard the public, as it did in this case involving the transportation of nuclear material. Today’s resolution, along with the related charges against the corporate executives and the Russian official in this matter, underscore the Department’s continued commitment to holding both companies and individuals accountable for their roles in corruption-related crimes and for breaching the public’s trust.”

Principal Deputy Inspector General April Stephenson of the U.S. Department of Energy’s Office of Inspector General (DOE-OIG) stated:

“The Department of Energy remains committed to ensuring the integrity of our contractors and subcontractors, as well as providing the nation transparency, accountability, and security when it comes to safe and reliable transport of sensitive materials. We appreciate the efforts of the FBI, the Justice Department’s FCPA Unit and the U.S. Attorney’s Office in pursuing this matter and will continue to work collaboratively with them to aggressively investigate those who seek to defraud Department programs.”

Andrew Vale (Assistant Director in Charge of the FBI’s Washington, D.C. Field Office) stated:

“Today’s charges reflect the determination and ability of the FBI to investigate and prosecute companies that engage in foreign corrupt business practices, regardless of how sophisticated or far-flung the scheme may be. No entity is above the law and those that try to perpetrate a similar scheme will be pursued by the FBI.”

As stated in the release:

“On June 17, 2015, TLI co-president Daren Condrey pleaded guilty to conspiracy to violate the FCPA and commit wire fraud.  On Aug. 31, 2015, Mikerin pleaded guilty to conspiracy to commit money laundering involving violations of the FCPA, and Mikerin was sentenced to 48 months in prison on Dec. 15, 2015.  On Jan. 12, an 11-count indictment was unsealed against TLI co-president Mark Lambert [9], which charged Lambert with one count of conspiracy to violate the FCPA and to commit wire fraud, seven counts of violating the FCPA, two counts of wire fraud and one count of international promotion money laundering.”

Thomas Buchanan [10] (Winston & Strawn) represented TLI.

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