On June 14, 2012, David Edmonds, the sole remaining U.S. defendant in the Carson FCPA case entered into a plea agreement. He will plead guilty to a one-count indictment alleging a violation of the FCPA. The case has been closely watched because of a number of the interesting arguments raised the defendants, but as those motions were denied, and the June 26 trial date approached, four defendants pled guilty in a two-month period.
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. Even before CCI finalized its Plea Agreement, its cooperation led to the April 8, 2009 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. In April 2011, the first defendant, Flavio Ricotti pled guilty.
The defendants moved to dismiss the Indictment, arguing, among other things, that the FCPA extended to payments made to employees of foreign state-owned companies. As discussed here, on May 18, 2011, Judge Selna denied the motion to dismiss, holding that "the question of whether state-owned companies qualify as instrumentalities under the FCPA is a question of fact." He concluded that issue could not be segregated from the evidence to be presented at trial. He noted that he could not simply assume as a matter of law that a state-owned company was an "instrumentality" under the FCPA, but there were several factors (none of which were dispositive) that must be considered. He also directed the parties to submit proposed jury instructions regarding the "instrumentality" issue.
The Government requested that the Court instruct the Jury that "[a]n ‘instrumentality’ of a foreign government is any entity through which a foreign government achieves an end or purpose, and can include state-owned entities" and that the jury should consider the six non-exclusive factors identified by the Court. Defendants requested that the jury be instructed that "[t]o conclude that a business enterprise is an "instrumentality" of a foreign government, you must conclude beyond a reasonable doubt that the business enterprise is part of the foreign government itself," and that the Government must establish four factors, including a majority ownership by the state. Defendants also requested a separate instruction that the Government must prove beyond a reasonable doubt that a defendant knew that the transaction at issue involved a foreign official.
As discussed here, in a February 16, 2012 Order, Judge Selna rejected a number of the defendants’ requests and "decline[d] to adopt the bright-line approach which turns on a mandatory set of criteria advanced by defendants." He found that the instructions proposed by the Government were appropriate in making a fact-based inquiry to determine whether an entity is an "instrumentality" under the FCPA. The Judge also held that "there is no basis to instruct the jury must find each factor is present."
As discussed here, on March 5, 2012, four of the defendants in the Carson case filed a Motion to Dismiss and a Motion to Suppress.
• 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, following a May 14, 2012 hearing, Judge James Selna denied both motions. With respect to the Motion to Suppress, Judge Selna rejected the defendants’ theory that CCI had become a "state actor," concluding 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." Judge Selna also denied the Motion to Dismiss, stating that many of the arguments raised in the motion had "been previously presented and rejected."
While the Motion to Dismiss and the Motion to Suppress were pending, defendants Stuart and Hong ("Rose") Carson pled guilty to one count of violating the FCPA on April 16, 2012. After Judge Selna ruling’s on the two motions, defendant Paul Cosgrove also pled guilty. The remaining defendant, Mr. Edmonds, entered into a Plea Agreement (attached) and will plead to a Superseding Indictment alleging one count of violating the FCPA based on a $45,000 payment. The prosecution and Mr. Edmonds agreed that "an appropriate disposition of this case is that the court impose a sentence of: no more than 15 months imprisonment; three years supervised release with conditions to be fixed by the Court; up to a $20,000 fine; no amount of restitution; and a $100 special assessment."
A sixth defendant, Han Yong Kim, the former president of CCI’s Korean office, is a fugitive and, according to an April 2011 filing, the Government seeks to have him extradited.