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Double-Barreled Prosecutions

After a corporation makes a deal to settle an FCPA case, it’s on the government’s side. For employees accused of violating the FCPA, that can mean facing the overwhelming firepower of both the government and the corporation.

In U.S. v. Carson, for example, six defendants — Stuart Carson, Hong “Rose” Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim — were indicted in April 2009 on conspiracy, FCPA, and Travel Act charges. Rose Carson also faces an obstruction charge. Their trial is set for November this year.

Two years earlier, their former employer, Control Components Inc., had hired counsel to conduct an internal investigation into overseas corruption. On August 15, 2007, CCI disclosed the investigation to the U.S. government.

In October 2007, CCI and its owner IMI entered into a Confidentiality and Non-Waiver Agreement with the DOJ. The companies agreed to cooperate “by producing document compilations, oral summaries of witness interviews, and other investigative findings.”

CCI eventually turned over to the government 41,000 pages from the 5.5 million generated during the internal investigation, including four charts showing all the alleged corrupt payments that had been uncovered.

Before indicting the six former employees in April 2009, the government showed some grand jury witnesses the charts showing all the alleged corrupt payments. When the six defendants asked for copies of the charts, the government said no. Under the Confidentiality and Non-Waiver Agreement, it said, the charts were protected by CCI’s attorney-client privilege, and only the company could waive it. 

The defendants filed a motion to compel. They argued CCI waived the privilege because its counsel created the charts with the intention of turning them over to the government, not keeping them confidential inside the company. The government has said it will honor the Confidentiality and Non-Waiver Agreement and defer to CCI, meaning if CCI waives the privilege and agrees to produce the charts, the government won’t object.

Meanwhile, CCI and IMI have intervened in the case to defend their privilege in the charts (and presumably other materials) against discovery by the defendants. CCI pleaded guilty in July 2009 to violating the FCPA and Travel Act. It paid a criminal fine of $18.2 million and agreed to cooperate with the DOJ. It isn’t clear if defending its privilege against the six defendants is a formal part of its cooperation.

Two former CCI executives also pleaded guilty a few months before CCI to conspiracy to violate the FCPA. Mario Covino and Richard Morlok are now cooperating with the government and haven’t been sentenced.

Judge James V. Selna has scheduled a hearing on the six defendants’ motion to compel discovery of the charts for September 13, 2010.

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2 Comments

  1. Pretty sure this chart was provided after Judge Selna granted Ds' motion for bill of particulars. See docket entry #89 of 6/9/2009 on Pacer.gov

  2. Take a look at the government's response linked in the post, which post-dates the order you cited. It describes the charts and related payment logs, which we've lumped together.


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