In connection with a May 14, 2012 hearing, Judge James Selna has prepared Tentative Minute Orders which deny two motions in the Carson FCPA cases. In a Motion to Suppress and a Motion to Dismiss, the defendants raised issues regarding DOJ’s relationship with Control Components, Inc. ("CCI"), the employer of defendants, who cooperated with the investigation and provided certain information. In addition to our discussion below, Professor Mike Koehler of The FCPA Professor Blog takes a careful look at the case (which includes copies of the tentative rulings, here and here).

On July 31, 2009, DOJ announced that Control Components, Inc. ("CCI"), a California company that designs and manufactures valves, had pled guilty to a three-count criminal information for its involvement in a lengthy scheme to secure contracts in approximately 36 countries by paying bribes to employees of various companies. That plea marked the culmination of an internal investigation by CCI and the company’s cooperation with DOJ. The cooperation led to the indictment of six former executives of CCI in the Carson case, alleging that the group conspired to violate the FCPA in order to secure contracts which yielded approximately $46.5 million in profits.

As discussed here, on March 5, 2012, several of the defendants in the Carson case filed a Motion to Dismiss and a Motion to Suppress in the case.

• In the Motion to Suppress, defendants argued that because CCI had collaborated with DOJ during the investigation, it was, in effect, a Government agent or a state actor who improperly compelled statements from the defendants during an internal investigation, violating their Fifth Amendment rights. As a result, defendants argued that the statements should be suppressed.

• In the Motion to Dismiss, defendants argued that "the impact of the cumulative impediments – unique investigation tactics preventing Defendants access" to certain evidence deprived them of their Due Process and Sixth Amendment rights, ("including the right to present a complete defense") and that "dismissal is the only appropriate remedy" for such severe prejudice.

As discussed here, the Government filed its Opposition to the Motion to Suppress on April 2, 2012, arguing, among other things, that the statements should not be suppressed because the employer’s "actions were not the result of any pressure or influence from the government sufficient to convert the Company’s lawyers to state actors." On April 6, 2012, the Government filed its Opposition to the Motion to Dismiss, arguing that the motion was meritless because, among other things, the Government "has gone beyond its discovery obligations" to make sure that defendants receive the appropriate documentation that had been in the possession of CCI."

An interesting development occurred while the motions were pending: two of the four defendants who had filed the Motion to Dismiss and the Motion to Suppress – Stuart and Hong ("Rose") Carson – pled guilty to one count of violating the FCPA on April 16, 2012. However, the remaining movants, Paul Cosgrove and David Edmonds, continue to pursue the motions. As discussed here, the two remaining defendants Reply Briefs on April 30, 2012.

The Motion to Suppress. With respect to the Motion to Suppress, Judge Selna rejected the defendants’ theory that CCI had become a "state actor." After reviewing the correspondence between Steptoe & Johnson, counsel to CCI and its parent corporation (IMI plc), and DOJ prior to the interviews of Messrs. Cosgrove and Edmonds, Judge Selna found that "there is no basis to conclude on the basis of events that transpired prior to the interviews or in the aftermath that the Steptoe lawyers were acting as agents of the Government." Instead, the Court determined that there was nothing "more than a unilateral determination on the part of CCI and its parent to cooperate with the Government." Judge Selna acknowledged that "it was in CCI’s interest and a legitimate activity to investigate potential criminal conduct in its business operations." The Court also noted that the Government was not involved with the Defendants’ interviews, and corporate counsel’s acts were not "so intertwined with the Government" that the interviews could be viewed as Government conduct, specifically pointing out that "[t]he record is clear that CCI through its parent IMI had made a decision to conduct an internal investigation before Steptoe contacted the Government."

Judge Selna also reviewed the issue of whether the defendants were coerced to give statements during the investigation, and if so, did the Government bring about the coercion? He pointed out that: (1) none of the defendants said they were threatened with termination; (2) while the company instructed defendants to cooperate, there were no threats in those instructions; (3) there was no evidence that the Government "precipitated or encouraged any threats of sanctions for failing to cooperate;" and (4) the company had already made a decision to suspend the defendants. The Court concluded that "the Defendants’ Fifth Amendment right were not violated during the conduct of the Steptoe interviews" and denied the Motion to Suppress.

The Motion to Dismiss. Judge Selna also denied the Motion to Dismiss, stating that many of the arguments raised in the motion had "been previously presented and rejected." For example, a theory based on the claim that Steptoe and CCI were, in effect, Government agents was already denied in the Motion to Suppress discussed above. The Court also rejected the argument that the Government had interfered with defense access to witnesses, pointing out that while "the Government has a responsibility not to interfere with witness access, … the Government is not the guarantor of such access." According to Judge Selna, defendants failed to prove the Government interfered with access to those witnesses or that their testimony was going to be "material and favorable" to the defense. The Court also rejected arguments regarding the production of documents, the ability of defendants to secure foreign documents by Letters Rogatory, or the production of documents under Brady v. Maryland, 373 U.S. 83 (1963). Finally, the Court ruled that "[t]ere has been no systemic or systematic denial of access to evidence enabling the Defendants to present a complete defense."

The theories in these two motions raised interesting issues which could have impacted future cases where a company cooperated and individual employees did not and faced the Government alone. In this case, the Government concluded that, with respect to the issues raised by defendants, the Government, CCI and its counsel did not act inappropriately. It will be interesting to see how the companies, the Government and the Courts behave the next time a case involving similar circumstances occurs.

In the mean time, Messrs. Cosgrove and Edmonds are scheduled to be tried beginning on June 26, 2012.