Category: Africa Sting

Africa Sting – A “Long And Sad Chapter In The Annals Of White Collar Criminal Enforcement”

Game Over – DOJ Moves To Dismiss Africa Sting Cases

In a filing this morning (see here), the DOJ has moved “to dismiss with prejudice the Superseding Indictment, and all underlying indictments, against the remaining defendants who are pending trial.”

The filing states as follows.  “The government has carefully considered (1) the outcomes of the first two trials in which, after extensive deliberations, the juries remained hung as to seven defendants and acquitted two defendants, and one defendant was acquitted on the sole charge against him pursuant to Fed. R. Crim. P. 29; (2) the impact of certain evidentiary and other legal rulings in the first two trials and the implications of those rulings for future trials, including with respect to Rule 404(b) and other knowledge and intent evidence the government proposed to introduce; and (3) the substantial governmental resources, as well as judicial, defense, and jury resources, that would be necessary to proceed with another four or more trials, given that the first two trials combined lasted approximately six months. In light of all of the foregoing, the government respectfully submits that continued prosecution of this case is not warranted under the circumstances.”

Today’s request for dismissal comes two weeks after the jury foreman in the second Africa Sting trial wrote this guest post on this site.

What Percentange of DOJ FCPA Losses Is Acceptable?

To be sure, the DOJ – when put to its burden of proof in FCPA enforcement actions – has had success.  Although an appeal is pending, the jury convictions of Joel Esquenazi and Carlos Rodriguez in 2011 come to mind (see here for the prior post).

Yet recent events (July 2011 – Judge Richard Leon declared a mistrial in the first Africa Sting case as to four defendants (after earlier tossing several substantive counts against certain defendants; October 2011, a federal court in Seattle dismisses, at the urging of the DOJ, an FCPA enforcement action against Si Chan Wooh “in the interest of justice and the efficient use of government resources” (those are the DOJ’s words) after he previously pleaded guilty; November 2011, Judge Howard Matz vacated the FCPA convictions of Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee and dismissed the indictment after finding numerous instance of prosecutorial misconduct; December 2011, in the second Africa Sting case, Judge Richard Leon, at the close of the DOJ’s case, dismissed  a conspiracy charge against all defendants – because this was the only charge Stephen Giordanella faced, he was exonerated; January 2012, Judge Lynn Hughes, at the close of DOJ’s case, dismissed FCPA charges against John Joseph O’Shea;  January 30, 2012 in the Africa Sting case, Patrick Caldwll and John Godsey were found not guilty by the jury and on January 31, 2012  Judge Leon declared mistrial as to the remaining three defendants) raise the following question:  what percentage of DOJ FCPA losses is acceptable?

After all, criminal charges damage lives, ruin careers and ostracize individuals from their  community. While it is unrealistic (and probably not desirable from a policy perspective) to expect the DOJ to win 100% of its FCPA cases when put to its burden of proof, given the referenced dynamics, I think it is realistic (and desirable from a policy perspective) to expect the DOJ to win a very high percentage of its FCPA cases when put to its burden of proof.

I posed the question – what percentage of DOJ FCPA losses is acceptable – to two individuals whose opinion and analysis on white-collar crime issues I highly respect.  Set forth below are their answers.

Scott Fredericksen (here) is the managing partner of the Washington, D.C. office of Foley & Lardner LLP.  He is a member of the firm’s Government Enforcement, Compliance & White Collar Defense and Securities, Enforcement & Litigation Practices.  Previously, Fredericksen had several stints at the DOJ including special counsel to the U.S. Attorney and Associate Independent Counsel in the Office of Independent Counsel.  Below is Fredericksen’s response to the question:  what percentage of DOJ FCPA losses is acceptable?

“By any measure the recent record of the DOJ in trying FCPA cases, well below the approximate 90% plus overall conviction rate the DOJ usually attains, is not acceptable. The recent  performance  in FCPA trials of individuals and small companies seems to represent a wrong turn by the DOJ, and it may stem from some fundamental misconceptions by the DOJ about the best approach to charging individuals with FCPA  violations.

First, the undeniable success the DOJ has had with  companies self-reporting and settling their FCPA cases with the DOJ is the result of an entirely different analysis by company counsel compared to counsel for individuals who face the loss of liberty and the prospect of real prison time.  No public company in approximately twenty years has challenged the DOJ at a trial for a FCPA violation and that probably will not change.  Companies usually face a more difficult task in defending themselves at trial that is not the case with individuals.  Even private companies face the burden that it only takes one of their employees who violate the FCPA to convict the company.

But when the DOJ insists on significant prison sentences in its FCPA charging decisions for individual defendants then experienced white collar lawyers will try those cases if there is a realistic opportunity for acquittal-exactly what has happened recently.  The reason is that FCPA cases are vulnerable for a few reasons, including ambiguous definitions that invite challenge, and the fact that often times the FCPA is not perceived by juries or the average person as an “intuitive” crime.  It is regulatory in nature and, rightly or wrongly, juries and the ordinary person do not necessarily perceive it as as a crime “worthy” of conviction and prison unless the evidence of a violation is strong and clear.

And the enforcement strategy must be fair. Using aggressive enforcement tactics such as the “Africa Sting” carries significant risk for the DOJ and for good reason.  It often runs counter to our sense of justice and juries are the first to see that. Yet, the DOJ has had considerable success prosecuting other sting cases in international prosecutions where there was strong evidence of an intent by the defendant to violate the criminal statute at issue. The record of 0-10  in the Africa Sting case here is more likely the result of a poorly designed “sting.”

The recent acquittals and hung verdicts was also remarkable for the earlier Rule 29 dismissal of the conspiracy count against the defendants by Judge Leon.  That is an unusual occurrence and speaks volumes about the lack of good evidence in the case.  A conspiracy count is usually the one count that survives and represents the framework for the government’s case. The lesson to be learned is that  it takes experienced prosecutors to make the right decisions in charging FCPA cases, and the DOJ must always stand firm in its review of sting cases to insure that there is no uncertainty or unfairness in its design.

Finally, Judge Matz’ decision to vacate the FCPA convictions in the Lindsey Manufacturing case for prosecutorial misconduct is an unfortunate reflection on the DOJ standards and training more than it is a comment on the DOJ enforcement of the FCPA. Prosecutorial misconduct has to be dealt with at the DOJ level with real sanctions for prosecutors who intentionally violate fundamental rules, including losing the privilege of representing the Department of Justice.” [For a prior post on this issue, see here].

Peter Henning (here) is a Professor of Law at Wayne State University School of Law.  Previously he was an enforcement attorney in the DOJ’s Fraud Section (as well as at the SEC) and, among other things, Professor Henning writes the always informative White Collar Crime Watch (here) at the New York Times.  Below is Professor Henning’s response to the question: what percentage of DOJ FCPA losses is acceptable?

“The recent acquittals in the Gabon FCPA sting case, coupled with a hung jury for other defendants, and dismissal of charges for prosecutorial misconduct in another foreign bribery prosecution in Southern California, raise an interesting question about the Justice Department’s focus on individuals as defendants.  While it is usually easy to get a company to agree to a guilty plea, or to enter a deferred prosecution agreement, individuals are more likely to take a case to trial.  So how many losses are too many?

The recent post (here) on the FCPA Professor Blog by the jury foreman in the Gabon sting case highlights how difficult it is to pursue these cases with a very complex law that requires proof of different intents – like knowingly and corruptly – based on circumstantial evidence against people who often have an unblemished record.  Multi-defendant cases are not uncommon in the drug area, but those are not nearly as difficult because the underlying conduct is clearly illegal, while the FCPA involves business transactions that are often quite ordinary.

I do not think there is a number that can be summoned to say when there are too many acquittals, especially because the result cannot be known in advance.  Some defendants have entered guilty pleas in cases that have resulted in acquittals of others, and the evidence in the Gabon sting case shows that there was a basis to pursue the charges.  But perhaps the Justice Department will now recognize that FCPA cases present distinct challenges, especially when multiple defendants are involved who will often have different levels of culpability.  It is not like the drug gang in which everyone is involved in illegal conduct, so ignoring the shades of gray in an FCPA case has been shown to be quite problematic.  Treating everyone as if they are the same does not work because, as the foreman’s report makes clear, juries are careful in assessing the evidence, and will not take a “birds of a feather flock together” approach, as can happen in other types of prosecutions.”

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Speaking of the guest post (here) earlier this week from the Africa Sting jury foreman, readers may also be interested in published comments to the post.  Also, as has been reported elsewhere (see here for instance), since the post ran, the DOJ, during a status conference with Judge Leon, requested a two week continuance for the next trial so that it can evaluate the remaining cases in light of recent events.

A Guest Post From The Africa Sting Jury Foreman

After Judge Leon declared a mistrial in the second Africa Sting trial last week (see here for the prior post), I was contacted by an individual who identified himself/herself as the jury foreman in the case.  After taking certain steps to reasonably assure myself of the individual’s identity and role in the Africa Sting case, I am pleased to publish this guest post from the jury foreman.

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“As foreperson of the jury that acquitted Messers. Caldwell and Godsey of FCPA charges, and as a non-practicing attorney, I thought it might be useful to those who practice and study the FCPA to pull back the veil a bit on jury deliberations. Professor Koehler has kindly provided this forum. The following view and recollection of the trial and deliberations is mine alone. In the interest of full disclosure, I voted not guilty in the final vote for all defendants and on all charges, convinced that the government’s evidence did not establish guilt beyond a reasonable doubt on any of the charges.

Jury Composition and Working Relationship

The jury was composed of four African-American men, three African-American women, one Asian-American woman, and four Caucasian men. General conversation over the course of the trial established that at least half of the jurors had at least some college education. Jury interaction was collegial at all times, excepting only a few confrontational moments during the last three days of deliberations.

Approach to Deliberations

We began deliberations with a secret ballot straw vote on all defendants. At this vote we did not vote specifically on each of the charges, and jurors were encouraged to vote “Leaning Guilty,” “No Leaning,” or “Leaning Not Guilty.” The results of the vote clearly indicated that it would be easiest to reach unanimity on Mr. Caldwell as ten jurors indicated a leaning toward his innocence and two indicated no leaning whatsoever. The straw vote also indicated that Messers. Godsey and Morales would be next most likely to receive a verdict and that the charges against the Mushriquis would be the greatest challenge. The initial straw vote on the Mushriquis returned approximately six “Not Guilty” votes each with the balance evenly split between “Guilty” and undecided. Over the course of the deliberations, no defendant ever received more than five guilty votes, though I did once incorrectly report a straw vote of 7-5 as 6-6 to the jury.

My initial recommendation that we walk through the elements of the offense was quickly overwhelmed by an unstoppable flood of opinion on process and evidence. It was not disorderly, but indicated the challenge of focusing a jury on a single element as it relates to a single defendant after nearly three and half months of being unable to discuss the case. We settled into a pattern for the first week of reviewing chronologically the evidence against a particular defendant.

Partial Verdict

In our first two days of deliberations we were able to reach unanimity on Mr. Caldwell and were only one vote from a “Not Guilty” verdict for Mr. Godsey. Some jurors were persuaded, based on the character evidence offered in Mr. Caldwell’s defense, that he could not have committed the offense. Others had reasonable doubt that he was able to hear the terms of the deal or that, based on his relative inexperience in the industry, he understood the terms of the deal. Some jurors gave significant weight to what they perceived to be Mr. Caldwell’s deference to Mr. Giordanella during the meeting in which the deal was pitched.

The initial straw poll did include two or three “Guilty” votes against Mr. Godsey. However, in the review of the evidence against Mr. Godsey, it became clear to the jury that there was very little indication in the evidence of his state of mind. The evidence included video of him in a meeting in which the terms of the deal were described, but the terms of the deal were described less fully than in the meetings with other defendants. In addition, Mr. Godsey made very few statements or even passive affirmations (“yeah,” “ok,” “uh huh”) near those portions of the meeting that contained the statements about part of the agent’s commission going to the Gabonese Minister of Defense. The last “Guilty” vote against Mr. Godsey fell on the morning of our third day of deliberations. In our review of the evidence against Mr. Morales, the holdout developed reasonable doubt of Mr. Godsey’s guilt and switched his or her vote.

We continued to deliberate for a couple more days in the same manner – walking chronologically through the evidence against Mr. Morales and then the Mushriquis. We then sent in our first note indicating that we were deadlocked and Judge Leon instructed us to try again, as we knew he would. At this point it became clear that we were not near agreement on these defendants and that we needed to revert to the original suggestion of walking through the elements of the offense for each of the three remaining defendants.

Adjustment to Deliberations

Upon our switch to an element-based deliberation, we quickly obtained agreement that each of the defendants was a “domestic concern” (as Judge Leon had instructed us) and that each of the defendants had made a payment. These were the first and third of six elements of the offense in our instructions.

The remaining elements of the offense were that the defendant had: 2) acted corruptly and willfully; 4) known that at least part of the payment was going to a foreign official; 5) intended the payment for at least one of four disallowable purposes (most notably, to influence the foreign official to do something or to gain an unfair advantage); 6) made the payment to obtain or retain business.

Deliberation following this approach was an arduous task because of the difficulty of keeping a single defendant and a single element in focus at a time. In addition, the idiosyncratic views of a few of the jurors came to light during this period. For example, one juror would not have convicted any of the defendants because he or she was not persuaded it would have been illegal for the Gabonese Minister of Defense to accept such a payment. “What,” she or he asked, “if that is part of his compensation? I don’t know. And the prosecution didn’t offer any evidence.” In this juror’s view, the fifth element of the offense could not be met without such evidence.

Another juror had difficulty parsing the language of the instructions. For example, he or she repeatedly pointed to a gloss of one of the terms of art (“corruptly,” I believe) included after the elements of the offense. The gloss used a brief phrase (something like “for some illegal purpose”) to broadly describe the four sub-elements of the fifth element of the offense. This juror would have voted “Not Guilty” on any of several grounds and so the extended detour to address this misreading of the instructions only muddied the water for others.

After a week of deliberation along these lines, we realized that there was no more to be done. For Mr. Morales, one member of the jury simply had insufficient doubt about his guilt to vote “Not Guilty.” This juror leaned heavily on his or her perception that Mr. Morales’s was more engaged in the meeting where the terms of the deal were described than was Mr. Godsey. This juror also relied heavily on a recorded phone call that corroborated Mr. Bistrong’s testimony that Mr. Morales had been made aware of the concerns another subject of the sting had about the legality of the deal.

Counsel for the Mushriquis had suggested during the trial that they had suspicions that Gabon was not the end destination for the goods in the first phase of the transaction. The jury agreed that at some point they were aware that Gabon was the destination of the goods.   So we started from the end of the transaction and walked that thread back through the evidence until all jurors agreed that they probably understood Gabon to be the end user before the date of a specific meeting.  This helped us determine, so far as we were able, their states of mind on the dates they were alleged to have violated the FCPA.

Even with this agreement, a significant majority of the jurors continued to vote “Not Guilty” on the Mushriquis because of reasonable doubt as to whether they believed at least a portion of the commission payment was going to a foreign official. And, of course, without agreement on that point, we could not even get to the question of their intent in that payment. In the end, only three jurors concluded that the evidence demonstrated beyond a reasonable doubt that the Mushriquis believed the goods were going to Gabon and that a portion of the commission they remitted in the first phase of the deal was going to a foreign official. All jurors admitted there was language in an email from Ms. Mushriqui and on a phone call from Mr. Mushriqui that could be reasonably construed as skepticism, but we could not secure unanimous agreement that the skepticism related specifically to the allegedly illegal payment.

Credibility of Witnesses

It may be clear from the description above that very little of the jury’s deliberations took into account the testimony of prosecution witnesses. In part, that is because the jury with near unanimity found nearly all of the prosecution witnesses to be evasive and combative. 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. And very little testimony would have been useful in reaching those determinations.

Nature of the Sting Operation

As noted above, a number of jurors were troubled by the nature of the FBI sting operation. Specifically, some seemed unwilling to convict on the basis of vague language (e.g., “commission” instead of “bribe”) and where the defendants had not sought out the deal. These jurors were largely not participatory in the deliberations and when specifically called upon for their views would typically voice agreement with views expressed by some other juror voting “Not Guilty.” But enough small comments through the course of deliberations lead me to believe that their underlying view was that the defendants had acted in good faith and the FBI/DOJ in bad faith. Along the same lines, more than one juror voiced concern that it would be unjust for the defendants in this case to be convicted when the government relied so heavily on Mr. Bistrong who freely admitted on the stand more illegal acts than the entire group of defendants was accused of, yet was able to plead to only one count of conspiracy to violate the FCPA.

A similar issue was raised specific to Messers. Morales and Godsey. In their case, the goods they were selling would not have received State Department clearance to be exported to Gabon. Evidence indicated that nine of the subjects of the sting would be lost if State failed to grant clearance and the FBI advocated such clearance on the grounds that the goods would not actually be exported to Gabon. Some jurors expressed concern that this was overreaching by the government and that it was impossible to determine what the intent of these defendants would have been at the point in time they were alleged to have violated the FCPA because they would never have been engaged in the deal at that point absent government interference. This “impossibility” defense was not raised in court – it originated in the deliberation room and may have carried special weight for some jurors due to concerns expressed by Mr. Morales (upon first being told of the potential deal) that treaties might not permit the sale and export.

Complications Related to the Size and Length of the Trial

In my opinion the larger and longer trial accomplished several things contrary to the goals of the prosecution. First, it gave the jury multiple iterations of the deal invitation language. When comparing the less clear language used in some pitches with the clearer language used in others, it provided a mechanism to conclude that there was relatively less likelihood of culpability for those who heard less clear language or who were less participatory in their pitch meetings.

Second, the decision of the government to prosecute at least one defendant who seemed to most of the jurors to be clearly innocent leant greater weight to concerns that the government was conducting the sting or prosecutions in bad faith.

Third, facing the defendants nearly every day for more than three months seemed to me to humanize the defendants in the eyes of many jurors. At least one juror expressed absolute confidence that none of the defendants would intentionally have participated in a crime and this seemed to me to be rooted in empathy. Additionally, jurors noticed that defendants were being burdened with a much longer trial than was necessary as very little of the testimony was applicable to more than two defendants at a time.

Fourth, it gave the jurors a very long time to develop their own theories of the case. Although the judge appropriately warned us at least once a day to not form conclusions, I suspect that it is largely, if unintentionally, violated in a trial of this length.

Conclusion

The government has the option to try Mr. Morales and Mr. and Ms. Mushriqui 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.”

Writer’s Cramp At The DOJ?

This is the second time I have written about this issue (see here for the first).  This time, the examples are more numerous and more significant.

The DOJ has stated (here) that its FCPA website (here) includes documents related to more than 140 FCPA prosecutions including “charging documents, plea agreements, deferred prosecution and non-prosecution agreements, press releases,and relevant pleadings and orders.”  To be sure, the DOJ has a nice (and much improved upon) FCPA website.  However, as demonstrated below, if one’s objective is to be informed of all FCPA developments (not just those that cast the DOJ in a favorable light), there are a number of websites, this one included, that highlight such developments, but the DOJ’s website is not one of them.

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In January 2010, the DOJ issued this release announcing the Africa Sting charges and it also held a press conference to discuss the charges.  In July 2011, Judge Richard Leon declared a mistrial in the first Africa Sting case (see here for the prior post).  However, there was no DOJ press release announcing this development and if your only source of information was the DOJ’s FCPA website you would not know that this development occured because there is no mention of it.

In 2007 Si Chan Wooh, an employee of SSI International, a wholly-owned subsidiary of Schnitzer Steel, was criminally charged (see here).  The DOJ issued a release (here) anouncing the charges and related guilty plea.  However last year, as reported in this Wall Street Journal Corruption Currents story, “the Justice Department informed Wooh’s counsel that a Federal Bureau of Investigation agent assigned to the investigation of Schnitzer and its employees had written a letter to high-ranking prosecutor in Washington saying Wooh should not have been charged in connection with the case.”  In October 2011, in this filing the DOJ moved to dismiss the case “out of prosecutorial discretion in the interests of justice and the efficient use of government resources.”  There was no DOJ press release announcing this development and if your only source of information was the DOJ’s website you would not know that this development occured because there is no mention of it.

In May 2011, the DOJ issued this same day release when Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee were found guilty of FCPA offenses after a jury trial.  However, in November 2011, Judge Howard Matz vacated the FCPA convictions of Lindsey Manufacturing and its executives and dismissed the indictment (see here for the prior post).  Again nothing from the DOJ, no press release, and no mention of this development on its website.

In December 2011, during the second Africa Sting case, Judge Richard Leon, at the close of the DOJ’s case, dismissed a conspiracy charge as to all defendants (see here for the prior post).  Because this was the only charge Stephen Giordanella faced, he was exonerated.  However, if your only source of FCPA knowledge was the DOJ’s website, you would not know this because there is nothing there as to this development.

In November 2009, the DOJ issued this release when John Jospeh O’Shea was arrested and charged with FCPA and related offenses.  However, on January 16th, Judge Lynn Hughes, after the DOJ’s case, dismissed the FCPA charges against O’Shea (see here for the prior post).  However, if your only source of FCPA knowledge was the DOJ’s website, you would not know this because the DOJ did not issue a release and there is nothing on its website regarding this development.  [Someone was staffing the DOJ press office at this time because approximately 18 hours later, the DOJ announced (here) a $55 million FCPA enforcement action against Marubeni Corporation of Japan.]

Returning to the second Africa Sting trial, earlier this week, Patrick Caldwell and John Godsey were found not guilty by the jury (see here for the prior post).  The next day, Judge Leon declared a mistrial as the remaining defendants –  John Mushriqui, Jeana Mushriqui and Marc Morales (see here for the prior post).  Again, nothing from the DOJ as to these developments.

President Obama has championed transparency and open government.  In this release, President Obama stated as follows.  “Transparency promotes accountability and provides information for citizens about what their Government is doing.  Information maintained by the Federal Government is a national asset. My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use.”

Consistent with President Obama’s directive, the DOJ’s website ought to be improved and ought to keep citizens informed of all FCPA developments – not just those that cast the DOJ in a favorable light.