On April 5, 2013, the Department of Justice (DOJ) unsealed charges against four former executives of BizJet International Sales and Support, Inc., the U.S.-based subsidiary of Lufthansa Technik, AG, a company that provides aircraft maintenance, repair and overhaul services for alleged bribery payments in Latin America. This news comes less than 30 days since our last blog entry, that quoted the warning by Department of Justice, FCPA Assistant Chief James Koukios, who said that the DOJ has "a lot of cases in the hopper" pertaining to Latin America. What can we learn from the latest case unsealed by the DOJ?
For those of you who missed it, the Bizjet case is not new. The individual prosecutions are new but the underlying case is not. It does make sense for our purposes to refresh our minds about the BizJet case back in March 2012. If you recall, back on March 14, 2012, the DOJ made an announcement that BizJet entered into a $11.8 million criminal settlement. In 2012, BizJet agreed to enter into a deferred prosecution agreement and a three year period of supervision by the DOJ. As a general matter, resolutions with the Company do not impact the liability of individuals. At the time of the agreement, the DOJ announced that, "BizJet paid bribes to officials employed by the Mexican Policia Federal Preventiva, the Mexican Coordinacion General de Transportes Aereos Presidenciales, the air fleet for the Gobierno del Estado de Sinaloa, the air fleet for the Gobierno del Estado de Sonora and the Republica de Panama Autoridad Aeronautica Civil. In many instances, BizJet paid the bribes directly to the foreign officials. In other instances, BizJet funneled the bribes through a shell company owned and operated by a BizJet sales manager. BizJet executives orchestrated, authorized and approved the unlawful payments."
BizJet's indirect parent company did not escape sanctions either. DOJ stated in 2012 that, "BizJet's indirect parent company, Lufthansa Technik AG, itself a German provider of aircraft-related services, entered into an agreement with the department in connection with the unlawful payments by BizJet and its directors, officers, employees and agents. The department has agreed not to prosecute Lufthansa Technik provided that Lufthansa Technik satisfies its obligations under the agreement for a period of three years. Those obligations include ongoing cooperation and the continued implementation of rigorous internal controls.'
It is important to note for companies facing FCPA investigations that in the BizJet case the DOJ gave credit to BizJet for a number of important remedial actions, "The agreements acknowledge BizJet's and Lufthansa Technik's voluntary disclosure of the FCPA violations to the department and their extraordinary cooperation, including conducting an extensive internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing and organizing voluminous evidence and information for the department. In addition, BizJet and Lufthansa Technik engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments, enhancing their due-diligence protocol for third-party agents and consultants, and heightening review of proposals and other transactional documents for all BizJet contracts." It is difficult to ascertain the precise financial value of BizJet's efforts, but nonetheless, there appears to be some merit to the DOJ's claims.
What is interesting about these events now is that the DOJ did not give up on the prosecutions of individuals. The lesson here is that even in a relatively small case the DOJ will continue to pursue the criminal conduct of individuals. The question is why? What about the facts of this case warrants the continued expenditure of government resources.
The primary reason appears to be that the conduct was blatant. The DOJ said in its April 2013 release that, "Bernd Kowalewski, the former president and chief executive officer of BizJet, Jald Jensen, the former sales manager at BizJet; Peter DuBois, the former vice president of sales and marketing at BizJet; and Neal Uhl, the former vice president of finance at BizJet; paid bribes to officials employed by the Mexican Policia Federal Preventiva, the Mexican Coordinacion General de Transportes Aereos Presidenciales, the air fleet for the Gobierno del Estado de Sinaloa in Mexico, the air fleet for the Estado De Roraima in Brazil, and the Republica de Panama Autoridad Aeronautica Civil in exchange for those officials' assistance in securing contracts for BizJet to perform MRO services." Acting Assistant Attorney General Raman said, "Former BizJet executives, including the former president and chief executive officer, allegedly authorized and caused hundreds of thousands of dollars to be paid directly and indirectly to ranking military officials in various foreign countries, and two former executives have pleaded guilty for their roles in the conspiracy. These charges reflect our continued commitment to holding individuals accountable for violations of the FCPA, including, as in this instance, after entering into a deferred prosecution agreement with their employer."
What is interesting here is that Kowalewski and Jensen were indicted in January 2012 and remain at-large. In contrast, DuBois and Uhl pleaded guilty in January 5, 2012 and their guilty pleas were unsealed on April 5, 2013. Perhaps what awaits next is finding Kowalewski and Jensen and extradition to the U.S. from parts unknown.
The final note worthy of some consideration is the actual sentences that were handed down to DuBois and Uhl. The DOJ release stated, "DuBois and Uhl pleaded guilty on Jan. 5, 2012, to criminal information, and their pleas were unsealed today. DuBois pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA. Uhl pleaded guilty to one count of conspiracy to violate the FCPA. Both defendants were sentenced today by U.S. District Judge Gregory K. Frizzell in the Northern District of Oklahoma. DuBois's sentence was reduced from a sentencing guidelines range of 108 to 120 months in prison to probation and eight months home detention based on his cooperation in the government's investigation. Uhl's sentence was similarly reduced for cooperation from a guidelines range of 60 months in prison to probation and eight months home detention."
There has a been some discussion within the Defense Bar that the sentences for FCPA cases have not been particularly high when compared to other kind of white collar criminal matters. The larger sentences have been reserved for the "Ponzi" scheme type cases. The good news for defendants in these FCPA type cases is that they will not likely seem the same kind of punishment. Having said that, the public flogging, loss of income and title, may still act as a reasonable deterrent for future cases, but it remains to be seen.
What is clear from this case is that the DOJ has an eye on US companies with operations in Latin America and will prosecute individuals.
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