Business Crimes Hotline

CALIFORNIA

Six Former Executives Indicted for FCPA and Travel Act Violations

The DOJ indicted six former executives of California-based industrial-valve manufacturer Control Components, Inc. for alleged violations of the Foreign Corrupt Practices Act (FCPA), conspiracy to violate the FCPA, and violations of the Travel Act for their part in an alleged ten-year foreign bribery conspiracy. The department alleged that the individuals participated in a scheme that, from 2003 to 2007, caused Control Components to pay approximately $4.9 million in bribes in violation of the FCPA, and $1.95 million in bribes in violation of the Travel Act, which netted the company approximately $46.5 million in sales. The government alleged that Control Components made over 230 corrupt payments in more than 30 countries, including payments to foreign officials of state-owned companies in China, Malaysia, and the United Arab Emirates.

Stuart Carson, the former CEO of the company, and his wife, Hong Carson, the former Director of Sales for China and Taiwan, were both indicted, along with the former worldwide director of sales, the former vice-president of worldwide customer service, the former vice-president and head of sales for Europe, Africa, and the Middle East, and the former vice-president of the company's Korean office.

Two other employees had previously pleaded guilty to conspiracy to bribe foreign officials. Mario Covino, former director of worldwide factory sales, and Richard Morlok, former finance director, are scheduled to be sentenced on July 20, 2009.

Hitachi Executive Charged with Conspiracy to Fix LCD Prices

Sakae Someya, a former Hitachi executive, was indicted by a federal grand jury for his role in a global price fixing conspiracy. The indictment alleges that he took part in the conspiracy for four years, participated in meetings where multiple parties discussed and agreed on the pricing of Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) monitors to be sold to Dell. The government also claimed that Someya furthered the agreement by exchanging sales data with competitors to ensure adherence to the conspiracy, issuing price quotations and accepting payments based on the improper agreements, and concealing the conspiracy. Someya, a Japanese national, is subject to a maximum fine of $1 million and 10 years in prison under the Sherman Act.

Someya's is the latest in a long line of pleas and indictments related to TFT-LCD price-fixing. In December 2008 and January 2009, LG Display Company, Sharp Corporation, and Chunghwa Picture Tubes Ltd. all pled guilty to conspiracies related to the monitors. LG received a $400 million criminal fine at sentencing, the second largest in the history of the DOJ's Antitrust Division. More recently, in March 2009, Hitachi Displays Ltd. agreed to plead guilty for its role in the conspiracy.

In addition, two Chunghwa executives and one LG executive have pleaded guilty and received prison sentences. Two other former Chunghwa executives and one other LG executive have been indicted.

NEW YORK

Former KPMG Senior Executives Sentenced After Tax Evasion Conviction

U.S. District Judge Lewis A. Kaplan sentenced two former KPMG executives and the attorney who endorsed their tax-evasion schemes to multi-year prison terms. The defendants had been part of a much larger case filed against numerous other individuals. Judge Kaplan dismissed charges against 13 other former KPMG executives after finding interference by the prosecution in their right to counsel. KPMG had agreed to pay $456 million in 2005 to settle the investigation of the partnership. The three defendants were convicted in December 2008 following a lengthy jury trial. A fourth defendant, David Greenberg, another former KPMG partner, was acquitted after the trial.

After leaving KPMG in 1997, John Larson, a former KPMG senior tax manager, and Robert Pfaff, a former KPMG tax partner, started their own firm where they were alleged to have developed, in conjunction with Raymond Ruble, a former partner at Brown & Wood, a variety of tax shelters to generate fictitious losses for their clients. The prosecution alleged that the schemes employed by the defendants cost the U.S. government more than $1 billion. The court sentenced Larson to 10 years in prison and a $6 million fine and Pfaff to eight years and a $3 million fine. Ruble received a six and a half-year sentence for his role in the scheme.

OHIO

Two Executives Sentenced to 25 and 30 Years Respectively

U.S. District Court Judge Algenon Marbley sentenced Lance K. Poulsen and Rebecca S. Parrett, two National Century Financial Enterprises (NCFE) executives, to lengthy prison terms after their convictions for conspiracy, securities fraud, wire fraud, and money laundering. The government had presented evidence showing that Poulsen and Parrett hid the financial health of the company from investors and ratings agencies, and misused investor funds. The government alleged that NCFE generated funds through the sale of asset-backed notes, which it then used to buy accounts receivables from and make unsecured loans to health-care providers, including those owned by the defendants. They had allegedly gone to great lengths to hide these actions, including fabricating investor reports and shifting money between corporate entities, to make it appear that the Company was operating in line with its public representations. The government claimed that these actions eventually cost investors $2 billion.

The court sentenced Poulsen to 30 years in prison followed by three years of supervised release. He will serve this term concurrently with a 10-year sentence he is currently serving for a March 2008 conviction for witness tampering. Parrett was sentenced to 25 years in prison followed by three years of supervised release. She fled after her conviction and remains at large. Both individuals were ordered to pay their share, along with several other defendants, of a $1.7 billion forfeiture of the proceeds of the conspiracy and $2.3 billion in restitution.

Four other NCFE executives have been convicted in connection with the fraud and sentenced to prison terms from five to 15 years. In addition, four former executives have pleaded guilty.

Washington, DC

Former Bristol-Meyers Senior Vice-President Pleads Guilty to Misleading the FTC

Former Bristol-Meyers Squibb (“BMS”) senior vice-president of strategy and member of the executive committee Andrew Bodnar pled guilty to making a false certification to the FTC in connection with the settlement of patent litigation. In 2006, BMS was in the midst of litigating the validity of its patent for the blood-thinning drug Plavix with Canadian drug maker Apotex, Inc. Due to a separate Federal Trade Commission (“FTC”) consent decree, BMS was required to submit the settlement for FTC review. The FTC instructed BMS that it would not approve the settlement if there were any limitation on BMS's ability to launch its own generic version of Plavix. Despite this, Bodnar represented to Apotex that BMS would not launch its own generic version of the drug if Apotex delayed introduction of its version. As a result of his plea, Bodnar faces up to a year in jail, and fines of up to $100,000 or twice the gains derived.

CALIFORNIA

Six Former Executives Indicted for FCPA and Travel Act Violations

The DOJ indicted six former executives of California-based industrial-valve manufacturer Control Components, Inc. for alleged violations of the Foreign Corrupt Practices Act (FCPA), conspiracy to violate the FCPA, and violations of the Travel Act for their part in an alleged ten-year foreign bribery conspiracy. The department alleged that the individuals participated in a scheme that, from 2003 to 2007, caused Control Components to pay approximately $4.9 million in bribes in violation of the FCPA, and $1.95 million in bribes in violation of the Travel Act, which netted the company approximately $46.5 million in sales. The government alleged that Control Components made over 230 corrupt payments in more than 30 countries, including payments to foreign officials of state-owned companies in China, Malaysia, and the United Arab Emirates.

Stuart Carson, the former CEO of the company, and his wife, Hong Carson, the former Director of Sales for China and Taiwan, were both indicted, along with the former worldwide director of sales, the former vice-president of worldwide customer service, the former vice-president and head of sales for Europe, Africa, and the Middle East, and the former vice-president of the company's Korean office.

Two other employees had previously pleaded guilty to conspiracy to bribe foreign officials. Mario Covino, former director of worldwide factory sales, and Richard Morlok, former finance director, are scheduled to be sentenced on July 20, 2009.

Hitachi Executive Charged with Conspiracy to Fix LCD Prices

Sakae Someya, a former Hitachi executive, was indicted by a federal grand jury for his role in a global price fixing conspiracy. The indictment alleges that he took part in the conspiracy for four years, participated in meetings where multiple parties discussed and agreed on the pricing of Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) monitors to be sold to Dell. The government also claimed that Someya furthered the agreement by exchanging sales data with competitors to ensure adherence to the conspiracy, issuing price quotations and accepting payments based on the improper agreements, and concealing the conspiracy. Someya, a Japanese national, is subject to a maximum fine of $1 million and 10 years in prison under the Sherman Act.

Someya's is the latest in a long line of pleas and indictments related to TFT-LCD price-fixing. In December 2008 and January 2009, LG Display Company, Sharp Corporation, and Chunghwa Picture Tubes Ltd. all pled guilty to conspiracies related to the monitors. LG received a $400 million criminal fine at sentencing, the second largest in the history of the DOJ's Antitrust Division. More recently, in March 2009, Hitachi Displays Ltd. agreed to plead guilty for its role in the conspiracy.

In addition, two Chunghwa executives and one LG executive have pleaded guilty and received prison sentences. Two other former Chunghwa executives and one other LG executive have been indicted.

NEW YORK

Former KPMG Senior Executives Sentenced After Tax Evasion Conviction

U.S. District Judge Lewis A. Kaplan sentenced two former KPMG executives and the attorney who endorsed their tax-evasion schemes to multi-year prison terms. The defendants had been part of a much larger case filed against numerous other individuals. Judge Kaplan dismissed charges against 13 other former KPMG executives after finding interference by the prosecution in their right to counsel. KPMG had agreed to pay $456 million in 2005 to settle the investigation of the partnership. The three defendants were convicted in December 2008 following a lengthy jury trial. A fourth defendant, David Greenberg, another former KPMG partner, was acquitted after the trial.

After leaving KPMG in 1997, John Larson, a former KPMG senior tax manager, and Robert Pfaff, a former KPMG tax partner, started their own firm where they were alleged to have developed, in conjunction with Raymond Ruble, a former partner at Brown & Wood, a variety of tax shelters to generate fictitious losses for their clients. The prosecution alleged that the schemes employed by the defendants cost the U.S. government more than $1 billion. The court sentenced Larson to 10 years in prison and a $6 million fine and Pfaff to eight years and a $3 million fine. Ruble received a six and a half-year sentence for his role in the scheme.

OHIO

Two Executives Sentenced to 25 and 30 Years Respectively

U.S. District Court Judge Algenon Marbley sentenced Lance K. Poulsen and Rebecca S. Parrett, two National Century Financial Enterprises (NCFE) executives, to lengthy prison terms after their convictions for conspiracy, securities fraud, wire fraud, and money laundering. The government had presented evidence showing that Poulsen and Parrett hid the financial health of the company from investors and ratings agencies, and misused investor funds. The government alleged that NCFE generated funds through the sale of asset-backed notes, which it then used to buy accounts receivables from and make unsecured loans to health-care providers, including those owned by the defendants. They had allegedly gone to great lengths to hide these actions, including fabricating investor reports and shifting money between corporate entities, to make it appear that the Company was operating in line with its public representations. The government claimed that these actions eventually cost investors $2 billion.

The court sentenced Poulsen to 30 years in prison followed by three years of supervised release. He will serve this term concurrently with a 10-year sentence he is currently serving for a March 2008 conviction for witness tampering. Parrett was sentenced to 25 years in prison followed by three years of supervised release. She fled after her conviction and remains at large. Both individuals were ordered to pay their share, along with several other defendants, of a $1.7 billion forfeiture of the proceeds of the conspiracy and $2.3 billion in restitution.

Four other NCFE executives have been convicted in connection with the fraud and sentenced to prison terms from five to 15 years. In addition, four former executives have pleaded guilty.

Washington, DC

Former Bristol-Meyers Senior Vice-President Pleads Guilty to Misleading the FTC

Former Bristol-Meyers Squibb (“BMS”) senior vice-president of strategy and member of the executive committee Andrew Bodnar pled guilty to making a false certification to the FTC in connection with the settlement of patent litigation. In 2006, BMS was in the midst of litigating the validity of its patent for the blood-thinning drug Plavix with Canadian drug maker Apotex, Inc. Due to a separate Federal Trade Commission (“FTC”) consent decree, BMS was required to submit the settlement for FTC review. The FTC instructed BMS that it would not approve the settlement if there were any limitation on BMS's ability to launch its own generic version of Plavix. Despite this, Bodnar represented to Apotex that BMS would not launch its own generic version of the drug if Apotex delayed introduction of its version. As a result of his plea, Bodnar faces up to a year in jail, and fines of up to $100,000 or twice the gains derived.