Lawyers for latest acquitted FCPA defendants: DOJ ‘overreaching’

By Alison Frankel
January 31, 2012

When Michael Madigan of Orrick, Herrington & Sutcliffe delivered a closing statement two weeks ago in the criminal trial of his client Greg Godsey, he told the federal jury in Washington, D.C., that the government had “danced with the devil.” In 2007, Madigan said, the Justice Department set up a “little nest out in Manassas, Virginia,” with the express intention of putting together Foreign Corrupt Practices Act cases. But when the FBI first tried to use an informant who appeared right after the Manassas base was established, it couldn’t make out any traditional cases based on his evidence. So according to Madigan, the Justice Department instead engineered a 2009 sting involving alleged bribes to the defense minister of Gabon in exchange for military supply contracts. That operation netted Justice 22 FCPA defendants and countless headlines touting its get-tough policy on foreign corruption.

On Monday, two of the Gabon sting defendants — including Madigan’s client — were acquitted by the jury. (Jurors said they were deadlocked on charges against three other defendants, but U.S. District Judge Richard Leon ordered them to keep deliberating.) Monday’s repudiation of the Justice Department’s case came a month after Leon entered an acquittal for a sixth defendant in the Gabon sting case, and two weeks after a federal judge in Texas dismissed an FCPA case against a former employee of an ABB Group subsidiary, who was accused of bribing a Mexican official. The Texas judge wouldn’t even let the government’s case go to a jury. The four recent acquittals extend a string of setbacks for the Justice Department in FCPA prosecutions, including a July mistrial in a previous Gabon sting trial against four different defendants, as well as the December dismissal of the Department’s case against Lindsey Manufacturing on prosecutorial misconduct grounds.

Lawyers for two of the acquitted Gabon sting defendants told me Tuesday that those results are no coincidence. “I think [prosecutors] got caught up in the klieg lights,” said Madigan of Orrick. “They were blinded with the idea of getting to the goal, and they ignored the means.” Stephen Bronis of Carlton Fields, who represented attorney Stephen Giordanella on the FCPA conspiracy charges Leon tossed earlier this month, said, “I do think this is somewhat systemic …. Juries and judges are troubled by this kind of use of federal resources.” Both Madigan and Bronis told me prosecutors may be overreaching to charge FCPA violations when they don’t have sufficient evidence. (Eric Dubelier of Reed Smith, who represents acquitted Gabon sting defendant R. Patrick Caldwell, declined comment.)

It’s not easy for U.S. officials to track what happens to alleged bribes when they disappear into the pockets of foreign officials. That’s why, according to FCPA guru (and former prosecutor) Philip Urofsky of Shearman & Sterling, the statute requires only a showing of a defendant’s intent to make a corrupt payment to a foreign official. “It’s a perennial problem in FCPA cases,” Urofsky said. “Most of the evidence is not available. You have to take the evidence as far as you can.”

Urofsky said, however, that the recent run of defense wins doesn’t mean that the Justice Department is stretched thin or that the FCPA is flawed. Instead, he said, “it has more to do with the difficulty of proving corruption,” particularly when defendants are represented by lawyers who challenge every piece of government evidence.

Nevertheless, Madigan’s image of an “FCPA nest” set up specifically to charge defendants with illicitly bribing foreign officials is disquieting, to say the least. So are text messages that emerged at the latest Gabon sting trial, featuring federal agents joking about who would play them when Hollywood made a movie about the case (talk about klieg lights!) and coaching their informant on how to deceive sting targets with cold feet. Even Urofsky, the former FCPA prosecutor, said the government’s assertion of a global conspiracy — which depends heavily on the Gabon defendants’ attendance at a government-arranged meeting — has been a problem in the case.

So far, the Justice Department has not managed to convict a single Gabon sting defendant who contested its charges. As of Tuesday afternoon the jury was still deliberating the fate of Godsey and Caldwell’s co-defendants. The next Gabon sting trial, featuring four more defendants, is scheduled to begin in February. If those defendants aren’t convicted, the DOJ may want to rethink its Hollywood ending.

I left a request for comment at the Justice Department’s Office of Public Affairs but didn’t hear back.

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