THE FIRST COMPANY TO BE TRIED ON FCPA CHARGES IS FOUND GUILTY
Lindsey Manufacturing, the first company to stand trial on FCPA charges, was convicted on all counts by a jury in the Central District of California yesterday. Keith Lindsey, Steve Lee and Angela Aguilar were also convicted. Mr. Lindsey is the owner and President of the Company and Mr. Lee served as vice president and CFO. Ms. Aguilar is a Mexican national, married to Enrique Aguilar of Grupo International which served as an agent for Lindsey to secure business from a state owned enterprise. Mr. Aguilar is a fugitive. U.S. v. Noriega, Case No. 2:10-cr-01031 (C.D. CA.).
The charges stem from bribes paid to employees of Comision Federal de Electricidad or CFE in Mexico. CFE is a state owned utility company. The company contracts with foreign enterprises for the goods and services necessary to supply electric power to its customers. Lindsay manufactures emergency restoration and other equipment used by utilities. Many of its customers are foreign state owned utilities. CFE eventually became one of its most significant customers.
Initially, Lindsey was unable to secure contracts from CFE. The company then retained Grupo based on information suggesting that Mr. Aguilar had a corrupt relationship with an official at the power company. Within months of retaining Grupo in 2002, and continuing over the next seven years, Lindsey secured business from CFE. Over the period the company was paid more than $19 million by the utility.
To secure the business Lindsey paid a 30% commission to Grupo with the understanding that all or part of it would go to CFE officials. To cover the cost of the commission Lindsey raised its prices to CFE thereby passing on the cost to the electric company. The commissions were paid under false invoices. Over the years Messrs. Lindsey and Lee wired about $5.9 million to Grupo.
Ms. Aguilar authorized the payment of Grupo funds to CFE officials. Specifically, she authorized $297,5000 for a Ferrari, $1.8 million for a yacht and over $170,000 towards the credit card bills of one official. She also authorized the transfer of $500,000 to the brother and mother of another official.
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. Prior to jury deliberations the court granted Ms. Aguilar’s motion for a judgment of acquittal as to one count of money laundering. Earlier in the case the court denied a motion to dismiss which argued that CFE employees are not government officials.
Sentencing is scheduled for the company and defendants Lindsey and Lee on September 16, 2011. Ms. Aguilar is scheduled to be sentenced on August 12, 2011.
This is the fourth recent FCPA trial in which DOJ has prevailed. Later this week the so-called shot-show cases – those arising from a huge sting operation – are scheduled to begin trial in the District of Columbia.
Add note: Thanks to reader Michael Huneke of Hughes Hubbard who notes that Lindsey is the first companiy tried and convicted by a jury in an FCPA case. In 1990 Harris Corp. went to trial in an FCPA case and its motion for acquital was granted. U.S. v. Harris Corp., CR 90 0456 (N.D. Ca.).