In 2011, the DOJ announced that Maxwell Technologies (a California-based manufacturer of energy-storage and power-delivery products) “agreed to pay an $8 million criminal penalty to resolve charges related to the FCPA for bribing Chinese government officials to secure sales of Maxwell’s products to state-owned manufacturers of electric-utility infrastructure in several Chinese provinces.”
In 2013, in connection with the same core conduct, the DOJ criminally charged Alain Riedo (a Swiss citizen and former executive of a Maxwell subsidiary in Switzerland) with nine criminal offenses: conspiracy to violate the FCPA’s anti-bribery, books and records, and internal controls provisions, two substantive violations of the FCPA’s anti-bribery provisions, five substantive violations of the FCPA’s books and records provisions; and one substantive violation of the FCPA’s internal controls provisions.
According to the court docket, nothing meaningful happened in the case for over a decade.
In 2024, Riedo (now 67 and retired) – in the words of his counsel – “could have chosen to remain in Switzerland and avoid answering the charges in the Indictment because Switzerland was not going to extradite him. Yet he has chosen willingly to travel to the United States—eleven years after the Indictment was filed—to submit himself voluntarily to the jurisdiction of the Court and to accept responsibility for an error in judgment he made more than 20 years ago.”
Riedo agreed to plead guilty to Charge 8 of the indictment (explained below) and the DOJ agreed to dismiss the other charges.
As explained in the DOJ’s sentencing memo:
“On March 7, 2024, over a decade after his indictment, Riedo entered a guilty plea to one count of violating the books and records provision of the FCPA. As stated in his Plea Agreement, Riedo, a citizen of Switzerland, was General Manager of Maxwell S.A. from in or around 2002 until July 2009. From in or around May 2006 until July 2009, Riedo also served as a Senior Vice President and officer of Maxwell. In his roles, Riedo exercised supervisory authority at Maxwell and Maxwell S.A., and owned a significant number of Maxwell shares.
As charged in Count 8, on or about April 15, 2009, Riedo caused a Maxwell S.A. employee to send from Switzerland to San Diego, California, an email containing Maxwell S.A. financial data that falsely characterized extra payments made to Agent 1. Specifically, Riedo, in his capacity as Senior Vice President and officer of Maxwell, and General Manager of Maxwell S.A., knowingly and willfully caused Maxwell S.A.’s books to hide an extra payment totaling approximately $346,000 made to a Chinese state-owned company through Agent 1. These extra payments were falsely characterized as sales expenses or commissions.”
The DOJ’s sentencing memo further stated:
“Riedo has entered a guilty plea to one count of violating the books and records provision of the FCPA. Riedo was a high-level executive in a public company that sold its products worldwide. In clear contravention of the law, as well as the ethical and moral standards such a position requires, Riedo caused Maxwell S.A.’s and Maxwell’s books and records to be falsified to cover up extra payments made to a Chinese state-owned company. Riedo knew and understood these payments were associated with the sales of Maxwell S.A.’s products to Chinese end users, and that they were not sales expenses or commissions, but caused them to be characterized as such. Riedo’s criminal activity undoubtedly misled investors as to the true activities of Maxwell S.A. in China. This type of criminal activity prioritized corporate and personal greed ahead of the interests of consumers, and the unwitting investing public.
As noted above, there are mitigating factors present here. Riedo has engaged in significant volunteer and humanitarian efforts. He does not have a criminal history and has maintained gainful employment his whole life. He continues to enjoy the support of his family. Moreover, despite a significant delay, he has submitted himself to the jurisdiction of the United States to address his indictment.
Balancing Riedo’s serious offense conduct, lack of criminal history, personal history and characteristics, the need for specific and general deterrence, and the need to avoid unwarranted sentencing disparities, the United States recommends a low-end sentence of 10 months in custody without supervised release to follow. The United States also recommends a fine in the amount of $55,000, and the imposition of the $100 special assessment fee.”
Riedo’s sentencing memo makes for an interesting read and states:
“Mr. Riedo is a citizen of Switzerland. He has lived and worked his entire life in Switzerland. He is, and has been, a pillar of the community in his hometown of Fribourg and has dedicated himself to various charitable causes and to caring for his family. In every respect, his life has been exemplary. Now 67 and retired, he could have chosen to remain in Switzerland and avoid answering the charges in the Indictment because Switzerland was not going to extradite him. Yet he has chosen willingly to travel to the United States—eleven years after the Indictment was filed—to submit himself voluntarily to the jurisdiction of the Court and to accept responsibility for an error in judgment he made more than 20 years ago.
Mr. Riedo is an engineer by training and he put his training to good use during a long career. Alain dedicated much of his career to the cutting-edge technology of developing and producing high-voltage power capacitors. He worked for a leading Swiss Company dedicated to developing high voltage components that would support power grids. That company was ultimately acquired by an American company, Maxwell Technologies.
Mr. Riedo stands before the Court because he turned a blind-eye to payments that were being made to a third-party agent related to the sales of products to Chinese customers. Alain did not want to disrupt operations or risk losing business, so he did not ask questions and did not seek more information about the payments to this agent. However, he knew the way his company’s books and records characterized the payments was not accurate, and he failed to act. He was not motivated by greed and did not directly benefit from his crime. But he knows what he did was wrong.
Alain knows he cannot undo the burdens he and his family have dealt with for years now as a result of what he did. But he is hopeful that by admitting his mistake publicly before this Court, and accepting the consequences of his actions, he will be able to move forward and continue being a productive member of his community and a cornerstone of his family. Many individuals in Switzerland are depending on Alain for their continued well-being.”
Riedo’s sentencing memo further states:
“The instant offense arises from Alain’s time working at Maxwell S.A. and relates to payments made by Maxwell S.A. to a third-party agent named Mr. Hou— referred to as Agent 1 in the Plea Agreement—related to the company’s “high voltage” business in China. Alain began working for a company called Condis S.A. in 1989, which later became Montena Component, which then was acquired by Maxwell in 2002 and became Maxwell S.A.
Charles Phillot, who served as the General Manager of Condis S.A. from 1983 to 1993 and recruited Alain to join the company, has submitted a letter to the Court detailing Mr. Hou’s relationship with Condis S.A. and other related companies. . Specifically, Condis S.A. was part of a group of companies owned by “Groupe Condensateurs Fribourg.” In 1985, a member of the Board of Directors for Groupe Condensateurs Fribourg proposed having Mr. Hou become the representative in China for all the subsidiary companies—including Condis S.A. As Mr. Phillot stated, “without anyone questioning either the legitimacy of Mr. Hou or the system of extra amounts, all the companies in the group were subject to this system, taken over by Maxwell.” Thus, Condis S.A. already had an established relationship with Mr. Hou before Alain started working for the company. Mr. Phillot’s submission includes a brochure for Condis S.A. from 1987—two years prior to Alain’s arrival—that lists Mr. Hou as Condis S.A.’s contact in the People’s Republic of China.Mr. Phillot also stated that “Mr. Hou was an agent long before the hiring of Mr. Riedo, who neither invented nor set up the system of extra amounts, which everyone, including myself, was convinced was legal.”
Although Alain was focused on the “Super Cap” sector of Maxwell S.A. after the acquisition, he was ultimately responsible for the high voltage business, which included the transactions involving Mr. Hou. Alain understood that invoices for sales to Chinese customers included a markup for commissions or extra payments, and that these payments were made to Mr. Hou. Alain did not know specifically where these payments were going and certainly did not, and does not, have any knowledge that these payments were being used as bribes to facilitate business with any Chinese customers.
Alain had “inherited a billing system that probably dates back to the 1980s,” and he did not want to disrupt the existing operations and relationship with Mr. Hou. Nor did he not want to risk losing business, so he did not ask any questions about the payments. Looking back at everything, Alain recognizes that he made the wrong decision.
As a Swiss national, Mr. Riedo had no reason to understand the Foreign Corrupt Practices Act (“FCPA”), which is a creature of U.S. law. Alain never received affirmative training on the FCPA. He understood that bribery was not acceptable, but he did not believe anyone was being bribed for purposes of securing or retaining business from the Chinese customers affiliated with Mr. Hou. Ironically, when questions first arose surrounding Mr. Hou, Alain obtained an FCPA certification from Mr. Hou in which Mr. Hou certified that he “has not in the past and will not in the future make any payment of anything of value to: (i) any government official . . . (as defined in the FCPA), for the purpose of influencing such government official or causing such official to use influence to obtain business or secure an improper advantage for Maxwell SA or its affiliates; or (ii) to any other person knowing that the payment will be used for the foregoing purpose.” Alain believed that certification was accurate.
Alain did not profit from the arrangement with Mr. Hou, and “[n]o bonuses were tied to the instant offense.” But he admits and regrets that he did not ask questions and that he did not change the description of the payments in Maxwell’s books and records. He has expressed remorse for his conduct, and, while he is proud of many things he has accomplished in his life, he believes his mistake overshadows all those accomplishments.”
In May 2024, Judge Jeffery Miller (S.D. California) rejected the DOJ’s sentencing recommendation and sentenced Riedo to two years of probation and ordered him to pay a $55,000 criminal fine. The judge’s order states that Riedo shall “successfully complete 300 hours of community service devoted to assisting the homeless and the elderly population in Fribourg, Switzerland …”.
Many in the FCPA space – myself included – keep various FCPA enforcement statistics – including how the DOJ fares in contested proceedings.
Score the DOJ’s prosecution of Riedo as you see fit, but I’ve got my answer.
Riedo was represented by Latham and Watkins attorneys David Schindler and David Rowe.
