11 May 2011
WASHINGTON – Lindsey Manufacturing Company, an Azusa, Calif., company, two of its executives and a Mexican intermediary today were convicted by a jury on all counts for their alleged roles in a scheme to pay bribes to Mexican government officials at the Comisión Federal de Electricidad (CFE), a state-owned utility company. The jury reached its verdict after one day of deliberations, following a five-week trial.
The convictions were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Steven M. Martinez, Special Agent-in-Charge of the FBI’s Los Angeles Field Office; and Victor S.O. Song, Chief of Internal Revenue Service-Criminal Investigation (IRS-CI).
“Today’s guilty verdicts are an important milestone in our FCPA enforcement efforts,” said Assistant Attorney General Breuer. “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.”
“Bribery is not a victimless crime,” said U.S. Attorney Birotte. “Not only does it damage citizens’ confidence in their own government, it also damages the integrity of the global marketplace. The Department of Justice remains committed to prosecuting violations of the Foreign Corrupt Practices Act to ensure that the payment of bribes can no longer be viewed simply as the cost of doing business in a foreign nation. Bribery, wherever it occurs, will carry the potential cost of criminal prosecution, hefty fines and prison terms.”
“The FBI investigates corruption and allegations of bribery to ensure that U.S. based companies do business on an even playing field,” said FBI Special Agent in Charge Martinez. “The guilty verdicts announced today should send a strong message to large public corporations and small businesses alike, that bribing foreign officials to obtain a competitive advantage is a crime and will be prosecuted.”
“IRS Criminal Investigation provides financial investigative expertise in our work with our law enforcement partners,” said Chief Song of IRS-CI. “Pooling the skills of each agency makes a formidable team as we investigate allegations of wrong-doing.”
Keith E. Lindsey, 66, of La Canada, Calif., and Steve K. Lee, 60, of Diamond Bar, Calif., were convicted of one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and five counts of FCPA violations. Angela Maria Gomez Aguilar, 56, of Cuernavaca, Mexico, was convicted of one count of money laundering conspiracy. The court entered a judgment of acquittal prior to the jury’s verdict on one substantive count of money laundering against Angela Aquilar.
Enrique Aguilar, 56, also of Cuernavaca, Mexico, and Angela Aguilar’s husband, is charged with conspiracy to violate the FCPA, violations of the FCPA and money laundering violations. He remains a fugitive, and is presumed innocent unless proven guilty beyond a reasonable doubt in a court of law. The defendants were charged in a superseding indictment returned by a federal grand jury in Los Angeles on Oct. 21, 2010.
According to the evidence presented a trial, CFE is responsible for supplying electricity in Mexico, and contracts with Mexican and foreign companies for goods and services to help supply electricity services to its customers. Enrique and Angela Aguilar were directors of Grupo Internacional de Asesores S.A. (Grupo), which purported to provide sales representation services for companies doing business with CFE.
According to evidence presented at trial, Lindsey Manufacturing hired Grupo to serve as its sales representative in Mexico and to obtain contracts for it from CFE. Lindsey Manufacturing makes emergency restoration systems and other equipment used by electrical utility companies. Many of Lindsey Manufacturing’s clients were foreign, state-owned utilities, including CFE, which was one of the company’s most significant customers. Grupo received a percentage of the revenue Lindsey Manufacturing realized from its contracts with CFE.
From approximately February 2002 until March 2009, according to evidence presented at trial, Lindsey Manufacturing, Lindsey, Lee and others orchestrated a scheme in which Enrique Aguilar was paid a 30 percent commission on all the goods and services Lindsey Manufacturing sold to CFE, even though this was a significantly higher commission than previous sales representatives for the company had received. According to evidence presented at trial, Lindsey and Lee understood that all or part of the 30 percent commission would be used to pay bribes to Mexican officials in exchange for CFE awarding contracts to Lindsey Manufacturing Company. The costs of goods and services sold to CFE allegedly were increased by 30 percent to ensure that the added cost of paying the bribes was absorbed by CFE and not Lindsey Manufacturing.
According to evidence presented at trial, fraudulent invoices were submitted from Grupo to Lindsey Manufacturing for 30 percent of the contract price. Lindsey and Lee then caused the money requested in the fraudulent invoices to be wired into Grupo’s brokerage account, knowing that the invoices were fraudulent and the funds were being used as bribes.
The evidence at trial established that in the months leading up to the hiring of Enrique Aguilar, Lindsey and Lee learned that Enrique Aguilar had a corrupt relationship with a top CFE official. In fact, according to evidence presented at trial, Lindsey and Lee complained to CFE about the way in which contracts were being awarded. The month after their complaint was rebuffed, Lindsey and Lee hired Enrique Aguilar. An employee of Lindsey Manufacturing testified at trial that in 2000, prior to hiring Enrique Aguilar, the employee and Lee discussed Aguilar’s possible representation of the company. The employee said he told Lee, “if we cannot defeat the enemy, might as well join the enemy.” The evidence at trial established that within months of hiring Enrique Aguilar, Lindsey Manufacturing began receiving contracts from CFE and over the course of the next seven years received more than $19 million in CFE contracts. The evidence also showed that Keith Lindsey and Lee wired approximately $5.9 million of that money directly to Grupo.
Evidence established that Angela Aguilar authorized money in the Grupo account to be used to buy a CFE official a $297,500 Ferrari Spyder and a $1.8 million yacht, as well as to pay more than $170,000 towards the official’s credit card bills. She also authorized the transfer of $500,000 to the brother and mother of another CFE official.
Angela Aguilar was arrested on Aug. 10, 2010, on a criminal complaint when she travelled to Houston from Mexico. She was ordered detained and removed to the Central District of California, where she remains in custody pending sentencing.
Sentencing for Lindsey Manufacturing, Lindsey and Lee is scheduled for Sept. 16, 2011. Angela Aguilar’s sentencing is scheduled for Aug. 12, 2011. The defendants face a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost on the FCPA conspiracy charge. Each of the five FCPA counts carries a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The money laundering conspiracy count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The government is seeking forfeiture against all defendants.
The case is being prosecuted by Senior Trial Attorneys Nicola J. Mrazek and Jeffrey A. Goldberg of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Douglas M. Miller in the Central District of California. The case was investigated by the FBI’s Los Angeles Field Office and the IRS-CI Los Angeles Field Office, with the assistance of the Department of Homeland Security Office of Inspector General. Significant assistance was provided by the Criminal Division’s Office of International Affairs. The Department of Justice also thanks Mexican authorities for their ongoing assistance in this matter.List your legal jobs on the LawFuel Network