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Judge (Again) Significantly Rejects DOJ’s Recommendations In Sentencing Nexus Defendants

By on September 20, 2010 in Bourke, FCPA Sentences, Greens, Jason Steph, Jim Bob Brown, Joseph Lukas, Nexus Technologies, Nguyens

As noted in this DOJ release, last week several defendants in the Nexus Technologies enforcement action (see here for prior posts) were sentenced. Because many media sources merely regurgitate DOJ releases in such instances, this post may be the first you’ll learn that the sentencing judge in the Nexus matter significantly rejected the DOJ’s sentencing recommendations.

For instance, and as described more fully below, the DOJ sought a 14-17 year sentence for lead defendant Nam Nguyen, but the judge sentenced him to 16 months (plus 2 years of supervised release).

Further, the DOJ sought multi-year sentences for two defendants, but the judge sentenced them to probation.

The DOJ’s sentencing memoranda (see here for the 79 pages of collective material) provide an interesting read and clearly demonstrate the growing divide between how the DOJ views FCPA defendants and how judges view such defendants at sentencing. For instance, Judge Shira Scheindin stated at Frederic Bourke’s sentencing (see here) “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.”

The DOJ stated in Nam Nguyen’s sentencing memo that its recommendation (168-210 months) should be accepted “to promote general deterrence” and that conduct such as Nguyen’s “will hardly be deterred by sending the message that the consequences of such conduct is at worst several months of imprisonment.”

Yet, the judge still sentenced Nam Nguyen to 16 months (plus 2 years of supervised release).

Also of note is that the DOJ criticized Nam Nguyen for “subjectively” looking at the “history of FCPA sentencing, focusing on the statistical outlier of the case U.S. v. Green … but ignoring the more common cases of significant prison time” such as “Charles Jumet, who paid less than 1/3 of what Nguyen paid in bribes, but received 87 months’ imprisonment.”

Let me assert that it is the DOJ who is “subjectively” looking at the “history of FCPA sentencing” and that Jumet is the “statistical outlier” – not sentences such as of the Greens.

Indeed, it is very common for FCPA defendants to be sentenced to prison terms measured in days and months, not years.

Consider the following recent sentences:

Greens – 6 months (August 2010)

Frederic Bourke – 366 days (November 2009)

Jim Bob Brown – 366 days (January 2010)

Jason Edward Steph – 15 months (January 2010)

The below post provides an overview of the Nexus sentences as well as the DOJ’s sentencing memos.

Nam Nguyen

Sentence: 16 months, 2 years of supervised release

DOJ Recommendation: 168-210 months

In its sentencing memorandum, the DOJ stated that Nguyen “paid bribes to multiple Vietnamese government officials in exchange for contracts for his business” and that “Nguyen literally offered a bribe on every single contract bid over a period of more than nine years …”.

DOJ sought a four-level sentencing enhancement “because the offense involved a public official in a high-level decision-making or sensitive position.” Specifically, the DOJ asserted that Nguyen paid bribes to “Nguyen Van Tan, who was the Managing Director of T&T Co. Ltd. … the procurement arm of Vietnam’s Ministry of Public Safety.”

Other items of interest from the DOJ’s sentencing memorandum.

In a footnote, the DOJ asserts that “the court has ruled in favor of the government” on the “foreign official” issue briefed in the case. However, as noted in this prior post, the DOJ specifically argued throughout its brief that a court decision as to this issue was premature. What actually happened is that the judge denied the defendants’ motion to dismiss without comment or analysis. The DOJ stated in the same footnote that because Nguyen’s counsel discussed the “foreign official” issue in his sentencing memorandum, that this “raises serious questions as to whether or not he has actually accepted responsibility for his crimes.”

The DOJ memo contains “Exhibit A” – a chart detailing the “Sentences of Natural Persons Who Pleaded Guilty to FCPA Violations Since 2001.”

The chart is misleading.

Nowhere in the chart does it indicate, nor in the brief referencing the chart is it noted, that the sentences are not just for FCPA violations, but, in many cases, sentences based on other violations of law as well.

For instance, in the longest sentence on the DOJ’s chart – Charles Jumet (87 months) nowhere is it noted that the “FCPA” portion of the sentence was actually lower. Jumet pleaded guilty to two counts – conspiracy to violate the FCPA and making false statements to federal agents. The false statements portion of his sentence was 20 months. Thus, Jumet’s “FCPA” sentence was 60 months – not 87 months as suggested by the DOJ’s chart.

An Nguyen

Sentence: 9 months, 3 years of supervised release (notwithstanding that, per the DOJ’s sentencing memorandum, Nguyen was on probation at the time of his offense)

DOJ Recommendation: 87-108 months

In its sentencing memorandum the DOJ stated that Nguyen “paid bribes to multiple Vietnamese government officials in exchange for contracts for his family’s business.” Elsewhere in the memo, the DOJ states that “Nguyen’s bribery was particularly egregious.” In connection with its decision not to seek a sentencing enhancement for an offense involving a public official in a high-level decision-making or sensitive position, the DOJ noted that “Nguyen was unaware of the nature, position, or role of the specific officials who received the bribe payments.”

Kim Nguyen

Sentence: 2 years probation

DOJ Recommendation: 70-87 months (even after the DOJ’s downward departure recommendation)

The DOJ requested a Section 5K1.1 downward departure. The DOJ noted that “even though Kim Nguyen did not begin providing information to the government until shortly before trial” this information nevertheless “appeared to play a role in her siblings’ decisions to plead guilty.” The DOJ noted that “Nguyen met with the government on approximately two occasions to explain the business practices and financial records of Nexus Technologies” and “explained various entries in the Nexus books which allowed the government accurately to calculate the total amount of bribes paid by the defendants …”

In its sentencing memo, the DOJ stated that “Nguyen played a critical role in this conspiracy, as she was the person responsible for handling the finances and maintaining the books and records of Nexus.” The DOJ stated that Nguyen “funneled the bribe payments to an off-shore company controlled by Nexus, which then forwarded the bribe payments to the Vietnamese officers, and it was Kim Nguyen who falsified the associated wire-transfer documents to cover their tracks.” The DOJ further asserted that e-mail correspondence “makes it very clear that Kim Nguyen knew exactly what she was doing, and why.” As with An Nguyen, the DOJ did not seek a sentencing enhancement for Kim Nguyen and noted that “Kim Nguyen was unaware of the nature, position, or role of the specific officials who received the bribe payments.”

Joseph Lukas

Sentence: 2 years probation

DOJ Recommendation: 37-46 months (even after the DOJ’s downward departure recommendation)

The DOJ requested a Section 5K1.1 downward departure. The DOJ noted that Lukas “met with the government on approximately seven separate occasions over the course of approximately 1.5 years and explained everything he knew about his co-defendants, their criminal conduct, their personal histories, and their business records.” According to the DOJ, “Lukas also created spreadsheets of information for the government, voluntarily turned over his computer for government analysis, and spent hours upon hours poring through documents in order to explain the business practices of Nexus Technologies and the Nguyen siblings.”

In its sentencing memorandum, the DOJ stated that “Lukas helped Nexus Technologies pay bribes to multiple Vietnamese government officials in exchange for contracts.” According to the DOJ, “Lukas was responsible for vendor relations and negotiations in the United States (which included identifying vendors who could supply the requested goods at low enough prices to allow the bribe payments.)”.

*****

As to the Greens’ sentence, the DOJ noted in footnote 8 of Nam Nguyen’s sentencing memo that the “DOJ is considering appealing the sentence in that case.”

Potpourri

By on January 29, 2010 in BAE, Bourke, Compliance, Costa Rica, Count Alfons Mensdorff-Pouilly, Extradition, FCPA Sentences, Individual Enforcement Action, Jason Steph, Jim Bob Brown, Kozeny, Lucent, Serious Fraud Office

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.

An FCPA Triangle

By on November 13, 2009 in DOJ Enforcement Action, Halliburton, Individual Enforcement Action, Jason Steph, Jeffrey Tesler, Jim Bob Brown, KBR, Nigeria, Paul Novak, Third Parties, Willbros Group, Wojciech Chodan

First it was the company – Willsbros Group Inc. (see here).

Then, it was the company’s employees – Jim Bob Brown (see here) and Jason Steph (see here).

Finally, it is the company’s consultant – Paul Novak (see here).

An FCPA triangle of sorts.

Don’t hold your breath waiting for an FCPA square because, as has been noted in previous posts, the final piece of the puzzle … the “foreign official” will not be happening anytime soon as the FCPA only applies to the “briber-giver” not the “bribe-taker.”

As noted in the DOJ release, Novak (a former consultant for Willbros International Inc. – a subsidiary of Willbros Group Inc.) pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA in connection with payments to Nigerian “foreign officials.”

Assistant Attorney General Breuer (the blog’s “person of the week” given his frequent mention here in the last few days) had this to say:

“The use of intermediaries to pay bribes will not escape prosecution under the FCPA. The Department will continue to hold accountable all the players in an FCPA scheme – from the companies and their executives who hatch the scheme, to the consultant they retain to carry it out.”

Of course, there still must be jurisdiction over the consultant, but this was not a problem in the Novak matter as he is a U.S. citizen and thus subject both to territorial jurisdiction (i.e. U.S. nexus – see 78dd-2(a)) or nationality jurisdiction (see 78dd-2(i)).

This isn’t the first time the DOJ has gone after consultants or agents. In March 2009, the DOJ unsealed indictments against U.K. citizens Jeffrey Tesler and Wojciech Chodan for their alleged roles in the KBR/Halliburton Nigeria bribery scheme. (see here for the DOJ release, here for the indictment).

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