FCPA Defendants Face Long Odds

In Los Angeles this week, the trial of Lindsey Manufacturing, Dr. Keith Lindsey, Steve K. Lee, and Angela Aguilar opened in federal court.

(On Friday, they lost their motion to dismiss the case when the judge ruled that officers of the Mexican electric utility CFE, who the defendants allegedly bribed, are foreign officials under the FCPA.)

Later this year, more FCPA trials are set to happen. In California, six defendants from Control Components Inc. will go on trial, and in Houston, John O’Shea of ABB will face a jury.

What are the prospects for this year’s FCPA defendants? It’s an uphill fight.

In 2009, another jury in LA convicted Gerald Green and his wife Patricia on FCPA and related charges in just hours. There are also lessons from Frederic Bourke, William Jefferson, David Kay, Douglas Murphy, and David Mead, who in recent times all lost FCPA-related jury trials.

Here are some reasons why fighting FCPA charges is so tough. Not all the reasons apply to all defendants.

Juries hate graft. FCPA cases are about bribes to corrupt foreign officials. They’re about sophisticated and often wealthy people looking for shortcuts, hoping to subvert foreign governments for personal or corporate gain. Wheeling and dealing in exotic places. Flashing cash and pulling strings. Juries lap it up. We’ve said before that even if the government’s evidence isn’t rock solid on all the elements of an FCPA offense, the jury will still get the picture that people stepped over the line of acceptable business behavior. And they’ll convict.

There are lots of witnesses. Forget lone wolves and rogue employees. Foreign bribery is usually a team effort. When the government gets a whiff of the plot, it hauls in everyone — from those who might have had a hand in it to anyone who could have overheard talk at the water cooler. If it’s early in the investigation, the bit players can be persuaded to turn, to become the government’s cooperating witnesses or confidential informants. Supporting actors are given immunity or offered the hope of lighter sentences. So they sing about their bosses, colleagues, clients, and friends.

Two former CCI execs — Mario Covino and Richard Morlok — already pleaded guilty and are helping prosecutors. And Fernando Basurto, ABB’s former agent in Mexico, will testify against John O’Shea. He may also turn up in the Lindsey trial. And both CCI and ABB have also pleaded guilty and have been cooperating with the feds.

Evidence is everywhere. Bribes have to be planned, funded, paid, and covered up. There’s always someone on the receiving end, so the complications multiply. It usually leaves behind a trail that’s easy to find and follow. Phony contracts and dummy invoices, hot money bouncing from bank to bank, fake agents and distributors, shell companies as fronts, two sets of books, and so on.

Prosecutors show and tell. These days the government is likely to show up for trial with audio tapes of the accused discussing the bribes or videos showing the actual handover of cash. “Wearing a wire” once meant strapping to your torso an awkward piece of electronic gear the size of a croissant. Not any more. A cell phone on the table can be an open mic. A spy pen in the breast pocket can capture or broadcast sound and pictures.

Related charges grow like mushrooms. With foreign bribery, there’s usually a conspiracy, money laundering, traveling to commit the offense, fraud and obstruction in the cover-up, and tax-cheating to boot. Prosecutors stack the charges and drop weak ones later, plowing ahead with the rest.

In addition to substantive FCPA charges, the Lindsey defendants face conspiracy counts; Angela Aguilar at first faced FCPA charges, later replaced with money laundering and aiding and abetting. On top of his FCPA counts, O’Shea faces conspiracy, money-laundering, and falsification of records. The CCI defendants are charged with FCPA violations and conspiracy, Travel Act, and aiding and abetting offenses.

Frederic Bourke, incidentally, was convicted not for violating the FCPA but of conspiracy and a Travel Act offense. William Jefferson beat a substantive FCPA charge but was found guilty of conspiracy to violate the FCPA and other corruption counts. Gerald Green beat the obstruction rap — the government ended up dropping the charge — but he and his wife were convicted of conspiracy to violate the FCPA, eight violations of the FCPA and seven counts of money laundering. Mrs. Green was also found guilty of two counts of falsely subscribing a U.S. tax return.

Forfeiture — the government’s WMD. An FCPA defendant can win acquittal on every FCPA-related count but one and still lose a forfeiture action. Any assets derived from proceeds traceable to a violation of the FCPA, or a conspiracy to violate the FCPA, can be forfeited. The Greens were only sentenced to six months in federal prison. But through forfeiture they lost their home, bank accounts, car, companies, and pensions. The Lindsey defendants all face forfeiture, as does O’Shea. The CCI defendants don’t.

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An indictment is merely an accusation, and all defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.