Africa Sting Updates
It’s been a while since the last post on the Africa Sting cases.
Below is a summary of recent activity.
Last week, the DOJ filed a routine discovery notice (see here) that perhaps hints at a much broader case.
In relevant part, the DOJ stated:
“The government has produced to each defendant and his or her co-defendant documents regarding the defendant’s participation in the Country A deal charged in the indictments and historic deals, including emails, invoices and quotes. Documents related to other co-conspirators’ participation in the Country A deal and historic deals have been made available to the defendants upon request.” (emphasis added).
Time will tell what is meant by “historic deals.”
However this case is already wider than the case charged in January (see here). In March, the DOJ filed a superseding indictment (see here) against Daniel Alvirez, the President of ALS Technologies, Inc. The superseding indictment contains charges against Alvirez not found in the original indictment, specifically charges related to the Republic of Georgia. Alvirez is expected to plead guilty to charges of conspiracy to violate the FCPA as set forth in the superseding indictment and cooperate in the government’s investigation.
For more on the DOJ’s discovery filing (see here) from Christopher Matthews at Main Justice.
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When the Africa Sting case was first announced, I raised the issue (see here) of whether the defendants could even be found guilty of violating the FCPA’s antibribery provisions given that the “foreign official” was not real.
At the time, it was yet known whether the “foreign official” was purely fictitious or an actual, yet non-participating person.
I suspected the later and Main Justice (see here) recently reported that the FBI agents involved in the sting operation were posing as representatives of Ali Ben Bongo – the current president of Gabon and the Minister of Defense of that country from 1999 to 2009.
Because the FCPA’s relevant provisions include terms such as influence and induce, it remains an open question whether one can seek to induce or influence an actual, yet non-participating “foreign official.”
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Finally, during a status hearing yesterday, Judge Leon indicated (see here) that it was highly unlikely that the cases would go to trial in 2010.
Also at the status conference, defense lawyers continued to argue that the DOJ has not produced sufficient information concerning Richard Bistrong – a key participant in the government undercover sting operation – yet a person who was also recently criminally charged in connection with a separate bribery scheme (see here for the prior post).
Judge Leon reportedly said that the FBI’s relationship with Bistrong is “likely relevant to the case” and that DOJ is going to have produce documents and information concerning this issue.
The next status hearing is April 21st.
Potpourri
Back in active blogging “mode” here on the campus of the Sweet 16 bound Butler Bulldogs after an enjoyable few days in Washington D.C. where I participated in Georgetown Law’s Combating Global Corruption Conference. It was nice to see some familiar faces, connect faces to some names I have met through this blog, and to meet new people. The title of my presentation and upcoming paper in the Georgetown Journal of International Law is “The Facade of FCPA Enforcement” and I will post in the coming days a short abstract of the paper as well as my presentation slides.
In the meantime, some items of note.
Africa Sting
Christopher Matthews at Main Justice continues to follow the Africa Sting case and has this report of yesterday’s hearing.
Shearman & Sterling Update
Shearman & Sterling pioneered the concept of keeping track of FCPA enforcement actions in an “FCPA Digest” (see here) and it supplements the digest with occasional “Recent Trends and Patters” update. For the latest, see here from Philip Urofsky & Danforth Newcomb.
FCPA Compliance in Phnom Penh
Looking for additional evidence that the FCPA is indeed a hot topic. How about this article from Phnom Penh Post of Cambodia. As noted in the article, a recent FCPA seminar, hosted in part by the American Chamber of Commerce, attracted more than 100 local business leaders.
I wonder if anywhere in the discussion of Siemens and/or BAE the point was made that neither of these entities were charged with FCPA antibribery violations?
Further, I remain perplexed by the curious (and frequent) tendency of FCPA conferences including representatives from FCPA violators – a regional compliance officer for Siemens Singapore presented at the seminar.
Africa Sting – Alvirez Superseding Indictment and Expected Plea – New Charges Relating to the Republic of Georgia
When the Africa Sting indictments were first unsealed, I noted as follows:
“Given the number of individuals indicted, and the motivations for pleading under the Sentencing Guidelines, it would seem inevitable that one or more individuals will soon “flip” and cooperate with the government thereby potentially complicating the defenses of the remaining individuals.”
Christopher Matthew’s at Main Justice reports this evening (see here) that Daniel Alvirez, the President of ALS Technologies, Inc., is expected to plead guilty to charges of conspiracy to violate the FCPA set forth in a superseding indictment and cooperate in the government’s investigation.
The superseding indictment (here) contains two conspiracy charges. The superseding indictment drops the substantive FCPA violations and conspiracy to commit money laundering charges in the original indictment.
The first charge in the superseding indictment is substantively similar to the conspiracy charge and substantive FCPA charges in the original indictment (here) and involves the same core set of facts as in the original indictment, but with more detail. For instance, the superseding indictment specifically lists the names of the Africa Sting defendants and references specific telephone calls and e-mails. The superseding indictment also newly alleges that Alvirez and others were not in Las Vegas merely to attend the Shot Show, but also “for the purpose of attending a meeting between the suppliers” in the deal and the hypothetical “Minister of Defense of Country A.” According to the superseding indictment, at this meeting Alvirez and others “expected to receive a payment at that meeting amounting to 60% of the inflated sales price” of the goods initially sold in the deal.
The second conspiracy charge in the superseding indictment is new and contains facts not yet alleged in this case concerning the Republic of Georgia.
According to the superseding indictment, Alvirez participated in “conversations and meetings with sales agents who Alvirez knew were making corrupt payments to Ministry of Defense officials of the Republic of Georgia (‘Georgia’) in order to assist in obtaining business from the government of Georgia.” The superseding indictment alleges that “Alvirez would facilitate the sale of military and law enforcement equipment to the government of Georgia, with the assistance of corrupt sales agents, knowing that the sales agents would make corrupt payments to Georgian government officials to assist in obtaining and retaining business from the government of Georgia” and that Alvirez accepted “commission payments from the corrupt sales agents for facilitating the corrupt deals with the government of Georgia.”
The Republic of Georgia charge references an “Israeli sales agent” “an executive of a company that supplied ammunition to facilitate the Israeli sales agent’s purchase (“Co-Conspirator 1”) and “Miami sales agent.”
Unlike the original Africa Sting charge, the Republic of Georgia charge does not mention any involvement by FBI agents and/or a sting.
Matthews quotes an individual familiar with the case who says that “Alvirez is a key part of the widespread conspiracy because he introduced many of the defendants to the government’s cooperating witness, Richard Bistrong, who facilitated meetings between the defendants and the undercover FBI agents.” According to this source, “other defendants were likely to work out plea agreements and that the government is using the cases to go after other defense-industry companies” including “corrupt deals in several specific countries, including the Republic of Georgia and Guatemala.”
Clearly this new development complicates the defense of the remaining Africa Sting defendants and foreshadows a much larger government investigation seemingly not involving the entrapment defense at issue in the original charges.
Step Up to the Podium Friday
Today’s post includes FCPA excerpts from various speeches/comments made by enforcement officials over the past couple of days.
Stepping to the podium will be Assistant Attorney General Lanny Breuer; Mark Mendelsohn – Deputy Chief of the DOJ Fraud Section; and Cheryl Scarboro – the head of the SEC’s newly formed FCPA unit.
Lanny Breuer
Breuer spoke at the ABA National Institute on White Collar Crime in Miami. See here for his comments.
As to the FCPA, here is what Breuer had to say.
“… As I’m sure many of you are aware, in a recent FCPA investigation, the Criminal Division’s Fraud Section used undercover law enforcement techniques to uncover what we allege to be widespread fraud and corruption. As a result, 22 executives and employees of companies in the military and law enforcement products industry were indicted for their involvement in schemes to bribe foreign government officials. This investigation involved the most expansive use ever of undercover techniques to uncover FCPA violations.”
Note – per the DOJ, there was no actual involvement by any real “foreign government official.” This dynamic raises some legal issues – see here.
Back to Breuer’s comments.
“Let me say a few more words about our very robust FCPA program, because it, in many ways, typifies how we are approaching crime in corporate America.”
“The FCPA investigation I just referenced is the largest single prosecution of individuals in the history of DOJ’s enforcement of the FCPA. It thus vividly illustrates one cornerstone of our FCPA enforcement policy: the aggressive prosecution of individuals. Put simply, the prospect of significant prison sentences for individuals should make clear to every corporate executive, every board member, and every sales agent that we will seek to hold you personally accountable for FCPA violations. As we focus on the prosecution of individuals, we will not shy away from tough prosecutions, and we will not shy away from trials. We are ready, willing, and able to try FCPA cases in any district in the country—as we demonstrated with our three FCPA trial victories just last year.”
Note – In one of the trials, William Jefferson was acquitted of FCPA substantive charges. He was convicted of, among things, conspiracy, a verdict that may or may not have, included conspiracy to violate the FCPA. See here. In another trial, Frederic Bourke was convicted of conspiracy to violate the FCPA. He was sentenced to 366 days in prison. At sentencing, Judge Shira Scheindin said – “After years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.” See here.
Back to Breuer’s comments.
“To be sure, we are not focusing on individuals to the exclusion of corporations. We will continue to insist on corporate guilty pleas or to bring criminal charges against corporations in appropriate cases – when the criminal conduct is egregious, pervasive and systemic, or when the corporation fails to implement compliance reforms, changes to its corporate culture, and undertake other measures designed to prevent a recurrence of the criminal conduct. We will continue to insist on appropriately stiff corporate fines, applying a consistent, principled approach that considers the facts and circumstances within the Department’s established framework and that is guided by the Sentencing Guidelines in arriving at an appropriate sanction.”
“I also want to assure you that the Department’s commitment to meaningfully reward voluntary disclosures and full and complete corporate cooperation will continue to be honored in both letter and spirit. I know that many of you often grapple with the difficult question of whether to advise your client to make a voluntary disclosure. I strongly urge any corporation that discovers an FCPA violation – or any other criminal violation, for that matter – to seriously consider making a voluntary disclosure and to cooperate with the Department. The Sentencing Guidelines and the Principles of Federal Prosecution of Business Organizations obviously encourage such conduct, and your clients will receive meaningful credit for that disclosure and cooperation.”
Mark Mendelsohn
Mendelsohn recently spoke at the Dow Jones Global Ethics Summit in New York City. DOJ has not released a transcript of his remarks, but a collection of media sources covered his comments.
As to the Africa Sting case, Main Justice reports the following from Mendelsohn:
That the government is “in a strong position because of the massive volumes of information it has collected. “That should give you an idea of the strength of our case,” he said. Specifically, Mendelsohn said that a simple meeting in a New York hotel to discuss a bribery scheme would fall under the FCPA, even if the rest of the scheme took place entirely outside the U.S. Money and, potentially, e-mails, electronically transferred through the U.S. could bring a bribery scheme under the jurisdiction of the FCPA, he said.”
Cheryl Scarboro
Scarboro, an SEC veteran, was recently appointed to lead the SEC’s new FCPA unit (see here). Jesse Sunenblick at Main Justice recently sat down with Scarboro for a Q&A (see here).
As to the new FCPA unit Scarboro said:
“… [T]he new unit will give us the resources and the ability to do even more going forward. People on the ground will be focusing exclusively [on FCPA investigations], making them smarter about industry practices problem areas. We will be able to leverage resources and leads we get from others. There are ongoing investigations exactly like oil for food: not just concerning one company, but looking beyond into widespread practice in particular areas. I would expect filed cases in the short term, in a matter of months. These cases will be an illustration of what we’ve already been doing. But the new unit will allow us to do even more of it. We have areas and industries we are focusing on—pharmaceutical is one.”
Africa Sting – Update
Yesterday was a busy day in Judge Leon’s packed courtroom in Washington D.C.
For a colorful description of what transpired see here for Christopher Matthew’s piece at Main Justice. See here for a Reuters piece.
Here are the highlights.
Judge Leon remains skeptical of the government’s assertion that all 22 defendants were in one grand conspiracy. According to the reports, Judge Leon read all of the indictments and has “zero sense that there was an omnibus grand conspiracy.” Judge Leon reportedly told the DOJ that “what you think is so transparent is not” and he urged the DOJ to “take a step back” given that the DOJ may be so “close to trees that it can’t see the forest.”
Defense lawyers are troubled by the lack of evidence turned over by the government concerning Richard Bistrong (Individual 1 in the indictments)(see here). One defense lawyer is quoted as saying, “this is an entrapment case […] we need to know more about Bistrong.”
Future dates to keep in mind are: March 10 (when the government must turn over all of its evidence concerning Bistrong) and March 22 (when the government must decide whether to consolidate the cases into one conspiracy). On that issue, Judge Leon again unexpressed an unwillingness to conduct a 22 defendant trial and the DOJ is reportedly in “disposition” talks with some of the defendants.
As previously noted, whether guilty or innocent, there is tremendous pressure on individual criminal defendants in multi-party cases to plead and cooperate in the government’s prosecution of others given the “juicy carrots” that are offered by the sentencing guidelines for such “flipping.”