As previously highlighted, last week the DOJ formally announced a criminal indictment against Joseph Sigelman charging the former co-CEO of PetroTiger “with conspiracy to violate the FCPA and to commit wire fraud, conspiracy to launder money, and substantive FCPA and money laundering violations.” This enforcement action – via a criminal complaint – was initially announced in January 2014 (see here).
This Wall Street Journal Risk & Compliance Journal post suggests that Sigelman will put the DOJ to its burden of proof at trial.
That alone makes the Sigelman action unique as few individual FCPA defendants are willing to “test their innocence” (see here for a prior post). Indeed, Sigelman’s co-defendants Knut Hammarskjold and Gregory Weisman have pleaded guilty.
The Sigelman action will also be interesting to follow as the FCPA charges, and no doubt other charges linked thereto, are premised on the enforcement theory that employees of alleged state-owned or state-controlled entities are “foreign officials” under the FCPA. Specifically, the Sigelman action alleges that Ecopetrol is “the state-owned and state-controlled petroleum company in Colombia.”
The most recent relevant jury instruction occurred in the so-called Carson enforcement action in which Judge James Selna (C.D. Cal.) issued the following “knowledge of status of foreign official” instruction (see here).
“(4) The defendant offered, paid, promised to pay, or authorized the payment of money, or offered, gave, promised to give, or authorized the giving of anything of value to a foreign official;
(5) The payment or gift at issue in element 4 was to (a) a person the defendant knew or believed was a foreign official or (b) any person and the defendant knew that all or a portion of such money or thing of value would be offered, given, or promised (directly or indirectly) to a person the defendant knew or believed to be a foreign official. Belief that an individual was a foreign official does not satisfy this element if the individual was not in fact a foreign official.
(6) The payment or gift at issue was intended for at least one of four purposes: a. To influence any act or decision of a foreign official in his or her official capacity; b. To induce a foreign official to do or omit to do any act in violation of that official’s lawful duty; c. To secure any improper advantage; or d. To induce a foreign official to use his or her influence with a foreign government or department, agency, or instrumentality thereof to affect or influence any act or decision of such government, department, agency, or instrumentality.”
Very soon after this pro-defendant jury instruction in the Carson enforcement action, the DOJ offered the defendants lenient plea deals which they accepted thus avoiding a trial.
As readers likely know, the SOE “foreign official” theory is currently on appeal to the 11th Circuit, the first instance in FCPA history in which an appellate court has a chance to directly address the issue. (See here).
The remainder of this post summarizes the six most recent instances in which the DOJ has been put to its burden of proof in an FCPA trial.
In January 2010, the DOJ announced criminal charges against 22 executives and employees of companies in the military and law enforcement products industry for engaging in a scheme to pay bribes to the minister of defense of an African country. However, there was no actual involvement from any minister of defense, rather it was a manufactured sting operation. Given the number of defendants, four separate trials were scheduled.
The first Africa Sting trial started in May 2011 and involved four defendants. At the close of the DOJ’s case, Judge Richard Leon dismissed a substantive FCPA charge against one defendant (Pankesh Patel), dismissed another substantive FCPA charge against another defendant (Lee Tolleson) and dismissed the money laundering count against all defendants (Patel, Tolleson, Andrew Bigelow, and John Weir). In July 2011, Judge Leon declared a mistrial as to all remaining counts against all defendants.
The second Africa Sting trial began in September 2011. At the close of the DOJ’s case, Judge Leon dismissed the conspiracy charge against all defendants (John Mushriqui, Jeana Mushriqui, Patrick Caldwell, Stephen Giordanella, John Godsey, and Mark Morales). Because Giordanella faced only that conspiracy charge, he was exonerated. The trial proceeded, the charges went to the jury, the jury deliberated, and in January 2012, the jury found two defendants (Caldwell and Godsey) not guilty. The jury hung as to the remaining defendants, and once again Judge Leon declared a mistrial as to all remaining counts against the remaining defendants.
Shortly after conclusion of the second trial, the jury foreman published this guest post on FCPA Professor and shortly thereafter the DOJ moved to dismiss with prejudice the criminal charges against all of the remaining defendants including those initially charged but not yet tried (Helmie Ashiblie, Yochanan Cohen, Amaro Goncalves, Saul Mishkin, David Painter, Lee Wares, Ofer Paz, Israel Weisler and Michael Sacks). The next day, Judge Leon granted the motion to dismiss and stated (see here) “this appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement.”
In November 2009, John O’Shea was charged with FCPA and related offenses for allegedly making improper payments to alleged Mexican “foreign officials.” O’Shea mounted a defense and proceeded to trial. In January 2012, following the DOJ’s case, Judge Lynn Hughes (S.D. Tex.) dismissed the FCPA charges against O’Shea. In doing so, Judge Hughes stated: ”The problem here is that the principal witness against Mr. O’Shea … knows almost nothing.” (See here). During the trial, Judge Hughes also admonished other aspects of the DOJ’s case stating: “I don’t know what was presented to the Grand Jury, but … the Government should have been prepared before they brought the charges to the Grand Jury. It’s something you have to prove. And you shouldn’t indict people on stuff you can’t prove.” (See here).
Lindsey Manufacturing et al
In 2010, the DOJ charged Lindsey Manufacturing Co. and two of its executives (company CEO Keith Lindsey and company CFO Steve Lee) with FCPA offenses for their alleged roles in a conspiracy to pay bribes to alleged Mexican “foreign officials.” In May 2011, Lindsey Manufacturing, Lindsey, and Lee were found guilty of various FCPA charges after a five-week jury trial. (See here).
However, after months of post-trial legal wrangling, Judge Howard Matz (C.D. Cal.) vacated the convictions and dismissed the indictment after finding numerous instances of prosecutorial misconduct. In the words of Judge Matz, the instances of misconduct were so varied and occurred over such a long time “that they add up to an unusual and extreme picture of a prosecution gone badly awry.” (See here).
[For more on the above instances of the DOJ being put to its burden of proof at trial, see my article "What Percentage of DOJ FCPA Losses Is Acceptable?"]
Esquenazi / Rodriguez
In August 2011, Joel Esquenazi and Carlos Rodriguez were convicted by a jury of one count of conspiracy to violate the FCPA and wire fraud; seven counts of FCPA violations; one count of money laundering conspiracy; and 12 counts of money laundering in connection with an alleged bribery scheme involving Haiti Teleco officials. (See here).
In October 2011, Judge Jose Martinez (S.D. Fl.) sentenced Esquenazi to 15 years in prison and Rodriguez to 7 years in prison. (See here). Several stunning and strange developments (see here and here), among other things, resulted in the defendants appealing their convictions to the 11th Circuit. Among the issues presented on appeal is whether employees of alleged SOE’s are “foreign officials” under the FCPA. (See here for the post regarding the October 2013 oral arguments as well as links to the briefing).
In September 2009, husband and wife Gerald and Patricia Green were found guilty after a jury trial of conspiracy to violate the FCPA, substantive FCPA violations and other charges in connection with a bribery scheme involving a Thailand tourism official. (See here).
Notwithstanding the guilty verdict, in sentencing the Greens, Judge George Wu (C.D. Cal.) rejected the DOJ’s 10 year sentencing recommendation and sentenced the Greens to six months in prison, followed by three years probation (including six months of home confinement) (See here). As highlighted here, Judge Wu saw “shades of gray” in the conduct at issue and believed that the Greens helped make the the project at issue a success, performed the services it was engaged to perform in a professional manner, and increased revenue for the country of Thailand.
The FCPA enforcement action against Fredric Bourke was arguably the most complex and convoluted case in the history of the FCPA. It involved an alleged bribery scheme by Bourke and others in connection with the privatization of the alleged state oil company of Azerbaijan. The action involved 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 conspiracy to violate the FCPA and other charges.
Following a six week jury trial, in July 2009 Bourke was found guilty of conspiracy to violate the FCPA and Travel Act and making false statement to the FBI. As highlighted here, in November 2009 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.
Even though Judge Scheindin denied Bourke’s post-trial motions, it was notable that she stated at sentencing as follows. “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.”
As highlighted here, in December 2011 the Second Circuit affirmed Bourke’s conviction. The Bourke appeal was principally based on knowledge issues which present narrow, factually unique issues. Nevertheless the Second Circuit’s holding on conscious avoidance was noteworthy in terms of FCPA jurisprudence. In short, the Second Circuit held that Bourke enabled himself to participate in a bribery scheme without acquiring actual knowledge of the specific conduct at issue and that such conscious avoidance, even if supported primarily by circumstantial evidence, is sufficient to warrant an FCPA-related charges.