Updated 5:10 p.m.
Nearly two dozen corporate executives and employees were arrested Monday in Las Vegas and in Miami in the first large-scale foreign bribery investigation using undercover federal agents, the Justice Department announced today.
Sixteen indictments were unsealed today in the U.S. District Court for the District of Columbia charging executives and employees in the military and law enforcement equipment industry with violations of the Foreign Corrupt Practices Act. Twenty-one people were arrested Monday at a convention in Las Vegas. The indictments were returned in federal court in Washington in December.
Justice Department officials said the defendants, including Amaro Goncalves, vice president of sales at the firearm manufacturer Smith & Wesson in Springfield, Mass., believed they were bribing the minister of defense of a foreign country through a sales agent to obtain contracts. The ongoing investigation began more than two years ago, Assistant Attorney General Lanny Breuer of the Justice Department’s Criminal Division said today.
“Indeed the undercover techniques used in this case should cause all would-be FCPA fraudsters to pause and to ask: am I really paying off a foreign government official or could this be a federal agent?” Breuer said. “Of course, if you even have to ask yourself this question in all likelihood you shouldn’t be doing whatever it is that you are doing.”
Breuer and Kevin Perkins, the FBI’s assistant director of criminal investigations in Washington, said there are 140 pending FCPA investigations. “There should be and can be no place for foreign bribery in any business model or corporate culture,” Breuer said today.
Breuer declined to comment about whether the military and law enforcement equipment industry was targeted. Recently, Justice officials said they were turning their sights on the pharmaceutical industry for FCPA investigations.
In the latest case, more than 150 FBI agents executed search warrants in several cities in Florida—including Miami, St. Petersburg and Sarasota—in addition to San Francisco and Woodbridge, Va. Click here for copies of the indictments in the case.
Justice officials said the defendants agreed to pay a 20 percent commission to a sales agent in order to win part of a $15 million deal to outfit the African country’s presidential guard. The sales agent was undercover for the FBI. The fictitious defense minister was supposed to personally receive a 10 percent bribe, according to the Justice Department.
Alexandra Wrage, an expert in corporate compliance with the FCPA, said in a statement that the undercover prosecution "changes the whole landscape" of enforcement of anti-bribery laws.
"More typical cases involve investigations of allegations by whistleblowers, competitors and disgruntled employees or settlements with companies that come in the DOJ’s front door, hat in hand," said Wrage, president of TRACE International, a non-profit membership association that works with companies to bolster compliance. "In this case, the DOJ trumped up a greedy African official and his (FBI) front man to snare 22 executives."
Wrage said the prosecution of the executives goes to company officials who have opted to play "compliance roulette." Justice officials declined to say whether any of the executives or employees are cooperating with the investigation and prosecution.