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The Randomness Of FCPA Sentences

random

Under the advisory U.S. Sentencing Guidelines, there are a number of factors (such as the defendant’s criminal history, value of the improper payment, and acceptance of responsibility) that can impact an individual sentence for Foreign Corrupt Practices Act offenses.

Yet, it appears that the single greatest factor influencing FCPA sentences is the judge assigned to the case. As highlighted by the below recent representative examples, there is a randomness to FCPA sentences. This is unfortunate, as individual sentences for FCPA offenses ought to be consistent. Indeed, consistency in application of the law is one of the fundamental hallmarks of the rule of law.

Harder

As highlighted in this DOJ release, last week Dmitrij Harder was sentenced to 60 months (5 years) in federal prison and also ordered to forfeit $1.9 million. Like the other individual FCPA sentences highlighted below, Harder accepted responsibility and, as highlighted in this April 2016 DOJ release, pleaded guilty to two counts of violating the FCPA for “bribing an official at the European Bank for Reconstruction and Development (EBRD).” As stated in the DOJ’s release:

“According to admissions made in connection with Harder’s plea, the EBRD was a multilateral development bank headquartered in London that was owned by more than 60 sovereign nations and provided financing for development projects in emerging economies, primarily in Eastern Europe.  Harder admitted that between 2007 and 2009, he engaged in a scheme to pay approximately $3.5 million in bribes to an EBRD official to corruptly influence the official’s actions on applications for EBRD financing submitted by the Chestnut Group’s clients and to influence the official to direct business to the Chestnut Group. The EBRD ultimately approved applications for financing from two of the Chestnut Group’s corporate clients; the first resulted in the EBRD providing an $85 million investment and a 90 million Euro loan, while the second resulted in a $40 million investment and a $60 million convertible loan, according to the plea.  Harder admitted that the Chestnut Group earned approximately $8 million in “success fees” as a result of the EBRD’s approval of these two applications.”

The remainder of this post uses Harder’s recent sentence to demonstrate the randomness of individual FCPA sentences. First, certain individuals who have pleaded guilty to seemingly more egregious FCPA violations have been sentenced to substantially less prison time than the 5 years Harder received. Second, certain individuals who have pleaded guilty to seemingly similar FCPA violations have been sentenced to substantially less prison time than the 5 years Harder received. Third, and to demonstrate that the randomness of FCPA sentences occupies the full range of the spectrum, certain individuals who have pleaded guilty to seemingly less egregious FCPA violations have been sentenced to more prison time than the 5 years Harder received.

As highlighted below, certain individuals who have pleaded guilty to seemingly more egregious FCPA violations have been sentenced to substantially less prison time than the 5 years Harder received

Stanley & Tesler

Albert Stanley and Jeffrey Tesler were charged in connection with a massive, decades-long bribery scheme and were accused of paying over $100 million in bribes to Nigerian “foreign officials” to obtain more than $6 billion in contracts at Bonny Island, Nigeria. As stated in the DOJ’s release:

“Stanley admitted that he authorized the joint venture to hire two agents, Consulting Company A and Consulting Company B, to pay bribes to a range of Nigerian government officials to assist the joint venture in obtaining the EPC contracts. Stanley also admitted that, at crucial junctures before the award of the EPC contracts, he and others met with three successive former holders of a top-level office in the executive branch of the Nigerian government to ask the office holder to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials. According to the criminal information to which Stanley pleaded guilty, the joint venture paid approximately $132 million to Consulting Company A and more than $50 million to Consulting Company B during the course of the bribery scheme. Stanley admitted that he had intended for the agents’ fees to be used, in part, for bribes to Nigerian government officials. In addition, Stanley pleaded guilty to a conspiracy count relating to a mail and wire fraud scheme to defraud his former employer and others. Stanley admitted to receiving approximately $10.8 million in kickbacks from a consultant whom he caused his former employer and its predecessor company to hire in connection with LNG projects around the world.”

As stated in the DOJ’s release:

“The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials and hired a Japanese trading company to pay bribes to lower-level Nigerian government officials. During the course of the bribery scheme, the joint venture paid approximately $132 million in consulting fees to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Tesler admitted that he used the consulting fees he received from the joint venture, in part, to pay bribes to Nigerian government officials.”

Stanley and Tesler both pleaded guilty.

Stanley was sentenced to 30 months (2.5 years) and Tesler was sentenced to 21 months (1.75 years).

Hammarskjold & Weisman

As highlighted in this DOJ release,

“Knut Hammarskjold, the former co-CEO of PetroTiger, pleaded guilty … to an information charging one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud … Gregory Weisman, … the former general counsel of PetroTiger, pleaded guilty to the same charges ….

According to the charges, the defendants allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million. To conceal the bribes, the defendants allegedly first attempted to make the payments to a bank account in the name of the foreign official’s wife, for purported consulting services she did not perform. The charges allege that … Hammarskjold provided Weisman invoices including her bank account information. The defendants made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed.

In addition, court documents allege that the defendants attempted to secure kickback payments at the expense of several of PetroTiger’s board members. According to the criminal charges, the defendants were negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition. In exchange for negotiating a higher purchase price for the acquisition, two of the owners of the target company agreed to kick back to the defendants a portion of the increased purchase price. According to the charges, to conceal the kickback payments, the defendants had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments, and used the code name “Manila Split” to refer to the payments amongst themselves.”

Hammarskjold and Weisman were both sentenced to probation.

Hirsch & McClung

As noted in this June 2015 DOJ release:

“Richard Hirsch … and James McClung … each pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA. […]

According to admissions in the [Louis Berger] DPA and statements in the charging documents, from 1998 through 2010, the company and its employees, including Hirsch and McClung, orchestrated $3.9 million in bribe payments to foreign officials in various countries in order to secure government contracts.  To conceal the payments, the co-conspirators made payments under the guise of “commitment fees,” “counterpart per diems,” and other payments to third-party vendors.  In reality, the payments were intended to fund bribes to foreign officials who had awarded contracts to LBI or who supervised LBI’s work on contracts.”

Hirsch was sentenced to probation and McClung was sentenced to 1 year and 1 day in federal prison.

As next highlighted, certain individuals who have pleaded guilty to seemingly similar FCPA violations have been sentenced to substantially less prison time than the 5 years Harder received

Rama

As noted in this June 2015 release

“IAP Worldwide Services Inc. (IAP), entered into a non-prosecution agreement and agreed to pay a $7.1 million penalty to resolve the government’s investigation into whether the company  conspired to bribe Kuwaiti officials in order to secure a government contract.  [James Rama] a former vice president of IAP also pleaded guilty today to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) for his involvement in the bribery scheme.

According to admissions made in connection with both the non-prosecution agreement and Rama’s plea agreement, IAP and Rama schemed to ensure that IAP worked as the consultant for Phase I so that it could tailor the requirements for the Phase II contracts to IAP’s strengths, which would give the company an advantage in the Phase II bidding.  To that end, both IAP and Rama admitted that in February 2006, executives and senior employees of IAP, including Rama, set up a shell company called “Ramaco” to bid on Phase I, in part to conceal IAP’s role in crafting the Phase II requirements and its conflict of interest in connection with securing the Phase II contract.

Ultimately, Ramaco secured the Phase I contract for approximately $4 million.  According to admissions made in connection with both agreements, the Rama and IAP agreed that half of that amount would be diverted to a consultant who would pay bribes to Kuwaiti government officials to assist IAP in obtaining and retaining the Phase I contract and to obtain the Phase II contract.  IAP and Rama admitted that they disguised the payments by transferring funds Ramaco received to an IAP bank account and then to the consultant through a series of accounts and intermediaries.  According to the factual statements incorporated into both the non-prosecution agreement and Rama’s plea agreement, between September 2006 and March 2008, IAP and its co-conspirators paid the consultant approximately $1,783,688 understanding that some or all of the funds would be used to bribe Kuwaiti government officials.”

Rama was sentenced to 4 months.

Ray, Ramnarine, Valdez and Perez

As stated in this DOJ release:

“Douglas Ray … Victor Hugo Valdez Pinon … pleaded guilty … to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and conspiracy to commit wire fraud.  Kamta Ramnarine … and Daniel Perez … both pleaded guilty … to one count of conspiring to violate the FCPA.  […]

According to the defendants’ plea agreements, between 2006 and 2016, Ray conspired with Valdez and others to bribe Mexican officials.  The defendants and their co-conspirators, who owned or were associated with companies in the United States that provided aircraft maintenance, repair, overhaul and related services to customers from the United States and Mexico, paid the bribes in order to secure parts and servicing contracts with Mexican government-owned customers.  Ray agreed to pay bribes to at least seven different foreign officials, including Hernandez Montemayor, sometimes paying the bribes via wire transfer and checks to accounts in the United States controlled by the officials.  As part of his guilty plea, Hernandez Montemayor admitted that while employed by a Mexican state government, he accepted bribes from Ray, Ramnarine, Perez and others in exchange for taking certain actions to assist companies they owned in winning business with Hernandez Montemayor’s state government employer.  Hernandez Montemayor also admitted that he conspired with Ray, Ramnarine, Perez and others to launder the proceeds of the bribery scheme.

Ramnarine and Perez admitted that, in addition to bribing Hernandez Montemayor, they also conspired to pay bribes to several other foreign officials between 2007 and 2015 to ensure that their Brownsville-based company won aircraft parts and services contracts with Mexican government-owned customers.  As part of his guilty plea, Nevarez admitted that while employed by a Mexican public university, he accepted bribes from Ramnarine and Perez in exchange for taking certain actions to assist their company in winning business with the university.  Nevarez also admitted that he conspired with Ramnarine, Perez and others to launder the proceeds of the bribery scheme.

In total, Ray, Valdez Pinon, Ramnarine, Perez and their co-conspirators paid more than $2 million in bribes to Mexican officials, including Hernandez Montemayor and Nevarez, in order to secure aviation maintenance, repair and overhaul contracts.”

Perez and Ramnarine were both sentenced to probation, Valdez was sentenced to one year and 1 day in prison and Ray was sentenced to 18 months (1.5 years).

Finally, and to demonstrate that the randomness of FCPA sentences occupies the full range of the spectrum, certain individuals who have pleaded guilty to seemingly less egregious FCPA violations have been sentenced to more prison time than the 5 years Harder received.

Jumet and Warwick

As highlighted in this DOJ release:

“Charles Jumet and “others conspired to pay money secretly to Panamanian government officials in exchange for awarding contracts to Ports Engineering Consultants Corporation (PECC) to maintain lighthouses and buoys along Panama’s waterway. In December 1997, the Panamanian government awarded PECC a no-bid 20-year concession. Upon receipt of the concession, Jumet admitted that he and others authorized corrupt payments to be made to the Panamanian government officials. In total, Jumet and others caused corrupt payments of more than $200,000 to be paid to the former administrator and the former deputy administrator of the Panama Maritime Authority and to a former high-ranking elected executive official of the Republic of Panama.

Jumet also made a false statement to federal agents about a “dividend” check payable to the bearer in the amount of $18,000 that was endorsed and deposited into an account belonging to the high-ranking elected Panamanian government official. Jumet falsely claimed that this “dividend” check was a donation for the high-ranking elected official’s re-election campaign, when, in fact, Jumet admitted it was given to the elected Panamanian government official as a corrupt payment for allowing PECC to receive the contract.

In a related case, John Warwick pleaded guilty ,,, for his role in the same conspiracy to violate the FCPA.”

Jumet was sentenced to 87 months (7.25 years) and Warwick was sentenced to 37 months (3.1 years).

And then of course there is the Joel Esquenazi and Carlos Rodriguez FCPA enforcement action that was seemingly less egregious than many of the examples highlighted below. Esquenazi and Rodriguez were charged and convicted for paying $890,000 to shell companies to be used for bribes to Haiti “foreign officials” to receive preferred telecommunication rates from the alleged state-owned telecommunications company.

Unlike the other defendants highlighted above who pleaded guilty, Esquenazi and Rodriguez exercised their constitutional right to a jury trial, yet paid a big price for testing their innocence.

Esquenazi was sentenced to 180 months (15 years) and Rodriguez was sentenced to 84 months (7 years).

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