Authors: John Fund
Even with all of the travails suffered by the defendants, there was some poetic justice and final embarrassment for the Justice Department at the end of the case. Despite the Justice Department's request that Richard Bistrong, their cocaine-addicted informant, not receive any jail time for his violation of the FCPA, Judge Leon gave him an 18-month prison sentence. So the only person who ever went to jail in the Africa Sting case was the Justice Department's own informant and center of the fraudulent sting!
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Not quite the movie ending that the FBI agents and Bistrong imagined.
If this was the only “corruption” case involving the FCPA that Eric Holder had lost, one could put it down to the random throw of the dice one gets when conducting government prosecutions. Prosecutors sometime lose even good cases because of events they cannot necessarily control. But the Africa Sting case was just one of a number of similar cases that illustrate bad lawyering and misbehavior by Eric Holder's prosecutors working under Lanny Breuer. The Justice Department garnered a similar result in a criminal prosecution in Houston against John O'Shea, the general manager of the American subsidiary of ABB Ltd., an international company headquartered in Zürich, Switzerland, that provides technology and equipment in the utility industry.
The Justice Department claimed that O'Shea had made illegal payments through an intermediary to “foreign officials” at the Comisión Federal de Electricidad, a Mexican utility supposedly owned by the Mexican government, in exchange for contracts with ABB.
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But the Justice Department's case was so poorly put together that the federal judge assigned to the case, Lynn Hughes, dismissed it before it could even be considered by a jury. Judge Hughes was stinging in his criticism of the government, including that the Justice Department's key witness against O'Shea, the company's Mexican representative, Fernando Basurto, knew “almost nothing.”
According to the judge, Basurto's answers “were abstract and vague, generally relating gossip.”
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The Justice Department couldn't even prove that the employees of the Mexican utility were foreign government officials, as is required under the FCPA. Judge Hughes said that the Justice Department “is supposed to know before it brings the indictment that it can prove” the governmental status of the individuals that the defendant supposedly bribed. Furthermore, the government and Basurto did not produce financial records that they were obligated to give O'Shea's lawyers. There was no real evidence that O'Shea had done anything other than pay the commissions due to Basurto as the sales representative of his company in Mexico, which the judge likened to “sort of like being a public relations officer.”
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O'Shea was acquitted and the Justice Department's shoddy case thrown out, but the damage to O'Shea and his family was horrendous. He had been arrested “in the early morning darkness by armed federal agents who took him away in handcuffs,” a completely unnecessary procedure for an accusation of financial improprieties and no violence.
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There is absolutely no reason why the Justice Department could not have contacted O'Shea and his lawyers to notify them of the prosecution and the indictment. However, such a more temperate procedure would not have had the same publicity value for the Justice Department.
The business that O'Shea had conducted in Mexico was to provide an upgrade of the country's massive, outdated power grid. He was a married grandfather with two children who, because of this abusive prosecution, lost his job, his house, his savings, and many of his friends. There were sobs from his family members in court when Judge Hughes dismissed the charges and O'Shea said “it is like starting over.”
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The unsuccessful prosecution of O'Shea illustrates another problem with the Justice Department's stepped-up use of nonprosecution settlements in FCPA cases. O'Shea's employer, ABB, was too intimidated by the Justice Department to fight the dubious charges in court and was apparently afraid of bad publicity. As a result, it settled with the Justice Department, agreeing to pay a hefty penalty and fine. The employee it fired and abandoned, John O'Shea, who had supposedly engaged in bribery, bankrupted himself fighting these false criminal charges in court and won, showing just how invalid and unfounded the case against ABB was.
After the acquittal, O'Shea's lawyer, Joel Androphy, made a key point that appears to have escaped Eric Holder and Lanny Breuer. Mexico is a country in which corruption is endemic and bribery is an accepted part of the culture, as it is in many other Third World countries. That is why the federal government and the CIA have a long history of paying bribes in foreign countries. As Androphy said, “deflecting blame for bribery in corruption-ridden countries onto unknowing business executives is both Cervantian and unfair.” He hoped that O'Shea's victory would “encourage others wrongfully accused under the FCPA to fight the charges against them.”
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As in other cases, none of the prosecutors at the Justice Department, including Eric Holder, ever apologized to O'Shea and his family for the hell they put him through. No press release was issued notifying the public and the media of the acquittal in the same way that the original indictment had been trumpeted by the Public Affairs Office of the Justice Department.
Shockingly, despite the obvious problems with the government's main witness, Fernando Basurto, Justice Department prosecutors tried to use him
again
in an entirely separate FCPA case that also involved the same Mexican utility, the Comisión Federal de Electricidad. In late 2010, the Justice Department indicted the Lindsey Manufacturing Company, Keith Lindsey (its president and CEO), and Steve Lee (its CFO), for supposedly paying bribes to utility officials through the commissions the company paid to its Mexican sales representative, who was also indicted along with his wife, Angela Maria Gomez Aguilar.
The trial took five weeks and the jury deliberated for only one day, convicting all of the defendants. Lanny Breuer himself boasted about the verdict in a Justice Department press release, calling the convictions an “important milestone” because Lindsey Manufacturing was “the first company to be tried and convicted on FCPA violations”; and he promised that it would “not be the last.”
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However, a federal judge in California, A. Howard Matz, overturned the convictions and threw out the government's case, just like Judge Hughes had in Texas. Matz “excoriated the FBI agent and prosecutors in charge of the case for lying and withholding evidence, as well as misleading the jury and court.”
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Judge Matz acknowledged an important point that is well known to government lawyers and private defense attorneys: DOJ lawyers are given enormous leeway in their conduct by judges. That is why it is so important that only the most ethical, professional, ideologically unbiased individuals are hired by the Justice Departmentâit is too easy for an unethical lawyer to take advantage of that leeway and use the enormous power of DOJ to ruin the lives of innocent Americans. As Matz said, “when faced with motions that allege government misconduct, most district judges are reluctant to find that the prosecutors' action were flagrant, willful or in bad faith.”
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But in the Justice Department's prosecution of Lindsey Manufacturing, Judge Matz concluded:
The Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyers, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court's rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.
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It turned out that neither Keith Lindsey nor Steve Lee had ever had “anything to do with” their Mexican sales representative's wife, who was also a defendant in the government prosecution. They had “never met her or communicated in any way with” herâtheir supposed co-conspirator. Moreover, the government prosecutors tried to use Fernando Basurto, the flawed witness from the failed O'Shea case in Texas, as a witness against Lindsey Manufacturing. Basurto gave testimony that directly conflicted with testimony from the O'Shea case and Judge Matz became very angry at the prosecutors' suggestion to jurors that Keith Lindsey or Steve Lee “had any connection to Basurto or even knew anything about him.” The prosecutors' claims “were not only misleading, but contrary” to the court's prior findings. The judge could not understand why the government had brought Basurto into the case:
I think it's fair to say that in [his] testimony, Mr. Basurto testified before us about his role in an entirely different conspiracy involving this company known as ABB. None of the defendants who is in this courtroom have been accused of any involvement in that conspiracy. None of the defendants in this courtroom have been accused of having any role whatsoever in that case. This case, in short, does not involve ABB. That's the other case.
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The only purpose served by bringing in Basurto was to try to prejudice the jury with stories about the corruption endemic in Mexico, even though he had absolutely no connection with Lindsey Manufacturing and knew nothing about the government's made-up case against the Lindsey defendants.
The long list of wrongdoing by the FBI agents and Justice Department prosecutors in this case cataloged by the judge is shocking and shows once again the apparent win-at-any-cost attitude that seems to have infected the Holder Justice Department. One of the prosecutors inserted a false statement into the affidavit of an FBI agent without consulting the agent, a false statement that was crucial to proving the government's case about payments supposedly being transferred between two organizations. That false statement was also used to obtain search warrants, resulting in what the judge called “unauthorized warrantless searches.”
There were no transfer payments, yet the prosecutors also made the same claim to the grand jurors who issued the original indictments of the Lindsey defendants when they presented the testimony of one of the key FBI agents in the case, Susan Guernsey. Judge Matz detailed the “unfounded and erroneous portions” of Guernsey's grand jury testimony, saying that “perhaps she was [just] sloppy, or lazy, or ill-prepared by the prosecutive team.”
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But the prosecutors apparently realized she would be a poor witness and that the Justice Department's investigation was “terribly flawed,” and so they did everything they could to keep Guernsey outside the courtroom and off the witness stand. They even refused to turn over her grand jury testimony to the defense, as well as exculpatory evidence from other witnesses, as was their obligation.
In another move that showed the depths to which the prosecutors were willing to sink in order to win the case, prosecutors put on another FBI agent, Dane Costley, to testify. Through his testimony, the government introduced a chart as an exhibit that supposedly showed that part of the payments made by Lindsey Manufacturing to another company, named Grupo, owned by defendant Enrique Aguilar, was used to pay the tuition of a private school of a Mexican utility executive. But Judge Matz discovered
after the trial was over
that in the O'Shea case, the Justice Department had “attributed the source of that very tuition payment” to a different companyânot Lindsey Manufacturing. Since one of the very same prosecutors who had been involved in the O'Shea prosecution was on the trial team for the Lindsey case, this could not have been an inadvertent error. The court said the misleading link demonstrated “how far the government was willing to go” to obtain a conviction.
Matz was shocked at the behavior of the prosecutors over this conflicting testimony. He cited a prior Supreme Court case about how “serious questions are raised when the sovereign itself takes inconsistent positions in two separate criminal proceedings against two of its citizens.” But this flatly contradictory testimony by government witnesses showed “just how far the Government was willing to go.”
In an action reminiscent of the NSA eavesdropping scandal, the prosecutors obtained recordings from the U.S. Bureau of Prisons of the privileged telephone conversations and copies of emails between Ms. Aguilar and her defense lawyers. She was being kept in prison to prevent her flight back to Mexico (she had been arrested on a shopping trip in the United States). DOJ had obtained a warrant for her telephone conversations with her husband, who was still in Mexico and was being sought by federal authorities. But prosecutors also obtained the attorney-client communications and the emails, which were not covered by the warrant, and then lied to the court when they claimed they had been authorized to obtain all “communications” that Aguilar made from prison.
The Lindsey defendants would not have suffered through this outrageous prosecution if Eric Holder's prosecutors had been doing their jobs in the ethical and professional way they should have been. Prosecutors can certainly lose cases they believe are valid and credible and that had a thorough and effective investigation because they are, for some reason, unable to convince a jury that a particular defendant is guilty. The vagaries of the criminal justice system are something all lawyers are familiar with.
But according to Judge Matz, the government should have known from the very beginning that it did not have a credible case. The grand jury transcripts that the government improperly withheld from the defense lawyers “show that at the investigative stage the Government failed to consider a number of factors pointing to [the] innocence” of Lindsey Manufacturing and its executives.
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