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A federal jury has found a California company and two of its senior executives guilty of violating the Foreign Corrupt Practices Act by paying bribes, including a $300,000 red Ferrari, to two officials from a state-owned electric utility company in Mexico. Lindsey Manufacturing Co., Chief Executive Officer Keith Lindsey and Chief Financial Officer Steve Lee each was convicted on May 10 on all counts — one of conspiracy to violate the FCPA and five of FCPA violations. The jury also convicted Angela Aguilar on one count of conspiracy to launder money. U.S. District Judge A. Howard Matz had thrown out a second count of money laundering against her on May 9. She is the wife of Enrique Aguilar, president of Mexican company Grupo International, which worked as a sales agent for Lindsey Manufacturing. Jan Handzlik, a shareholder in the Los Angeles office of Greenberg Traurig who represents Lindsey Manufacturing and Keith Lindsey; Janet Levine, a partner in the Los Angeles office of Crowell & Moring, who represents Lee; and Stephen Larson, a partner at Girardi & Keese in Los Angeles, who represents Angela Aguilar, did not respond to requests for comment. “Today’s guilty verdicts are an important milestone in our FCPA enforcement efforts,” said Assistant Attorney General Lanny Breuer of the Justice Department’s criminal division, in a prepared statement. “Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last” Steven Martinez, FBI special agent-in-charge of the Los Angeles field office, added: “The guilty verdicts announced today should send a strong message to large public corporations and small businesses alike, that bribing foreign officials to obtain a competitive advantage is a crime and will be prosecuted.” The case was one of the few to go to trial over FCPA violations and had been closely watched nationwide. Sentencing is scheduled for Sept. 16. Lindsey and Lee face maximum prison sentences of 30 years — five years and a fine of at least $250,000 on the FCPA conspiracy charge, and five years and a fine of at least $100,000 for each of the additional five FCPA counts. Aguilar, who is scheduled to be sentenced on Aug. 12, faces a maximum of 20 years in prison and a fine of at least $500,000. Her husband has been charged with but remains a fugitive. The jury deliberated for one day following a one-month trial. The verdict came one day after Handzlik and Levine filed a motion alleging prosecutorial misconduct, arguing that an FBI special agent lied during her grand jury testimony. “Sadly, there is considerable evidence of substantial and sustained prosecutorial misconduct throughout this case,” they wrote. FBI Special Agent Susan Guernsey’s grand jury testimony was “riddled with material misrepresentations and falsehoods,” they added. Specifically, Guernsey told the grand jury that 90% to 95% of the funds in a Grupo International account came from Lindsey Manufacturing when, at the time the company was raided, she had estimated that the figure at closer to 70%, the motion says. She also falsely told the grand jury that Lindsey Manufacturing, which manufactures emergency power transmission towers, had few contracts with Mexico’s Comisión Federal de Electricidad prior to working with Grupo — and that Lindsey Manufacturing received the contracts despite not being the lowest bidder when, in fact, the company had no competitors at that time, the motion says. “It is clear that the false testimony of Agent Guernsey influenced the grand jury and therefore prejudiced the defendants,” they wrote. It was unclear whether the defendants would continue to pursue that motion in light of the verdict. Meanwhile, defense lawyers in a separate case involving executives of Control Components Inc. continued to assert that the charges against their clients should be dismissed based on the FCPA’s vague definition of “foreign official.” The law designates a “foreign official” as “any officer or employee of a foreign government or any government, agency, or instrumentality thereof.” U.S. District Judge James Selna in Santa Ana, Calif., issued a tentative ruling on May 9 denying the defendants’ motion to dismiss. Whether a company is an “instrumentality” under the FCPA is a question of fact for the jury to decide, he wrote, citing prior rulings by two other judges, including Matz’s April 1 decision on a similar motion in the Lindsey case. In the Control Components case, prosecutors have charged executives — including the company’s former chief executive officer, Stuart Carson — with 16 counts of paying bribes to state-owned companies in countries including China, Malaysia and the United Arab Emirates. Trial is scheduled for Oct. 4. During a hearing on May 9, Nicola Hanna, a partner in Gibson, Dunn & Crutcher’s Irvine, Calif., office who represents Carson, argued that the court’s definition of “instrumentality” in the tentative order is “inherently vague and overbroad and can’t be applied in a constitutional manner.” It’s also contrary to what Congress had intended, he said. “There is nothing to suggest they wanted state-owned enterprises to be included,” he said. He added that a jury should not be allowed to decide the definition of “instrumentality.” “There have to be some parameters, otherwise it’s completely arbitrary,” he said. He questioned whether some of the companies in the case, which are subsidiaries of state-owned enterprises, would be included in the FCPA definition. Of particular concern are Chinese companies, most of which are state-owned enterprises, said Kimberly Dunne, a partner in Sidley Austin’s Los Angeles office. She represents Hong Carson, Stuart Carson’s wife, who served as director of sales for China and Taiwan until 2007. “The point here is that there was absolutely no basis for the defendants in advance of being charged in this case, in advance of litigating this case over two years, to know if anyone in the state-invested companies with which they were dealing were government officials,” she said. Nathaniel Edmonds, assistant chief of the fraud section of the Justice Department’s criminal division, told the judge that the FCPA definition of “instrumentality” would be proven at trial. He also questioned the method by which the defendants have raised the argument. “There are many times where that is appropriate to ask. At a motion to dismiss stage, that is not an appropriate time,” said Edmonds. “We think this is a typical standard for various juries to consider.” Edmonds was quoted in a May 4 article at mainjustice.com saying that companies should be cautious about challenging the FCPA’s definition of “foreign official.” Defense lawyers in the Control Components case cited the article in a May 5 supplement – specifically, Edmonds’s public statement during a Webcast on the FCPA sponsored by The Conference Board: “It’s not necessarily the wisest move for a company” to challenge the definition of “foreign official.” Defense lawyers, in their supplement, asserted that the remark constituted a threat that has made companies and individuals reluctant to challenge the government’s interpretation of the statue “for fear of the consequences.” David Wiechert of the Law Offices of David Wiechert in San Clemente, Calif., who represents David Edmonds, former vice president for worldwide customer service at Control Components, said in court that he was “troubled” by the statements, which he viewed as “a shot across the bow of entities or persons raising this.” Wiechert signed the supplement along with Hanna, Dunne and Thomas Bienert of Bienert, Miller & Katzman in San Clemente, who represents Paul Cosgrove, the former head of the worldwide sales department at Control Components. In court, Selna appeared to give little weight to their argument. “I don’t find this supplement particularly helpful,” he said. Amanda Bronstad can be contacted at [email protected].

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