[This post is part of a periodic series regarding “old” FCPA enforcement actions]
Yesterday’s post highlighted a number of Foreign Corrupt Practices Act enforcement actions in connection with U.S. government aid or assistance programs.
This post goes into more detail regarding the DOJ’s 2002 FCPA enforcement action against Richard Pitchford (the Vice President and Country Manager in Turkmenistan for the Central Asia American Enterprise Fund (CAAEF), an entity wholly funded by a $150 million appropriation from Congress pursuant to the Support for Eastern European Democracy Act of 1989 and the Freedom for Russia and Emerging Eurasian Democracies and Open Market Support Act of 1992).
One of the ironies with this enforcement action (there is another highlighted at the end of the post) is that prior to the enforcement action Pitchford was quoted as saying: “The potential in Central Asia is tremendous, especially in Turkmenistan because of its proximity to Turkey and the Persian Gulf. What’s missing is government political will to do the job. There’s no doubt this is a dictatorship and from top to bottom, it’s corrupt.” A short time later, Pitchford himself would be prosecuted for corruption.
As alleged in this criminal information, Pitchford and others conspired “in furtherance of an offer, payment, promise to pay, or authorization of the payment of money to an official of the Government of the United Kingdom for the purpose of influencing his acts and decisions in his capacity as an official of the Department of Trade and Industry [with responsibilities for promoting business opportunities for British companies in the Central Asia region] in order to assist the British Company to obtain business, that is, a contract with [CAAEF].”
In addition, the information alleged that Pitchford and others conspired “to embezzle, steal, obtain by fraud and otherwise without authority to knowingly convert to the use of [Pitchford] … property valued at $5,000 or more and owned by and under the care, custody, and control of CAAEF.”
According to the information, “the purpose and objective of the conspiracy were, among other things to unjustly enrich themselves and to steal, embezzle, and otherwise obtain covert and illicit kickbacks from contracts in which the CAAEF entered.”
In terms of the embezzlement and stealing portion of the action, the information focuses on:
- a $4 million investment in a project known as the “Premier Spinning Company” joint venture to produce cotton yarn in Turkmenistan;
- a $1.7 million investment in a project known as the “Classic Clothing Company” joint venture to manufacture men’s dress shirts and trousers in Turkmenistan; and
- a $347,000 contract to purchase a cotton gin.
The information alleges as follows regarding “The British Company Contract.”
“On or about September 1997, in connection with a CAAEF project to establish and equip an edible oil manufacturing facility in Ashkhabad, Turkmenistan, Pitchford and the Foreign Government Official whose duties included identifying foreign business opportunities for British companies and assisting these companies in obtaining contracts – entered into an agreement by which the Official would cause a British Company to bid on the CAAEF Turkmenistan project at a price inflated by approximately 15 percent, or $200,000, and Pitchford would ensure that CAAEF awarded the contract to the British Company.
Thereafter, Pitchford obtained confidential information from the bids of the British Company’s competitors for the CAAEF Turkmenistan project and delivered the information to the British Company through the Foreign Government official.
The British Company used the confidential information to tailor its bid to include the extra $200,000, but still remain under the bids of its competitors.
In or before January 1998, the Foreign Government Official created “Melioservice,” a Swiss shell corporation, and caused it to be used as a “commission” agent.
On or about January 14,1998, Pitchford caused the CAAEF Board of Directors to approve a contract with the British Company in the approximate amount of 51.5 million.
On or about January 17, 1998, Pitchford signed a CAAEF “Investment Disbursement Approval” form, authorizing the disbursement of $896,535 to the British Company and caused the form to be faxed from Turkmenistan to CAAEF in Washington, D.C.
On or about January 20, 1998, in reliance upon Pitchford authorization, CAAEF transferred $896,535 by wire to Account No. 20434768563744 at Barclays Bank PIc in Hull, England, for the benefit of the British Company.
On or about January 22, 1998, Pitchford caused the British Company to wire transfer $200,000 from its account at Barclays Bank PIc in Hull, England, to Account No.1 01-82-762 at Credit Suisse Bank in Winterthur, Switzerland, purportedly in payment of a “commission” to Melioservice. In truth, the beneficiaries of this wire transfer were Pitchford and the Foreign Government Official.”
Based on the above allegations, the information charged Pitchford with conspiracy to commit theft from a federal program and to violate the FCPA’s anti-bribery provisions, theft from a federal program, and a violation of the FCPA’s anti-bribery provisions.
Pitchford pleaded guilty and this plea agreement further notes that he agreed to pay restitution of $400,000 as well as forfeit certain property (including a yacht) derived from proceeds traceable to his crimes.
As noted in this release, Pitchford was sentenced to 12 months prison and three years of supervised release.
According to this site, CAAEF “commenced a wind-down plan in 2002, and achieved an orderly liquidation of its investment and loan portfolios (with operational closure of its offices in Central Asia) in 2004.”
One final irony about the enforcement action. As noted here, former U.S. Representative Stephen Solarz served as Chairman of CAAEF. What makes this ironic is that Solarz, while in Congress in the mid-1970s, was a leader in the House of Representative regarding what would become the FCPA. (See here for “The Story of the FCPA”).
Elevate Your FCPA Research
There are several subject matter tags in this post. However, only subscribers to FCPA Professor's premium search feature can see and use them in research. Efficient and cost-effective FCPA research is just a click away.Elevate Your Research