by John Fund
Well, of course. That is the choice government prosecutors should have—to indict or walk away. As Mike Koehler says, “Bringing criminal charges against a person (natural or legal) should not be easy. It should be difficult. Our founding fathers recognized this as a necessary bulwark against an all-powerful government, and there is no legal or policy reason warranting a change from such a fundamental and long-lasting principle.”9
Insulating its behavior from judicial scrutiny makes it much easier for Justice Department prosecutors to abuse their authority because it puts them “in the role of prosecutor, judge and jury all at the same time.”10 Even former attorney general Alberto Gonzales has criticized these settlements, saying that “the more that American companies elect to settle and not force the DOJ to defend its aggressive interpretation of the Act, the more aggressive DOJ has become in its interpretation of the law and its prosecution decisions.”11
In fact, when the Holder Justice Department has been forced into court, it has often suffered embarrassing defeats. Cases have been lost because of abusive behavior by its prosecutors and the FBI agents involved in the investigations, as well as accusations that the Justice Department withheld evidence and tried to mislead juries and courts. But while the targets of the Justice Department’s unjustified prosecutions have been acquitted or had their convictions overturned, fighting the most powerful law enforcement agency in the country has ruined their businesses and bankrupted their personal lives.
One of the most graphic examples of these abusive FCPA prosecutions is the case that Lanny Breuer called “the largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the FCPA.” In what came to be known as the “Africa Sting” case, the Justice Department tried to prosecute twenty-two executives and employees in the military and law enforcement industry for supposedly trying to bribe the minister of defense of an African country. The prosecutions resulted from an FBI sting operation called Operation Landslide, in which FBI agents and a federal informant posed as the representatives of an allegedly corrupt Gabonese minister named Ali Bongo.12
The informant was Richard Bistrong, described as “a drug-addled former law enforcement equipment salesman.”13 Bistrong “had a $15,000 monthly cocaine habit and routinely had sex with prostitutes.” The vice president of a police equipment company, he had been fired in 2007 when the company discovered that he had been bribing foreign officials and had accepted $1.3 million in kickbacks from suppliers.14 After he pleaded guilty to a violation of the FCPA, he agreed to help the FBI in Operation Landslide. He tried to interest executives at other companies in a $12 million contract to supply equipment for the presidential guard of Gabon. Bistrong worked with a supposed Frenchman named Pascal Latour, who was really an FBI agent whose French accent was so bad it was described by a defense attorney “as sounding like Inspector Clouseau’s in the ‘Pink Panther’ movies.”15
As in prior sting operations like Abscam, which inspired the recent movie American Hustle, the FBI set up surveillance equipment in hotel rooms where Bistrong’s meetings took place. But even though the sting was intended to catch executives who were willing to pay bribes to get the fake African business, neither Bistrong nor Latour ever “uttered the words ‘bribe’ or ‘kickback’ ” in their description of the deal—they simply talked about the commission that would be required.16 What further hurt the government’s case was a series of embarrassing text messages eventually turned over to the defendants in which the FBI agents and Bistrong talk about sex, prostitutes, and booty calls, as well as their excitement about going to Las Vegas, where they were going to close “the deal.”17 One of the texts from FBI agent Michael Dubravetz told Bistrong he was going “to have a good time in Vegas the two days before” Bistrong got there and that he would probably be married by then “to a woman of ill repute!”
In the press conference announcing the indictments and the arrests in Las Vegas, Lanny Breuer could not contain his excitement, joking that “this is one case where what happened in Vegas doesn’t stay in Vegas.” He was right, but not in the way that he expected—what didn’t stay in Vegas was the misbehavior of the FBI agents involved in the sting and the abusive behavior of the Justice Department prosecutors. The text messages revealed that the FBI agents and Bistrong “basked in the positive press” of Breuer’s press conference, saying it was “like an atomic mushroom cloud” and speculating on who would play them in a movie based on the sting.18
Ultimately, after two lengthy, expensive trials, all of the defendants were either acquitted or had the indictments dismissed by the judge or the Justice Department because of the weakness of the government’s case, and doubts raised about the credibility of Bistrong, the FBI, and DOJ. In fact, in a very unusual occurrence, one of the jury foremen, a nonpracticing attorney, posted an anonymous blog describing the many problems with the government’s case. The jury “with near unanimity found nearly all of the prosecution witnesses to be evasive and combative.” Moreover, the jury believed that the defendants in the case “had acted in good faith and the FBI/DOJ in bad faith.” The jurors were concerned, as any reasonable person would be, that Bistrong, the government’s main witness, had “freely admitted on the stand more illegal acts than the entire group of defendants was accused of, yet was able to plead only one count of conspiracy to violate the FCPA.” “Prolonging this prosecution” would be “a waste of government resources,” the jury foreman said.19
When the final charges were dismissed by the Justice Department after their stinging losses in court, Judge Richard Leon of the U.S. District Court for the District of Columbia called these prosecutions “a long and sad chapter in the annals of white-collar criminal enforcement.” He criticized the “government’s very, very aggressive conspiracy theory that was pushing its already generous elasticity to its outer limits.” By the time of the second trial, “that elastic snapped in the absence of the necessary evidence” to support the government’s claims. He also criticized the way the Justice Department had investigated the case and handled its informant, Richard Bistrong. Judge Leon accused government prosecutors of “sharp practices that have no place in a federal courtroom,” which is a very critical comment by a federal judge.20 However, such “sharp practices” seem to have become a common occurrence with government prosecutors and their “win-at-all-costs” attitude since Eric Holder became the attorney general.
Judge Leon also pointed out that “unlike takedown day in Las Vegas” and the big public relations campaign conducted by Breuer and the Justice Department, there would be “no front page story in the New York Times or the Post . . . reflecting the government’s decision today to move to dismiss the charges against the remaining defendants in this case.” Neither Lanny Breuer nor Eric Holder held a press conference to announce that their big prosecution had failed and that the claims they had made with great public fanfare were invalid. Nor did they make any public apologies or offer to reimburse the defendants for the enormous amounts they had spent defending themselves from an unjustified prosecution. And there is no indication that any of the lawyers or FBI agents involved were ever disciplined for their misbehavior.
Michael Madigan, a lawyer who represented one of the defendants, criticized the Justice Department for not recognizing that this “case was flawed from Day 1, both by its choice of a snitch (a despicable, dishonest 30 yr cocaine addict who admitted to taking kickbacks and stashed millions of dollars in Swiss bank accounts to avoid U.S. taxes), the ‘it’s all just a game’ commentary from the agents who disrespected the rule of law, and the structuring of the ‘sting’ in its documents and taped conversations to make the Defendants think it was a legal transaction they were being asked to participate in.” His client, John Godsey, wanted to know “how our Justice system could have gone so awry and where he goes to get his reputation and two full years of his life back!”21
The lawyers representing another defendant, Lee Allen Tolleson, blamed the government for pinning “its e
ntire investigation on a despicable character, Bistrong, who manipulated Federal Agents throughout the investigation, in order to save his soul for his misdeeds. . . . Now, where does Lee go to get back his good name? He is from a small Arkansas town with a GED and has a home education. His family has been devastated financially by this process. Two things have kept him grounded: his faith in God and his family.” 22
Even with all of the travails suffered by the defendants, there was some poetic justice and final embarrassment for the Justice Department at the end of the case. Despite the Justice Department’s request that Richard Bistrong, their cocaine-addicted informant, not receive any jail time for his violation of the FCPA, Judge Leon gave him an 18-month prison sentence. So the only person who ever went to jail in the Africa Sting case was the Justice Department’s own informant and center of the fraudulent sting!23 Not quite the movie ending that the FBI agents and Bistrong imagined.
If this was the only “corruption” case involving the FCPA that Eric Holder had lost, one could put it down to the random throw of the dice one gets when conducting government prosecutions. Prosecutors sometime lose even good cases because of events they cannot necessarily control. But the Africa Sting case was just one of a number of similar cases that illustrate bad lawyering and misbehavior by Eric Holder’s prosecutors working under Lanny Breuer. The Justice Department garnered a similar result in a criminal prosecution in Houston against John O’Shea, the general manager of the American subsidiary of ABB Ltd., an international company headquartered in Zürich, Switzerland, that provides technology and equipment in the utility industry.
The Justice Department claimed that O’Shea had made illegal payments through an intermediary to “foreign officials” at the Comisión Federal de Electricidad, a Mexican utility supposedly owned by the Mexican government, in exchange for contracts with ABB.24 But the Justice Department’s case was so poorly put together that the federal judge assigned to the case, Lynn Hughes, dismissed it before it could even be considered by a jury. Judge Hughes was stinging in his criticism of the government, including that the Justice Department’s key witness against O’Shea, the company’s Mexican representative, Fernando Basurto, knew “almost nothing.”
According to the judge, Basurto’s answers “were abstract and vague, generally relating gossip.”25 The Justice Department couldn’t even prove that the employees of the Mexican utility were foreign government officials, as is required under the FCPA. Judge Hughes said that the Justice Department “is supposed to know before it brings the indictment that it can prove” the governmental status of the individuals that the defendant supposedly bribed. Furthermore, the government and Basurto did not produce financial records that they were obligated to give O’Shea’s lawyers. There was no real evidence that O’Shea had done anything other than pay the commissions due to Basurto as the sales representative of his company in Mexico, which the judge likened to “sort of like being a public relations officer.”26
O’Shea was acquitted and the Justice Department’s shoddy case thrown out, but the damage to O’Shea and his family was horrendous. He had been arrested “in the early morning darkness by armed federal agents who took him away in handcuffs,” a completely unnecessary procedure for an accusation of financial improprieties and no violence.27 There is absolutely no reason why the Justice Department could not have contacted O’Shea and his lawyers to notify them of the prosecution and the indictment. However, such a more temperate procedure would not have had the same publicity value for the Justice Department.
The business that O’Shea had conducted in Mexico was to provide an upgrade of the country’s massive, outdated power grid. He was a married grandfather with two children who, because of this abusive prosecution, lost his job, his house, his savings, and many of his friends. There were sobs from his family members in court when Judge Hughes dismissed the charges and O’Shea said “it is like starting over.”28
The unsuccessful prosecution of O’Shea illustrates another problem with the Justice Department’s stepped-up use of nonprosecution settlements in FCPA cases. O’Shea’s employer, ABB, was too intimidated by the Justice Department to fight the dubious charges in court and was apparently afraid of bad publicity. As a result, it settled with the Justice Department, agreeing to pay a hefty penalty and fine. The employee it fired and abandoned, John O’Shea, who had supposedly engaged in bribery, bankrupted himself fighting these false criminal charges in court and won, showing just how invalid and unfounded the case against ABB was.
After the acquittal, O’Shea’s lawyer, Joel Androphy, made a key point that appears to have escaped Eric Holder and Lanny Breuer. Mexico is a country in which corruption is endemic and bribery is an accepted part of the culture, as it is in many other Third World countries. That is why the federal government and the CIA have a long history of paying bribes in foreign countries. As Androphy said, “deflecting blame for bribery in corruption-ridden countries onto unknowing business executives is both Cervantian and unfair.” He hoped that O’Shea’s victory would “encourage others wrongfully accused under the FCPA to fight the charges against them.”29
As in other cases, none of the prosecutors at the Justice Department, including Eric Holder, ever apologized to O’Shea and his family for the hell they put him through. No press release was issued notifying the public and the media of the acquittal in the same way that the original indictment had been trumpeted by the Public Affairs Office of the Justice Department.
Shockingly, despite the obvious problems with the government’s main witness, Fernando Basurto, Justice Department prosecutors tried to use him again in an entirely separate FCPA case that also involved the same Mexican utility, the Comisión Federal de Electricidad. In late 2010, the Justice Department indicted the Lindsey Manufacturing Company, Keith Lindsey (its president and CEO), and Steve Lee (its CFO), for supposedly paying bribes to utility officials through the commissions the company paid to its Mexican sales representative, who was also indicted along with his wife, Angela Maria Gomez Aguilar.
The trial took five weeks and the jury deliberated for only one day, convicting all of the defendants. Lanny Breuer himself boasted about the verdict in a Justice Department press release, calling the convictions an “important milestone” because Lindsey Manufacturing was “the first company to be tried and convicted on FCPA violations”; and he promised that it would “not be the last.”30
However, a federal judge in California, A. Howard Matz, overturned the convictions and threw out the government’s case, just like Judge Hughes had in Texas. Matz “excoriated the FBI agent and prosecutors in charge of the case for lying and withholding evidence, as well as misleading the jury and court.”31
Judge Matz acknowledged an important point that is well known to government lawyers and private defense attorneys: DOJ lawyers are given enormous leeway in their conduct by judges. That is why it is so important that only the most ethical, professional, ideologically unbiased individuals are hired by the Justice Department—it is too easy for an unethical lawyer to take advantage of that leeway and use the enormous power of DOJ to ruin the lives of innocent Americans. As Matz said, “when faced with motions that allege government misconduct, most district judges are reluctant to find that the prosecutors’ action were flagrant, willful or in bad faith.”32
But in the Justice Department’s prosecution of Lindsey Manufacturing, Judge Matz concluded:
The Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyers, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.33
It turned out that neither Keith Lindsey nor Steve Lee had ever
had “anything to do with” their Mexican sales representative’s wife, who was also a defendant in the government prosecution. They had “never met her or communicated in any way with” her—their supposed co-conspirator. Moreover, the government prosecutors tried to use Fernando Basurto, the flawed witness from the failed O’Shea case in Texas, as a witness against Lindsey Manufacturing. Basurto gave testimony that directly conflicted with testimony from the O’Shea case and Judge Matz became very angry at the prosecutors’ suggestion to jurors that Keith Lindsey or Steve Lee “had any connection to Basurto or even knew anything about him.” The prosecutors’ claims “were not only misleading, but contrary” to the court’s prior findings. The judge could not understand why the government had brought Basurto into the case:
I think it’s fair to say that in [his] testimony, Mr. Basurto testified before us about his role in an entirely different conspiracy involving this company known as ABB. None of the defendants who is in this courtroom have been accused of any involvement in that conspiracy. None of the defendants in this courtroom have been accused of having any role whatsoever in that case. This case, in short, does not involve ABB. That’s the other case.34
The only purpose served by bringing in Basurto was to try to prejudice the jury with stories about the corruption endemic in Mexico, even though he had absolutely no connection with Lindsey Manufacturing and knew nothing about the government’s made-up case against the Lindsey defendants.
