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BAE – Every Circus Has A Final Act

Today in a Washington D.C. courtroom, U.S. District Judge John D. Bates had authority, pursuant to Rule 11 of the Federal Rules of Criminal Procedure, to reject the BAE plea agreement (see here).

However, as district court judges often do, Judge Bates “rubber-stamped” the plea agreement according to this first-hand account by Christopher Matthews at Main Justice.

In allowing the BAE “bribery yet no bribery” circus to leave town, Judge Bates reportedly said that the plea agreement was “fully reflective” of BAE’s crimes. This is surely subject to debate and for prior acts in this circus (see here).

According to the DOJ’s Release (see here), BAE pleaded guilty today to “conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its FCPA compliance program, and to violate the Arms Export Control Act and International Traffic in Arms Regulations” and was sentenced to “pay a $400 million criminal fine, one of the largest criminal fines in the history of DOJ’s ongoing effort to combat overseas corruption in international business and enforce U.S. export control laws.”

The DOJ’s release continues to reference BAE’s non-bribery, bribery allegations. See here for a prior post.

So too does the government’s sentencing memorandum (see here). Should you be wondering whether national security and/or debarment issues drove resolution of this prosecution, you may want to check it out.

One immediately sees that the National Security Division (“NSD”) played a role in the BAE case. According to its website: “[t]he mission of the National Security Division is to carry out the Department’s highest priority: to combat terrorism and other threats to national security.” (see here).

Among other things, the Sentencing Memorandum repeats the government’s non-bribery, bribery allegations.

Relevant quotes include: “BAE made some third party payments while aware that there was a high probability that part of the funds would be passed on to a foreign government official to influence a decision in favor of BAES” and that “BAES made other payments aware that there was a high probability that the payments would be used to influence government decision makers in the purchase of defense materials.”

In addressing relevant factors under the Principles of Federal Prosecution of Business Organizations (see here), the government notes that these payments: were “a major and longstanding business strategy replete with corruption risk; “were pervasive across the Company, covered numerous markets, and lasted for decades; “were tolerated or condoned up to the highest corporate levels; and that “corporate leadership created the structures” for the payments “in order to frustrate investigations and avoid identification of those payments to and through marketing advisers.”

And then there is this relevant paragraph regarding collateral consequences:

– “Europen Union Directive 2004/18/EC, which has recently been enacted in all EU countries through implementing legislation, provides that companies convicted of corruption offenses shall (emphasis in original) be mandatorily excluded from government contracts.”

– “BAES’s business is primarily from government contracts, including with several EU customers.”

– “Mandatory exclusion under EU debarment regulations is unlikely in light of the nature of the charge to which BAES is pleading. Discretionary debarment will presumably be considered and determined by various suspension and debarment officials.”

– “The Department will communicate with U.S. debarment and regulatory authorities, and relevant foreign authorities, if requested to do so, regarding the nature of the offense of which BAES has been convicted, the conduct engaged in by BAES, its remediation efforts, and the facts relevant to an assessment of whether BAES is presently a responsible government contractor.”

The Sentencing Memorandum also notes that “[i]ndividuals responsible for criminal activities may be beyond reach of U.S. authorities based on U.S. statute of limitations or jurisdictional limitations.”

Now that the curtain has closed on this circus and the elephants and monkeys are back in their cages, it is worthwhile to take a step back and analyze how DOJ prosecutors are supposed to resolve corporate criminal liability through plea agreements.

The Principles of Prosecution, part of the U.S. Attorneys’ Manual, state: “[i] negotiating plea agreements with corporations, as with individuals, prosecutors should generally seek a plea to the most serious, readily provable offense charged.”

Additional commentary states that a “corporation should generally be required to plead guilty to the most serious, readily provable offense charged;” that a “corporation should be made to realize that pleading guilty to criminal charges constitutes an admission of guilt and not merely a resolution of an inconvenient distraction from it business;” and that “where the corporation is a government contractor, permanent or temporary debarment may be appropriate” and “where the corporation was engaged in fraud against the government […], a prosecutor may not negotiate away an agency’s right to debar or delist the corporate defendant.”

This last clause, part of the U.S. Attorneys’ Manual, seems particularly relevant here given that the DOJ release and the Sentencing Memorandum both expressly state that BAE “defrauded” the U.S.

Sections 9-27.400-530 of the U.S. Attorneys’ Manual supplement the above corporate specific provisions by setting forth information relevant to “Selecting Plea Agreement Charges.”

Among other things, this section notes: “the defendant should be required to plead to a charge or charges” “that is the most serious readily provable charge consistent with the nature and extent of his/her criminal conduct” and “that has an adequate factual basis.” Commentary notes that “except in unusual circumstances, this charge will be the most serious one.”

It sure seems, per the government’s own evidence, that there was a more serious readily provable charge against BAE. But all things, even the circus, must come to an end, so perhaps this was one of those “except in unusual circumstances” type of cases.

The BAE circus is still playing out across the Atlantic and the next post will discuss how various public interest organizations, subject to less restrictive “standing” rules than here in the U.S. for challenging agency decisions, are challenging the SFO’s plea agreement with BAE.

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