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The BOTA Foundation explained (Part Three): The Giffen case

The story of the failed FCPA prosecution of James Giffen is likely familiar to many readers of the FCPA Blog.  Following a three-year investigation by the DOJ that started in 1999, in March 2003 Giffen was arrested as he was boarding a Paris bound plane at JFK.

The arrest was based on a federal grand jury indictment alleging that Giffen used $84 million collected from U.S. oil companies as success fees or escrowed deposits to bribe Kazakhstan’s president and other officials. 

Giffen was indicted on 65 counts in connection with violations of the Foreign Corrupt Practices Act, mail and wire fraud,  failing to disclose foreign bank accounts, money laundering and filing false tax returns. He faced more than 80 years in prison. 

Giffen escaped jail time, criminal fines, and probation when he was allowed to plead guilty to failing to report a foreign bank account in a 1996 tax return. His now-dormant firm, Mercator Corporation, pleaded guilty to one count of violating the Foreign Corrupt Practices Act by giving two snowmobiles to officials in Kazakhstan in 1999.

What explained the long gap between Giffen’s arrest and his court reckoning in 2010?  Giffen argued that all of his actions in Kazakhstan were well known to the U.S. government and were done with the government’s full approval.  In fact, Giffen claimed that he was an informant for the CIA, and his lawyers requested that Agency provide files covering its work in Kazakhstan, which it refused to do.

Some observers called this the “spy defense” while others less kindly referred to Giffen’s legal tactics as the “blackmail defense.” Giffen’s defense tactics apparently worked and one of the most important FCPA prosecutions up to that point ended with a whimper.

Judge William H. Pauley in New York said classified documents showed that Giffen had “advanced the strategic interests of the United States and American businesses in Central Asia. Throughout this time,” the judge said, Giffen “continued to act as a conduit for communications on issues vital to America’s national interest in the region.” Judge Pauley called Giffen a hero.

None of the oil companies that Giffen was working with on deals were indicted, although an associate of Giffen, an executive at Mobil Oil in the 1990’s, J. Bryan Williams was prosecuted. He pleaded guilty in September 2003 to tax charges and was sentenced to 46 months in prison. Prosecutors said the Virginia lawyer took a $2 million kickback from Giffen for helping negotiate a deal involving Kazakhstan’s Tengiz oil field. Williams was released from prison in 2006.

In my next post, I’ll examine the motivations of the governments of Kazakhstan, the U.S., and Switzerland to use $84 million dollars (plus $31 million in accrued interest) that had been frozen in the Pictet and Cie Swiss Bank in connection with the Giffen case to start the BOTA Foundation.

Part One of this series is here and Part Two is here.

________

Aaron Bornstein was the Executive Director of BOTA Foundation, employed by a Washington, D.C. based NGO called IREX, from 2011 until its close in 2014. He is a foundation and international development professional who has worked in 8 different countries on a variety of civil society strengthening, poverty alleviation, and other projects. Aaron is interested in receiving institutional support for the more extensive documentation of the BOTA experience that he is working on. Please send your suggestions, along with your feedback on the BOTA series, to [email protected].

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