Execs & Company Convicted for Bribing Officials at Mexican Utility Co
The Justice Department has announced that on May 10, 2011, Lindsey Manufacturing Company, of California, two of its executives, Keith Lindsey and Steve Lee, and a Mexican intermediary were convicted for their alleged roles in a scheme to pay bribes to Mexican government officials at the state-owned utility company, Comisión Federal de Electricidad (CFE), in violation of the Foreign Corrupt Practices Act.
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Lindsey Hired Mexican Intermediary to Obtain Contracts from Mexican Company
According to the evidence presented at trial, CFE is responsible for supplying electricity in Mexico, and contracts with Mexican and foreign companies for goods and services to help supply electricity services to its customers. Enrique and Angela Aguilar were directors of Grupo Internacional de Asesores S.A. (Grupo), which purported to provide sales representation services for companies doing business with CFE.
Lindsey Manufacturing makes emergency restoration systems and other equipment used by electrical utility companies. Evidence presented at trial indicates that Lindsey Manufacturing hired Grupo to serve as its sales representative in Mexico and to obtain contracts for it from CFE. Grupo allegedly received a percentage of the revenue Lindsey Manufacturing realized from its contracts with CFE.
Intermediary was Paid 30% Commission to Use as Bribes for CFE Officials
From approximately February 2002 until March 2009, Lindsey Manufacturing, Lindsey, Lee and others allegedly orchestrated a scheme in which Enrique Aguilar was paid a 30% commission on all the goods and services Lindsey Manufacturing sold to CFE, even though this was a significantly higher commission than previous sales representatives for the company had received. According to evidence presented at trial, Lindsey and Lee understood that all or part of the 30% commission would be used to pay bribes to Mexican officials in exchange for CFE awarding contracts to Lindsey Manufacturing.
Execs Wired $5.9M to Intermediary that was Used to Pay CFE Officials
The evidence at trial established that in the months leading up to the hiring of Enrique Aguilar, Lindsey and Lee learned that Enrique Aguilar had a corrupt relationship with a top CFE official. Within months of hiring Enrique Aguilar, Lindsey Manufacturing allegedly began receiving contracts from CFE and over the course of the next seven years received more than $19 million in CFE business.
Keith Lindsey and Lee are also alleged to have wired approximately $5.9 million of that money directly to Grupo and that Angela Aguilar authorized money in the Grupo account to be used to buy a CFE official a $297,500 Ferrari Spyder and a $1.8 million yacht, as well as to pay more than $170,000 towards the official’s credit card bills and authorized the transfer of $500,000 to the brother and mother of another CFE official.
Fraudulent Invoices were Submitted to Lindsey for the 30% Used as Bribes
According to evidence presented at trial, fraudulent invoices were submitted from Grupo to Lindsey Manufacturing for 30% of the CFE contract price. Lindsey and Lee then allegedly caused the money requested in the fraudulent invoices to be wired into Grupo’s brokerage account, knowing that the invoices were fraudulent and that at least part of the funds were being used as bribes.
Defendants Could Face Max Penalty of 5 Yrs in Prison, $250K Fine
Keith Lindsey and Steve Lee were convicted of one count of conspiracy to violate the FCPA and five counts of FCPA violations. The defendants face a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost on the FCPA conspiracy charge. Each of the five FCPA counts carries a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The government is also seeking forfeiture against all defendants.
(See ITT's Online Archives or 05/10/11 news, 11051032, for BP summary for details of the Justice Department's facilitation payments exception to the FCPA.
See ITT's Online Archives or 10/25/10 news, 10102510, for BP summary of the company and its executives being indicted for their alleged roles in this bribe conspiracy.
See ITT's Online Archives or 03/08/11 news, 11030842, for BP summary of the company and its executives filing a motion to dismiss their indictment, arguing that employees of a state-owned corporation do not qualify as foreign officials under the FCPA.)