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January 13, 2012

Interesting extended review of FCPA prosecutions and sentencing outcomes

Bloomberg's Businessweek has this effective and lengthy review of prosecution and sentencing developments in a "hot" new area of federal corporate crime.  The piece is headlined "Foreign Bribery Defendants May Fight More as Cases Falter," and here are excerpts:

Executives facing trial in U.S. courts over accusations of bribing foreign officials may be encouraged to fight charges as prosecutors regroup after two courtroom setbacks and await a verdict in their largest overseas corruption probe targeting individuals.

One of two cases hailed by the government as milestones in its enforcement of the Foreign Corrupt Practices Act was dismissed last year by a judge who said the jury verdict convicting two men at an electricity tower company of bribing Mexican officials was tainted by prosecutor misconduct in “a sloppy, incomplete and notably over-zealous investigation.”

In the first prosecution under the FCPA based on a sting operation, a judge declared a mistrial for four of 22 defendants accused of participating in a fake $15 million weapons deal involving Gabon. A separate trial is under way for a second group of defendants.

The 2011 outcomes will make individual defendants in FCPA cases more confident in contesting charges, in particular because they may face long prison terms under the plea deals the Justice Department offers, even as corporations continue to self-report and settle, said Philip Urofsky, a former FCPA prosecutor who now defends cases at Shearman & Sterling LLP. “If a defendant is able to finance a significant defense, they can really put the government to the test,” Urofsky said in a phone interview.

In a crackdown on overseas bribery that started during the Bush administration, the government settled 57 cases against companies from 2005 through 2011 without trial, reaping $4.1 billion for the U.S. treasury, according to Justice Department data.  A push to prosecute more individual defendants during the same period has produced mixed results, with some beating charges outright and others getting less punishment than prosecutors sought.

Of the 93 people charged over the past seven years, including 43 in 2009 alone, 41 pleaded guilty and six were convicted at trial, according to Shearman & Sterling data.  Four defendants are fugitives, one was exonerated and three had their cases dismissed.  Of the remainder, 38 either have a trial date scheduled or are awaiting one.  The 31 defendants who’ve been sentenced got an average of 2 years and 2 months in prison.

Laura Sweeney, a spokeswoman for the Justice Department, said the government has had “great success” against individuals since increasing its enforcement actions in 2009.  “Our record speaks for itself, with numerous guilty pleas and trial convictions, and substantial sentences imposed, including a 15-year prison sentence just three months ago on FCPA charges,” she said in an e-mailed statement.  “These many successful prosecutions of individuals are in addition to our numerous corporate prosecutions.”...

The 1977 law bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business.  Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S. Corporations started to approach the Justice Department about possible FCPA violations and to negotiate settlements beginning about 2003, when, as part of the Sarbanes-Oxley Act, top executives were required to certify that they weren’t aware of any fraud at their companies, Urofsky said.

The multimillion-dollar settlements the Justice Department reached with public companies led to more resources, including prosecutors and FBI agents, getting assigned to FCPA cases, Urofsky said.  That in turn brought about more investigations of smaller, closely held companies and individuals and an uptick in FCPA trials the past two years, he said. “Corporations will look at it as part of business management and settle as long as the costs are reasonable and don’t break the bank,” Urofsky said.  “An individual can go to jail -- they have a lot more tangible skin in the game.”...

Even when the government secures a conviction, some judges have been disinclined, over the objections of prosecutors, to impose significant sentences for foreign bribery crimes. The U.S. sought 10-year prison terms for a Hollywood couple convicted in 2009 of bribing a Thai government official to get a contract to run a Bangkok film festival.

In August 2010, U.S. District Judge George Wu in Los Angeles said while sentencing Gerald Green and his wife, Patricia, to six months behind bars that their crimes weren’t as serious as other foreign bribery cases.  That was after a Justice Department lawyer argued that it defied logic for the couple to get a more lenient sentence than other defendants in foreign bribery cases who pleaded guilty and cooperated.

Federal prosecutors in New York sought the maximum 10-year prison term after winning a conviction against Frederic Bourke for conspiring to pay bribes to leaders in Azerbaijan in what they called one of the most corrupt investment schemes in the former Soviet Union. Instead, Bourke, the co-founder of handbag maker Dooney & Bourke, got one year and one day in prison.

At Bourke’s sentencing in November 2010, U.S. District Judge Shira Scheindlin cited Bourke’s “lifetime of good works” for a sentence that was far less than the 57 months to 71 months recommended by U.S. sentencing guidelines.  The judge said that while she agreed with prosecutors that Bourke helped promote a deal he knew was corrupt, there was “slim proof” that bribes were ever paid.

Two executives charged under the FCPA didn’t fare as well when they fought back.  The former president of Miami-based Terra Telecommunications Corp., Joel Esquenazi, was sentenced in October to 15 years in prison after he was found guilty at trial of bribing officials at a state-owned Haiti company.  The sentence was the longest ever in an FCPA case.  A co-defendant received a seven-year sentence.

Many individual defendants still choose to settle, rather than fight, and avoid the risk of a trial.  In September, the former chief executive officer of Latin Node Inc., a Miami-based telecommunications company, was sentenced to 46 months in prison after pleading guilty to bribing Honduran government officials, and last month, a United Arab Emirates man, who was extradited to the U.S., got 30 months after pleading guilty to bribing Iraqi officials and paying kickbacks under the UN oil for food program.  

“They probably have had more successes than failures,” Davis, the Miller & Chevalier attorney, said of the Justice Department’s FCPA unit. “They’re still very committed to charging individuals because of the deterrent effect.”

January 13, 2012 at 09:18 AM | Permalink


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My gosh.

Extorting 4.1 Billion from Industry to further fund the DOJ, or support Demorats or Republicats.

What is wrong with this picture? Buehler, Buehler, anyone, anyone?

Posted by: albeed | Jan 13, 2012 8:21:09 PM

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