JURY VERDICT AGAINST LINDSEY DEFENDANTS ON FCPA CHARGES DISMISSED
In an extraordinary ruling, Judge Howard Matz concluded that “the Court throws out the convictions of Defendants Lindsey Manufacturing Company, Keith E. Lindsey and Steve K. Lee and dismissed the First Superseding Indictment.” This ruling brought to an end the first FCPA case in which a corporation had been convicted by a jury. U.S. v. Aguillar, 2:10-cr-01031 (C.D. Cal. Order Filed Dec. 1, 2011).
The case was brought against Lindsey Manufacturing, Its owner and President, Keith Lindsey, Steve Lee, the CFO and vice president of the company and Angela Aguilar, the wife of Enrique Aguilar of Grupo International which served as an agent in Mexico for Lindsey. The company and its employees were alleged to have paid bribes to the Comision Federal de Electricidad or CFE in Mexico through Grupo. CFE is a state owned utility company. Lindsey manufactures emergency restoration and other equipment used by utilities. Many of its customers are foreign state owned utilities.
Lindsey, according to the government, initially was unable to secure contracts from CFE. It then retained Grupo. Lindsey obtained information, according to the government, suggesting that Mr. Aguilar had a corrupt relationship with an official at the power company. Within months of retaining Grupo in 2002, the company obtained business from CFE who eventually became a significant client.
Following a jury trial the company and Messrs. Lindsey and Lee were each convicted on one count of conspiracy and five counts of FCPA violations. Ms. Aguilar was convicted on one count of conspiracy to commit money laundering.
In ruling on the Lindsey defendants’ post verdict motions, the Court made it clear that it was reluctant to dismiss the proceeding based on prosecutorial misconduct. The case here was fast moving with multiple pretrial motions, some of which made allegations of prosecutorial misconduct. In ruling on those motions the Court concluded that it had missed the “proverbial forest for the trees.” It saw the individual motions but missed the overall pattern: “The Court was confronted with so many motions challenging the Government’s conduct that it was difficult to step back and look into whether what was going on reflected not isolated acts but a pattern of invidious conduct . . . the Court did issue orders granting various Defendants’ motions . . . it did not fully comprehend how the various pieces fit together . . . And fit together they do … they add up to an unusual and extreme picture of a prosecution gone badly awry.”
After carefully reviewing the evidence of misconduct beginning before the trial and continuing through it, the court concluded that the government had:
- Improperly delayed the production of key grand jury transcripts;
- Procured search and seizure warrants through materially false and misleading affidavits;
- Improperly obtained attorney-client privileged communications;
- Violated court orders;
- Improperly questioned witnesses;
- Failed to timely produce information required under Jenks; and
- Engaged in questionable conduct during closing argument.
The prejudice from this misconduct, the Court found, is “palpable once the prosecution and trial are assessed as a whole.”
In concluding that the charges had to be dismissed the Court considered two other points. First, the “case against the Lindsey Defendants was far from compelling.” The evidence was entirely circumstantial and was “at best, was murky . . . regardless of what the Lindsey Defendants knew or intended, for the most part there was no clear evidence that if Enrique Aguilar bribed Moreno and Hernandez [of CFE] it was with .. . “ Lindsey funds.
Finally, the Court considered the impact of the charges and trial on the defendants: “Dr. Lindsey and Mr. Lee were put through a severe ordeal. Charges were filed against them as a result of a sloppy, incomplete and notably over-zealous investigation, an investigation that was so flawed that the Government’s lawyers tried to prevent inquiry into it . . .The financial costs of the investigation and trial were immense, but the emotional drubbing these individuals absorbed undoubtedly was even worse. As for LMC [Lindsey Manufacturing], the very survival of that small, once highly-respected enterprise has been placed in jeopardy. That is not to say that the Lindsey Defendants are entitled to a finding of factual innocence; they are not.” In this case however, they are entitled to dismissal.