The U.S. Justice Department, fresh from convicting Galleon Group LLC’s Raj Rajaratnam with the unprecedented use of wiretaps on Wall Street, leveraged similar tactics to charge security industry executives in the biggest prosecution of individuals for foreign bribery.
The four defendants, whose trial begins today in federal court in Washington, are part of a 22-defendant kickback conspiracy case resulting from a government sting operation and a fake $15 million weapons deal. Prosecutors alleged the defendants sought to provide guns, grenades and uniforms for the presidential guard of Gabon in violation of the U.S. Foreign Corrupt Practices Act and laws against money laundering.
The charges stem from a three-year investigation involving an informant who pleaded guilty in an earlier bribery case, recorded telephone calls and videotaped meetings with FBI agents posing as representatives of Gabon, sub-Saharan Africa’s fifth-biggest oil producer. The government said the defendants agreed to pay $3 million in kickbacks for the Gabon business.
“This case shows the government is willing to work at finding a case they believe is out there rather than having companies bring voluntary disclosures” to the Justice Department, said Timothy Dickinson, a lawyer at Paul Hastings Janofsky & Walker LLP in Washington who specializes in FCPA cases. Most foreign bribery cases are made through company disclosures or a whistleblower, Dickinson said.
Those arrested in what the government said was the biggest prosecution by number of individuals for foreign bribery include Amaro Goncalves, a former sales executive for Smith & Wesson Holding Corp., based in Springfield, Massachusetts, and R. Patrick Caldwell, a former Secret Service official who was chief executive officer of Protective Products of America Inc., based in Sunrise, Florida. The two men pleaded not guilty.
Assistant U.S. Attorney General Lanny Breuer, who oversees the Justice Department’s criminal division, has cited the Gabon case, along with the Galleon insider-trading probe, as examples of the government using wiretaps and other undercover techniques to pursue white-collar criminals.
Rajaratnam, 53, was found guilty May 11 of all 14 counts against him in the largest illegal stock-tipping case in a generation. Jurors heard 66 taped conversations during the trial.
The four defendants on trial in Washington have denied any wrongdoing. In court papers and in hearings, lawyers for the men have accused the government of engineering the conspiracy.
“The government did not infiltrate an ongoing organization, but instead attempted to create its own organization by roping together targeted individuals who had no reason to cooperate or work together, and never did,” lawyers for John Wier III, the former president of SRT Supply Inc. and one of the four defendants facing trial today, said in court papers.
The case has been nicknamed the “Shot Show case” because the Federal Bureau of Investigation arrested 21 of the defendants while they were attending the annual Shooting, Hunting, Outdoor Trade Show and Conference in Las Vegas in January 2010.
About 150 FBI agents searched locations in Arkansas, California, Florida, Kentucky, Pennsylvania and Virginia in the case, the Justice Department said. The U.K.’S City of London Police executed search warrants in connection with investigations in England.
Three of the defendants pleaded guilty and agreed to cooperate. U.S. District Judge Richard Leon has grouped the remaining 19 defendants into four trials. The first group consists of Wier, Andrew Bigelow, Lee Tolleson and Pankesh Patel.
Patel, 45, of the U.K., is managing director of Quartermaster’s Ltd., a company that sells military and law enforcement uniforms, according to court papers. Bigelow, 42, of University Park, Florida, was the managing partner and director of government programs for Heavy Metal Armory, a Sarasota, Florida, company that sells machine guns, grenade launchers and other firearms.
Tolleson, 27, of Mountain Home, Arkansas, was director of acquisitions and logistics for ALS Technologies, a company that sells law enforcement and military equipment. Wier, 48, sold tactical and ballistic equipment through his company in St. Petersburg, Florida, according to court papers.
They were indicted on one count of FCPA conspiracy, one count of money laundering conspiracy, and 42 counts of violating the FCPA. The FCPA conspiracy and bribery charges carry maximum five-year prison sentences. The maximum sentence for money laundering conspiracy is 20 years in prison.
Wier’s lawyer, Todd Foster of Tampa, Florida, and Bigelow’s lawyer, Lawrence Jacobs of Bradenton, didn’t return e-mail messages seeking comment. Tolleson’s lawyer, Dee Wampler of Springfield, Missouri, declined to comment. Patel’s lawyer, Eric Bruce of Washington and New York, didn’t return a telephone message seeking comment.
The government’s case was put together through Richard Bistrong, a former executive from Armor Holdings Inc. He pleaded guilty last year to bribing officials of the United Nations and the Netherlands to obtain contracts for body armor and pepper spray, according to court papers.
BAE Systems Plc, Europe’s largest arms company, bought Armor Holdings in 2007 for $4.53 billion. Bistrong, who said his conspiracy took place from 2001 to 2006, began cooperating with prosecutors in 2007, according to court records.
Bistrong identified possible targets for the government, according to court papers. Working with the Federal Bureau of Investigation, he recorded telephone and in-person meetings with the defendants. He also introduced them to Pascal Latour, an FBI agent posing as a representative for Gabon’s defense minister.
The defendants “were invited” to participate in a $15 million deal to outfit Gabon’s presidential guard and agreed that 20 percent of their contract would be paid as a commission to Gabon officials, according to the government.
The agreement included two price quotations, one representing the true price of the product and the other inflated with the 20 percent commission, according to the indictment.
Prosecutors alleged Patel agreed to sell uniforms. Wier was selling laser sight grips. Tolleson agreed to sell grenades and grenade launchers and Bigelow was selling M4 rifles.
The deal was set up for two phases, the U.S. said. The first involved a small shipment of the products to test that the commission would be paid, and the second would supply the larger contract.
The products were shipped from June to August of 2009. The defendants, after receiving payment, wired commission payments into Latour’s U.S. bank account, prosecutors said.
In January 2010, 21 of the defendants traveled to Las Vegas as part of the second phase of the transaction, according to the government.
The case is U.S. v. Goncalves, 09-cr-00335, U.S. District Court, District of Columbia (Washington).