On May 10, 2011, a California federal jury convicted Lindsey Manufacturing Company, two of its executives—Keith Lindsey and Steve Lee—and a Mexican sales agent—Angela Aguilar—on all counts charged in the superseding indictment arising out of their participation in a scheme to bribe Mexican government officials at the Comisión Federal de Electricidad, a state-owned utility company. Lindsey Manufacturing Company, Keith Lindsey and Steve Lee were each convicted on one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and five substantive bribery counts under the FCPA. Angela Aguilar was convicted on one count of money laundering conspiracy.
The verdict marks a watershed moment in the 34-year history of the FCPA, as it is the first time a company has been tried and convicted under the statute. The US Department of Justice (DOJ) has recently made the prosecution of companies and corporate executives under the FCPA a department priority. Companies have generally avoided the risk posed by fighting criminal charges in a full-blown trial by seeking deferred and non-prosecution agreements with the DOJ. As part of these agreements, companies have been willing to submit to a panoply of expensive and intrusive conditions—including paying fines and penalties, cooperating with further DOJ investigations, establishing internal compliance programs, and appointing (and paying for) independent, corporate monitors—in order to avoid the drastic consequences a criminal conviction would pose.
Lindsey Manufacturing Company opted to challenge the DOJ’s allegations in court and mounted an aggressive defense, filing a flurry of motions, including one that tested the DOJ’s position on who qualifies as a “foreign official” under the FCPA, a battle the company eventually lost. This legal gamble did not pay off. In announcing the verdict, Assistant Attorney General Lanny A. Breuer made it clear that this verdict would only embolden the department in its prosecution of foreign bribery:
Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last. Foreign corruption undermines the rule of law, stifling competition and the health of international markets and American businesses. As this prosecution shows, we are fiercely committed to bringing to justice all the players in these bribery schemes—the executives who conceive of the criminal plans, the people they use to pay the bribes, and the companies that knowingly allow these schemes to flourish. Bribery has real consequences.
Companies may now have even more reason to avoid trial and seek non- and deferred-prosecution agreements with the DOJ when it shows up at the front door asking about suspicious foreign payments.
For inquires related to this Legal Update, please contact James Ancone at +1 212 506 2353.