Archive for the ‘Stephen Gerard Giordanella’ Category

Writer’s Cramp At The DOJ?

Friday, February 3rd, 2012

This is the second time I have written about this issue (see here for the first).  This time, the examples are more numerous and more significant.

The DOJ has stated (here) that its FCPA website (here) includes documents related to more than 140 FCPA prosecutions including “charging documents, plea agreements, deferred prosecution and non-prosecution agreements, press releases,and relevant pleadings and orders.”  To be sure, the DOJ has a nice (and much improved upon) FCPA website.  However, as demonstrated below, if one’s objective is to be informed of all FCPA developments (not just those that cast the DOJ in a favorable light), there are a number of websites, this one included, that highlight such developments, but the DOJ’s website is not one of them.

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In January 2010, the DOJ issued this release announcing the Africa Sting charges and it also held a press conference to discuss the charges.  In July 2011, Judge Richard Leon declared a mistrial in the first Africa Sting case (see here for the prior post).  However, there was no DOJ press release announcing this development and if your only source of information was the DOJ’s FCPA website you would not know that this development occured because there is no mention of it.

In 2007 Si Chan Wooh, an employee of SSI International, a wholly-owned subsidiary of Schnitzer Steel, was criminally charged (see here).  The DOJ issued a release (here) anouncing the charges and related guilty plea.  However last year, as reported in this Wall Street Journal Corruption Currents story, “the Justice Department informed Wooh’s counsel that a Federal Bureau of Investigation agent assigned to the investigation of Schnitzer and its employees had written a letter to high-ranking prosecutor in Washington saying Wooh should not have been charged in connection with the case.”  In October 2011, in this filing the DOJ moved to dismiss the case “out of prosecutorial discretion in the interests of justice and the efficient use of government resources.”  There was no DOJ press release announcing this development and if your only source of information was the DOJ’s website you would not know that this development occured because there is no mention of it.

In May 2011, the DOJ issued this same day release when Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee were found guilty of FCPA offenses after a jury trial.  However, in November 2011, Judge Howard Matz vacated the FCPA convictions of Lindsey Manufacturing and its executives and dismissed the indictment (see here for the prior post).  Again nothing from the DOJ, no press release, and no mention of this development on its website.

In December 2011, during the second Africa Sting case, Judge Richard Leon, at the close of the DOJ’s case, dismissed a conspiracy charge as to all defendants (see here for the prior post).  Because this was the only charge Stephen Giordanella faced, he was exonerated.  However, if your only source of FCPA knowledge was the DOJ’s website, you would not know this because there is nothing there as to this development.

In November 2009, the DOJ issued this release when John Jospeh O’Shea was arrested and charged with FCPA and related offenses.  However, on January 16th, Judge Lynn Hughes, after the DOJ’s case, dismissed the FCPA charges against O’Shea (see here for the prior post).  However, if your only source of FCPA knowledge was the DOJ’s website, you would not know this because the DOJ did not issue a release and there is nothing on its website regarding this development.  [Someone was staffing the DOJ press office at this time because approximately 18 hours later, the DOJ announced (here) a $55 million FCPA enforcement action against Marubeni Corporation of Japan.]

Returning to the second Africa Sting trial, earlier this week, Patrick Caldwell and John Godsey were found not guilty by the jury (see here for the prior post).  The next day, Judge Leon declared a mistrial as the remaining defendants –  John Mushriqui, Jeana Mushriqui and Marc Morales (see here for the prior post).  Again, nothing from the DOJ as to these developments.

President Obama has championed transparency and open government.  In this release, President Obama stated as follows.  “Transparency promotes accountability and provides information for citizens about what their Government is doing.  Information maintained by the Federal Government is a national asset. My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use.”

Consistent with President Obama’s directive, the DOJ’s website ought to be improved and ought to keep citizens informed of all FCPA developments – not just those that cast the DOJ in a favorable light.

Africa Sting Development – “Mr. Giordanella, You Are Excused … You Are Free To Go”

Thursday, December 22nd, 2011

In the first Africa Sting trial this past summer, Judge Richard Leon granted defendant Pankesh Patel’s Rule 29 acquittal motion at the end of the DOJ’s case as to a substantive FCPA charge.  (See here for the prior post).  Judge Leon also dismissed a substantive FCPA violation as to defendant Lee Allen Tolleson and dismissed a money laundering charge as to all four defendants (Patel, Tolleson, Andrew Bigelow, and John Benson Weir).  Thereafter, Judge Leon declared a mistrial as to the remaining charges against the defendants.  (See here for the prior post).  In short, the DOJ’s “turning point” prosecution did not go so well.

Undeterred, the DOJ plowed ahead with the second (of four) trials in its manufactured case against defendants John Mushriqui, Jeana Mushriqui, Patrick Caldwell, Stephen Giordanella, John Godsey, and Mark Morales.  Opening arguments were held in September – see here for the prior post.  The DOJ’s case is not going so well.

Earlier today, Judge Leon ruled on defendants’ Rule 29 acquittal motions.  In a significant rebuke to the DOJ’s conspiracy charge against all defendants, Judge Leon granted defendants’ motion.  Judge Leon stated as follows.  “[V]iewing the evidence in the light most favorable to the Government, the Court does not believe the Government has produced sufficient evidence to enable a rational trier of fact  to conclude beyond a reasonable doubt that each of these six defendants participated in the overarching conspiracy charged in the superseding indictment in this case.

The only charge against Giordanella was the conspiracy charge, thus Judge Leon stated as follows.  “Mr. Giordanella, you are excused [...] you are free to go.”  Giordanella was represented by Paul Calli and Stephen Bronis of Carlton Fields (see here and here).  In a firm release, Bronis stated as follows.  “The Court found that government had not presented sufficient evidence to establish the existence of the charged crime.  We are grateful the Court made the correct and just ruling.  Mr. Giordanella is grateful to be exonerated, and can now begin to put this unnecessary and unfortunate experience behind him.”  Calli stated as follows.  “Mr. Giordanella was innocent and should never have been accused in the conspiracy.  In many respects, Mr. Giordanella’s indictment in the DOJ’s fake Gabon sting operation conspiracy represents a prosecution at its most dangerous.”

In addition, Judge Leon granted acquittal motions as to substantive FCPA charges against defendants John and Jeana Mushriqui (counts 5 and 6 of the superseding indictment – see here).  Judge Leon stated as follows.  “Neither John nor Jeana Mushriqui had, according to the evidence in this case, the requisite knowledge of the corrupt nature of the Gabon deal that would be necessary with regard to the events on May 22nd of ’09 when Ms. Mushriqui had traveled to Washington, D.C. for the pitch meeting and when a call was placed by Mr. Bistrong to Ms. Mushriqui during that meeting to discuss the deal when he was in the Middle East.”

The Mushriqui’s and the other remaining defendants still face certain other FCPA substantive charges and the defense began presenting its case this afternoon.

Second Africa Sting Trial Begins

Friday, September 30th, 2011

The first Africa Sting trial (as to defendants Andrew Bigelow, Pankesh Patel, John Benson Weir, and Lee Allen Tolleson) ended in July with dismissal of certain charges and Judge Richard Leon declaring a mistrial as to the remaining charges (see here for the prior post).  The second (of four) trials in this manufactured case began earlier this week in Judge Leon’s courtroom in Washington, DC.  The defendants in this trial are John Mushriqui, Jeana Mushriqui, Patrick Caldwell, Stephen Giordanella, John Godsey, and Mark Morales.

This post contains excerpts from the opening statements of the DOJ and defense counsel.

DOJ

Laura Perkins delivered the opening argument on behalf of the DOJ.

“This is a case about international bribery and the savvy business people who seek to profit from it. Normally, corrupt deals are struck in secret. The money if funneled quietly, and sham paperwork covers the illegal nature of the deal. The result is that most corrupt deals are never discovered by law enforcement. But this time, someone was watching, listening and recording the bribe payers: The FBI. The evidence will show that in May 2009 these defendants agreed to be part of a $15 million business deal involving the sale of weapons and other military products to a small country in Africa called Gabon. But unlike an honest business deal, the defendants didn’t get this business by offering the lowest prices or the best products. Instead, they got this business, they got this deal by agreeing to pay a bribe. Specifically, to get the pay-to-play business deal, the defendants and the other suppliers agreed to pay money amounting to $1.5 million to Ali Bongo, the Minister of Defense of Gabon. Ali Bongo was the head of Gabon’s military, and most importantly, he was the person who would choose which companies would get the contracts. So where was the $1.5 million for AliBongo going to come from? The defendants weren’t going to take it out of their own pockets. Instead, they were going to take it from the people of Gabon and put it in the bank account of the minister. To do that, the defendants and their partners agreed to add $3 million to the price tag for the weapons and the military products they were selling. And if you will look at the screen,we have a chart that shows how this deal worked. It worked like this. As you see — you can see Gabon in the lower right-hand corner of this chart. Gabon would pay the suppliers $15 million, but it was $15 million for only $12 million worth of weapons and products. The defendants and their partners would send the extra $3 million to Pascal LaTour, a middle man. Pascal LaTour would then funnel half of that, $1.5 million, right back to Ali Bongo for his own personal use. And what would the people of Gabon get in return for paying this extra $3 million? Nothing. They would get ripped off. To understand how serious this is, it may help to think of it this way, ladies and gentlemen. This is just like a foreign company overcharging the United States Government $3 million for a product — let’s say bulletproof vests — and then taking $1.5 million of that $3 million and giving it to the Secretary of Defense for his own personal use. In short, ladies and gentlemen, the evidence will show, plain and simple, that this deal was corrupt, that these defendants knew it, and that they chose to participate in it anyway. Ladies and gentlemen, it may be an obvious point, but bribery, whether it happens here or overseas, prevents legitimate American businesses from competing on a level playing field. It allows Government officials to get rich at the expense of the people they are supposed to be serving. So it’s a crime to pay a foreign official to get business, just as it is a crime to pay a U.S. official. We want American people and American businesses to export goods, not corruption. And to that end, there is a law called the Foreign Corrupt Practices Act, or FCPA, which makes it illegal to pay foreign officials to get business. Bribery schemes, like the one you will see during this trial, are often hatched behind closed doors in places like hotel rooms, restaurants, or conference rooms. Unlike robbing a bank or holding someone up, this form of cheating and stealing happens secretly, without force, without threats, and not at gunpoint. White collar criminals are careful and they are discrete. So the same crime fighting techniques that are used in organized crime cases and drug rings are used and must be used in white collar cases as well. And those techniques were used here. So while these businessmen and women thought they were committing their crimes secretly, they were wrong. The FBI was watching, and they were listening. We expect that the defendants will try to portray themselves as victims, victims of an FBI undercover operation, not as the eager, knowing participants that the evidence will prove them to be. But as you will see, the defendants were not victims of anything other than their own greed. The defendants may not like that the FBI uses undercover agents and sting operations in white collar investigations, but the law plays no favorites, not for corporate executives or anyone else.”

Later in her opening statement, Perkins stated as follows.  “[T]he Gabon deal, it wasn’t real. It was an FBI-controlled deal that was used to determine who in the industry would agree to participate in a corrupt deal when given the opportunity to do so.” 

 As to Ricard Bistrong (the individual who pleaded guilty to separate FCPA offenses and agreed to act as the FBI’s cooperating witness and help orchestrate the sting – see here for the prior post), Perkins stated as follows.  “During this trial, you will likely hear Mr. Bistrong called many names by defense counsel. He was, after all, a corrupt businessman, committing the same types of crimes with which these defendants are now charged. He has paid bribes, engaged in corrupt conduct, and has done all of the things you would expect a corrupt businessman to do. He lied, he cheated and he stole. You will also hear that Mr. Bistrong led a reckless personal life. Ladies and gentlemen, we make no excuses for Mr. Bistrong’s actions prior to becoming involved with the FBI, and we don’t apologize for using him as a cooperator in this case. Think about it. If the FBI is going to undercover well-hidden international corruption schemes, the best way and often the only way to gain access to this private corrupt world is to use a criminal, an insider, use someone like Mr. Bistrong, even with all of his history and all of his baggage. But because of that baggage, ladies and gentlemen, the FBI agents in this case did what good agents do when working with any cooperator – trust, but verify. Once Mr. Bistrong started working with the FBI, you will hear that the plan was for him to reinsert himself into the industry, pretend, obviously, that he hadn’t been caught, and to have him propose a corrupt deal that looked and sounded like the corrupt deals he had been a part of. With the FBI monitoring, he would propose this corrupt deal to some of his prior industry contacts.”

John Mushriqui

David Krakoff (Buckley Sander – here) argued on behalf of John Mushriqui.

“When the Government launched the phony Gabon deal, they must have thought they were going to bring home a bunch of Oscar for the best sting ever, best picture, best screenplay, best leading actor. They billed it as the first sting ever involving payments to foreign officials. They put huge resources into this, ladies and gentlemen: Time, manpower and, of course, money. It was so big they had to go all the way to the top levels of management of the FBI to get approval. And you know what? They were really confident of success because they had the perfect actor for the role of con man: Richard Bistrong, a veteran of the military products industry, an insider who his handler, Agent Forvour, told the top brass at the FBI is highly personable, educated, highly intelligent, one of the most respected people in the industry. He has been around this industry for 20 years. In short, an immensely successful salesman, which is exactly what they needed to pull off the phony Gabon deal. It turns out that the FBI’s choice for the con man role was no actor at all. He was a con man in real life. And you know what is the most essential quality for a con man? Dishonesty. What did Mr. Bistrong do? Of course, he cut his losses. He was looking at potentially decades in jail. He became a cooperator with the FBI. The FBI had its leading man. Highly motivated and highly self-interested. He must have figured, ladies and gentlemen, that the more people I get into this phony Gabon deal, the less time I do in jail. But you know what? The FBI needed Bistrong as much as he needed the FBI. So the evidence will show they laundered Mr. Bistrong so people would think he was still a major player in the industry. They gave him a front company, The Bistrong Group. They falsified State Department and Commerce Department documents for him. They even paid him 5,000 bucks a month for a while. And more than that, they let him keep — Ms. Perkins said a lot of money. You bet a lot of money: Over $1.2 million they let him keep from the proceeds of his undercover — phony undercover operation. There was a lot of money in being a cooperator for Richard Bistrong. This is the man who the Government says you must trust in this case. This is who is they say you must believe. Ladies and gentlemen, the case against John Mushriqui is all about the Government’s actor, Richard Bistrong. The FBI was convinced Bistrong could pull off the record the Government had scripted for him that he pretend to be a middleman in a deal with Gabon where there would be a sale of vests to Gabon and there would be a split of a commission with the Minister of Defense.”

“Ladies and gentlemen, here is what happened with John Mushriqui. He was not the pushover that they wanted him to be. These qualities were a real problem for an phoney undercover operation and its leading man. It meant that he questioned the terms of the deal because they didn’t make sense. It meant he became very suspicious. It meant he pushed back on Bistrong. It meant that when Bistrong offered him a lowball price, he said, I am not taking that. It meant that he ignored Bistrong. It meant that he didn’t answer his calls until — and frustrating Bistrong over and over and over again until Mr. Bistrong dropped his guard. He slipped up. And the truth came out — and you will hear it on the tapes in this courtroom. When Bistrong slipped up, dropped his guard and said, you know what? The commission is mine. It’s my commission. No Minister of Defense. It’s my commission. Ladies and gentlemen, throughout this trial, we will present the full story of what Richard Bistrong communicated to John Mushriqui. And we will show you how John Mushriqui figured out there was no Gabon and there were no payments to the Minister of Defense. He is not guilty.”

Jeana Mushriqui

Charles Leeper (Drinker Biddle & Reath – here) argued on behalf of his client Jeana Mushriqui.

“It is sad, but true: Even today, in the 21st century, when the playing field in the workplace is supposed to be a level one, it’s still the sad truth that many men, rich and successful at the top of the business world underestimate and disrespect the newcomers who are trying to work their way up. You may have seen it on your job in your own experience. It may have happened to you. The evidence in this case will show that Richard Bistrong is one of those kinds of men. He seriously underestimated Jeana Mushriqui, and so did the FBI agent playing the role of Pascal LaTour. Bistrong and LaTour thought they could tell a string of lies about their Gabon story to Jeana and that she would be duped by those lies. Bistrong and LaTour thought that they could tell their Gabon story to Jeana without having to do their homework and without having to worry about telling their lies the same way every time they told them. But as you will hear and see, Bistrong and LaTour could not keep their lies straight. And Jeana Mushriqui heard that, she saw that, and she figured out that this Gabon story was a fake, and the real customer in this case was not the Government of Gabon. Instead, from where Jeana sat, it looked like Bistrong was trying to buy the Mushriquis’ vests at a lowball price and mark up that price and resell it to a customer here in the United States.”

“So the Government’s own evidence will show you that this so-called conspiracy didn’t exist as far as Jeana Mushriqui was concerned.”

Patrick Caldwell

Eric Dubelier (Reed Smith – here) argued on behalf of his client Patrick Caldwell.

“If it is not already abundantly clear to you, it may not have been in the beginning of the Government’s opening statement, but it certainly became clear when the two defense counsel got up and started talking, this whole thing is fake, right? Mr. Mahmadou is fake. Mr. Miller is fake. Mr. Latour is fake. These are all FBI agents. There is no sale to the Government of Gabon. It is fake. Mr. Ali Bongo, I will assure you, that there will be no evidence that anybody checked with him to see if it was okay to use his name and claim that he was going to take a bribe in connection with this deal. It’s all made up.”

“This case doesn’t involve the real Government of Gabon. It doesn’t involve anybody living in Gabon. It doesn’t involve any people who live in Gabon, regardless of what the prosecutor told you. It is all fake.”

“Now, this case is about proving what is in people’s minds, because it’s fake. There is no real crime. So they can’t prove a real crime happened because there is no real crime. So they have to prove what’s in people’s minds. They have to try and prove that Mr. Caldwell and the others believed there was a crime occurring, because that’s the only crime. That would be the only conceivable crime here, their belief that a crime was occurring. So they have to prove to you what these people had in their minds, both my client and all other five Defendants sitting here, what they had in their minds. What is the most obvious way you would use to prove what somebody had in their mind? What they said. You’re going to hear tapes where my client says nothing, he never opens his mouth. The whole discussion about this is the undercover agents and Bistrong talking about committing a crime. My client never opens his mouth and says anything. So you’re going to have to judge, at the end of this six or eight weeks or however long it takes, what my client had in his mind a year and a half ago or two years ago when these events occurred, even though on these tapes he doesn’t say anything that’s going to help you determine that.”

“Conspiracy? Pat Caldwell does not know Jeana Mushriqui, John Mushriqui, Greg Godsey, barely Steve Giordanella — and we’ll talk about that — or Marc Morales. He doesn’t know these people, never met them, never had anything to do with them, and didn’t have anything to do with any of the other people they have charged in this conspiracy.”

“This is a man who spent his entire professional career working for the United States Secret Service, where his primary responsibility was providing security every single day for the president of the United States, the vice president of the United States, and visiting heads of state. That was his job.”

“Now, you are going to hear testimony about Bistrong — I’m not going to spend a lot of time with it — but they allowed him to earn hundreds of thousands of dollars. They allowed him to sign a contract with PPI [Caldwell's employer], and then they claimed, well, we’ll have the illegal deal with PPI, and then you can have legal business with PPI and you can earn money off of that contract. That’s crazy. That’s crazy. How can you have a man setting up a sting to sting business people, and then, oh, but you can have legitimate business with that company too, and you can make money off them and we’ll let you keep it? They let him keep the money. This is a man who has committed crimes all over the world, he’s cooperating with the FBI, he’s earning hundreds of thousands of dollars a year, and they let him keep the money.”

Stephen Giordanella

Paul Calli (Carlon Fields – here) argued on behalf of his client Stephen Giordanella.

“Steve Giordanella is not guilty. As Judge Leon informed you, Mr. Giordanella is accused of only one count in this case, and that is allegedly being a member of one big conspiracy charged in this indictment, with 21 other people named therein. Mr. Giordanella is not accused of violating the Foreign Corrupt Practices Act. Mr. Giordanella’s lack of involvement is a lack of evidence, and it is a lack of proof against him. Mr. Giordanella never knowingly or willfully joined this big conspiracy that the Government is going to attempt to prove existed for the next eight weeks. He never offered, he never promised, he never authorized the payment of money to a foreign official. In fact, Mr. Giordanella did not have the authority to offer, to promise, or to authorize any payments whatsoever from his former employer, Protective Products.”

“Mr. Giordanella never knowingly joined in the big conspiracy the Government charged him with. Steve Giordanella never had any meetings, never had any discussions, and never had any communications with 20 of the other 21 people supposedly in this big conspiracy he’s charged with.”

“I’m going to take one minute, because I must, and talk about Mr. Bistrong. Mr. McCool and Mr. Madigan will go into more detail. The man — and I use that term generously — is a master of lying, cheating and deception. He is a career criminal. He is a con artist of the highest order. He uses women. He uses everyone he comes into contact with for one reason: To advance his own self-interest. Chris Forvour will tell you a laundry list of Bistrong’s crimes. Bistrong frequents prostitutes. He transports illegal narcotics across state and international borders for his personal use. He transports his personal cash across international borders without reporting it. He parks his money offshore. And Bistrong commits the crime of structuring his cash deposits so he doesn’t have to fill out the form like law-abiding citizens do that shows if you’re depositing a lot of money at one time. And this is the person that Chris Forvour partnered up with. You’ll hear that Bistrong became almost like best friends forever with the FBI agent sitting at my elbow. Oh, sure. They exchanged gifts. They smoked cigars together. Trust and verify? From what I can see from the evidence, the only thing Chris Forvour verified was that the fancy Padron cigars Bistrong gave him were not fake and counterfeit. Bistrong posed for happy pictures with the FBI. I mean, this is a guy who should be in prison, folks. Not only is he not in prison, but they’re paying him. Not only are they paying him, but he’s getting earned money anyway. Big smiles, peace signs with the FBI agents. Bistrong and the FBI gave each other nicknames that they thought were real cool. Bistrong was Flash Bang because of his ability to disorient people. And he was called Tom Brady, the quarterback. Mr. Forvour was El Chupacabra, the mythical half man, half beast that stalks the island of Puerto Rico terrorizing the citizens. And he was also Coach Bill Belichick. They think they’re on the same team. They talked about it all the time. You’ll hear that.”

John Godsey

Michael Madigan (Orrick, Herrington & Sutcliffe – here) argued on behalf of his client John Godsey.

“[The FBI} had one goal in mind, and that goal was to make a splashy FCPA case, and to get it on the front page of the New York Times. And that’s not Mike Madigan, the lawyer, talking. You’re going to see a document written by Agent Forvour saying that was his goal from the beginning.”

“And not only, not only do they allow Mr. Bistrong to skate, but they make him a millionaire, a millionaire. For the two years that he operates undercover, it has to be some kind of record, he is paid — he makes $1.2 million into his pocket courtesy of our government.”

Mark Morales

Steven McCool (Mallon & McCool – here) argued on behalf of his client Mark Morales.

“You can listen to each and every one of the tapes that they introduce into evidence, every single one, from beginning to end, and no one said that that man, Marc Morales, or that man, Greg Godsey, that in order to secure this deal you got to pay the minister. It didn’t happen. It’s fiction, ladies and gentlemen. This was pitched as a done deal. It was pitched as a done deal with no conditions. That man was entitled to clear terms. You are entitled to clear terms. Their rules require that when you engage in this sort of undercover activity — set aside the ethics of sting operations. They’re legal, that’s fine. But their rules say when you do it, you have to make the supposed illegality of this activity clear to the subject of that investigation. Those are rules issued by the director of the FBI, by the Attorney General of the United States. The rules also say that you have to do it fairly, ladies and gentlemen. Fairly.”

“If the FBI is going to sting someone, all right, by secretly recording their meetings and telephone calls, in an effort to convict that person for violating the Foreign Corrupt Practices Act, do it fairly, don’t scam them. Right? They could have pitched that deal to Marc, right, when he was not in turmoil and under the influence of alcohol. They chose not to. They could have pitched that deal in clear terms and say this thing is supposed to be illegal. They could have said, like I said before, we got this dirty official, we pay him off, he’s all ours. They chose not to do it. They pitched it as a done deal, like I said in the beginning, ladies and gentlemen. They pitched it as a done deal with no strings attached.”

From the Dockets

Thursday, September 15th, 2011

This post details developments as to FCPA or related litigation previously reported.

Haiti Teleco Case

Previous posts (here and here)  detailed Joe Esquenazi’s and Carlos Rodriguez’s motion for acquittal or a new trial based on statements made (and then seemingly retracted) by Jean Max Bellerive (Prime Minister of Haiti) concerning the ownership of Haiti Teleco – the entity at the middle of the bribery scheme.  In the DOJ’s response (here) to the defendants’ motion, the DOJ argues, among other things, that “the Government did not seek the first Bellerive declaration from the Republic of Haiti, and there is no need for an evidentiary hearing as to when or how the Government obtained it.”  As to the second Bellerive declaration, the DOJ stated that “the Government assisted Mr. Bellerive in preparing the declaration” in which Bellerive, as noted in the prior post, stated that the first declaration was strictly for internal purposes and he did not know it was going to be used in criminal legal proceedings in the U.S. or that it was going to be used in support of the argument that Teleco was not part of Public Administration of Haiti.

Substantively, the DOJ argues that the first Bellerive declaration does not “contain newly discovered evidence” because the jury “heard most of” the points addressed in the first Bellerive declaration from Garry Lissade, the DOJ’s expert witness, who testified as to the legal status of Haiti Teleco after “he conducted extensive research, including legal research and interviews, in reaching his conclusions.”

The DOJ’s position in many FCPA enforcement actions concerning state-owned or state-controlled entities seems to be that the ownership structure of the entity at issue should be obvious and easily ascertainable to defendants.  If so, why did Lissade (Haiti’s former Minister of Justice) have to “conduct extensive research, including legal research and interviews, in reaching his conclusion” that Teleco was a Haitian public entity?

Africa Sting Case

The second Africa Sting trial involving defendants John Mushriqui, Jeana Mushriqui, R. Patrick Caldwell, Stephen Giordanella, John Godsey, and Marc Morales is set to begin on September 22nd.  The second trial will be more narrowly focused than the first Africa Sting trial that resulted in a mistrial (as well as dismissal of certain counts including money laundering conspiracy charges).

Why?  Because the DOJ did not oppose defendants’ motion to dismiss the money laundering conspiracy charges.  In pre-trial briefing, the DOJ stated as follows.  “At the conclusion of the government’s case-in-chief in the first trial, the Court granted a motion for judgment of acquittal on Count Forty-Four of the Superseding Indictment with respect to the defendants in the first trial. The government continues to believe that the Court should not have granted the motion and that Count Forty-Four should have been submitted to the jury. But the government understands the Court’s ruling and will not object to the Defendant’s motion. The government’s position in this filing recognizes the Court’s past ruling, and in no way suggests that the government will not seek to bring similar charges in future cases.”

Siriwan “Foreign Official” Case

A previous post (here) detailed how Juthamas Siriwan and Jittisopa Siriwan (the “foreign officials” in the Green FCPA enforcement action) were fighting back against DOJ criminal charges.  As noted in the post, the Siriwans argued as follows.  “This is the first judicial challenge to a novel prosecutorial approach the Government recently developed to charge foreign officials allegedly involved in corruption.  That approach is aimed at overcoming a fundamental FCPA limitation.  The FCPA does not criminalize a foreign public official’s receipt of a bribe.  Nor can the Government employ an FCPA conspiracy charge against a foreign public official.  Accordingly, these new enforcement initiatives require expansive interpretations [of] “promotion money laundering” [under the Money Laundering Control Act].”  The Siriwans further argued as follows.  “Congress has extensively amended the FCPA, yet it deliberately has not extended FCPA liability to foreign officials.  If the Government wishes to extend U.S. criminal penalties to foreign officials accepting a bribe, it must go back to Congress, rather than employ dubious charging tactics to evade the direct and repeated congressional choice not to apply FCPA criminal liability to such officials.”

In its opposition brief (here) filed last week, the DOJ stated as follows.  “Upon analysis of defendants’ arguments, it is quickly evident that, in support of their positions, defendants routinely conflate and confuse multiple statutes, interpret and argue the elements of uncharged statutes, and ignore case law relevant to the statutes actually charged.”  Among other things, the DOJ stated as follows.  “That foreign officials cannot face liability for FCPA offenses does not give foreign officials a free pass to commit other, entirely separate, crimes.”  The DOJ noted that the Siriwans are not charged with accepting a bribe, or conspiring to violate the FCPA, but rather with “the separate, and entirely analytically distinct, crime of international transportation money laundering to promote the Greens’ violation of the FCPA.”  The DOJ noted that just because Siriwan ”was a foreign official at the time of these offenses, and therefore, not charged under the FCPA does not change the analysis.”

As reported by Samuel Rubenfeld at Wall Street Journal Corruption Currents, a hearing on Siriwans’ motion to dismiss is scheduled for Oct. 20.

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;

(c) “the fact that all of the conduct [at issue] took place prior to the acquisition of Armor by BAE Systems; and

(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.