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One Of The More Dubious FCPA Enforcement Actions Of All-Time

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

If one were to compile a list of the most dubious Foreign Corrupt Practices Act enforcement actions of all-time, near the top of the list would be the DOJ’s 1994 enforcement action against Vitusa Corporation and its President Denny Herzberg.

In this criminal information, the DOJ alleged that Vitusa (a New Jersey corporation engaged in the business of selling commodities and other goods) “entered into a lawful contract to sell milk powder to the Government of the Dominican Republic.”

The DOJ then alleged as follows.

“Although Vitusa delivered the milk powder to the Government of the Dominican Republic, the Dominican government did not pay Vitusa promptly for the milk powder received and, in fact, maintained an outstanding balance due for an extended period of time.  Vitusa, therefore, made various efforts to collect the outstanding balance due, including contacting officials of the United States and Dominican Governments to obtain their assistance in securing payment in full.”

According to the DOJ, “during the pendency of the contract, Servio Tulio Mancebo (a citizen of the Dominican Republic) communicated to Herzberg a demand made by a foreign official [a senior official of the Government of the Dominican Republic] which called for the payment of a ‘service fee’ to that official in return for the official using that official’s influence to obtain the balance due to Vitusa for the milk powder contract from the Dominican Government.”

According to the DOJ, “Herzberg agreed to Mancebo’s proposal that Vitusa would pay a ‘service fee’ indirectly to the foreign official.”  Thereafter, the DOJ alleged that the Government of the Dominican Republic made payment of $63,905.12 to Vitusa on the contract, but that following Herzberg’s instruction, “Mancebo retained $20,000 from that payment.”

According to the DOJ, Vitusa and Herberg knew “that all or a portion of the money would be given to the foreign official for the purpose of inducing the official to use that official’s position and influence with the Government of the Dominican Republic in order to obtain and retain business, that is, full payment of the balance due for Vitusa’s prior sale of milk powder to the Government of the Dominican Republic.”

Based on the above allegations, the DOJ charged Vitusa with violating the FCPA’s anti-bribery provisions.

Based on the same allegations, the DOJ also charged Herzberg with violating the FCPA’s anti-bribery provisions.  (See here for the DOJ’s Statement of Facts).

Vitusa pleaded guilty and agreed to pay a $20,000 criminal fine (see here).

Herzberg also pleaded guilty and was placed on two years probation (see here).  Herzberg was also ordered to pay a $5,000 criminal fine, but the judgment notes that “this fine shall be applied to the $20,000 fine to be paid by Vitusa Corp.”

In the DOJ’s sentencing document (as to both Vitusa and Herberg – see here and here) the DOJ stated:

“The unlawful payments to the foreign official were made in order to obtain payment of a legitimate and lawful obligation owed by the Government of the Dominican Republic to Vitusa.  There was no loss to any party and no individual victim exists.”

See here Vitusa Corp.’s current website.

FCPA aficionados know that the Vitusa / Herzberg action is not the only FCPA enforcement action in which an enforcement agency alleged that payments in connection with securing a bona fide receivable violated the anti-bribery provisions.  See here for the prior post on the SEC’s 2010 FCPA enforcement action against Joe Summers.

Foreign Military Sales Lead To FCPA Enforcement Action

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

In 1989, the DOJ criminally charged Minnesota based military equipment and supplies company Venturian Corporation, along with its wholly-owned subsidiary NAPCO International, with conspiracy to violate the Foreign Corrupt Practices Act, substantive FCPA offenses (anti-bribery, books and records and internal controls), as well as various tax fraud offenses.

The conduct at issue was in connection with the Foreign Military Sales (FMS) program in which the U.S. government made loans to certain foreign governments to finance the purchase of defense items of U.S. origin.  The Defense Security Assistance Agency (DSAA), an agency of the U.S. Department of Defense, was responsible for directing, administering, and supervising FMS loans.  In connection with the FMS program, contractors and commercial suppliers were required to certify, among other things, that: (i) “commissions would be paid only to bona fide employees or agencies which neither exerted or proposed to exert improper influences to solicit or obtain the contact;” and (ii) “no rebates, gifts or gratutities contrary to U.S. law have been or would be given to officers, officials or employees of the purchaser …”.

The conduct at issue concerned the Republic of Niger, a foreign nation qualified to receive FMS loan assistance from the DSAA, specifically Tahirou Barke Doka (the First Counselor of the Embassy of Niger in Washington, D.C.) and Captain Ali Tiemogo (Chief of Maintenance for the air force component of the Niger Ministry of Defense).

According to the detailed 50-page information, Niger entered into a contract with Dornier GmbH (a West German aircraft maintenance company) to perform maintenance on Nigerien C-130’s.  However, according to the indictment, “the Government of Niger had insufficient funds to pay for Dornier’s services and Dornier sought to affiliate with a U.S. contractor so that the Government of Niger could qualify” for the FMS program.

Thereafter, NAPCO, acting in cooperation with Dornier, began negotiations with the Government of Niger for a contract to furnish replacement parts and to perform maintenance on two C-130 transport aircraft owned by the airforce of the Government of Niger.  Four contracts, in the approximate amount of $2.4 million, were entered into between NAPCO and the Government of Niger.

The information alleges that NAPCO conspired with others to violate the FCPA by making payments or authorizing payments of money to “officials of the Government of Niger, that is, Counselor Tahirou Barke Doka and Captain Ali Tiemogo” and “Fatouma Mailelel Boube and Amadou Mailele, both relatives of Tiemogo, while knowing that all or a portion of such money would be offered, given or promised, directly or indirectly, to foreign officials, namely Barke and Tiemogo” for the purpose of “influencing the acts and decisions of Barke and Tiemogo in their official capacities, and inducing them to use their influence with the Ministry of Defense.”

The information further alleged that NAPCO “falsely represent[ed] to DSAA the identifies of NAPCO’s agents, misrepresenting the percentages of contract funds paid and to be paid to non-U.S. suppliers and filing misdated invoices.”

According to the information, the aggregate amount of bribes paid to Barke and Tiemogo was approximately $131,000.  In addition, the information alleges that Barke “traveled from Washington, D.C. to Niger for his wedding and subsequent honeymoon in Paris, Stockholm and London, using tickets charged to a NAPCO account.”

The information further alleges that NAPCO and others used various methods to conceal the conspiracy such as “preparing and using bogus commission agreements,” “creating a fictitious commission agent,” using the names of Mailele and Boube “in order to conceal the payment of bribes,” “falsely representing to DSAA that Mailele and Boube were NAPCO’s agents “when these persons were not its agents, had performed no services for NAPCO, and had acted solely as the intermediaries for Tiemogo and Barke for the purpose of concealing the bribe payments.

In addition to the conspiracy charge and a substantive FCPA charges, the information also alleges that NAPCO filed false and fraudulent U.S. tax returns which “falsely claimed certain deductions for the payment of agent commissions.”

NAPCO pleaded guilty to the above charges (see here for the plea agreement).  As noted in the plea agreement, the DOJ and the company settled on a fine amount in the “aggregate amount of $1 million in satisfaction of its criminal and civil fines, penalties, taxes and restitution.”  The amount consisted of the following:  $785,000 for the criminal charges set forth in the information, $140,000 in restitution “for full payment of its civil tax liability to the DSSA for appropriate crediting to the FMS account of Niger,” and $75,000 restitution to the IRS for full payment of all criminal and civil tax liabilities.

The plea agreement notes that the DOJ will not prosecute NAPCO for “Napco’s contracts with Egypt,” “alleged United States Customs violations arising from the sale of misidentified radios to the Government of Egypt and to other countries;” or “FCPA violations arising from the transactions evidenced in the documents Napco produced to the Yellow Grand Jury.”

The plea agreement further states:

“The Department of Justice will advise the Department of Defense, Defense Logistics Agency, which is the suspension and debarment authority in this matter, of the facts learned during the government’s investigation of Napco; Napco’ s cooperation during the investigation; and the importance of this prosecution in the government’s efforts towards eradicating fraud in the Foreign Military Sales program.”

The above settlement terms are set forth in this judgment.

According to original source media reports, the DSSA “uncovered the fraud when it checked the name of one of the agents with the government of Niger.”  Media reports quoted Theodore Greenberg (Deputy Chief DOJ Fraud Section) as follows:  “[money from the FMS program] is to be used for the military preparedness of certain governments; that, of course, is important to our national security.”  Media reports quoted Peter Clark (DOJ FCPA Unit) as follows:  “the object of the program is to be getting the biggest bank for the buck – not to pay illegal bribes.”

(See here for NAPCO’s current company website).

(The FMS program is still an active program of the Defense Department – see here).

In addition to the enforcement action against NAPCO / Venturian, the DOJ also brought an injunctive action against Dornier.  Of note, the DOJ described Dornier (a German company) as an “agent of NAPCO” and thus a “domestic concern” under the FCPA.  As to relevant jurisdiction allegations, the DOJ alleged that a Dornier employee Axel Kurth, had telephone conversations with NAPCO employees in Minnesota and that Kurth traveled in the U.S. “where he met with officers of NAPCO” to discuss the alleged improper payments.  Without admitting or denying the DOJ’s allegations, Dornier consented to a permanent injunction prohibiting future FCPA violations.

In addition, the DOJ criminally charged the Vice President of the Aerospace Division of NAPCO.  That individual exercised his constitutional right to a jury trial, put the DOJ to its burden of proof, and the results and ultimate outcomes will be explored in a future post.

An Obscure Enforcement Action

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

In 1993, the DOJ brought a Foreign Corrupt Practices Act enforcement action against American Totalisator Company (“ATC”), a company engaged in the manufacture and sale of totalisator systems.  A totalisator system is machine for computing and showing totals, especially a pari-mutuel machine showing the total number and amounts of bets at a racetrack.  The conduct at issue focused on ATC’s business “with the Horse Races Administration of Greece (“ODIE”), an instrumentality of the Greek government … in connection with the sale of a totalisator system and spare parts for the Phaleron racetrack in Athens, Greece.”

Oddly enough, the ATC enforcement was not the first “old” FCPA enforcement action concerning bribery at the racetrack.  See here for the prior post regarding a 1981 FCPA enforcement action against Sam Wallace Company and various individuals concerning alleged payments made to the chairman of the Trinidad and Tobago Racing authority concerning a racetrack project in Trinidad.

In a civil Complaint for Permanent Injunction, the DOJ alleged:

“Beginning in or about 1985 and continuing through the present, ATC … corruptly used means and instrumentalities of interstate commerce, in furtherance of the offer, payment, promise to pay, and authorization of the payment of money, to a person, to wit, its Greek agent, while knowing that all or a portion of such money would be offered, given, or promised, directly or indirectly, to a foreign official, for purposes of: influencing the acts and decisions of such foreign official in his official capacity or; inducing such foreign official to do or omit to do any act in violation of the lawful duty of such foreign official or; inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence an act or decision of such government or instrumentality, in order to assist ATC in obtaining or retaining business in connection with its contract for the sale of a totalisator system and spare parts to ODIE …”.

The DOJ requested a Final Judgment of Permanent Injunction restraining and enjoining ATC from violating the FCPA.  The Consent and Undertaking indicates that the DOJ “declined criminal prosecution.”  The DOJ letter setting forth the declination states that “illicit payments were made to officials of the Greek government and judiciary by ATC’s agent, O. Nicholas Katsanis.”  The letter does not provide a specific reason for the declination other than that the Fraud Section “determined that a criminal prosecution of ATC or [its parent company General American Totalisator Company] was not warranted, but that the [Fraud] Section deemed it appropriate for ATC to consent” to the Order of Permanent Injunction.

See here for original source documents in connection with the enforcement action.

The ATC enforcement action is an obscure enforcement action.  My searches revealed no real-time media reporting of the action and the action is not found on the DOJ’s FCPA website.

The ATC enforcement action is also a reminder of an obscure FCPA provision – the ability of the DOJ to bring civil injunctive actions. 15 USC 78dd-2(d)(1) states:

“When it appears to the Attorney General that any domestic concern to which this section applies, or officer, director, employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) or (i) of this section, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond.”

At The 11th Hour

[This post is part of a periodic series regarding “old” Foreign Corrupt Practices Act enforcement actions]

The 1989 Foreign Corrupt Practices Act enforcement action against advertising agency Young & Rubicam, Inc. (“Y&R”) and its executives Arthur Klein, Thomas Spangenberg and others is one of the more interesting enforcement actions of all-time.

For starters, the enforcement action had an unusual origin.  According to media reports, in connection with an unrelated tax fraud case against Robin Moore (the author of the “French Connection” and “The Green Berets”), law enforcement officials confiscated his diaries.  Moore was a friend of Jamaican Prime Minister Edward Seaga and the diaries led to the investigation of Y&R and its executives.

The indictment alleges a conspiracy between Y&R, Klein, Spangenberg and others to induce Eric Abrahams and Arnold Foote “in their official capacities with respect to the selection and retention of an advertising agency for the Jamaica Tourist Board” and to induce Abrahams and Foote “to use their influence with the Jamaica Tourist Board to affect and influence the decisions of the Board with respect to the selection and retention of an advertising agency.”

Eric Abrahams is described in the indictment as the Minister of Tourism of the Government of Jamaica and Arnold Foote is described as “a prominent Jamaican citizen with close political ties to the Jamaican Labor Party and to the Administration of Prime Minister Edward Seaga”.  As to Foote, the indictment further alleges as follows.  “Foote served as executive chairman of Martin’s Travel, an instrumentality of the Government of Jamaica, and he also acted in an official capacity on behalf of the Minister of Tourism and the Jamaica Tourist Board as an advisor to the Government of Jamaica with respect to tourism, advertising and public relations matters, including the selection and retention of an advertising agency for the Jamaica Tourist Board.

According to the indictment, the defendants “would and did arrange for and pay kickbacks” to Foote and through Foote, to Abrahams.  The indictment alleges that the “kickbacks and the manner in which they were paid would and did cause the Jamaica Tourist Board to make unnecessary and excessive expenditures for advertising services and deprived the Board of economically material information in its business dealings” with Y&R.

According to the indictment, as part of the conspiracy Robin Moore (described as a well-known author residing in Connecticut who had longstanding ties to the Island of Jamaica and was a close friend of Foote and Jamaican Prime Minister Seaga) and Frederick Sturges (described as a resident of Connecticut and an associate of Moore and Foote) “would and did act as middlemen and ‘go betweens’ for the communication of information and monies between and among the conspirators, and that certain kickback payments would be and were funnelled through bank accounts established and controlled by them.”

According to the indictment, “in order to disguise and conceal their unlawful activities, the conspirators would and did cause Y&R to enter into a contract with Ad Ventures, Ltd. a Cayman Island corporation created for the purposes of funneling kickbacks to Foote and Abrahams and affording Y&R an ostensibly legitimate reason for making such payments.”  According to the indictment, various means and devices were used to conceal the unlawful activities including: false statements to government investigators; testifying falsely before the Grand Jury; making some kickback payments in cash and others to a Cayman Islands bank account so as to make the tracing of funds more difficult; and Y&R failed to reflect the kickback payments on reports it filed with the DOJ pursuant to the Foreign Agents Registration Act.

In addition to the conspiracy charge, Y&R, Klein, Spangenberg – along with the “foreign officials” Abrahams and Foote – were also charged with violating RICO.  The predicate offenses alleged were multiple violations of the Travel Act.

The indictment further alleged that the defendants sought to buy the silence of various individuals who had threatened to expose the unlawful conduct.

Y&R, Klein and Spangenberg all pleaded not guilty and the case resulted in extensive media coverage.  In a statement, Y&R said that the criminal charges were “based on speculation and innuendo and [were] without substance or merit.”  A Y&R attorney (Thomas Barr of Cravath, Swaine and Moore) stated at the courthouse as follows.  “This is a lawsuit that involves characterization.  If you pull the characterization out, you haven’t got anything.”  Referring to the labeling of Foote in the indictment as a foreign official, Barr is quoted as follows.  “The reality is this.  Y&R makes very simple, conventional business arrangements in Jamaica.  By calling an advertising man a foreign official the prosecution has converted these charges into one of the most bizarre criminal allegations.”

According to media reports, many were shocked that Klein and Spangenberg were criminally charged.  Quotes to the media included the following.

“[Klein] is the straightest guy in the world.  I was absolutely shocked at the charges.  Of all the people I know in advertising, I don’t know anyone I’d least expect this to happen to.”

“Of all the people I’ve worked with, I’d rank them in the upper 10 percent for their ethical conduct.”

Y&R and Klein moved to dismiss the RICO charge.  Among other things, the defendants argued that the FCPA “cannot serve as a basis for a Travel Act violation, nor in turn as a predicate for a RICO violation.”  The court denied the motion to dismiss the RICO charge.  (See here for the decision).

The defendants also moved to dismiss the conspiracy charge concerning payments to Abrahams on the ground that prosecution of that aspect was time-barred.  The defendants argued that “Abrahams ceased to be Jamaica’s Minister of Tourism more than five years prior to the return of the indictment.”  The court noted that a conspiracy charge is timely if it alleges the commission of at least one overt act in furtherance of the conspiracy within the applicable five-year statute of limitations and rejected the defendants’ arguments.  The court stated as follows.

“Whether Abrahams withdrew from the conspiracy is a question of fact for the jury.  Nor does Abrahams’ resignation as Minister of Tourism necessarily end the alleged conspiracy or his participation in it.  The indictment charges overt acts committed in furtherance of a single conspiracy from 1984 until 1989.  The allegation of overt acts committed within five years meets the requirements of the statute of limitations.”

The defendants also moved for a bill of particulars requesting specific information as to particular allegations including: the facts which supported the allegations that Mr. Foote was a foreign official within the meaning of the FCPA.  The court stated that “adequate notice of the manner in which Mr. Foote obtained his status as a foreign official” was provided in the indictment.  [See the above description of Foote’s status]. 

Of further interest from the pre-trial proceedings, the DOJ moved to make an opening statement at trial.  The opinion states as follows.

“The government claims that the complexity of this case, both factually and legally, as well as the nature of the evidence to be presented warrant the need for opening statements.  First, the government argues that the term ‘foreign official’ as defined in the FCPA has a meaning broader than the ordinary meaning of the phrase.  Without categorizing the evidence for the jury, the government claims that the jury might misinterpret the significance of the evidence.  This amounts to a request to make a legal argument during opening statement which is precisely what should be avoided in opening statements.  Second, the government contends that a substantial portion of its case depends on ‘a complex confluence of circumstantial evidence’ which a jury may not understand if it is not allowed to make an opening statement.  However, ‘a mere recitation’ of what evidence is going to be presented does not necessarily ‘help jurors better understand the evidence when it is introduced.’  To go beyond that would risk stepping into the realm of legal argument which is not allowed.”

Shortly before the trial was to begin in February 1990, Y&R pleaded guilty (see here for the plea agreement).  Pursuant to the plea agreement, Y&R agreed to pay a $500,000 criminal fine.  Although not apparent from the plea agreement, Y&R pleaded guilty to one count of conspiracy to violate the FCPA.

If your only source of FCPA information is the DOJ’s FCPA website, this is where the story stops.  But the story does indeed continue.

The company issued the following press release on February 9, 1990.

“Young &  Rubicam Inc., announced today that it had reached an agreement with  the U.S. Attorney for the District of Connecticut under which the  government agreed to drop all RICO charges against the agency that had been brought in indictments on Oct. 6, 1989.  The charges were  made in connection with the agency’s successful attempts to obtain the advertising account of the Jamaica Tourist Board in 1981.

Further, the government dropped all the indictments charging that the agency was guilty of bribery of Arnold Foote, a Jamaican advertising executive, for the purposes of his bribing the Minister of Tourism, Eric Anthony Abrahams.  In addition, all  charges against Arthur Klein, an executive vice president of Young & Rubicam, and Thomas  Spangenberg, a former senior vice president of the agency  were dismissed.

The company, in order to put the case entirely behind it, agreed to plead guilty to conspiring to violate a section of the Foreign Corrupt Practices Act (FCPA) and accepted a fine of  $500,000.  The section of the Act under which the plea is made has been a controversial part of the law because it requires organizations and people who are placed in positions where criminal  activities may be taking place in a “reason to know” relationship with those activities, whether or not they, in fact, did know or if the events did or didn’t occur.  This section of the Act is no longer in the statute, having been removed by Congress in 1988.  Y&R was charged with events that allegedly took place in 1981 when this portion of the statute was in effect.  Ironically, if the case were brought today there would have been no such charge.

A Young & Rubicam spokesperson said, ‘We are particularly  pleased that one of Y&R’s finest individuals, Arthur Klein, has been cleared completely of all charges made against him.  The failed indictments caused Klein and his family extraordinary grief, and to  us this was the worst part of this entire procedure.  His complete exoneration is a cause for major celebration around Y&R.

The government no longer claims that the agency won the competition for the account on anything but the merits of its  presentation, or that Arnold Foote was a public official, as had  been charged.  To the best of Y&R’s knowledge, there is no  evidence that any monies were given to Abrahams.

For  its part, Young & Rubicam did agree that beginning in late 1981, some of its employees did on occasions hear reports of alleged  bribery efforts.  These rumors alleged that Foote, who had been  retained by Y&R to represent the agency in Jamaica, was using  money paid to him by the agency to bribe Abrahams.  Young &  Rubicam itself is not charged with paying bribes.  In fact, an  investigation by the agency in 1986 could find no evidence to support those rumors, and the government has conducted a four-year  investigation, and it has never proved that such bribes occurred.  Both of the individuals deny that any bribes were paid.  There is now no charge that any Young & Rubicam employee, past or present, knew enough ‘individually’ about these rumors to cause a violation.  Thus the agency agreed that because of that knowledge by ‘some’ of its employees it can be construed that it ‘technically’ entered into a “conspiracy.”

The  spokesperson stated, ‘In hindsight, we agree that an early investigation should have been carried out sometime during 1982 when these rumors began surfacing.  We did complete an investigation in 1986 and discovered no evidence of bribery.  The government in its four-year investigation has also not made such a discovery.  So, in  fact, we would have looked and found nothing.  But looking back, we agree that we should have done it in 1982; hence our guilty plea to that violation. ‘In fact we have been pressing since early October for an early decision so that the agency can put the matter  behind us and get on with our business.  This certainly allows us to  do just that.'”

[For on the FCPA’ original knowledge standard applicable to third-party payments, see this prior post.]

As to the “reason to know” standard, media reports quote U.S. Attorney Stanley Twardy as follows.  “The ‘reason to know’ plea meant that while no individual within Y&R knew enough to understand that a law was being violated, the cumulative knowledge of the group working on the account, who should have been in touch with each other, would have given the agency the requisite information.”

According to media reports, the DOJ’s case “fell apart” on the eve of trial “when Y&R’s attorneys submitted to the [DOJ] a document that had been subpoenaed two years ago and that made clear, in the words of U.S. Attorney Twardy, “that Arthur Klein was not aware of what was going on.”  Twardy further stated that the document “suggested quite strongly that Spangenberg did not have criminal intent.”  Twardy further stated:  “We got a transcript of a tape of a phone conversation that made it obvious that the accusations against Mr. Klein were totally without merit.  Ironically, we’d been trying for two years to get a hold of that tape.”  Another media report quoted Twardy as follows.  “The transcript of the conversation was extremely exculpatory, meaning it gave evidence that Klein and in turn Spangenberg were not knowledgeable of the illegal aspects of the payments …”.

Kickbacks For Bugging Equipment

[This post is part of a periodic series regarding “old” Foreign Corrupt Practices Act enforcement actions]

In 1989, the DOJ charged (see here) F.G. Mason Engineering Inc. (a Connecticut company that manufactured anti-bugging devices to detect the presence of electronic surveillance) and Francis Mason (the President and sole shareholder of the company) with conspiracy to violate the FCPA’s anti-bribery provisions.  The conduct at issue focused on payments to Dirk Ekkehard Zoeller (a civilian employee of the West German Military Intelligence Services (“MAD”), an agency of the Ministry of the Defense) whose responsibilities included the selection, procurement and testing of various equipment for MAD and other agencies of the West German Government.

According to the criminal information, the amount of kickbacks to Zoeller were approximately 13% of the payments received by F.G. Mason Engineering from MAD under the procurement contracts and approximately 50% of the payments received by the company from MAD for service contracts.  The total amount of the corrupt payments to Zoeller was approximately $225,000.

The information alleged that the conspiracy permitted F.G. Mason Engineering to “obtain inflated and excessive prices on its contracts with MAD,” caused  “MAD and other agencies of the West German government to make excessive and unnecessary expenditures for the procurement and servicing” of the devices, and “deprived MAD and other agencies of the West German government of economically material information in their business dealings with F.G. Mason Engineering.”

F.G. Mason Engineering and Francis Mason pleaded guilty.  (See here and here for the plea agreements).  F.G. Mason Engineering and Francis Mason were ordered to pay a $75,000 fine to be paid jointly and severally.  F.G. Mason Engineering was placed on probation for two years and Francis Mason was placed on probation for five years. (See here and here).

The plea agreements note that the defendants agreed to “make restitution to the [West German government] which is the victim of the defendants’ illegal conduct.”  Specifically, the company was ordered to make restitution to the West German government “in the amount of $160,000 which will take the form of a credit granted by the company against monies to be paid to the company by the Ministry of Defense under existing contracts.”  In addition, the company agreed to “provide certain discounts on future purchases of equipment or services should such purchases be made by the German Government.”  In the plea agreements the defendants also agreed to cooperate in the West German prosecution of Zoeller.

According to this article, F.G. Mason Engineering also provided surveillance equipment to the U.S. government.  This internet source suggests that the company closed after the FCPA enforcement action.

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