The Justice Department and the FBI announced the arrest and indictment of 22 executives and employees from 16 companies that supply equipment to law enforcement and the military. The government charged them with attempting to bribe officials of an African country.
There was no African country. The whole thing was a sting operation.
The arrests were the result of a 30-month undercover investigation by prosecutors and FBI agents which resulted in 21 individuals being arrested in Las Vegas and one more in Miami.
The defendants allegedly agreed to pay a 20 percent commission to a sales agent they believed represented the defense minister for an African country. They were trying to win a multimillion-dollar deal to outfit the presidential guard.
The sales agent was actually an undercover FBI agent, and no defense minister was involved at all. Several of the indictments in the probe disclosed that at least one other FBI agent was operating undercover, posing as a procurement officer for the ministry of defense of the African nation.
Among those arrested were Amaro Goncalves, the vice president of sales for the Smith & Wesson Holding Company, officials said.
Also charged is R. Patrick Caldwell, recently named CEO of Protective Products of America, Inc. He had previously worked for the U.S. Secret Service, where he was special agent in charge of protection of the vice president of the United States.
Stephen Giordanella, the former CEO of Protective Products of America, was also charged. Giordanella was the one suspect arrested in Miami.
"This is one case where what happens in Vegas doesn't stay in Vegas," said Assistant Attorney General Lanny Breuer, head of the Justice Department's Criminal Division.
Representatives for Smith & Wesson and Protective Products of America, Inc. could not be reached by ABC News.
The cases involved two phases. In the first, the suspects allegedly sent test samples of weapons along with payments to the sales agent and minister to show that the minister would receive his cut of the bribes. Then, in the second phase, the final large payments would be made.
The cases involved two phases where the defendants would send test samples and payments to the sales agent and minister to show that the minister would receive his cut of the bribes. The Goncalves indictments allege that "Goncalves further agreed to proceed with the Phase One deal knowing that the purpose of the Phase One deal was to show Country A's Minister of Defense that the Minister of Defense would personally receive a 10 percent 'commission' on the deal."
The 22 individuals were charged in 16 indictments in an investigation run by the Justice Department, the U.S. Attorney's Office in Washington, D.C., and the FBI's Washington field office. Employees from a British and Israeli military supply company were also arrested in the sting.
Breuer said in a statement, "The fight to erase foreign bribery from the corporate playbook will not be won overnight, but these actions are a turning point."
There was no African country. The whole thing was a sting operation.
The arrests were the result of a 30-month undercover investigation by prosecutors and FBI agents which resulted in 21 individuals being arrested in Las Vegas and one more in Miami.
The defendants allegedly agreed to pay a 20 percent commission to a sales agent they believed represented the defense minister for an African country. They were trying to win a multimillion-dollar deal to outfit the presidential guard.
The sales agent was actually an undercover FBI agent, and no defense minister was involved at all. Several of the indictments in the probe disclosed that at least one other FBI agent was operating undercover, posing as a procurement officer for the ministry of defense of the African nation.
Among those arrested were Amaro Goncalves, the vice president of sales for the Smith & Wesson Holding Company, officials said.
Also charged is R. Patrick Caldwell, recently named CEO of Protective Products of America, Inc. He had previously worked for the U.S. Secret Service, where he was special agent in charge of protection of the vice president of the United States.
Stephen Giordanella, the former CEO of Protective Products of America, was also charged. Giordanella was the one suspect arrested in Miami.
'What Happens in Vegas....'
The individuals in Las Vegas were arrested while they were attending the annual Shot Show convention in Las Vegas and all were arrested at a Vegas location when they believed they would be meeting the defense minister to finalize their deals according to DOJ officials familiar with the case."This is one case where what happens in Vegas doesn't stay in Vegas," said Assistant Attorney General Lanny Breuer, head of the Justice Department's Criminal Division.
Representatives for Smith & Wesson and Protective Products of America, Inc. could not be reached by ABC News.
FBI Sting Operation Nails Gun Company Executives
According to Goncalves' indictment, "On or about May 21, 2009, at the Ritz-Carlton meeting in Washington, D.C., Goncalves agreed to proceed with the Country A deal, after being told that in order to win the Country A business, [Smith & Wesson] would need to add a 20 percent 'commission' to the invoices."The cases involved two phases. In the first, the suspects allegedly sent test samples of weapons along with payments to the sales agent and minister to show that the minister would receive his cut of the bribes. Then, in the second phase, the final large payments would be made.
The cases involved two phases where the defendants would send test samples and payments to the sales agent and minister to show that the minister would receive his cut of the bribes. The Goncalves indictments allege that "Goncalves further agreed to proceed with the Phase One deal knowing that the purpose of the Phase One deal was to show Country A's Minister of Defense that the Minister of Defense would personally receive a 10 percent 'commission' on the deal."
The 22 individuals were charged in 16 indictments in an investigation run by the Justice Department, the U.S. Attorney's Office in Washington, D.C., and the FBI's Washington field office. Employees from a British and Israeli military supply company were also arrested in the sting.
Breuer said in a statement, "The fight to erase foreign bribery from the corporate playbook will not be won overnight, but these actions are a turning point."
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FOR IMMEDIATE RELEASE
Carlton Fields Client Stephen G. Giordanella Acquitted
in Largest Foreign Bribery Case in U.S. History
Washington, D.C. – December 22, 2011 – After a twelve week jury trial in U.S. District Court for the District of Columbia, U.S. District Judge Richard J. Leon entered judgment acquitting Carlton Fields client Stephen G. Giordanella of conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”), finding that the Government’s evidence was insufficient to sustain a conviction. Carlton Fields Shareholders Stephen J. Bronis and Paul A. Calli represented Mr. Giordanella at trial with the assistance of Paralegal Aixa Ferrer.
The allegations against Giordanella stemmed from a two-and-a-half year undercover “sting” operation concocted by the Fraud Section of the U.S. Department of Justice (“DOJ”) and the Federal Bureau of Investigation (“FBI”) in Washington, D.C., and involved approximately 150 FBI agents. Prosecutors claimed 22 military and law enforcement equipment industry executives tried to bribe the defense minister of Gabon, Africa in order to win contracts to provide body armor, weapons and military gear, in violation of the FCPA. The FCPA prohibits U.S. persons and companies, and foreign persons and companies acting in the United States, from bribing foreign government officials for the purpose of obtaining or retaining business. Giordanella was accused of being a member of the conspiracy.
According to the testimony at trial of the lead FBI case agent and all evidence presented by the government during trial and during pretrial proceedings, the government confirmed that the Minister of Defense of Gabon wasn’t involved and no bribe was to be paid for procurement of equipment to take place. Instead, the government had entered a partnership with Richard Bistrong who for decades had engaged in foreign bribery, embezzlement from his employer, tax fraud and evasion, drug deals, solicitation of prostitutes and transportation of prostitutes across state lines. In an effort to reduce his prison sentence, Richard Bistrong convinced the government to fund him and a “sting” operation and helped the government to create a fake scenario that resulted in the prosecution.
The government indicted the defendants on December 11, 2009, becoming the largest prosecution of individuals since the DOJ began enforcing the FCPA in 1977. It also marks the first large-scale use of undercover tactics in an FCPA case. Assistant Attorney General Lanny A. Breuer, head of the DOJ’s Criminal Division, has toured the country touting the strength of the government’s case, calling it “a turning point” in FCPA enforcement and quipped “what happens in Vegas does not stay in Vegas,” a reference to the location in which the DOJ enticed people to travel as part of orchestrating their arrests. Twenty-one of the 22 accused persons traveled to Las Vegas and were arrested. Mr. Giordanella did not travel to Las Vegas.
In a procedurally uncommon move that rebuked the government’s case and highlighted the lack of evidence, Judge Leon granted Mr. Giordanella’s motion for acquittal under Rule 29 of the Federal Rules of Criminal Procedure, prior to Mr. Giordanella having the opportunity to present evidence on his behalf and prior to the case being submitted to a jury.
“The Court found that government had not presented sufficient evidence to establish the existence of the charged crime. We are grateful the Court made the correct and just ruling. Mr. Giordanella is grateful to be exonerated, and can now begin to put this unnecessary and unfortunate experience behind him,” said Bronis.
Calli added, “Mr. Giordanella was innocent and should never have been accused in the conspiracy. In many respects, Mr. Giordanella’s indictment in the DOJ’s fake Gabon sting operation conspiracy represents a prosecution at its most dangerous,” said Calli.
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