Top Menu

We’ll Have To Wait A Bit Longer To See If The DOJ Can Reverse Its String Of FCPA Trial Debacles

DOJ2

Trial was supposed to begin today in U.S. v. Ng Lap Seng, a criminal enforcement action involving alleged bribery of United Nations officials that includes FCPA charges.

However, last Friday evening the DOJ moved to adjourn the trial until June 26th, a motion that the defense agreed to and was granted by the judge.

It appears that classified materials are a reason for the trial delay.

As stated in a defense letter to the court:

“At 5:30 p.m., this past Friday, May 26, 2017, the parties had scheduled a call to discuss the identity of witnesses who would be called by the government in the first week of trial and outstanding government requests for stipulations. On that call, however, the government informed the defense of its intention to request an adjournment due to a motion it planned to file regarding classified materials. The government further informed the defense that earlier on Friday, it had participated in an ex parte conference with the Court to discuss some issue that, as we understood it, touched on classified materials. Later that evening, the government filed a letter requesting the adjournment, and, at the request of the defense, the Court held a telephonic court conference.”

As highlighted in this prior post, the DOJ’s October 2015 enforcement action alleged bribery at the United Nations and charged John Ashe (described as having various positions at the U.N. including serving as the Permanent Representative of Antigua to the U.N. and recently serving as the President of the U.N. General Assembly) and others (including Ng Lap Seng and Jeff Yin) with a variety of criminal offenses based on allegations that payments were made to Ashe in connection with a U.N. sponsored conference center in Macau, China and to influence business interactions with Antiguan government officials.

The post noted that although the alleged bribery was charged under 18 USC 666 (theft or bribery concerning programs receiving federal funds) on account of the U.N. receiving U.S. federal government funds, Ashe was likely a “foreign official” under the FCPA given that the definition of “foreign official” includes individuals associated with “public international organizations” and the U.N. has been designated as such an organization.

It was further noted that the alleged payors of the bribes to Ashe were predominately naturalized U.S. citizens subject to the FCPA’s anti-bribery provisions and that the Chinese national defendant was alleged to have engaged in conduct in the U.S. likely sufficient to satisfy the dd-3 prong of the FCPA.

As highlighted in this post, in late 2016 the DOJ filed a superseding indictment adding Foreign Corrupt Practices Act charges against Seng and Yin alleging. In the superseding indictment, the DOJ alleges that the U.N. is a public international organization as that term is used in the FCPA and that the Antiguan Ambassador and Dominican Ambassador to the U.N. were “foreign officials.”

According to the indictment, in 2009 Ng “helped to found a non-governmental organization based in New York (NGO-1), purportedly as a media platform dedicated to covering stories regarding sustainable development, the UN, and related topics.” According to the indictment:

“Since its creation, Ng has served as at least the principal source of funding for NGO-1, and has wired millions of dollars from Macau, China to NGO-1 in New York, New York. Ng appointed the Dominican Ambassador “Honorary President” of NGO-1 and, acting in part through NGO-1, paid the Dominican Ambassador at least hundreds of thousands of dollars between 2010 and 2015.”

According to the indictment, money was paid to both Ambassadors “in exchange for official action to benefit Ng and his company, the Macau Real Estate Development Company.”

As alleged in the indictment, the principal objective of the defendants “was to obtain official action from the UN with respect to a multi-billion dollar conference center that Ng hoped to build in Macau, China using his company the Macau Real Estate Development Company. In particular, Ng sought formal UN support for the Macau Conference Center, including establishing the Macau Conference Center as the permanent site of the annual UNOSSC Expo and as a location for other meetings, forums, and events associated with the UN.”

According to the indictment, the alleged bribes to the Ambassadors took various forms such cash, payments to the Antiguan Ambassador’s wife, and payments to one or more third-parties to cover the Antiguan Ambassador’s personal expenses.

As alleged in the indictment, “each of the Ambassadors agreed to and did, among other things, use their positions to advance and to seek to have others advance Ng’s interest in obtaining Formal UN Support for the Macau Conference Center.”

According to the indictment, the defendants “agreed to and did transmit funds from China to the United States and from the United States to the Dominican Republic.”

The indictment invokes 78dd-2 (the “domestic concern”) prong of the FCPA and 78dd-3 (the “person other than an issuer of domestic concern”) prong of the FCPA.

Ng filed the following pretrial motions: (1) motion to compel the production of the internal documents from all agencies of the Government related to the establishment of a permanent conference center in Macau, China; (2) motion to suppress post-arrest statements; (3) motion to dismiss Indictment or in the alternative for a bill of particulars; and (4) motion to strike the Indictment or, in the alternative, to strike references to “Boss Wu” from the Indictment.

In late April 2016 in this decision federal trial court judge Vernon Broderick (S.D.N.Y.) stated as follows regarding the FCPA issues:

“Ng further argues that, with respect to the FCPA charges, there was no “official act” and that the FCPA is unconstitutionally vague as applied to him.

Because I find that the [Indictments] are legally sufficient and that neither violates the Constitution as applied to Ng, Defendant Ng’s motion to dismiss is denied.”

If the DOJ is ultimately put to its burden of proof in the Ng case, it will be only the fifth time since September 2011 that the DOJ has been put to its burden of proof in an FCPA enforcement actions.

As highlighted in the remainder of this post, the prior four instances were all trial court debacles for the DOJ.

Joseph Sigelman (2015)

In January 2014, the DOJ announced FCPA and related charges against former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.” The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.

Hammarskjold and Weisman pleaded guilty, but Sigelman mounted a defense.

In its superseding indictment, the DOJ charged Sigelman with six criminal charges (conspiracy, money laundering, and several substantive FCPA charges) as well as various forfeiture counts.  Sigelman, the father of young children, faced up to 20 years in prison if convicted on all counts.

The trial was in the early stages when the DOJ’s star witness Gregory Weisman (an individual who previously pleaded guilty to the same core conduct and was cooperating with the DOJ in the hopes of achieving a lower sentence) ran into some problems on the witness stand. In short, Weisman acknowledged giving false testimony during the trial (see here for the transcript and here and here for additional media coverage) prompting federal court judge Joseph Irenas (D.N.J.) to ask Weisman “did you have a hallucination?”

The trial ended for the week as the DOJ contemplated what to do next. The DOJ of course can control if it is ultimately put to its burden of proof and can effectively pull a case if it feels it will not prevail. This is what the DOJ did in the so-called Carson cases (see here and here) after the trial court judge issued a pro-defense jury instruction concerning knowledge of status of foreign official. The SEC did something similar in an FCPA enforcement action against Mark Jackson and David Ruehlen – see here.

The trial never started up again, as the DOJ effectively pulled its case against Sigelman when it offered the defendant a plea agreement to substantially reduced charges (a single FCPA conspiracy charge) which Sigelman accepted. However, Judge Irenas refused to sentence Sigelman to any jail time and he was sentenced to probation.

John O’Shea (2012)

In November 2009, John O’Shea was charged with FCPA and related offenses for allegedly making improper payments to alleged Mexican “foreign officials.”  O’Shea mounted a defense and proceeded to trial.  In January 2012, following the DOJ’s case, Judge Lynn Hughes (S.D. Tex.) dismissed the FCPA charges against O’Shea.  In doing so, Judge Hughes stated:  ”The problem here is that the principal witness against Mr. O’Shea … knows almost nothing.”  (See here).  During the trial, Judge Hughes also admonished other aspects of the DOJ’s case stating:   “I don’t know what was presented to the Grand Jury, but … the Government should have been prepared before they brought the charges to the Grand Jury. It’s something you have to prove. And you shouldn’t indict people on stuff you can’t prove.”  (See here).

Africa Sting (2011-2012)

In January 2010, the DOJ announced criminal charges against 22 executives and employees of companies in the military and law enforcement products industry for engaging in a scheme to pay bribes to the minister of defense of an African country.  However, there was no actual involvement from any minister of defense, rather it was a manufactured sting operation.  Given the number of defendants, four separate trials were scheduled.

The first Africa Sting trial started in May 2011 and involved four defendants.  At the close of the DOJ’s case, Judge Richard Leon dismissed a substantive FCPA charge against one defendant (Pankesh Patel), dismissed another substantive FCPA charge against another defendant (Lee Tolleson) and dismissed the money laundering count against all defendants (Patel, Tolleson, Andrew Bigelow, and John Weir).  In July 2011, Judge Leon declared a mistrial as to all remaining counts against all defendants.

The second Africa Sting trial began in September 2011.  At the close of the DOJ’s case, Judge Leon dismissed the conspiracy charge against all defendants (John Mushriqui, Jeana Mushriqui, Patrick Caldwell, Stephen Giordanella, John Godsey, and Mark Morales).  Because Giordanella faced only that conspiracy charge, he was exonerated.  The trial proceeded, the charges went to the jury, the jury deliberated, and in January 2012, the jury found two defendants (Caldwell and Godsey) not guilty.  The jury hung as to the remaining defendants, and once again Judge Leon declared a mistrial as to all remaining counts against the remaining defendants.

Shortly after conclusion of the second trial, the jury foreman published this guest post on FCPA Professor and shortly thereafter the DOJ moved to dismiss with prejudice the criminal charges against all of the remaining defendants including those initially charged but not yet tried (Helmie Ashiblie, Yochanan Cohen, Amaro Goncalves, Saul Mishkin, David Painter, Lee Wares, Ofer Paz, Israel Weisler and Michael Sacks).  The next day, Judge Leon granted the motion to dismiss and stated (see here) “this appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement.”

Lindsey Manufacturing et al (2011)

In 2010, the DOJ charged Lindsey Manufacturing Co. and two of its executives (company CEO Keith Lindsey and company CFO Steve Lee) with FCPA offenses for their alleged roles in a conspiracy to pay bribes to alleged Mexican “foreign officials.”  In May 2011, Lindsey Manufacturing, Lindsey, and Lee were found guilty of various FCPA charges after a five-week jury trial.  (See here).

However, after months of post-trial legal wrangling, in December 2011 Judge Howard Matz (C.D. Cal.) vacated the convictions and dismissed the indictment after finding numerous instances of prosecutorial misconduct.  In the words of Judge Matz, the instances of misconduct were so varied and occurred over such a long time “that they add up to an unusual and extreme picture of a prosecution gone badly awry.”  (See here).

 

To read more about the Africa Sting, O’Shea and Lindsey Manufacturing cases see the article “What Percentage of DOJ FCPA Losses Is Acceptable?

FCPA Institute - Philadelphia (October 18-19, 2018)

A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learing. Learn more, spend less. CLE credit is available.

Learn More & Register

 

Powered by WordPress. Designed by WooThemes