by Bruce Carton
In late February, the Department of Justice’s massive “Africa Sting” operation against 22 individual defendants for alleged violations of the Foreign Corrupt Practices Act finally came to a whimpering end.
The case was dismissed after the Department of Justice threw in the towel and filed a motion with U.S. District Judge Richard Leon to dismiss with prejudice all indictments against all remaining defendants.
Rewind to two years earlier. On January 19, 2010, the Justice Department made headlines when it charged 22 defendants with engaging in a scheme to pay bribes to the minister of defense for Gabon, a country in West Central Africa. The defendants allegedly agreed to pay a 20 percent “commission” to a sales agent who they believed represented the minister of defense for Gabon in order to win a portion of a $15 million deal to outfit the country’s presidential guard. In reality, the Justice Department stated, the entire scheme was an undercover operation and the “sales agent” was actually an FBI agent.
In the end, the Justice Department had little choice but to give up on the cases. Two juries had already spent a combined six months listening to the Justice Department’s evidence against 10 of the 22 defendants, and the results had been dismal for the Justice Department: a hung jury as to seven defendants and acquittals for three other defendants. In dismissing the remaining cases, the Justice Department told Judge Leon that in light of “the substantial governmental resources, as well as judicial, defense, and jury resources, that would be necessary to proceed with another four or more trials,” it did not believe that continued prosecution of the cases was warranted.
Leon noted dismissal marked “the end of a long and sad chapter in the annals of white collar criminal enforcement.” The judge concluded that “I, for one, hope this very long, and I’m sure expensive, ordeal will be a true learning experience for both the [Justice Department] and the FBI” that delivers “a positive, if not painful, lesson that results in better prosecutions of individuals in the future under the FCPA.”
Expensive and painful indeed. When he announced the case, Assistant Attorney General Lanny Breuer hailed the investigation as an important “turning point” in the government’s “fight to erase foreign bribery from the corporate playbook.” The case was the first large-scale use of undercover law enforcement techniques to uncover FCPA violations and the largest action ever undertaken by the Justice Department against individuals for FCPA violations, he stated. An assistant director from the FBI added that investigating corruption was now “the number one priority of the FBI’s Criminal Division.”
As advertised, the FBI and Justice Department resources dedicated to this unprecedented undercover operation were staggering. Based on court records and press reports, the investigation included:
- approximately 150 FBI agents executing 14 search warrants in nearly a dozen locations in the U.S.;
- seven search warrants executed in the U.K.;
- at least 615 audio and video recordings of more than 150 meetings; 5,287 recorded telephone calls between the defendants and the cooperating witness and undercover FBI agents; and nearly 3,000 pages of text messages from the cooperating witness;
- an extraordinary gathering of all 22 defendants at a restaurant in Washington, D.C.—secretly videotaped by the FBI—at which they all reportedly “raised their glasses to toast the man who’d brought them together.” It turned out that this man was a government informant and the representative who was present (purportedly from Gabon) was an undercover FBI agent.
- a dramatic swoop by the FBI on January 18, 2010, on the eve of an industry convention in Las Vegas, which enabled the FBI to quickly arrest 21 of the 22 subjects.
Yet just two years after the Africa Sting was announced, the Justice Department had suffered losses or hung juries in cases against 10 of the defendants, and had been forced to dismiss the remaining cases (aside from three guilty pleas) altogether. What happened to the Justice Department’s case? And what does the failure to win convictions mean for the prosecution of individuals and for corporate compliance going forward?
Interestingly, the foreman of the jury in the Justice Department’s second jury trial in the Africa Sting, which resulted in not guilty verdicts for two men and a hung jury for three more individuals, took the initiative to write an extraordinary account of why the jury rejected the Justice Department’s case. In a guest post on Mike Koehler’s “FCPA Professor” blog, the jury foreman explained that the jury was left with significant questions about whether some of the defendants intended to violate the law or not. Despite the hundreds of recorded calls and meetings, the terms of the alleged illegal deal were described vaguely to some defendants, and some defendants made very few statements or only passive affirmations (“yeah,” “ok,” “uh huh”) indicating that they were on board with the scheme.
The jury foreman added that another overarching issue was the jury’s perception that nearly all of the prosecution witnesses were “evasive and combative,” with very low credibility. Finally, the foreman said, a number of jurors were troubled by the very nature of the FBI operation, which tended to rely on vague language (for example, discussions of “commissions” rather than “bribes”) and which targeted defendants who had never sought out the undercover deal proposed to them.
According to Koehler, the failure to win convictions in the Africa Sting operation and several other recent Justice Department’s defeats in the FCPA area could rein in the more aggressive practices by the Justice Department. “If there is a common theme in the recent Justice Department losses in FCPA enforcement actions it is this—the Justice Department’s aggressive theories and tactics, when subjected to scrutiny, failed,” he concludes. “All individual FCPA defendants and all enforcement actions are unique, but the recent FCPA trials demonstrate that the enforcement agencies often have difficulty meeting their burden of proof when required to do so.”
Speaking on a webcast just a week after the Justice Department dismissed the Africa Sting case, Joe Warin, a partner in the Washington, D.C. office of Gibson Dunn & Crutcher, pointed to the “intent” issue flagged by the jury foreman, as well as several evidentiary rulings that went against the Justice Department, as key blows to the Justice Department ‘s Africa Sting case. He also observed that the jury had soured on the government’s cooperating witness, who they learned had a $15,000 monthly cocaine habit, frequented prostitutes, exchanged racy and vulgar text messages with his FBI contacts, and had formerly pleaded guilty to an unrelated FCPA charge.
But the defeat will only go so far to discourage the Justice Department from continuing its aggressive pursuit of FCPA violations. For example, Warin said he does not believe the Africa Sting defeat will mark the end of the Justice Department’s prosecution of individuals, as some had speculated. “I think that’s a fairy tale,” he said. Warin said that his law firm’s interactions with the Justice Department in the brief period since the end of the Africa Sting case already show that the federal prosecutors are in no way “shrinking from looking at individual culpability.” He said the Justice Department’s FCPA lawyers were extremely talented lawyers and that he fully expects that they will be bringing additional cases against individuals.
In fact, Koehler says that the “unfortunate reality” is that the Justice Department’s recent FCPA losses are unlikely to have much impact on corporate enforcement of the FCPA. Unlike individuals, many corporate FCPA defendants are given an option by the Justice Department to resolve an FCPA inquiry through a non-prosecution agreement or deferred prosecution agreement. When offered an NPA or DPA, Koehler says, “very, very few business organizations will reject these vehicles and put the Justice Department to its burden of proof.”
At least one business advocate, the U.S. Chamber of Commerce, is trying to use the outcome in the Africa Sting cases to bring about change in the area of corporate enforcement. Immediately following the dismissal of the cases, the Chamber stated that the matter showed the need for greater clarity and guidance concerning the FCPA. The Chamber asked the Justice Department and the Securities and Exchange Commission to provide guidance on, (1) the definition of several key FCPA terms, such as what constitutes a “Foreign Official,” (2) what would constitute an effective FCPA compliance program that would provide a corporation with favorable consideration in enforcement decisions, and (3) whether a company may be criminally sanctioned for FCPA bribery violations of which the company had no direct knowledge.
It’s too soon to know how the Justice Department and the SEC will respond, but plenty of companies are hoping that the colossal failure of Africa Sting will prompt them to act.
Originally published in Compliance Week. Reprinted with permission.
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