Justice gives up sting case over foreign bribes

AP News
Posted: Feb 21, 2012 5:11 PM
Justice gives up sting case over foreign bribes

In an embarrassing setback, the Justice Department gave up Tuesday on its high-profile prosecution of nearly two dozen businessmen charged in the first undercover sting the government used to enforce a 35-year-old law against foreign bribery.

U.S. District Judge Richard Leon granted the department's motion to dismiss all charges against 16 defendants still facing trial after the case fell apart in its first two courtroom tests. Ten defendants went through two lengthy trials, but jurors did not convict a single one.

The defendants were military suppliers arrested at a 2010 trade show in Las Vegas where they anticipated picking up checks for sales to outfit Gabon's presidential guard. But no officials from the central African nation were really involved in the purported deal invented by the FBI.

Leon called the dismissal "the end of a long and sad chapter in the annals of white collar criminal enforcement." He said he had concerns from the start over the way the men were investigated, charged and prosecuted and the government's handling of its star witness.

"I for one hope that this very long and I'm sure very expensive ordeal will be a learning experience" leading to better prosecutions under the 1977 Foreign Corrupt Practices Act, Leon said. He said he hoped everyone involved in the trials, including the defendants who could have faced a decade or more in prison if convicted, could now move on with their lives.

Afterward outside the courtroom, defendant Marc Morales said he was "just happy to move on with my life and spend time with my family" after enduring a four-month trial that ended last month. But he said the case cost him his job as a vice president of ammunitions supplier Allied Defense Group and that he spent "more than I had" on his defense.

David Krakoff, attorney for Morales' co-defendant John Mushriqui, said the Justice Department's request to dismiss the case despite the substantial resources it invested ends his client's "two-year nightmare."

"It's really hard to take on the government, but when you believe in your innocence and fight for your freedom, these cases can be won," Krakoff said.

Morales and Mushriqui were two of seven defendants whose trials ended with a hung jury and were facing a second trial. Three others were acquitted, with nine additional defendants awaiting an initial trial. Three other defendants had pleaded guilty in the case, and Leon said he would schedule hearings soon to consider the status of their cases.

Prosecutors did not say much during the brief hearing in which Leon dismissed the case. In a two-page motion filed earlier in the day, they wrote that the case should end because of the outcome of the first two trials and the substantial resources that would be needed to continue. "The government respectfully submits that continued prosecution of this case is not warranted under the circumstances," they concluded.

Their case was based on the Foreign Corrupt Practices Act that was enacted among the reforms after the Watergate era in response to Securities and Exchange Commission investigations but had fallen into infrequent use since that scandal. Enforcement picked up in the last years of President George W. Bush's administration, as more companies did business abroad and senior corporate officials had to certify financial statements under laws passed in response to corporate accounting scandals. FCPA prosecutions grew even more under the Obama administration _ from seven individuals charged and more than $27 million in criminal fines collected in 2004-2005 to more than 50 charged and nearly $2 billion collected in 2009-2010.

But the sting operation was the largest prosecution yet of individuals under the law and the round-up in Las Vegas got front-page coverage in the nation's leading newspapers. The FBI captured the businessmen with the help of an inside informant, Richard Bistrong, who would become part of the case's downfall.

Defense attorneys were critical of the FBI's reliance on the informant, an executive of a Florida body armor company who they called a sociopathic liar with a devious mind. They said he was able to persuade federal agents to let him plead guilty to a single bribery count for more than $4.4 million in bribes to officials at the United Nations and overseas even though he had a history of bribery, embezzlement, tax evasion, drug use and solicitation of prostitutes.

Prosecutors acknowledged Bistrong was a criminal and a scoundrel. But working with the FBI, he lured the defendants to be part of a $15 million deal to outfit Gabon's presidential guard from head to toe in new gear. The catch was that they would have to prepare two invoices _ one written out to the broker for the real value of the deal and the other written out to the Gabonese government with a 20 percent commission added for the broker and the defense minister.

But defense attorneys say he never used words like "bribe" or "kickback" to make clear the payment was illegal. Prosecutors said the defendants clearly knew that sending $1.5 million in public money to line a defense minister's pocket was wrong, but jurors had their doubts.