By: James W. Kraus
After two trials resulted in acquittals for three defendants, hung juries as to seven others and no convictions, the United States has given up on what it had originally touted as “the largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the Foreign Corrupt Practices Act (FCPA).” On February 21, 2012, the government filed a motion to dismiss, with prejudice, the indictments of all remaining defendants (including those not yet brought to trial and those who had been granted a mistrial) in United States v. Goncalves, et al. , D.D.C., Criminal No. 09-335. Judge Richard J. Leon granted the government’s motion.
In its three paragraph motion, the government indicated that its request to dismiss all remaining charges was based on three primary factors: (1) the unfavorable outcomes of the first two trials; (2) the impact of the court’s ruling on certain evidentiary matters in the first two trials, including rulings relating to Rule 404(b) and other “knowledge and intent” evidence; and (3) the substantial resources that would be expended to proceed with four or more additional trials.
Although Judge Leon granted the government’s motion from the bench, he did not do so without comment. According to the Washington Post, Judge Leon was critical of the government, indicating that, in his opinion, the case was a “long and sad chapter in the annals of white collar criminal enforcement.” The Post further reported that the Judge specifically criticized how prosecutors handled evidence, managed their key informant and pushed an “aggressive” interpretation of conspiracy charges.
The original indictment charged twenty two executives and employees of companies in the military and law enforcement products industry for an alleged scheme to bribe foreign government officials to obtain and retain business. Specifically, the defendants were charged with engaging in a scheme to pay bribes to the Minister of Defense for the African nation of Gabon. In fact, the scheme was part of an undercover operation, with no involvement from any official from Gabon or any other nation. As part of the sting, the defendants allegedly agreed to pay a 20% “commission” to a sales agent that the defendants believed represented the Minister of Defense for Gabon in order to win a portion of the $15 million contract to outfit the country’s presidential guard.
Underlying the government’s decision to move to dismiss all of the remaining charges in this case were problems relating primarily to the credibility of the government’s witnesses and the difficulty in proving the elements of willfulness and intent with respect to each of the defendants. It is likely that among the important considerations in the government’s decision to dismiss was a blog post on the “FCPA Professor” website (www.fcpaprofessor.com), where the foreman of the jury in the second trial posted a detailed discussion of the jury deliberations. The foreman indicated that the jurors were nearly unanimous in finding the prosecution witnesses to be evasive and combative. In addition, many of the jurors had a problem finding that the alleged payment of a “commission,” as described by government witnesses was equivalent to a “bribe.” Lastly, it appears that the jurors had substantial problems with the government’s star witness, Richard Bistrong, who had previously been convicted of violating the FCPA and accepting $1.3 million in kickbacks, before participating in the undercover sting.
This is the second time in less than three months that the DOJ has suffered the dismissal of a high profile FCPA case. In December, Judge Howard Matz, in the U.S. District Court for the Central District of California, granted a motion to dismiss the Lindsey Manufacturing FCPA case. U.S. v. Enrique Faustino Aguilar Noriega, et al., C.D. Cal., No. CR 10-01031, slip op. (December 1, 2011). By granting dismissal in that case, Judge Matz vacated the convictions of Lindsey Manufacturing Co., its CEO, Keith E. Lindsey and CFO, Steve K. Lee. Judge Matz found that there was prosecutorial misconduct throughout the course of the prosecution, including falsehoods made in search and seizure warrant affidavits, unauthorized and warrantless searches, false or misleading testimony by government witnesses in the grand jury, failure to produce questioned grand jury testimony and misconduct in the delivery of closing argument. Id. slip op. at 8-24.
FCPA enforcement has been, and will likely continue to be, one of DOJ’s top priorities. The Department set records in 2010 and 2011 for the number of cases resolved, and for the length of prison sentences achieved in criminal prosecutions under the Act. In 2011, however, there was a rise in the number of FCPA matters taken to trial, a trend that is expected to continue. It is yet to be determined how the results in the prominent cases above will impact the DOJ’s FCPA enforcement priorities and tactics.