Lindsey Case Dismissed but Government’s Interest in FCPA Prosecution Remains

We have written more than once about the closely watched Lindsey Manufacturing Co. case in the Central District of California – a Foreign Corrupt Practices Act (FCPA) case that resulted in convictions of the electrical transmission equipment manufacturer and its top executives last year but that saw those convictions thrown out by a U.S. district judge because of the prosecutors’ actions before and during the trial.

Lindsey Manufacturing and the two executives had been convicted of paying bribes to officials at the Mexican state-owned utility Comisión Federal de Electricidad from 2002 to 2009 in order to obtain supply contracts.

Last December, however, U.S. District Judge Howard Matz tossed out the convictions. He found that the U.S. Department of Justice had engaged in several varieties of misconduct. The prosecutors, he said, “allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyers, recklessly failed to comply with discovery obligations, posed questions to certain witnesses in violation of the Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.”

The government at first appealed the dismissal of this case, which it regarded as a centerpiece of its FCPA enforcement program, to the U.S. Court of Appeals for the 9th Circuit.

However, on May 25, 2012, the government moved to voluntarily dismiss its appeal.
Lawyers for the company and one of the executives said the dismissal is an indication of the defendants’ innocence.

We don’t know the facts behind this case and can’t say whether the defendants were actually innocent or whether the government simply botched the prosecution of people who had violated the FCPA.

We do know that the government is not going to view the Lindsey case as the end of its vigorous FCPA enforcement efforts. In all probability, the Justice Department dropped the case because it couldn’t defend a series of highly questionable prosecutorial actions, not because it believes that the FCPA is unenforceable or that bribery is no longer a problem.
Companies doing business abroad are still well advised to steer clear of any conduct that could be construed as constituting bribery or illegal payments.

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