BAE
In a joint enforcement action that is sure to generate much discussion and controversy, the U.K. Serious Fraud Office (SFO) and the U.S. DOJ announced today resolution of an enforcement action against BAE Systems.
The SFO announced (here) that it has “reached an agreement with BAE systems that the company will plead guilty” to the offense of “failing to keep reasonably accurate accounting records in relation to its activities in Tanzania.”
BAE’s press release (here) notes that “[i]n connection with the sale of a radar system by the Company to Tanzania in 1999, the Company made commission payments to a marketing adviser and failed to accurately record such payments in its accounting records. The Company failed to scrutinise these records adequately to ensure that they were reasonably accurate and permitted them to remain uncorrected. The Company very much regrets and accepts full responsibility for these past shortcomings.”
The SFO and company release note that BAE will pay a £30 million penalty “comprising a fine to be determined by the Court with the balance paid as a charitable payment for the benefit of Tanzania.”
In a strange turn of events, the SFO also announced (here) that it has withdrawn charges filed last week (see here) against a former agent charged with “conspiracy to corrupt” and for “conspiring with others to give or agree to give corrupt payments […] to unknown officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc.”
The SFO release notes that “[t]his decision brings to an end the SFO’s investigations into BAE’s defence contracts.”
So what happened to the charges and allegations involving certain Eastern and Central European governments, including the Czech Republic, Hungary, and Austria?
Good question.
Much like the wave of magician’s wand, they have simply disappeared.
Closer to home, the DOJ announced that it:
“filed a criminal charge (here) in the U.S. District Court for the District of Columbia against BAE Systems plc charging that the multinational defense contractor conspired to impede the lawful functions of the Departments of Defense and State, made false statements to the Departments of Defense and Justice about establishing an effective anti-corruption compliance program to ensure conformance with the Foreign Corrupt Practices Act and paid hundreds of millions of dollars in undisclosed commission payments in violation of U.S. export control laws.”
The DOJ and BAE release note that the company “will pay a fine of $400 million and make additional commitments concerning its ongoing compliance.”
According to the DOJ release (which is available through the DOJ Office of Public Affairs, but not yet publicly posted on DOJ’s website) “BAE Systems is charged with intentionally failing to put appropriate, anti-bribery preventative measures in place, contrary to the representations it made to the United States government, and then making hundreds of millions of dollars in payments to third parties, while knowing of a high probability that money would be passed on to foreign government decision makers to favor BAE in the award of defense contracts. BAE Systems allegedly failed to disclose these payments to the State Department, as it was required to do so under U.S. laws and regulations in order to get necessary export licenses.”
The bold language above would expose most companies to an FCPA enforcement action, but BAE is no ordinary company. It is a major defense contractor on both sides of the Atlantic (as noted in the criminal information “in 2008, BAE was the largest defense contractor in Europe and the fifth largest in the U.S. as measured by sales”).
You can bet that these charges were the subject of much negotiation so as to not upset current or future government contracts as well as foreign policy issues and concerns.
The BAE charges and thus similar to those against Siemens in December 2008. In that case, despite the company engaging in bribery “unprecedented in scale and geographic scope” and despite the company being one in which “bribery was nothing less than standard operating procedure” (both direct DOJ quotes), the company avoided FCPA antibribery charges. (See here for prior posts about Siemens).
These two cases seriously raise the issue of whether certain companies in certain industries are simply “above” the FCPA.
Can the enforcement agencies on both sides of the Atlantic say with a straight face that this case was merely about improper record keeping, making false statements to the government, and export licenses?
Transparency, corporate accountability, and indeed a criminal justice system all suffered setbacks today.
The FCPA suffered a black-eye as well and one would be right to ask, “what the heck is going on here!”
Africa Sting – “Individual 1” Identified … and Charged … In a Different Case
“Individual 1” – a key player in each of the Africa Sting indictments (see here) has been identified by the New York Times (see here) as Richard T. Bistrong, a former employee of Armor Holdings. (Armor Holdings, a former publicly-traded company, is currently a subsidiary of BAE Systems).
In an ironic twist, Bistrong was charged today in a criminal information (see here) with conspiracy – not for his role in the Africa Sting case – but a wholly separate bribe scheme.
The information charges Bistrong with conspiracy to violate the FCPA’s antibribery provisions, books and records provisions, and the International Emergency Economic Powers Act and related Export Administration Regulations.
The conspiracy is broad in scope and includes charges that Bistrong conspired with others: (i) to obtain for his employer, United Nations body armor contracts (valued at $6 million) by causing his employer to pay $200,000 in commissions to an agent while knowing that the agent would pass along a portion of that money to a United Nations procurement officer (a “foreign official” per the FCPA) to cause the officer to award the contracts; (ii) to obtain for his employer, a $2.4 million pepper spray contract with the National Police Services Agency of the Netherlands by paying a Dutch agent approximately $15,000 while knowing that the agent would pass along some of that money to a procurement officer with the Police Services Agency to influence the contract; (iii) to obtain for his employer (although it was never obtained), a contract to sell fingerprint ink pads to the Independent National Elections Commission of Nigeria by making kickback payments to a commission official indirectly through an intermediary company.
As the New York times notes, a “criminal information is typically filed when the defendant has waived indictment and is negotiating a plea agreement.”
The New York Times story concludes by describing the abrupt end to today’s court hearing.
Indicting a “Foreign Official” – Part II
Yes, there is FCPA news other than the Africa Sting case.
In connection with the Green case (see here), an indictment was recently unsealed (see here) against Juthamas Siriwan and Jittisopa Siriwan.
According to the indictment, Juthamas “was the senior government officer of the Tourism Authority of Thailand (TAT)” and she is the “foreign official” the Greens were convicted of bribing. Jittisopa is the daughter of the “foreign official” and also alleged to be an “employee of Thailand Privilege Card Co. Ltd.” an entity controlled by TAT and an alleged “instrumentality of the Thai government.”
Incidentally, the Green’s sentencing (which was to occur today) in which the government is essentially seeking a life sentence for Mr. Green based on FCPA, as well as other convictions and factors, was postponed until March. For more on that issue, see here.
As noted in the first Indicting a “Foreign Official” post a month ago (see here), the FCPA only covers “bribe-payers, not “bribe-takers.”
Thus, like the prior indictment against the alleged Haiti “foreign officials” (Robert Antoine and Jean Rene Duperval), the charges against the Siriwans are not FCPA charges, but largely conspiracy to money launder and “transporting funds to promote unlawful activity.”
However, unlike Antoine and Duperval who are alleged to have U.S. bank accounts which were used in the connection with the bribery scheme, the Siriwan’s bank accounts were located in Singapore, the United Kingdom, and the Isle of Jersey.
There are however facts alleged in the Siriwan indictment which suggest a U.S. nexus. The indictment alleges that the Greens did on occasion “arrange for cash payments to be made directly to Juthamas Siriwan, including during her trips to Los Angeles, California.” The indictment further alleges that Juthamas Siriwan “sent and caused to be sent to co-conspirator Gerald Green a facsimile on TAT letterhead providing wire instructions for transferring funds.” Finally, the indictment also alleges that “co-conspirator Patricia Green received instructions to divide ‘commission’ payments owed to defendant Juthamas Siriwan into wire transfer to three separate accounts.” Although the indictment does not say, it is presumed that the facsimile and instructions were sent to the U.S.
The “transporting funds to promote unlawful activity” charges (two – eight) of the indictment rely on 18 USC 1956(a)(2)(A) which reads in pertinent part:
“(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States
(A) with the intent to promote the carrying on of specified unlawful activity
shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both.”
The specified unlawful activity alleged in the indictment is “namely, bribery of a foreign official” in violation of the FCPA; “bribery of a public official of Thailand” in violation of Thai law; and the “misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official” in violation of Thai law.
In November 2009, Attorney General Eric Holder stated (see here) that the U.S. was committed to recovering funds obtained by “foreign officials” through bribery and the indictment seeks forfeiture of approximately $1.7 million in the foreign bank accounts.
Indicting a “Foreign Official”
Yesterday, the DOJ announced (see here) the unsealing of an indictment (see here) against Joel Esquenazi, Carlos Rodriguez, and Marguerite Grandison which charges (among other things) conspiracy to violate the FCPA and substantive FCPA violations for an alleged scheme to bribe two former employees of Haiti Teleco, the alleged “state-owned national telecommunications company.”
Esquenazi and Rodriguez are former executives of a privately owned, Florida-based telecommunications company and Grandison was the President of Telecom Consulting Services Corp., a Florida based company which served as an intermediary.
The unsealed indictment is the latest chapter in this matter; in May 2009, the DOJ announced (see here) the guilty pleas of Juan Diaz and Antonio Perez in connection with the same scheme.
This matter is also yet another example of an FCPA enforcement action in which the “foreign official” is an employee of an alleged state-owned or state-controlled entity.
That, however, is not why this enforcement action is noteworthy.
It is noteworthy because DOJ also indicted Robert Antoine and Jean Rene Duperval – the alleged “foreign officials.” According to the indictment, Antoine and Duperval both served as the “Director of International Relations of Haiti Teleco” and were responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco.
Of course, the charges were not FCPA charges, because the FCPA only covers “bribe-payers” not “bribe-takers” (see here, here, for prior posts on this subject).
Rather the charges against Antoine and Duperval were money laundering conspiracy and/or substantive money laundering charges.
According to the DOJ release, Antoine is from “Miami and Haiti” and Duperval is from “Miramar, Fla. and Haiti.” Further, according to the indictment, both individuals had bank accounts in the U.S. and these accounts were used in connection with the bribery scheme. (I wonder if Washington Mutual, Wachovia, or Miami Federal Credit Union were aware that Haitian “foreign officials” were among its customers!)
To my knowledge this is the first time “foreign officials” have been specifically charged as defendants in connection with an FCPA enforcement action. This indictment of “foreign officials” comes on the heels of AG Holder’s recent speech (see here) in which he stated that the U.S. government was committed to recovering funds obtained by “foreign officials” through bribery.