At a hearing on November 29, 2011, Judge A. Howard Matz stated that he would be granting the motion to dismiss for prosecutorial misconduct filed by Lindsey Manufacturing Company (a privately-held company), its President Keith Lindsey, and its Vice President Steve Lee in the criminal FCPA case against them. Judge Matz prepared a tentative order which he shared with the parties and plans to issue a formal order on Wednesday, November 30, 2011. According to Edward Pettersson’s article on Bloomberg.com, "[t]he judge cited government misconduct including providing false information to get a search warrant, making unauthorized searches and giving incorrect testimony to a grand jury." As a result, the May 2011 convictions of conspiracy and FCPA charges against the company and Messrs. Lindsey and Lee will be dismissed.
As discussed here, on May 10, 2011, following a five-week trial, a federal jury convicted Lindsey Manufacturing, Mr. Lindsey, and Mr. Lee of one count of conspiracy to violate the FCPA and five counts of actually violating the Act. The charges were based on payments to employees of the Comisión Federal de Electricidad ("CFE"), an electric utility company owned by the government of Mexico, which were made in exchange for the CFE to award contracts to Lindsey Manufacturing.
In a press release following the verdict, Assistant Attorney General Lenny Breuer called the result "an important milestone" in the Department of Justice’s FCPA enforcement efforts. "Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations." At the time, Mr. Breuer stated: "As this prosecution shows, we are fiercely committed to bringing to justice all the players in these bribery schemes … ." As it turns out, the prosecution team appears to have been a little too "fiercely committed."
In a series of briefs filed before and after the trial, the company and Messrs. Lindsey and Lee accused the Government of prosecutorial misconduct. As discussed here, in a motion filed on May 9 (before the verdict), they accused the Government of presenting the Grand Jury with "knowingly false and misleading representations on critical matters" and omitting the "disclosure of material facts" during the testimony of an FBI Special Agent. The defendants further accused the Government of covering up this testimony by refusing to produce the complete Grand Jury transcript of the agent’s testimony until ordered by the Court in the middle of the trial. The Government filed its Opposition on June 6, 2011.
At a June 27, 2011 hearing, Judge Matz learned that certain grand jury transcripts which he previously ordered to be disclosed had not been turned over to the defendants. The Court then ordered the Government to turn over the missing transcripts by 9:00 a.m. the following morning and ordered further briefing.
On July 25, 2011, the defendants filed a supplemental brief (discussed here), stating that the Government’s "investigation and prosecution of this case were permeated with instances of purposeful, prejudicial government misconduct. The government’s misconduct was patent and pervasive, designed to win the case, not do justice." In that pleading, defendants argued that the conviction should be vacated because the Government:
• fatally contaminated the presentation of this case to two grand juries;
• purposefully concealed the testimony and other material matters from scrutiny;
• misused witness lists to deceive the defense as to the witnesses it would call; and
• gave a prejudicial and improper summation, including an argument which had been explicitly rejected by the Court.
The Government filed a responsive brief on September 5, 2011.
An initial hint as to how the Judge might rule occurred during the trial when the Court granted a Rule 29 motion for judgment of acquittal for co-defendant Angela Aguilar, dismissing one of the two money laundering counts against her (she was subsequently convicted on the remaining money laundering count). Her motion argued, in part, that the same FBI agent had misled the Grand Jury about her (Ms. Aguilar’s) alleged involvement in the money laundering scheme. On June 3, 2011, the Court sentenced Ms. Aguilar (who had been incarcerated since her arrest) to time served, plus three years supervised release. A second hint may have been seen when the Court issued an order vacating the scheduled sentencing hearing for the company and Messrs. Lindsey and Lee, which had been set for September 16, 2011.
The Court finally held a hearing regarding to the motion to dismiss on Tuesday, November 29, 2011. Richard Cassin of the FCPA Blog received the following information from Jan Handzlik, counsel for Lindsey Manufacturing and Keith Lindsey:
In the 38-page tentative order provided to the parties today, Judge Matz said the convictions should be thrown out and the indictment dismissed with prejudice. The judge told the parties he would make some revisions to the tentative order and enter the final order tomorrow.
According to the article in Bloomberg.com, a spokesman for the U.S. attorney in Los Angeles said: "We are awaiting the court’s final ruling, and we will carefully review the order to consider appropriate steps." Counsel for the defense was understandably pleased with the result, telling the FCPA Blog that "It was a long time coming, but justice has been done."
The Federal Securities Law Blog will provide an update when Judge Matz’s final order becomes available.