For many, summer signifies baseball, beer and the beach.
This summer, you might have to add corruption trials to the mix.
Several Foreign Corrupt Practices Act cases could go to trial this summer, a prospect that is leaving members of the private FCPA bar salivating.
U.S. v. John O’Shea is scheduled to go to trial in Houston on May 3. Meanwhile, the first trial in the well-publicized FCPA “shot show sting” case is scheduled to begin in Washington, D.C. on May 12. The case’s 22 defendants have been broken up into 4 separate trial groups that will go to trial in May, July, September and November.
While courts often schedule trial dates only to see the defendant work out a plea, lawyers involved in the sting and O’Shea cases say these cases are certain to go to trial.
Another FCPA case, U.S. v. Joel Esquenazi et al. also is scheduled to go trial in July, but it’s unclear whether that trial will actually proceed.
What has folks in private practice buzzing, is the prospect of getting some case law on the FCPA, which prohibits bribes to foreign officials to obtain or retain business.
While the 33 year old law has been enforced with zest in recent years, there remains a dearth of judicial rulings on the statute. This is largely because most FCPA matters never go to trial. Corporations are almost always unwilling to roll the dice and go to trial because of the enormous consequences of losing (think Arthur Andersen). Instead, they settle the cases by entering into deferred and non-prosecution agreements with the Justice Department, removing the courts from the process, and leaving DOJ to formulate enforcement policies, largely without judicial oversight.
Facing jail sentences, a few individual defendants have fought FCPA charges in the past, but those are the exception to the rule. That’s what makes the prospect of four or five FCPA trials in one summer so exciting.
The cases themselves also raise a number of interesting legal issues.
O’Shea, a former manager at ABB Inc., was charged in 2009 with one count of conspiracy to violate the FCPA, 12 counts of violating the FCPA, four counts of money laundering and one count of falsifying records for allegedly bribing Mexican officials.
Defense attorneys in the case already have challenged the Justice Department’s definition of a foreign official in a pre-trial motion. In a number of recent cases, DOJ has held that employees of state-owned enterprises constitute foreign officials under the statute. Members of the FCPA bar aren’t so sure (defendants in two other cases also have filed motions challenging this definition).
Making matters even more interesting, U.S. District Judge Lynn Hughes, who is presiding over the O’Shea case, has shown some skepticism of FCPA enforcement. Hughes ordered the prosecutors in October to prosecute FCPA charges against O’Shea, stripping out money laundering and falsifying records charges.
“[The judge] made it clear to us at the time that he thought that the extra charges were just that,” Sarah M. Frazier, a partner at Berg & Androphy who is representing O’Shea, told Just Anti-Corruption in October. “That, for instance, the money laundering charge was just a restatement of the bribe allegation.”
Hughes also knocked a DOJ-suggested $28.5 million fine down to $17.1 million for ABB Inc., which entered into a DPA in October to settle charges.
Meanwhile, the FCPA sting case is the largest-ever prosecution of individuals brought under the statute.
The case’s 22 defendants were charged, in 16 sealed indictments filed in December 2009, with violating and conspiring to violate the FCPA and conspiracy to commit money laundering. The indictments were unsealed in January 2010 after the arrests of all but one of the defendants in a dramatic roundup at a gun show in Las Vegas.
The case is the culmination of an elaborate multi-year sting operation in which FBI agents, in coordination with a cooperating witness, posed as representatives of the West African country of Gabon, soliciting bribes for a fictitious $15 million deal to supply the Ministry of Defense.
The case represents the first wide-scale use of aggressive undercover techniques by the Justice Department in an FCPA investigation. A trial will put those tactics to the test. Defendants already have begun to allege entrapment.
Defense lawyers also have argued that their clients cannot be charged with conspiring to bribe an African defense minister because the minister knew nothing about the payment and did not participate in the scheme. The attorneys have asked that the charges be dismissed because of the “legal insufficiency” of the government’s allegations.
A ruling on that issue would answer whether or not a person can be charged with trying to bribe a foreign official if the official knew nothing about the scheme.
Denis McInerney, the chief of DOJ’s Criminal Fraud Section, appeared to throw down the gauntlet to the FCPA bar in November.
“The courts are available to companies if they dispute the department’s interpretation of the [Foreign Corrupt Practices Act],” McInerney said in an interview with Bloomberg News at the time.
At least a few have accepted the challenge.