Additional Lighthouses and Buoys Sentence
Last Friday, the DOJ announced (see here) that John Warwick was sentenced to approximately three years in federal prison “for his role in a conspiracy to pay bribes to former Panamanian government officials to secure maritime contracts.” U.S. District Court Judge Henry Hudson also sentenced Warwick to two years of supervised release following his prison term and ordered Warwick to forfeit approximately $330,000 in proceeds from his crime.
In February, Warwick pleaded guilty to a one-count indictment charging him with conspiring to make corrupt payments to Panamanian officials for the purpose of securing business for Ports Engineering Consultants Corporation in violation of the Foreign Corrupt Practices Act. The business involved contracts to maintain lighthouses and buoys along Panama’s waterways.
This is the same conduct at issue in the prior plea and sentencing of Charles Edward Jumet. (See here for additional posts on this matter). In April, Jumet was sentenced to approximately 7.25 years in federal prison after pleading guilty to two charges – conspiracy to violate the FCPA and making false statements to federal agents. (See here). Even though Jumet’s charges were equal part FCPA and equal part making false statements to federal agents, his sentence was described as the “longest prison term imposed against an individual for violating the FCPA.”
Given that Warwick was charged and pleaded guilty to the same conspiracy as Jumet, it suggests that the FCPA component of Jumet’s sentence was between 3-4 years.
Two-Tiered Justice?
Certain corporations (acting through employees and agents) in certain industries, most often selling certain things, to certain customers can seemingly violate the FCPA’s anti-bribery provisions with very little consequence. In fact, with increasingly frequency, such companies are not even charged with FCPA antibribery violations and/or may not even have to plead guilty to anything. See here for the recent Daimler, here for the recent BAE, and here for the (somewhat) recent Siemens “bribery, yet no bribery” enforcement actions. Sure these companies coughed up hundreds of millions of dollars, in some cases offered up a few subsidiaries to take the fall, but yet were allowed to escape the full legal consequences of their action despite DOJ and SEC allegations that these companies paid hundreds of millions of dollars in bribes to obtain or retain hundreds of millions, and in some cases billions, of dollars of business. The deterrent message in these cases is so strong that the U.S. government continues to do business with these companies – see here for the recent $28 million dollar contract between the U.S. government and a BAE business unit – see here for a general overview of Siemens post-bribery scandal U.S. government contracts.
Charles Paul Edward Jumet of Fluvanna County, Virginia will probably not be getting U.S. government contracts in the near future.
In fact, he probably will not be doing much of anything (other than sitting around) in the near future.
Why?
Because yesterday he was sentenced to approximately 7.25 years in federal prison (see here for the DOJ release).
His crime?
Conspiring to violate the same law that Daimler, BAE, Siemens, its employees, and several other corporations, apparently are immune from violating … the FCPA’s anti-bribery provisions.
Surely, Jumet’s conduct was more egregious than that of Daimler, BAE, Siemens, and others?
Well, not exactly.
Not to make light of his crime, but according to the DOJ, the total amount that Jumet and others paid to Panamanian government officials to receive a lighthouse and buoy contract was approximately $200,000 – an amount that pales in comparison to the hundreds of millions of bribe payments in the above referenced enforcement actions.
Even though Jumet’s sentence is equal part FCPA and equal part making false statements to federal agents, it is not surprisingly being termed the “longest prison term imposed against an individual for violating the FCPA.”
The DOJ release contains the usual get tough language (i.e. “foreign corruption carries with it very serious penalties,” “bribery isn’t just a cost of doing business overseas [… but] a serious crime that the U.S. government is intent on enforcing.”
Serious penalties and intent on enforcing against whom is the question.
The issue is not whether the DOJ was too lenient in the Daimler, BAE, and Siemens case or whether the DOJ was too harsh in the Jumet case.
Rather, the issue is that there appears to be a two-tiered justice system when it comes to FCPA enforcement.
As noted in the DOJ’s release, Jumet’s co-defendant John Warwick, who also pleaded guilty, is scheduled to be sentenced by the same judge on May 14th. (See here for prior posts on this entire enforcement action).
Potpourri
A Friday roundup of recent FCPA events.
An FCPA Sentencing Trend?
As noted in yesterday’s DOJ release (here), two former executives of Willbros International Inc. (a subsidiary of Houston-based Willbros Group Inc.) were sentenced for their roles in a conspiracy to make improper payments to “foreign officials” in Nigeria and Ecuador.
Jason Edward Steph was sentenced to 15 months in prison and Jim Bob Brown was sentenced to 366 days in prison.
For more on the Willbros matter, see here and here.
The DOJ’s sentencing recommendations appear to be sealed, but one can assume, given the “light” sentences, that perhaps the DOJ likely sought sentences greater than those issued by District Court Judge Simeon Lake.
If so, this would appear to continue a trend of judges sentencing FCPA defendants to prison sentences less than those recommended by DOJ.
For instance, in Frederic Bourke case, a case which involved a “massive bribery scheme” according to DOJ, Judge Shira Scheindin rejected the 10-year prison sentence proposed by DOJ and sentenced Bourke to 366 days in prison. (see here). In sentencing Bourke, Judge Scheindin is reported to have said “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crok or a little bit of both.”
With several FCPA sentencing dates on the horizon, this apparent trend will be an issue to watch.
See here for local media coverage regarding the sentences.
Kozeny’s Tan Not in Jeopardy
While Bourke (see here) prepares his appeal, Viktor Kozeny, the alleged master-mind of the scheme to bribe officials in Azerbaijan in connection with privatization of the state-owned oil company, will be staying put in The Bahamas as an appellate court again rejected DOJ’s extradition attempts.
As noted in the recent Bahamian Court of Appeals decision (here), Kozeny, a Czech national, has been living in The Bahamas since 1995 and has not departed the country since 1999.
The opinion notes that there is no dispute “that there was a conspiracy to corrupt the Azeri officials and that such officials were paid money, given gifts and provided shares in certain companies under the control of [Kozeny] without payment; and had certain medical procedures paid for them by [Kozeny].
Even so, the court concluded that while The Bahamas did indeed have a bribery/corruption statute, it applied only to bribes within The Bahamas or given to a Bahamian public officer. Thus, because Kozeny’s conduct would not violate Bahamian law, the appellate court upheld the lower court’s denial of the extradition request.
For additional coverage (see here and here and here).
According to these reports, the decision may be appealed to London’s Privy Council pursuant to Bahamian legal procedure. Kozeny’s U.S. lawyer is quoted as saying “enough is enough” and U.S. prosecutors should finally accept the fact that Kozney, a non-U.S. citizen, could not violate the FCPA as it existed in 1998 – the year in which the bribe scheme perhaps ended – although, as noted in the opinion, the U.S. alleges that the bribe scheme continued into 1999.
Why is this relevant?
Because the FCPA was amended in 1998 to include, among other provisions, 78dd-3 which applies the antibribery provisions to “any person” (i.e. foreigners) “while in the territory of the U.S.” from making use of the mails or any other means or instrumentality of interstate commerce in furtherance of an improper payment.
The SFO Continues to “Step-It-Up”
Today, the U.K. Serious Fraud Office (the functional equivalent of the DOJ) issued a release (here) indicating that a former BAE agent has been charged with “conspiracy to corrupt” 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.”
For local media coverage of the charges (see here).
With a new Bribery Bill expected in the U.K. by years end, the SFO continues to “step-it-up” (see here for more on the SFO).
Disclosing FCPA Compliance
Public companies dislose FCPA issues all the time. Rarely though do the disclosures concern issues other than internal investigations and potential enforcement actions.
Accordingly, two recent SEC filings caught my eye.
China MediaExpress Holdings, Inc. (a Delaware company) recently disclosed (here) that it:
“[e]ntered into a securities purchase agreement with Starr Investments Cayman II, Inc. Under this agreement, Starr will, subject to various terms and conditions, purchase from the Company 1,000,000 shares of Series A Convertible Preferred Stock and warrants to purchase 1,545,455 shares of the Common Stock of the Company for an aggregate purchase price of US$30,000,000.”
One of the conditions was that the company “shall have adopted a program with respect to compliance with the US Foreign Corrupt Practices Act” and a post-closing covenant obligates the company to “implement a program regarding compliance with the US Foreign Corrupt Practices Act not later than April 30, 2010.”
Cardtronics Inc. (an operator of ATM networks around the world) (here) recently disclosed (here) that:
“On January 25, 2010, the Board of Directors by unanimous vote approved three management proposed modifications to the Company’s Code of Business Conduct and Ethics. The modifications as approved by the Board include: (i) adding a section that addressed compliance with the Foreign Corrupt Practices Act and International Anti-Bribery and Fair Competition Act of 1998.”
Costa Rica Joins the Club
Last, but certainly not least, Costa Rica recently announced a first … the first time a foreign corporation has paid the government damages for corruption.
As noted here, telecom company Alcatel-Lucent recently disclosed a $10 million payment to settle a corruption case in Costa Rica in which it was accused of paying kicbacks to former Costa Rican President Miguel Angel Rodriguez (and others government officials) in return for a 2001 contract worth $149 million.
There has been FCPA/corruption issues on both sides “of the hyphen” as noted here in this recent Main Justice article.
And with that, have a nice weekend.
Jefferson Sentenced / When a Jury Verdict is Relegated to a Footnote
[Please scroll down, there are three posts today]
Today, former Congressman William Jefferson was sentenced to 13 years in federal prison. He was convicted in early August of a variety of charges (solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy)(see here for the DOJ release).
However, he was acquitted on the substantive FCPA antibribery charge.
As mentioned above, Jefferson was convicted of conspiracy, but what conspiracy was unclear as the indictment charged conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA.
Problem is, the jury was instructed that to convict it only needed to find Jefferson guilty on two out of three of those counts.
In announcing the jury verdict, the court did not specify which counts the jury agreed on … the jury may have concluded that Jefferson conspired to violate the FCPA or it may have not. (See here for my prior post). See here for what others have said.
This uncertainty / ambiguity, it would seem, matters little to the DOJ as its sentencing memorandum in the Jefferson case says that “… as egregious and illegal as [Jefferson’s] bribe solicitations were, Congressman Jefferson further compounded his criminal culpability by conspiring with others to pay a bribe to the then-sitting Vice President of Nigeria.” (p. 6).
Given the above, this statement would seem to be a bit of a stretch based on the jury’s verdict.
Sure, the DOJ sentencing memorandum mentions the jury’s verdict on this issue, but it relegates the verdict to a mere footnote. Here is the footnote in its entirety:
“The government recognizes that the jury returned a verdict of “not guilty” to the charge contained in Count 11 of the indictment, a substantive violation of the Foreign Corrupt Practices Act. The government believes that the jury found Congressman Jefferson not guilty on Count 11, at least in part, because he ultimately failed to deliver the $100,000.00 in cash to the Nigerian Vice President before the Vice President departed the United States on July 31, 2005. However, the evidence fully supports the proposition that the jury, nevertheless, found that the defendant conspired to bribe the Vice President of Nigeria, an object of the conspiracy charged in Count 1, a count on which the jury returned a guilty verdict. Such a verdict would not require proof of the actual delivery of the cash to the Vice President (front end) or actual payment of the percentage of the proceeds of the joint venture (back end). The government believes that the evidence supports such a split finding by the jury as to Counts 1 and 11. Although delivery of the cash to the Vice President of Nigeria was not a legal pre-requisite to finding Congressman Jefferson guilty of Count 11, it offers a compelling explanation for the jury’s split verdict. Finally, the government recognizes that such a split verdict can never be completely confirmed because the conspiracy charged in Count 1 contained three objects, one of them being the charge related to the bribe of the Vice President of Nigeria. The verdict form completed by the jury on August 5, 2009 did not require the jury to delineate which, if not all, of the objects charged in the conspiracy in Count 1 were found to have been proved, only that at least one of the objects was proven by the government beyond a reasonable doubt.”
As if relegating a jury verdict to a footnote is not unsettling enough, yesterday Assistant Attorney General Breuer in his speech (see here for the post) was so bold as to say this:
“In the past few months, we have the completed the trials of the Greens in California, of Mr. Bourke in New York and of former Congressman William Jefferson in Virginia. In each of these cases, individuals were found guilty of FCPA violations and face jail time.”
366 Days
After a nearly decade long investigation which spanned the globe, dismissal of FCPA substantive charges on statute of limitations grounds, reinstatement of the FCPA substantive charges, a superseding indictment which then dropped the FCPA substantive charges in exchange for “only” conspiracy to violate the FCPA, and a six week jury trial this past summer, the DOJ finally extracted its “pound of flesh” from Frederic Bourke.
As has been widely reported, this afternoon Judge Shira Scheindin (S.D.N.Y.) sentenced Bourke to a year and a day in federal prison (followed by three years probation) and ordered him to pay $1 million fine. The DOJ sought a 10 year prison sentence. The DOJ release announcing the sentence is presumably forthcoming.
Bourke who? What’s this about?
To those of you wading into the details of this case for the first time or only recently, you will be well served by reading Andrew Longstreth’s superb piece which recently appeared in the American Lawyer (see here).
Bourke was convicted in July by a jury for conspiring to pay bribes to Azerbaijan officials. The DOJ news release announcing the conviction (see here) called it a “massive [bribery] scheme.”
What was Bourke guilty of? According to the DOJ release:
“Evidence presented at trial established that Bourke was a knowing participant in a scheme to bribe senior government officials in Azerbaijan with several hundred million dollars in shares of stock, cash, and other gifts. According to evidence presented at court, the bribes were meant to ensure that those officials would privatize the State Oil Company of the Azerbaijan Republic (SOCAR) in a rigged auction that only Bourke, fugitive Czech investor Viktor Kozeny and members of their investment consortium could win, to their massive profit.”
Bourke lawyers (and many other observers) feel that Bourke was simply guilty of being negligent and not asking enough questions before making a foreign investment, an investment that was also made by former U.S. Senate Majority Leader George Mitchell and Columbia University (among others). An investment that resulted in Bourke reportedly losing $8 million.
The Bourke case is arguably the most complex and convoluted case in the history of the FCPA.
Yet it is not over as Bourke’s lawyers have promised an appeal.
Under our legal system, if a grand jury indicts you, a jury convicts you, and a judge sentences you … well, that is just sometimes “how the cookie crumbles.”
However, the Bourke case and his sentence does not exactly leave one with “warm, fuzzy feelings.”
In fact, Judge Scheindin (i.e. the sentencing judge and the judge who denied Bourke’s post-verdict motions) is being widely reported as saying this at today’s sentencing hearing:
“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.”
That seems an appropriate end to this chapter of the Bourke saga.
******
I haven’t read every pleading in this case, every motion filed, nor obviously heard every word of evidence the convicting jury did. There is certainly enough in this case for a law school to one day offer an LLM in the Bourke case!
Nonetheless, it is a seriously open question in my mind as to whether this case was an appropriate exercise of prosecutorial discretion and whether justice has indeed been served with Bourke’s sentence.
So what do you think? What are your thoughts on the Bourke case and his sentence?
I would like to do a post on reader commentary in the coming days, so please do contact me if you are so inclined.
For starters, Brian Whisler of Baker & McKenzie contacted me. He is what Brian (a former federal prosecutor) had to say:
“In federal parlance, 12 months and one day translates into 10 months due to some quirky Bureau of Prisons calculus. This sentence is also less than the 2 years that the US Probation Office represented as the appropriate guideline sentence. I expected that the district judge would impose a sentence less than the two years because (1) Bourke lost $8 million in a bribery scheme that did not meet its objective; (2) Bourke has no criminal history and does not represent a future danger, economic or otherwise. This bribery case, while certainly important to DOJ in its dedicated effort to eradicate corruption globally, stands in sharp contrast to the likes of Madoff and others whose harm to others is readily apparent.”