As noted in various reports, three executives of SNC-Lavalin Group (former SNC vice-president of energy and infrastructure Kevin Wallace, former SNC vice-president of international development Ramesh Shah, and Bangladeshi-Canadian businessman Zulfiquar Ali Bhuiyan) were recently acquitted in connection with a Bangladesh bribery scheme “after an Ontario judge threw out wiretap evidence key to the case, saying the wiretap applications were based on gossip and rumour.”
The recent development follows charges being dropped against two other defendants charged in the same case.
While not a perfect parallel, the recent failed prosecution north of the border is similar in certain respects to the DOJ’s failed, manufactured Africa Sting case.
According to reports:
“Justice Ian Nordheimer of the Ontario Superior Court ruled he had serious concerns about three applications the RCMP filed in 2011 to get court approval to use wiretaps. The RCMP had sought the approval as it probed allegations that SNC staff planned to bribe officials in Bangladesh to try to win a $50-million (U.S.) contract to supervise construction on the country’s Padma Bridge project.
“Reduced to its essentials, the information provided in the [wiretap applications] was nothing more than speculation, gossip and rumour,” Judge Nordheimer concluded.
“Nothing that could fairly be referred to as direct factual evidence, to support the rumour and speculation, was provided or investigated. The information provided by the tipsters was hearsay (or worse) added to other hearsay.”
The decision [to acquit the defendants] came after Crown attorney Tanit Gilliam elected to call no witnesses at the trial following the judge’s decision to exclude wiretap evidence.
“The Crown had the opportunity to reassess the case and concluded we had no reasonable prospect of conviction based on the evidence,” Ms. Gilliam told the court.
[…]
Mr. Wallace’s lawyer, Scott Fenton, said the Crown made the right decision to end the case, noting the RCMP relied on the same evidence for approval for search warrants, and he was prepared to similarly challenge those documents.
“My client is greatly relieved that the matter is at an end and he has been vindicated with a verdict of not guilty,” Mr. Fenton said after the trial.
Frank Addario, who represented Mr. Bhuijan, said he did not want to comment in detail in case the Crown appeals the wiretap decision, but said his client will resume his life “and try to put it back together.”
David Cousins, who represented Mr. Shah, said the RCMP clearly should have done more work to validate the credentials and credibility of the informants, observing that one of them turned out to be an employee of an SNC competitor who had lied in another matter.
“Mr. Shah has undergone a terrible ordeal over the past four years – he’s been unemployable; he’s had his passport seized from him,” Mr. Cousins said. “His liberties have been really greatly impinged on.”
In his ruling, Judge Nordheimer said much of the information provided in the wiretap applications came from e-mails sent by three anonymous or unreliable tipsters. He said police had not attempted to first interview other sources, even though informants had named people they said police should contact.
Judge Nordheimer was especially critical of the RCMP’s claims there was evidence some people may have travelled to a meeting in Dubai to discuss their bribery plans in person. The wiretap applications included travel histories for three people, showing they were all out of Canada in March, 2011.”
For additional media reporting see here and here.
While not a perfect parallel, the recent failed prosecution north of the border is similar in certain respects to the DOJ’s failed, manufactured Africa Sting case.
To those who are unfamiliar with the Africa Sting case or have forgotten its details, it is important to never forget the colossal failure that it was.
Indeed, many people seem to pound the pavement for more enforcement of bribery offenses and there appears to be no such thing as a bad enforcement action regardless of enforcement theory, regardless of resolution vehicle and indeed regardless of outcome. While many in the anti-corruption space cheered more FCPA enforcement in the Obama administration, there was silence by the same cheerleaders regarding the many instances over the past 5-7 years of the DOJ failing, often in spectacular fashion, when put to its burden of proof in an FCPA enforcement.
Success in enforcing the FCPA is not processing voluntary disclosures or hopping on foreign law enforcement investigations to extract a settlement from a risk averse company. The best measure of success in enforcing any law is being able to prove legal violations to someone other than yourself in the context of an adversarial proceeding. The Africa Sting case was just one failure of the DOJ over the last several years in contested FCPA actions. (See here and here for other examples).
In summary form, set forth below is the Africa Sting debacle.
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, FBI agents, with the assistance of an individual (Richard Bistrong) who had already pleaded guilty to real, unrelated FCPA offenses, posed as representatives of the Gabon Minister of Defense. While it was not the first use of proactive, undercover investigative techniques in an FCPA investigation, it was certainly the largest and most dramatic use of such techniques in the FCPA’s history and the full force of the government’s surveillance capabilities were used against individuals from mostly small private companies located across America.
In announcing the criminal charges, the DOJ Assistant Attorney General called the manufactured case a ‘‘turning point’’ in the DOJ’s FCPA enforcement program and otherwise trumpeted that the charges represented the ‘‘largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the FCPA.” All but one of the charged individuals was arrested at the industry’s leading trade show in Las Vegas and in a sophomoric statement the Assistant Attorney General said, ‘‘this is one case where what happened in Vegas doesn’t stay in Vegas.”
In a press release that foreshadowed the conduct of the FBI agents involved in the sting operation, the FBI stated that the undercover operation was like a ‘‘ruse [that] played out with all the intrigue of a spy novel.” A good spy novel often involves sex, drugs, and criminals, and the FBI’s conduct in carrying out the manufactured case touched upon all such subjects. Indeed, the FBI agents openly wondered who would portray them when Hollywood made a movie about the case.
The judge immediately expressed strong skepticism of the DOJ’s enforcement theories and the difficulties of trying such a large group of defendants and ultimately decided that the defendants would be tried in four separate groups. The first Africa Sting trial started in May 2011 and involved four defendants. At the close of the DOJ’s case, the judge dismissed a substantive FCPA charge against one defendant, dismissed another substantive FCPA charge against another defendant, and dismissed the money laundering count against all defendants. (See here). In July 2011, the judge declared a mistrial as to all remaining counts against all defendants.
At this point, prudence might have suggested a reevaluation of the DOJ’s ‘‘turning point’’ prosecution. However, the DOJ quickly announced that it would retry the remaining charges against the first group of defendants. In addition, the DOJ plowed ahead against the second group of six defendants, and the second trial in the manufactured case began in September 2011. At the close of the DOJ’s case in December 2011, the judge dismissed the conspiracy charge against all defendants. (See here). Because one defendant faced only that conspiracy charge, he was exonerated by the decision. The trial proceeded, the charges went to the jury, the jury deliberated, and in January 2012 the jury found two defendants not guilty. (See here). The jury hung as to the remaining defendants, and once again the judge declared a mistrial as to all remaining counts against the remaining three defendants. (See here).
It is rare for a jury foreman to go public after a stint of public service, but what happened next may have turned the direction in the DOJ’s ‘‘turning point’’ prosecutions. Soon after the judge declared a mistrial in the second Africa String trial, the jury foreman published a post this post on FCPA Professor. The jury foreman, a nonpracticing attorney, described numerous facets of the trial and the jury’s deliberations including its assessment of the government’s witnesses. The foreman stated that ‘‘the jury with near unanimity found nearly all of the prosecution witnesses to be evasive and combative’’ and further stated:
“The very low view of their credibility was also based on the concerns of many jurors related to the nature of the sting operation. Though, in the end, I am not sure the credibility concerns were an important aspect of this case because the jury had the most difficult time ascertaining the state of mind and intent of the defendants.”
The foreman also stated that ‘‘a number of jurors were troubled by the nature of the FBI sting operation’’ and stated that the underlying view of the jury was that ‘‘the defendants had acted in good faith and the FBI/DOJ in bad faith.”
The jury foreman concluded the FCPA Professor post as follows:
“The government has the option to try [the defendants on which the jury hung] again. As a taxpayer, I sincerely hope they will instead dismiss the charges. The evidence simply does not exist, even if they get their witnesses to behave better under cross, to convict. This is a case that makes one wish that a supermajority was sufficient to acquit. Prolonging this prosecution is a waste of government resources. At some point in the deliberations, I described this sting and prosecution as a quarterback sneak. Although I came to regret that analogy for the frequency with which it was recalled in the jury room, I think it apt. The FBI and DOJ designed a play to get the ball just across the goal line. Unfortunately, in the ensuing pileup, no camera angle shows the ball with clarity and it is anyone’s guess as to whether they scored.”
According to knowledgeable sources, the jury foreman’s FCPA Professor post soon reached high levels in the DOJ. Two weeks later, the DOJ moved to dismiss with prejudice the criminal charges against all of the remaining Africa Sting defendants. The DOJ’s filing stated that ‘‘continued prosecution of this case is not warranted under the circumstances.”
The next day, the judge granted the DOJ’s motion to dismiss and stated:
“This appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement. Unlike takedown day in Las Vegas, however, there will be no front page story in the New York Times or the Post for that matter tomorrow reflecting the government’s decision today to move to dismiss the charges against the remaining defendants in this case. Funny, isn’t it, what sells newspapers? The good news, however, is that for these defendants, agents, prosecutors, defense counsel and the court we can get on with our professional and personal lives without the constant strain and burden of three to four more eight-week trials hanging over our heads. I for one hope this very long, and I’m sure very expensive, ordeal will be a true learning experience for both the DOJ and the FBI as they regroup to investigate and prosecute FCPA cases against individuals in the future. Two years ago, at the very outset of this case, I expressed more than my fair share of concerns on the record regarding the way this case has been charged and was being prosecuted. Later, during the two trials that I presided over, I specifically commented again on the record regarding the government’s very, very aggressive conspiracy theory that was pushing its already generous elasticity to its outer limits. Of course, in the second trial that elastic snapped in the absence of the necessary evidence to sustain it. In addition, in that same trial, I expressed on a number of occasions my concerns regarding the way this case had been investigated and was conducted especially vis-a-vis the handling of [the undercover cooperator]. I even had an occasion, sadly, to chastise the government in a situation where the government’s handling of the discovery process constituted sharp practices that have no place in a federal courtroom. Notwithstanding all of this water over the dam, and there has been a lot of water, I’m happy to see and I applaud the DOJ for having the wisdom and courage of its convictions to face up to the limitations of its case as revealed in the past 26 weeks of trial and the courage to do the right thing under the circumstances. Having served at the higher levels of the DOJ, I know that that was not an easy decision. They never are, when so much has been invested, and the agents and the prosecutors are so convinced of the righteousness of their position. I for one however am confident this will be in the end a positive, if not painful, lesson that results in better prosecutions of individuals in the future under the FCPA. As for the defendants, I hope the healing process is a swift one and that they get back to their normal lives in the very near future. […] And so without further adieu I grant the government’s motion to dismiss. The defendants are excused.”
The DOJ’s ‘‘turning point’’ FCPA prosecution, the “largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the FCPA,’’ failed spectacularly. The defendants’ lives were damaged, their real careers were sidetracked, their real bank accounts were emptied in mounting a defense, and their real reputations were damaged.
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ViewThe press release issued by defendant Lee Tolleson’s attorneys after the dismissal best captured the human element of the Africa Sting action:
“Lee Tolleson and his family are elated at this unnecessary and worthless nightmare is now over with the Government dismissing the multi count indictment with prejudice. Lee was a victim of a scheme by the Government, which was the mother of all gigantic taxpayers’ waste of dollars, to entrap him and others by faking an overseas business scam. The prosecutors were testing the FCPA by setting up a sting to raise a national awareness of the law, but the little guy suffers. The Government went to great expense to attempt to sucker many businesses into a fake business deal in Gabon, West Africa. The Government pinned its entire investigation on a despicable character, [the undercover cooperator], who manipulated Federal Agents throughout the investigation, in order to save his soul for his misdeeds. Ultimately, the Government finally did the right thing today and should think twice about going after honest business people in the future. Now, where does Lee go to get back his good name back? He is from a small Arkansas town with a GED and has a home school education. His family has been devastated financially by this process. Two things have kept him grounded; his faith in God and his family.”
In the aftermath of its spectacular Africa Sting failure, a DOJ spokesperson merely stated that the DOJ’s ‘‘FCPA enforcement efforts are broader than one case.” This statement, of course, is true, but it is also true that the Africa Sting case was not the only DOJ FCPA individual prosecution that failed in this new era. (See here).
Time has passed and many perhaps have forgotten about the Africa Sting debacle, but the parallel example north of the border provides an opportunity to reflect on the flip side of aggressive enforcement of bribery and corruption statements.
One group of people who have not forgotten are the 22 individuals whose lives were turned upside down by the DOJ’s manufactured case.
Let’s not forget that.
