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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Enforcement Report For Q3 ’09

During the third quarter, we counted Foreign Corrupt Practices Act enforcement actions involving nine individuals and five corporations. Among the developments: Three FCPA-related trials were completed, all ending badly for the defendants (Bourke, Jefferson and Green). For the first time, the SEC asserted control-person liability in an FCPA case (Faggioli and Huff). And the Justice Department used a California anti-corruption law as the basis for a federal Travel Act charge in an FCPA prosecution (CCI).

Here’s what happened:

AGCO Corporation (September 30, 2009) Criminal and civil enforcement actions resolved. To settle charges that it paid kickbacks to the pre-war Iraqi regime under the U.N. oil for food program, agricultural equipment-maker AGCO Corporation agreed with the Justice Department to pay a criminal fine of $1.6 million and enter into a three-year deferred prosecution agreement. Its U.K. subsidiary was charged in a one- count criminal information with conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA.

In its settlement of civil charges with the Securities and Exchange Commission, AGCO Corporation agreed to disgorge $13,907,393 in profits and $2,000,000 in pre-judgment interest, and pay a civil penalty of $2,400,000. The SEC charged the company with failing to maintain an adequate system of internal controls to detect and prevent the corrupt payments and failing to properly record the payments.

Gerald and Patricia Green (September 14, 2009) Convicted of conspiracy to violate the FCPA and violating the FCPA.
The Hollywood film executives were found guilty by a federal jury in LA of violating the FCPA by bribing a Thai official in exchange for contracts to manage and operate Thailand’s yearly film festival.

Gerald Green, 77, and Patricia Green, 52, were convicted of conspiring to violate the FCPA and U.S. money laundering laws, nine counts of violating the FCPA, and seven counts of money laundering. Patricia Green was found guilty of two counts of falsely subscribing to a U.S. income tax return.

The conspiracy and FCPA charges each carry a statutory maximum penalty of five years in prison. Each of the money laundering counts carries a statutory maximum penalty of 20 years in prison. The tax charges against Patricia Green each carry a statutory maximum penalty of three years in prison. The Greens are scheduled to be sentenced by United States District Judge George H. Wu on December 17, 2009.

Leo Winston Smith (September 3, 2009) Guilty plea to a two-count indictment. The former director of sales and marketing for Pacific Consolidated Industries (PCI), admitted that he bribed an official from the U.K. Ministry of Defense (MOD) in return for equipment orders. Smith, 73, pleaded guilty in the U.S. federal district court for central California to conspiracy to violate the FCPA (18 U.S.C. §371) and corruptly obstructing and impeding the due administration of the internal revenue laws (26 U.S.C. §7212(a)).

Sentencing is scheduled for December 18, 2009. He faces a maximum five years in prison on the FCPA conspiracy charge and three years on the tax charge, and a fine of about $255,000.

Oscar H. Meza (August 28, 2009) Resolved civil enforcement action. Meza, the former sales director in Asia for Faro Technologies, Inc., was charged by the SEC with violating the FCPA’s antibribery provisions (Section 30A of the Securities Exchange Act of 1934 [15 U.S.C. §78dd-1]), the books and records and internal control provisions (Section 13(b)(5) ofthe Exchange Act and Exchange Act Rule 13b21 [15 U.S.C. § 78m(b)(5) and 17 C.F.R. § 240.13b2-1]), and with aiding and abetting Faro’s violations of the anti-bribery, books and records, and internal controls provisions. The complaint alleged that he “authorized bribery payments to employees of Chinese state-owned companies in order to obtain contracts, and that in order to conceal the bribes Meza instructed that account entries be altered.”

Meza paid a $30,000 civil penalty and $26,707 in disgorgement and prejudgment interest.

William Jefferson (August 5, 2009) Convicted of conspiracy to violate the FCPA. The former nine-term congressman from Louisiana was found guilty by a federal jury in Alexandria, Virginia of 11 of 16 corruption charges. In addition to the conspiracy charge, he was also found guilty of soliciting and taking bribes, depriving citizens of honest services, money laundering and racketeering, and conspiracy to solicit bribes. He was acquitted of a substantive charge of violating the FCPA.

Jefferson’s case started in 2005 when the FBI raided his congressional office. He then became the first elected U.S. official to be charged under the Foreign Corrupt Practices Act. The indictment alleged among other things that he conspired to bribe the then Nigerian vice president, Atiku Abubakar, to steer telecommunications contracts to companies controlled by Jefferson’s family.

Nature’s Sunshine Products Inc. (NSP), Douglas Faggioli, and Craig D. Huff (July 31, 2009) Civil enforcement actions resolved. The SEC filed a settled enforcement action against NSP, its CEO Faggioli, 54, and its former CFO Huff, 53. The charges related to cash payments made in 2000 and 2001 by the Brazilian subsidiary of NSP, a manufacturer of nutritional and personal care products, to import unregistered products into Brazil and the subsequent falsification of its books and records to conceal the payments. NSP was required to pay a civil penalty of $600,000; Faggioli and Huff each paid $25,000.

The SEC’s civil complaint alleged thatNSP’s Brazilian subsidiary made a series of cash payments to customs officials to import product into that country and then purchased false documentation to conceal the nature of the payments. The conduct violated the FCPA, and the antifraud, issuer reporting, books and records and internal controls provisions of the federal securities laws. The complaint also alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions of the securities laws in connection with the Brazilian cash payments. NSP also failed to disclose the payments to Brazilian customs agents in its filings with the SEC.

Control Components Inc. (July 31, 2009) Criminal enforcement action resolved. Valve-maker CCI of Rancho Santa Margarita, California pleaded guilty to violating the anti-bribery provisions of the FCPA (15 U.S.C. §78dd-2) and the Travel Act (18 U.S. C. §1952). It bribed foreign officials in a decade-long scheme to secure contracts in about 36 countries. CCI’s plea agreement imposes a criminal fine of $18.2 million, a compliance monitor for three years, and a three-year term of organizational probation.

CCI designs and manufactures service control valves for use in the nuclear, oil and gas, and power generation industries. Its website is here. It’s owned by British-based IMI plc, which trades on the London Stock Exchange under the symbol IMI.L.

The corrupt payments were made to foreign officials at state-owned entities including Jiangsu Nuclear Power Corp. (China), Guohua Electric Power (China), China Petroleum Materials and Equipment Corp., PetroChina, Dongfang Electric Corporation (China), China National Offshore Oil Corporation, Korea Hydro and Nuclear Power, Petronas (Malaysia) and National Petroleum Construction Company (United Arab Emirates).

Ousama Naaman
(July 31, 2009) Arrested in Frankfurt, Germany. The Canadian citizen had been indicted in August 2008 for his alleged role in an eight-year conspiracy to defraud the United Nations Oil for Food Program (OFFP) and to bribe Iraqi government officials in connection with the sale of a chemical additive used in refining leaded fuel. Naaman, 60, of Abu Dhabi, United Arab Emirates, was charged with one count of conspiracy to commit wire fraud and to violate the FCPA and two counts of violating the FCPA. The Justice Department is trying to extradite him from Germany to the United States to stand trial. He faces a maximum prison sentence of 15 years.

Helmerich & Payne Inc. (July 30, 2009) Criminal and civil enforcement actions resolved. The Oklahoma-based oil and gas driller paid a $1 million criminal penalty to the Justice Department and entered into a two-year deferred prosecution agreement to settle FCPA violations related to improper payments to government officials in Argentina and Venezuela. It was also required to disgorge to the Securities and Exchange Commission $320,604 plus prejudgment interest of $55,077.22 for books and records and internal controls violations.

Avery Dennison Corporation (July 28, 2009) Civil enforcement action resolved. Label-maker Avery Dennison resolved civil and administrative charges brought by the SEC in the United States District Court for the Central District of California. Avery was charged with violating the FCPA’s books and records and internal controls provisions. In the administrative action, the SEC ordered the company to disgorge $273,213 and $45,257 in prejudgment interest. In the federal civil action, Avery agreed to a final judgment requiring it to pay a civil penalty of $200,000.

From 2002 through 2005, the Reflectives Division of Avery (China) Co. Ltd. paid or authorized the payment of kickbacks, sightseeing trips, and gifts to Chinese government officials amounting to about $30,000. In one transaction, Avery China secured a sale to a state-owned end user by agreeing to pay a Chinese official a kickback of nearly $25,000 through a distributor. Avery China earned $273,213 in profit from the transaction, which it inaccurately booked as a sale to the distributor rather than to the end user.

Frederic Bourke (July 10, 2009) Convicted of conspiring to violate the FCPA, violating the Travel Act, and lying to FBI agents.

Bourke, 63, is co-founder of well-known handbag brand Dooney & Bourke. A federal jury in Manhattan found that he invested in Czech-born promoter Viktor Kozeny’s unsuccessful attempt in 1998 to gain control of Azerbaijan’s state oil company, Socar, despite knowing Kozeny planned to bribe Azeri leaders. Kozeny has also been charged in the case but is a fugitive living in the Bahamas. Bourke was acquitted of money-laundering charges.

Sentencing is scheduled for Oct. 13, 2009. Bourke faces a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss resulting from the alleged violations on each of the two counts on which he was convicted.

Click on the party names for the original posts, with links to charging documents, plea agreements, and news and litigation releases.

View our enforcement report for Q2 ’09 here.

View our enforcement report for Q1 ’09 here.

View our 2008 enforcement index here.

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