Posted On Tuesday, September 25, 2012
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On September 24, 2012, DOJ announced the resolution of its prosecution of a subsidiary of TYCO International Ltd. (TYCO) under the Foreign Corrupt Practices Act (FCPA). In accordance with the agreement, TYCO Valves & Controls Middle East, Inc. (TVC ME) entered a plea of guilty in the U.S. District Court for the Eastern District of Virginia to a one count criminal information charging conspiracy to violate the anti-bribery provisions of the FCPA in its sale and marketing of valves and other industrial equipment throughout the Middle East. According to the criminal information, TVC ME paid bribes to officials employed by Saudi Aramco, an oil and gas company controlled and managed by the government of the Kingdom of Saudi Arabia, in order to obtain contracts with Saudi Aramco. At the conclusion of the plea proceeding, the Court sentenced TVC ME to pay a $2.1 million fine. The fine was part of a $13.68 million penalty paid by TYCO for falsifying books and records in connection with payments by its subsidiaries to government officials. TYCO paid the fine as part of a non-prosecution agreement (NPA) that it entered into with DOJ.
As part of TVC ME’s plea agreement and TYCO’s NPA, the companies agreed to cooperate with DOJ and report periodically concerning the company’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations. DOJ’s decision to allow a subsidiary to enter a plea of guilty and the parent company (TYCO) to enter into an NPA was apparently based on DOJ’s recognition of TYCO’s timely, voluntary and complete disclosure, which included a global internal investigation concerning bribery and related misconduct, as well as follow on remediation of the noted problems. DOJ cited TYCO’s remediation efforts, which included the implementation of an enhanced compliance program, the termination of employees responsible for the improper payments and falsification of books and records, the severing of contracts with responsible third-party agents and closing of subsidiaries due to compliance failures.
TYCO also consented in parallel civil proceedings to a judgment in favor of the SEC, requiring the company to pay an additional $10,564,992 in disgorgement and $2,566,517 in pre-judgment interest. The total of the fine to TVC ME, the agreed payment by TYCO under the NPA, and the SEC consent judgment is more than $26 million. No individuals were prosecuted in the matter.
Posted On Monday, September 24, 2012
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The Wall Street Journal recently featured the story of Kenneth Kassab, an individual who, almost as an afterthought, withdrew his plea of guilty to federal explosives charges, and ended up being acquitted by a jury. Gary Fields and John Emshwiller, Federal Guilty Pleas Soar as Bargains Trump Trial, Wall Street Journal, September 24, 2012, A1. The article zeroed in on the real-world peril of overwhelming sentencing consequences that individuals charged with federal crimes face, highlighting the fact that even those who may believe in their innocence, plead guilty as a way of choosing the lesser of two evils.
Mr. Kassab was a handy man at a local hotel in Sault Ste. Marie in Michigan’s Upper Peninsula. In the course of his duties, he was asked by the hotel owner, John Lechner, to move several dozen 50 pound bags that he believed were fertilizer. The problem was that Mr. Lechner was under investigation for making statements about becoming a mercenary if the government ever failed. The bags actually contained ammonium nitrate fuel (ANFO) , the same compound used in the bombing of the Alfred P. Murrah Building in Oklahoma City in 1995.
Mr. Kassab had maintained his innocence, believing he had done nothing wrong. Nonetheless, after discussing the potential sentence that he was facing, the complicating factors that included a prior criminal history, as well as the fact that he would be tried alongside Lechner, he decided to enter a plea of guilty. It was only after the Court held a bond revocation hearing for violation of the conditions of his pretrial release, that he, without prior planning or warning to his counsel, declined the magistrate judge’s request that he reaffirm his prior guilty plea. After a jury trial, the defense of which had to be prepared hastily (the trial was four days away when he changed his plea), he was acquitted of all charges following 2 hours of deliberation.
The case highlights growing concern that 25 years of federal legislation aimed at getting tough on crime, and the accompanying evolution of the United States Sentencing Guidelines, has resulted in a charging regime that leaves most defendants with little choice but to plead guilty even in circumstances where they maintain their innocence. Often prosecutors also use the threat of additional charges in a superseding indictment to obtain guilty pleas. A companion article in the same issue of The Journal reported on a recent academic study, which results indicated that when faced with dire consequences, 55% of innocent people would be inclined to enter into an agreement to plead guilty. John Emshwiller and Gary Fields, Study Shows Innocent Plead Guilty at a High Rate, Wall Street Journal, September 24, 2012, A20. It reported other studies have resulted in rates of guilty pleas by innocent people in the range of 10% – 50%.
Both of these articles point to a growing problem and concern regarding our current system of justice. There is no practical way that the government could try all of the cases that it charges. At the same time, however, defense lawyers are faced with difficult tasks of mitigating the potential exposure to their individual clients while holding the government to its evidence.
