Wednesday, January 19, 2011

Africa Sting - Year Two

One year ago today, the DOJ announced (here) the unsealing of 16 indictments (here) charging 22 "executives and employees of companies in the military and law enforcement products industry" for engaging in a scheme to "pay bribes to the minister of defense for a country in Africa."

It was not the first time the DOJ had used undercover tactics in an FCPA enforcement action (see here), but it was certainly the most dramatic as nearly all the defendants were arrested while attending a trade show (here) in Las Vegas.

I provided an overview of the allegations (here) in what I called the Africa Sting case - a case involving: individuals employed by large companies and small companies; private companies and publicy-trade companies; chief executives, sales managers, and even a general counsel; U.S. citizens, U.K. citizens, an Israeli citizen, and a pair of siblings.

A lot has happened in the Africa Sting cases over the past year.

What has occured?

For starters, we learned that there was never a real "foreign official" looking to do business with the defendants. Rather, FBI agents posed as representatives of an imaginery Minister of Defense of an African country - later identified as Gabon. (See here for analysis).

Assisting the FBI was "Individual 1" a person described as a business associate of certain of the defendants and a "former Vice President of International Sales for a company that manufactured and supplied law enforcement and military equipment to law enforcement and military customers around the world."

Individual 1 was soon identified as Richard Bistrong, a former employee of Armor Holdings. (See here). Bistong was soon criminally charged, but in a separate case (see here) - one largely involving United Nations body armor contracts and conduct in the Netherlands and Nigeria.

When Bistong was assisting the FBI in its undercover operations of the Africa Sting defendants, we learned that he had already pleaded guilty to the charges against him. (See here).

Given these circumstances, the defendants are likely to eventually assert entrapment - among other legal defenses. (See here).

In February, the defendants pleaded not guilty.

Judge Richard Leon (Federal District Court - Washington D.C.) appeared skeptical of the government's assertion that all 22 defendants were in one grand conspiracy. Defense lawyers were troubled by the lack of evidence turned over by the government concerning Bistrong. (See here).

With so many individual defendants indicted, and the motivations for pleading under the Sentencing Guidelines, it seemed inevitable that one or more defendants would "flip" and cooperate with the government.

In March, the DOJ filed a superceding information (here) against defendant Daniel Alvirez and speculation was that Alvirez would soon plead guilty. (See here). The superceding information contained allegations not found in the orignal charges concerning the Republic of Georgia - allegations that did not mention any involvement by FBI agents.

Judge Leon indicated that it was highly unlikely that the cases would go to trial in 2010 and the DOJ and defense counsel soon battled as to discovery and evidentiary issues - particularly as to the FBI's relationship with and use of Bistrong.

In April, the DOJ filed a superceding indictment (here) charging the individual defendants in one big conspiracy to violate the FCPA. Judge Leon said that he would not try 22 individuals together in one case, and in response, the DOJ proposed tried the defendants in 4 groups.

The documents began to pile up: "615 audio and video recordings of more than 150 meetings;" "5,287 recorded telephone calls between the defendants and [Bistrong], and between the defendants and undercover FBI agents;" "recordings of telephone calls between [Bistrong] and FBI agents;" "in excess of 5,000 pages of documents relating to [Bistrong], including reports, expense paperwork, bank statements, quotes, emails, notes, drug tests results, payment receipts, and Skype text messages, among others;" "emails from the accounts of [Bistrong] and the undercover FBI agents;" "nearly 3,000 pages of text messages from the telephone [Bistrong] used in connection with the undercover operation;" and "materials seized during the 13 search warrants executed in connection with the undercover investigation relating to the defendants." (See here).

The companies impacted by their employee's conduct began to lawyer up and over the summer Smith & Wesson and Allied Defense Group - the two public companies indirectly implicated made disclosures in connection with the case. (See here and here).

In December, certain defendants filed a motion "for an evidentiary hearing requiring the testimony of Richard Bistrong and federal law enforcement agents responsible for managing him in connection with the investigation resulting in the indictment."

The defense claims that Bistrong assured various defendants that the fake Gabon deal had been approved by the U.S. State Department, was not illegal, was not in violation of the FCPA, and that Bistrong "angrily admonished one Defendant who indicated that he was going to tell other defendants that his lawyer had advised that the Gabon deals might be illegal."

The DOJ says that the defense has "presented the Court with selective and misleading facts about this case" and that many of the defendants, wholly apart from the Gabon deal, were involved in paying bribes to foreign officials in other countries. Further, the DOJ argues, pretrial resolution of factual issues is not warranted. (See here for additional analysis).

That brings one to the present, year 2 of the Africa Sting case.

On the one hand much has happened.

On the other hand, much is still yet to occur and the defendants are presumed innocent until proven otherwise.

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