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Richard Bistrong Reports To Prison

Monday, October 1st, 2012

Today’s post is from Paul Calli (Carlton Fields – here). Calli represented Stephen Giordanella in the Africa Sting case and as noted in this prior post Giordanella was completley exonerated.

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Richard Bistrong Reports To Prison

Paul Calli

This Johnny Cash song is an appropriate background song for this post.

Following a lifetime of lying , cheating and stealing, Friday night it all caught up to Richard Bistrong and he turned himself in to serve his 18 month prison sentence at the United States Penitentiary in Lewisburg, PA. The Federal Bureau of Prisons makes that information available to the public here and calculates his release date as January 15, 2014.

Bistrong, as you know from previous FCPA Professor posts, as well as articles in the New York Times and Washington Post, became a member of the team with the FBI and the FCPA unit at Main Justice – then led by Hank Bond Walther – to concoct what will perhaps go down as the most ill conceived and greatest failure ever in the enforcement of U.S. criminal law: the “Africa Sting” case.

Bistrong’s lifetime of drug transactions, bribery, tax evasion, prostitution crimes, predilection for “hard core pornography” (you can’t truly appreciate the impact of that phrase until you hear Mike Madigan from Orrick articulate it to a jury), is second to none and turned out to be merely a lead-in to his staggering moral transgressions and self-inflicted personal failures, all of which came out during the trial or in trial preparation.

Against this backdrop, it was not without drama when sometime in November 2011 during the second trial , after two years of pretrial litigation and DOJ’s unsuccessful prosecution that resulted in no convictions and a hung jury in the first Africa Sting trial (during which the government elected to not call its star witness), Bistrong entered the court room to begin a month of testimony. It really was “all eyes” in the court room on the person about whom everyone had heard so much, and you could hear a pin drop. After all, in a text message later introduced into evidence Bistrong wrote to Chris Farvour, his FBI handler, “tell Hank (Bond Walther) that I’m an ace on cross exam!”

I remember that after a real short time it became apparent that Bistrong was the most narcissistic person I had ever heard. It wasn’t just that he could not tell the truth – I think everyone expected that eventuality – it was that he seemed to think he was above criticism and above everyone else. He was smug and self-righteous. He didn’t seem contrite at all. He wanted to argue. He gave the impression that he felt he was smarter than everyone else, especially than the lawyers cross examining him. He gave a false portrayal of himself on the witness stand, and tried to get the jury to believe he was someone they could trust. He tried to make forced eye contact with the jurors, and it was uncomfortable to watch him do so. Heck, why wouldn’t he think he could pull off that manipulation one last time? He had been doing it his whole life, including recently. But it was perplexing, because Bistrong’s words, tone and demeanor recorded on tape and in text messages with his BFF’s in the FBI could not be reconciled with the Bistrong that he tried to sell while on the witness stand. After a while many of the jurors turned away from him and couldn’t’ look at him even as he testified. Those who looked at him to me seemed to be interested in him more as a psychology case study than as someone whose testimony they could ever trust. As the jury foreperson wrote in his FCPA Professor guest post (here), “…more than one juror voiced concern that it would be unjust for the defendants in this case to be convicted when the government relied so heavily on Mr. Bistrong who freely admitted on the stand more illegal acts than the entire group of defendants was accused of…” and “the jury with near unanimity found nearly all of the prosecution witnesses to be evasive and combative.” In the end, Bistrong’s venality and greed got the best of him.

I can’t imagine a more talented, committed, and passionate group of defense attorneys than the ones with whom I had the honor of trying the Africa Sting case. It was a remarkable experience to watch them shine throughout, and vindicate their clients. Notwithstanding all that legal talent, however, the most concise, poignant and important summary of this case came from the bench. As United States District Judge Richard J. Leon wisely cautioned: “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.”

I hope that everyone on the Bistrong team understands that.

Reading Bistrong’s recent comments in a Forbes article (here), it is clear Bistrong maintains the belief that he is a “victim” and “fallen hero” who did something noble. In reality, nothing could be farther from the truth. I hope that prison is the place where Richard Bistrong is able to finally right his ship, come clean with himself and learns how to be truthful, and that he comes out prepared and able to be a productive member of society, during his three years on federal supervised release and beyond.

A Final Embarassing Setback For The DOJ Related To The Africa Sting Cases

Wednesday, August 1st, 2012

Yesterday, the DOJ was dealt a final embarrassing setback in connection with the Africa Sting cases as Judge Leon rejected the DOJ’s recommendation of no jail time for Richard Bistrong and sentenced the conductor of the manufactured sting to 18 months in prison followed by three years of supervised release. (For more on the Africa Sting case, see here, as well as numerous prior posts under the subject matter heading Africa Sting).

Bistrong, of course, was not charged in connection with the Africa Sting case. As noted in this prior post, in February 2009 he pleaded guilty to real-world conduct including conspiring with others: (i) to obtain for his employer [Armor Holdings] United Nations body armor contracts (valued at $6 million) by causing his employer to pay $200,000 in commissions to an agent while knowing that the agent would pass along a portion of that money to a United Nations procurement officer to cause the officer to award the contracts; (ii) to obtain for his employer, a $2.4 million pepper spray contract with the National Police Services Agency of the Netherlands by paying a Dutch agent approximately $15,000 while knowing that the agent would pass along some of that money to a procurement officer with the Police Services Agency to influence the contract; and (iii) to obtain for his employer (although it was never obtained), a contract to sell fingerprint ink pads to the Independent National Elections Commission of Nigeria by making kickback payments to a commission official indirectly through an intermediary company.

In this letter to Judge Leon, Bistrong candidly acknowledged spending a portion of his adult life ”engaged in dishonest, deceitful and illegal behavior.” (See here for a copy of Bistrong’s sentencing memorandum).

Nevertheless, in its sentencing memorandum (here) the DOJ stated as follows. “Given Bistrong’s substantial assistance to law enforcement, the government recommends that Bistrong be sentenced within the guideline range to a sentence that includes a combination of probation, home confinement, and/or community service.” After detailing Bistrong’s cooperation, the DOJ stated “put simply, the length, depth, breadth, and thoroughness of Bistrong’s proactive cooperation was extraordinary.” As to the failure of the Africa Sting cases, the DOJ stated as follows. “[T]he dismissals and acquittals were not caused by a failure of Bistrong’s cooperation or assistance. Like any other case involving cooperating witnesses, the government views Bistrong’s cooperation in the investigation and prosecution of others independently from the outcome of the Gabon case against others. Credit should be based on Bistrong’s truthfulness and the completeness of his cooperation, irrespective of the outcome of any particular investigation, case, or trial.”

As to the DOJ recommending no prison time for Bistong, Judge Leon remarked, as noted in this post by Mike Scarcella at the Blog of LegalTimes, that the DOJ was “asking for the moon.” In this Wall Street Journal Corruption Currents post, Chris Matthews describes “a courtroom packed with prosecutors, agents from the Federal Bureau of Investigation and a handful of the men Bistrong helped to indict gathered to learn his fate.” Matthews quotes Judge Leon as follows in rejecting the DOJ’s sentencing recommendation. “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.”

Michael Madigan (Orrick – here) who represented an individual defendant in the Africa Sting case and who was present at yesterday’s sentencing observed as follows. “Judge Leon had it right on in observing that Bistrong got a huge break on the front side by being charged only with a one count conspiracy despite years of serious criminal conduct both in the US and in England (where he received immunity, with the help of the DOJ). The Judge’s rejection of the DOJ’s recommendation of probation was well warranted on the facts of the case. For example, the evidence showed Bistrong made millions illegally and actually made $1.2 million while acting as a government informant which the government allowed him to keep for his personal use (such as paying for his luxury wedding at the Ritz Carlton overlooking the Pacific while he was serving his difficult duty as a government informant). Bistrong was a one man crime wave who richly deserved his jail sentence.”

Armor Holdings Resolves Enforcement Action / BAE Avoids Successor Liability

Thursday, July 14th, 2011

In February 2009, Richard Bistrong a former employee of Armor Holdings Inc. (a former publicly-traded company, currently a subsidiary of BAE Systems) pleaded guilty to charges he conspired with others to, among other things, obtain United Nations body armor contracts valued at $6 million by causing his employer to pay $200,000 in commissions to an agent while knowing that the agent would pass along a portion of that money to a United Nations procurement officer (a “foreign official” under the FCPA) to cause the officer to award the contracts. (See here and here for the prior posts).

Bistrong then became an informant for the government and helped the FBI manufacture an entirely different case – the Africa Sting case – against, among others, Jonathan Spiller (the former CEO and President of Armor Holdings and Bistrong’s boss) and Stephen Gerard Giordanella (formerly associated with Armor Holdings). Spiller, who testified at the first Africa Sting trial that resulted in a mistrial (see here for the prior post) is one of the Africa Sting defendants that has pleaded guilty. Giordanella is scheduled for a September trial.

Yesterday, in a related development, the DOJ and SEC announced an FCPA enforcement against Armor Holdings. Total fines and penalties are approximately $16 million ($10.3 million via a DOJ non-prosecution agreement and $5.7 million via a settled SEC civil complaint).

That the DOJ would resolve the matter solely against Armor Holdings without also holding BAE accountable stands in stark contrast to other recent FCPA enforcement actions where the DOJ has used successor liability theories against acquiring companies (see here for the 2010 enforcement action against Alliance One International for instance). But then again, in 2010 the DOJ resolved an enforcement action against BAE – one that per the DOJ’s own allegations directly implicated the FCPA’s anti-bribery provisions – without FCPA charges. See here for the prior post.

This post analyzes both the DOJ and SEC enforcement actions against Armor Holdings.

DOJ

The NPA (here) begins as follows.

The DOJ “will not criminally prosecute Armor Holdings, Inc., or any of its present or former parents, subsidiaries, or affiliates for any crimes … related to the making of, and agreement to make, improper payments by Armor employees and agents to a procurement official of the United Nations in connection with efforts to obtain and retain body armor contracts for an Armor subsidiary from the U.N. in 2011 and 2003, and related accounting and record-keeping associated with these improper payments …”.

The NPA has a term of two years. As is typical in FCPA NPAs or DPAs, Armor agreed “not to make any public statement contradicting” the described conduct.

According to the NPA, the DOJ agreed to resolve the action via an NPA based, in part, on the following factors.

(a) Armor’s complete disclosure of the facts at issue;

(b) Armor’s self-investigation and cooperation with the DOJ and SEC;

(d) “the extensive remedial efforts undertaken by Armor, before and after Armor’s acquisition by BAE Systems, including but not limited to terminating the Armor employees who were involved in the misconduct; terminating approximately 1,700 international sales representatives and distributors of Armor Holdings Products LLC immediately after the acquisition closed; conducting extensive FCPA compliance training for over 1,000 Armor employees; implementing BAE Systems’ due diligence protocols and review processes for any new Armor foreign sales representatives and distributors; and applying BAE Systems’ compliance policies and internal controls to all Armor businesses.”

According to the Statement of Facts in the NPA, “Armor manufactured security products, vehicle armor systems, protective equipment and other products for use, primarily, by military, law enforcement, security and corrections personnel.” The conduct at issue focuses on Armor Holdings Products Group (“Products Group”), which was a wholly owned division of Armor, Bistrong (Product Group’s Vice President for International Sales) and Armor Products International Ltd. (“API”), which was a wholly owned subsidiary of Armor that was a part of the Products Group and headquartered in the U.K.

Under the heading “Improper Conduct” the NPA states as follows. From 2001 to 2006, “API and its employees and agents made corrupt payments to a United Nations procurement official to induce that official to provide non-public, inside information to API, and to cause the U.N. to award body armor contracts to API.” The NPA further states that “Armor employees falsely recorded the nature and purpose of these improper payments, as well as other payments, in Armor’s books and records.”

Under the heading “Books and Records” the NPA states as follows. From 2001 to 2006, “Bistrong, Products Employee A and others caused the Products Group to keep off Armor’s books and records approximately $4.4 million in payments to agents and other third-party intermediaries used by the Products Group to assist it it obtaining business from foreign government customers.”

Pursuant to the NPA, the DOJ agreed not to prosecute Armor based on the above described conduct if it complies with the compliance-related obligations set forth in the NPA. In an interesting sentence similar to the recent Tenaris DOJ NPA, the DOJ also agreed not to prosecute Armor for conduct “Armor specifically disclosed to the DOJ in meetings during its voluntary disclosure from March 2007 to December 2010.” This sentence suggests that Armor disclosed other conduct to the DOJ in addition to the conduct described above.

See here for the DOJ’s release announcing the enforcement action. Among other things, the release states as follows. “Due to Armor’s implementation of BAE’s due diligence protocols and review processes, its application of BAE’s compliance policies and internal controls to all Armor businesses, its extensive remediation and improvement of its compliance systems and internal controls, as well as the enhanced compliance undertakings included in the agreement, Armor is not required to retain a corporate monitor. Armor will be required to report to the department on implementation of its remediation and enhanced compliance efforts every six months for the duration of the agreement.”

SEC

The SEC’s settled civil complaint (here) is based on the same core conduct described above.

In summary, the complaint states as follows. “From 2001 through 2006, certain agents of Armor Holdings participated in a bribery scheme in which corrupt payments were authorized to be made to an official of the United Nations (“U.N.”), for the purpose ofobtaining and retaining U.N. business. Armor Holdings generated more than $7.1 million in improper revenues, and realized over $1.5 million in improper profits, through the award of U.N. body armor contracts to its subsidiary during this period. From 2001 through June 2007, another Armor Holdings subsidiary employed an accounting practice that disguised in its books and records approximately $4,371,278 in commissions paid to intermediaries who brokered the sale of goods to foreign governments. By virtue of this conduct, Armor Holdings violated the anti-bribery, books and records, and internal controls provisions of the FCPA and the Exchange Act.”

In an SEC release (here), Robert Khuzami (Director of the SEC’s Division of Enforcement) stated that “illicit payments to U.N. officials are no less reprehensible than bribes to foreign government officials.” As noted in the SEC release, Armor, without admitting or denying the SEC’s allegations, consented to the entry of a permanent injunction against further FCPA violations and agreed to pay $1,552,306 in disgorgement, $458,438 in prejudgment interest, and a civil monetary penalty of $3,680,000.

The SEC release also contains the following summary statistic. “Since 2010, the SEC has filed 32 FCPA cases, including the case against Armor Holdings, and obtained more than $600 million in penalties, disgorgement and interest.”

Roger Witten and Kimberly Parker (here and here of Wilmer Cutler Pickering Hale and Dorr) represented Armor Holdings.

Africa Sting Update

Wednesday, January 5th, 2011

The Africa Sting case is surely one to watch in 2011.

Recently, certain defendants filed a motion (here) “for an evidentiary hearing requiring the testimony of Richard Bistrong and federal law enforcement agents responsible for managing him in connection with the investigation resulting in the indictment.” The defense claims that Bistrong (see here for a prior post) assured various defendants that the fake Gabon deal had been approved by the U.S. State Department, was not illegal, was not in violation of the FCPA, and that Bistrong “angrily admonished one Defendant who indicated that he was going to tell other defendants that his lawyer had advised that the Gabon deals might be illegal.”

The DOJ response brief is here. The DOJ says that the defense has “presented the Court with selective and misleading facts about this case” and that many of the defendants, wholly apart from the Gabon deal, were involved in paying bribes to foreign officials in other countries. Further, the DOJ argues, pretrial resolution of factual issues is not warranted.

So what does this all mean for the defendants’ entrapment defense?

As entrapment issues are a bit outside my strike zone, I once again go to the bullpen and call upon Dru Stevenson (here) a Professor of Law at South Texas College of Law.

In this guest post, Professor Stevenson analyzes the issues presented in the above briefs.

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“The defendants in the pending FCPA “Africa Sting” case have moved for a pretrial evidentiary hearing, insisting that the government has refused to produce – or perhaps destroyed – potentially exculpatory evidence in the case. The defendant’s allegations of Brady violations (failure to turn over evidence) are serious, but seems based on serious misunderstandings of federal entrapment law.

All of the items alleged to be missing relate to the FBI’s instructions to Bistrong, its undercover informant in the sting operation – a turncoat FCPA violator who offered to set up others as part of his “deal” with the government. The problem is that such information could not be exculpatory under the federal rules for the entrapment defense, which appears to be the defendants’ only theory of the case. Federal courts use only the “subjective test” for entrapment claims, a test that focuses exclusively on the defendant’s own predisposition to commit the crime, NOT the government’s conduct or intentions in the sting operation. It may strike us as upsetting to read about FBI handlers coaching their field operative on lying and deception of the potential felons, but this is legally immaterial for the entrapment defense, because it does not relate to the defendant’s predisposition to commit the crime. If the missing evidence is not “material evidence” for the defense, there is no Brady violation.

Surprisingly, the government’s response brief does not emphasize this issue, but focuses instead on the inappropriateness of a pre-trial hearing when the issues will get full airing at trial. This is probably true, but a court might feel there is no harm in allowing evidentiary hearings before trial, which is rather commonplace.

The defendants advance two points in their brief that, if successful, would dramatically change the law of entrapment in the United States. First, there is a recurring theme throughout the brief that evidence of outright lying by the undercover operative in a sting operation is exculpatory. It is not. All entrapment claims involve sting operations; all sting operations involve some deception and lying to ensnare the defendant; and nearly all entrapment claims fail. Deceiving the defendant may reach a level where it negates the required mens rea for the crime – but this is a mistake of fact defense, a derivative defense that refutes an element of the crime charged, not entrapment, which is an affirmative defense. The defendants in this case do not appear to be raising a derivative defense related to the scienter requirement for FCPA – their case centers on claims of entrapment. Intentional deception is immaterial for the defendant’s predisposition, which is the issue at stake for entrapment in the federal system. Nor does it matter that the undercover operate gave false assurances that the proposed transaction was legal (which the defendants allege happened, and the government denies). This is presumably a common feature of sting operations as well – blithe reassurances that the deal is “completely legal” – just as it is a common feature of conspiracies and recruitment by real criminals, not just undercover agents. In the United States, ignorance of the law is no excuse. There is a seldom-used, and even more seldom-successful, defense of “entrapment by estoppel,” not at issue in this case, for instances where the defendant receives official assurances of legality directly from a government authority, such as an opinion letter from the Attorney General. Yet this would not apply to situations where the co-conspirator merely asserts that he “checked it out” or got “clearance” from the State Department.

A second innovation in the defendant’s brief, which would mark a sea change in entrapment law if successful, is the assertion that dismissal of the charges is an appropriate remedy for “entrapment as a matter of law.” There is no such thing as “entrapment as a matter of law” in the federal system – no Supreme Court cases have ever recognized an entrapment scenario that would need no adjudication or factual determinations. The Supreme Court has been very clear, in every entrapment case, that federal courts should use the “subjective test” for entrapment, which requires a full factual inquiry into the defendant’s predisposition to commit the crime. This is really a two-pronged innovation – one part focused on changing the test used, and the other focused on the procedural juncture for rendering a decision on such claims. “Entrapment as a matter of law” is really another name for the rival version of the entrapment test, usually called the “objective test” (which evaluates what the outrageousness of the government’s conduct rather than the defendant’s subjective predisposition) – a test that the Supreme Court has rejected every time it decided an entrapment case. Essentially, the defendants are asking the court to change the entrapment test used in the federal system from the subjective to the objective test, contrary to long-settled precedent. Further, positioning this decision within a Motion to Dismiss is particularly unprecedented, even for the objective test. Entrapment cases are heavily fact-specific under either test, because they all involve sting operations that included some inducement – and usually a fair amount of false reassurances and even badgering by the agents. Dismissal is generally a remedy for legal problems with the prosecution’s case, not factual problems. Again, it may be troubling to read of the FBI’s undercover operative lying, badgering, and bribing a defendant to commit a crime, but this is a matter for the jury to decide – and, from a policy standpoint, is no different from what would happen in a “true” criminal enterprise. In other words, a defendant who falls for halfhearted, unsupported reassurances by the undercover – or who succumbs to a monetary inducement or mild badgering – would presumably also fall for the same tactics by a criminal organizer.”

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For Professor Stevenson’s other guest posts on the Africa Sting case see here and here.

Will Bistrong’s Plea Impact The Africa Sting Cases?

Wednesday, September 22nd, 2010

Last week Richard Bistrong’s plea agreement was made public.

Who is Richard Bistrong?

He is “Individual 1″ – the person who worked with FBI agents as alleged in the Africa Sting indictments. (See here). (See here for the superseding indictment).

Bistrong was soon identified as Individual 1 and criminally charged.

Not in connection with the Africa Sting case, but a completely different matter. (See here). The criminal information (here) charges Bistrong with conspiracy to violate the Foreign Corrupt Practices Act’s antibribery provisions, books and records provisions, and the International Emergency Economic Powers Act and related Export Administration Regulations.

The conspiracy was broad in scope and included charges that Bistrong conspired with others: (i) to obtain for his employer [Armor Holdings, a former publicly-traded company, currently a subsidiary of BAE Systems] United Nations body armor contracts (valued at $6 million) by causing his employer to pay $200,000 in commissions to an agent while knowing that the agent would pass along a portion of that money to a United Nations procurement officer (a “foreign official” per the FCPA) to cause the officer to award the contracts; (ii) to obtain for his employer, a $2.4 million pepper spray contract with the National Police Services Agency of the Netherlands by paying a Dutch agent approximately $15,000 while knowing that the agent would pass along some of that money to a procurement officer with the Police Services Agency to influence the contract; and (iii) to obtain for his employer (although it was never obtained), a contract to sell fingerprint ink pads to the Independent National Elections Commission of Nigeria by making kickback payments to a commission official indirectly through an intermediary company.

Bistrong’s criminal information was filed on January 21, 2010.

It turns out that Bistrong agreed to plead guilty nearly a year before that – in February 2009, as indicated in the Bistrong plea agreement (see here).

So what did Bistrong agree to when he signed the plea agreement in February 2009?

To cooperate fully with with the government, including:

“whenever requested by the Government, working in an undercover role to record meetings and telephone calls under the supervision of United States law enforcement;” and

“attending all meetings at which the Government requests his presence.”

Per the Bistrong plea agreement, Bistrong “and the Department of Justice agree that the [Sentencing Guidelines] sentence is five years’ imprisonment.” Even so, the plea agreement states: “if in the sole and unreviewable judgment of the Government the defendant’s cooperation is of such quality and significance to the investigation or prosecution of other criminal matters as to warrant the Court’s downward departure from the sentence calculated by the Sentencing Guidelines, the Government may at or before sentencing make a motion pursuant to Section 5K1.1 of the Sentencing Guidelines reflecting that the defendant has provided substantial assistance and recommending a downward departure from the applicable guideline range.”

Brady Toensing (diGenova & Toensing, LLP) (see here) represents Bistrong.

What impact will Bistrong’s plea have in the Africa Sting case – particularly the defendants’ expected entrapment defense?

Per the superseding indictment, the earliest conduct forming the basis of the criminal charges against the Africa Sting defendants occurred in May 2009. In other words, Bistrong had already agreed to plead guilty to separate criminal charges prior to introducing the Africa Sting defendants to the undercover “foreign official” or the “foreign official’s” undercover representative.

Will this matter?

Unlikely says Dru Stevenson, a Professor of Law at South Texas College of Law (see here). Professor Stevenson previously offered his thoughts on the entrapment issue (here) and offered these thoughts in light of Bistrong’s plea.

“The incentives of the informant or undercover agent have never mattered in an entrapment defense, under either of the tests that courts use. For the subjective test (used in federal court), entrapment analysis focuses entirely on the defendant’s predisposition to commit the crime. The incentives of the agent provocateur are irrelevant. For the objective test (used in a minority of states, but never in the federal courts), entrapment analysis focuses on the actual conduct of the undercover agents – how outrageous it was – but not on the agent’s incentives or motives. It would be a completely novel approach if a court gives any weight to the fact that the agent provocateur had made a plea bargain. And it is not clear why this should matter any more than an undercover police officer who is paid to trick criminals into committing crimes as part of a sting operation.”