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One of the federal government’s few successful verdicts in a Foreign Corrupt Practices Act case now faces reversal after prosecutors acknowledged for the first time during a court hearing that they had failed to turn over all of an FBI agent’s grand jury testimony. During a June 27 hearing in Los Angeles, U.S. District Judge Howard Matz called the disclosure “astonishing” and “troublesome.” He ordered both sides to provide supplemental briefing on why the indictments should not be thrown out. He called the government’s handling of the case “extraordinarily sloppy” with a “bad odor at times,” and recited additional aspects of the “tortured history of this prosecution” that had troubled him. They included, he said, the search of two buildings without warrants and the government’s unauthorized acquisition of e-mails of a defendant who was in jail. “I think this question of whether or not the rights of any or both or all three defendants to due process was violated and if so what remedy has to be briefed and addressed in a broader context,” he said. Matz delayed ruling on a motion to dismiss based on prosecutorial misconduct that had been filed by Lindsey Manufacturing Co. and two of its executives. All three were convicted of paying bribes, including a $300,000 red Ferrari, to two officials from a state-owned electric utility in Mexico. The individual defendants, Chief Executive Officer Keith Lindsey and Chief Financial Officer Steve Lee, were convicted on five FCPA counts and one count of conspiracy to violate the FCPA. The verdict came one day after Jan Handzlik, a shareholder in the Los Angeles office of Greenberg Traurig who represents Lindsey Manufacturing and Lindsey, and Janet Levine, a partner in the Los Angeles office of Crowell & Moring who represents Lee, filed a motion to dismiss the indictment based on prosecutorial misconduct. They maintained that FBI Agent Susan Guernsey lied during her testimony before the grand jury. Handzlik said he was preparing on the morning of the hearing when he noticed that Assistant U.S. Attorney Douglas Miller was quoted in the transcript of an Oct. 21 grand jury hearing as saying, “as I mentioned last week.” He realized that prosecutors had not provided defense counsel with a full transcript of a prior proceeding, on Oct. 14. During that session, two witnesses had testified before the grand jury. Handzlik asked prosecutors to provide the full testimony, and it turned out that one of those witnesses was Guernsey – the person whose testimony is at the heart of his motion to dismiss. “Just the very fact that this took place and was not disclosed to us is significant,” he told Matz. “There are elements in the transcript that are material and would have been important for us to know.” Miller acknowledged that prosecutors had omitted 20 minutes – or 19 pages — of Guernsey’s direct examination before the grand jury. But he said it was something he overlooked and had not prejudiced the case against the defendants. Nor was it “flagrant misconduct,” he said. “I regret more so in my career that it took place,” Miller told the judge. Nicola Mrazek, a trial attorney in the fraud section of the U.S. Department of Justice’s criminal division in Washington, said in court that some of the lapse could be because the government’s original plan was not to call Guernsey as a witness during trial. After the Lindsey defendants began to question the search warrants in the case, she was obligated to turn over the Guernsey testimony. She told Matz that she hadn’t remembered that Guernsey had testified on Oct. 14. The hearing wasn’t the first time Matz had admonished prosecutors. On March 29, Matz suppressed statements that Lindsey made during an FBI raid because he hadn’t been warned of his Miranda rights. But Matz declined to dismiss charges on ground of prosecutorial misconduct. This time, Matz ordered the government to provide the full transcript of Guernsey’s Oct. 14 testimony on the first thing in the morning on June 28. He also asked both sides to provide supplemental briefing on whether the defendants’ due process rights had been violated and scheduled a Sept. 8 hearing on the issue. He also bumped deadlines that had been scheduled for post trial motions, forfeiture and sentencing. Lindsey and Lee, who each faced 30 years in prison, were due to be sentenced on Sept. 16. Amanda Bronstad can be contacted at [email protected] .

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