Previous posts have highlighted the sentences of various defendants in the so-called Carson / CCI enforcement action.  The sentences were as follows.
Stuart Carson (four months in prison, followed by eight months of home detention).
Hong Carson (three years probation to include six months of home detention)
Paul Cosgrove (thirteen months of home detention)
David Edmonds (four months in prison followed by four months of home confinement).

In mid-March, Judge James Selna (C.D. Cal.) sentenced the remaining defendants in the case – Mario Covino, Richard Morlok and Flavio Ricotti.

This post highlights various issues connected to these sentences.  Each of these defendants were the first to plead guilty in the case and cooperated with the DOJ in the prosecution of the above defendants – the so-called “Carson” defendants.  Much is made in the sentencing memos of this and the fact that Covino, Ricotti, and Morlok did not force the DOJ to prove its case.  (For more on the ending of the cases against the ”Carson” defendants as the DOJ was close to being put to its burden of proof, see prior posts here and here).  The sentencing memos also shed light on the perceived unfairness from the defendants’ point of view of potentially receiving stiffer sentences than the ”Carson” defendants.  This did not happen as Judge Selna sentenced Covino and Morlok to probation and Ricotti to time served.

Covino

Covino was sentenced to three years probation, including a three-month period of home detention.

As explained in the DOJ’s sentencing memorandum, Covino was the first CCI employee to plead guilty.  The DOJ stated as follows.

“Beginning in February 2008, during the initial stages of the government’s investigation, defendant provided and subsequently continued to provide the government with invaluable information concerning the bribery practices at CCI.  [...] Defendant had a first-hand view of CCI’s “friends in camp” sale model and the improper payments that were an integral part of that model.  Defendant gave the government an insider’s view of the company’s sales practices, accounting systems, terminology, executives, employees, and agents, and provided a compelling narrative for the documents that indicated improper payments.  Defendant entered into a plea agreement in December 2008 and pleaded guilty in January 2009.  [...]  The government’s indictment of six individual defendants followed in April 2009.”

The DOJ further stated that “for several of the counts and overt acts in the indictment, defendant’s statements were the only witness testimony the government had available to corroborate payment records and e-mails.”

In its sentencing memo, the DOJ made much of the fact that Covino’s early acceptance of responsibility ”can be contrasted with the much later acceptance of responsibility by the Carsons, Cosgrove, and Edmonds, each of whom pleaded guilty only after approximately three years of hard-fought, protracted litigation.”  Elsewhere, the DOJ stated that it is “only fair” that Covino do “no worse than the defendants who resisted the government’s case for three years and only struck deals on the eve (or near eve) of trial.”  The DOJ recommended a sentence of probation.

Morlok

Covino was sentenced to three years probation, including a three-month period of home detention.

As explained in the DOJ’s sentencing memorandum, Morlok was the “second CCI employee to plead guilty, doing so just a few weeks after Mario Covino.”  The DOJ memo states that Morlok was CCI’s Finance Director from 2002 through 2007 and that in July 2007, ”shortly after a new Chief Financial Officer joined CCI and became defendant’s new boss, defendant precipitated a confrontation with senior sales executives over commission payments to Korea.  This confrontation ultimately escalated into the new CFO’s discovery of the systematic corrupt payments made by CCI from 1998 until 2007 as alleged in the indictment.  This discovery caused CCI to undertake an internal investigation that led to its voluntary disclosure to the Department of Justice.”  In all other respects, the DOJ’s sentencing memorandum is similar to the above Covino sentencing memo.

Morlok’s sentencing memorandum makes much of the fact that the “Guidelines calculations contained in the plea agreements for the Carson Defendants are significantly less severe than those included in the plea agreements for Mr. Morlock and Mr. Covino, the two cooperators in this matter.”  The sentencing memo states that “this inconsistency is a result only of a change in the government’s strategic position.”  Morlok’s sentencing memo states that he “accepted responsibility for his conduct not only after the government’s investigation began, but well before that, when he took steps in 2004 and in 2007 to bring CCI’s misconduct to the attention of CCI’s parent company.”  The memo states, “as the government points out, Mr. Morlok’s whistleblowing ultimately caused the internal investigation that led to CCI’s voluntary disclosure to the Department of Justice.”

Ricotti

Ricotti was sentenced to time served.

As explained in the DOJ’s sentencing memorandum, after the grand jury indictment in the case in April 2009, Ricotti, an Italian citizen and resident, was detained in Germany, subsequently extradicted, and following his guilty plea served nearly 11 months in federal custody.  The memo indicates that Ricotti was the third CCI employee to plead guilty after Mario Covino and Richard Morlock, both of whom pleaded guilty pre-indictment.  In all other respects, the DOJ’s sentencing memorandum is similar to the above Covino and Morlok sentencing memos.  Given Ricotti’s time in custody, the DOJ recommended a sentence of time served.

Ricotti’s sentencing memo makes much of the fact that given his time in custody he “already served the longest sentence in this case despite having cooperated and pleaded guilty long” before the other defendants “some of whom are significantly more culpable than Mr. Ricotti.”  Ricotti’s sentencing memo states as follows.

“Most of this time [Ricotti's time in custody] was in the United States, thousands of miles away from any family or friends.  Although he speaks English, Mr. Ricotti was completely cut off from Italian life and language.  Thus, Mr. Ricotti served ‘harder’ time than most defendants in this jurisdiction who usually have some cultural and family ties to the U.S.”

The sentencing memo also states as follows.  “After Mr. Ricotti began to cooperate and pleaded guilty, the remaining defendants continued their pitched litigation campaign against the government’s case for another year and forced the government to prepare for trial.  Nonetheless, they received disparately more favorable plea agreements and hence lighter sentences than Mr. Ricotti.”

*****

Thomas Farrell, a defendant in the long-running Bourke/Kozeny matter concerning alleged payments in Azerbaijan, was also recently sentenced.  Farrell, according to the DOJ, was involved in various investment vehicles used by Bourke, Kozeny and others in connection with the bribery scheme and pleaded guilty in 2003 to conspiracy to violate the FCPA and a substantive FCPA violation.  Judge Shira Scheindlin sentenced Farrell to time served with no period of supervised release.