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A federal judge has tentatively refused to dismiss a criminal case against five former executives of a California valve company, rejecting their argument that the employees of state-owned companies they are accused of bribing weren’t “foreign officials” under the Foreign Corrupt Practices Act. In a tentative order issued on Monday, U.S. District Judge James Selna upheld 10 counts against the former executives of Control Components Inc., including its former president, Stuart Carson. Trial is scheduled for Oct. 4 in Santa Ana, Calif. Also on Monday, a federal judge in a separate FCPA case threw out a money-laundering count against a defendant in a closely watched criminal trial against Lindsey Manufacturing Co. that concluded on Friday. The government has charged Control Components executives with 16 counts of allegedly paying bribes to state-owned companies in countries including China, Malaysia and the United Arab Emirates. At issue in the dismissal motion were one count of conspiring to violate the FCPA and nine counts of FCPA violations. The FCPA designates a “foreign official” as “any officer or employee of a foreign government or any government, agency, or instrumentality thereof.” In a motion filed on Feb. 21, the defendants said the government’s inclusion of an executive of a state-owned corporation as a “foreign official” would lead to “absurd results,” particularly since the government failed to clearly establish how much government ownership is required. “Are General Motors and AIG ‘instrumentalities’ of the United States government as a result of the government’s ownership stake in them?” they wrote. The government’s position lacked support in the legislative history of the FCPA, they added. In the government’s opposition to that motion, filed on April 18, prosecutors argued that whether a specific state-owned corporation constitutes an “instrumentality” of a government is a question of fact for the jury, not a matter of law. Prosecutors cited three district court rulings as supporting their position, including an April 1 ruling in the Lindsey case. In his tentative ruling, Selna cited the Lindsey ruling and one other case. “The Court reaches the same conclusion as these district courts: state-owned companies may be considered ‘instrumentalities’ under the FCPA, but whether such companies qualify as ‘instrumentalities’ is a question of fact,” Selna wrote. He also supported the government’s position regarding the FCPA’s legislative history. On April 28, Flavio Ricotti, former director and vice president for sales for Europe, Africa and the Middle East at Control Components, pleaded guilty to one count of conspiring to make corrupt payments to foreign government officials and officers of private companies in Saudi Arabia and Qatar. He said the bribes generated between $400,000 and $1 million in business. He faces up to five years in prison and is scheduled to be sentenced on March 12, 2012. Two other Control Components executives pleaded guilty to FCPA charges prior to the 2009 indictment. Control Components, which manufactures valves used in the nuclear, oil and gas and power-generation industries, pleaded guilty to FCPA charges and was ordered to pay an $18.2 million criminal fine and implement a compliance program. The company, which was placed on organization probation for three years, admitted making corrupt payments in more than 30 countries from 2003 through 2007 that resulted in $46.5 million in sales. In the second FCPA case, Angela Aguilar was accused of setting up a brokerage account so that Lindsey Manufacturing could pay bribes to two officials of Mexico’s Comisión Federal de Electricidad in exchange for lucrative contracts. The case was brought against Aguilar; her husband, Enrique Aguilar; Lindsey Manufacturing, which makes emergency power transmission towers; Chief Executive Officer Keith Lindsey; and Chief Financial Officer Steve Lee. The government alleges the defendants paid more than $5 million in bribes–including a $300,000 red Ferrari–over seven years. Specifically, Lindsey and Lee allegedly paid fees that were inflated by 30% to another company, Grupo International, which then transferred the excess amount as bribes to the two utility officials. Enrique Aguilar was president of Grupo International. Angela Aguilar was charged with two counts of money-laundering associated with the purchase of the Ferrari and a $1.8 million yacht and payment of various American Express credit card bills. In a motion for judgment of acquittal filed on April 29, Angela Aguilar’s lawyer, Stephen Larson, a partner at Girardi & Keese in Los Angeles, argued that the evidence at trial failed to establish that she knew anything about her husband’s business and that she could not have known that the money used to purchase the Ferrari had been derived from a crime. “I don’t doubt that Angela Aguilar knew something fishy was going on,” U.S. District Judge Howard Matz said during a hearing in downtown Los Angeles in throwing out one of the money laundering counts. “But that doesn’t amount to knowledge necessary for money laundering.” Closing arguments took place on May 6 after about a month of trial; the jury began deliberating on Monday. Amanda Bronstad can be contacted at [email protected].

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