CA Court Throws Out Lindsey FCPA Conviction due to Gov't Misconduct
On December 1, 2011, a California District Court decided to throw out convictions and dismiss a superseding indictment that charged Lindsey Manufacturing Company (LMC) and two of its executives, Keith Lindsey and Steve Lee,1 for violating the Foreign Corrupt Practices Act. The Court ordered this decision due to Government misconduct and reckless failure to comply with its duties during the course of the trial.
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Indictment Charged Defendants for Bribing Officials at Mexican Gov't Owned Co
In October 2010, the Government filed a First Superseding Indictment (FSI) charging the Lindsey defendants for allegedly paying bribes to two high-ranking employees of the Comisión Federal de Electricidad (CFE), an electric utility company wholly-owned by the Mexican Government. LMC funneled the alleged bribes to the CFE employees by making payments to Grupo International, a company owned and controlled by co-defendants Enrique Faustino Aguilar Noriega and his wife, Angela Maria Gomez Aguilar, who were indicted in September 2010. The Lindsey defendants were convicted for these FCPA violations in May 2011.
Gov't Misconduct Included False Testimony, Reckless Noncompliance, Etc.
The Court stated that the Government's misconduct in this case included the fact that it: (i) allowed a key FBI agent to testify untruthfully before the grand jury; (ii) inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants; (ii) improperly reviewed e-mail communications between one defendant and their lawyer; (iii) recklessly failed to comply with its discovery obligations; (iv) posed questions to certain witnesses in violation of the Court’s rulings; (v) engaged in questionable behavior during closing argument; and (vi) made misrepresentations to the Court.
Court Found Misconduct Substantially Prejudiced Lindsey Defendants
Having indicted the Aguilars in September, the prosecution then moved quickly to secure charges against the Lindsey defendants. After the Lindsey defendants were added to the FSI indicting the Aguilars, the Court stated the case moved quickly and led to an "extraordinary number" of entries. Within one year after the return of the FSI (an unusually brief period for this kind of case) the docket had almost 700 entries, many of which the Court stated consisted of non-stop motions, ex parte applications, oppositions, hearings, and rulings necessitated by the prosecution’s astonishing number of "mistakes."
The Court is persuaded that the Government's multiple acts of misconduct undoubtedly affected the verdicts in this case and thus substantially prejudiced the Lindsey defendants as they were thrown off balance by being forced to devote enormous effort to responding to and redressing serious and prejudicial wrongs, while at the same time having to defend themselves against the charges.
Also Found Lack of Evidence Showing "Knowing" Intent to Bribe Officials
The Court noted; however, that the flurry of activity quickly revealed that neither the Lindsey Defendants nor any LMC representatives never had anything to do with Angela Aguilar. At trial, what proved critical as to the Lindsey Defendants was whether their dealings with Enrique Aguilar showed a knowing intent on their part to use him to bribe CFE officials.
According to the Court, the case against the Lindsey defendants was far from compelling. There was no direct evidence of such intent and there were no oral admissions; no writings acknowledging the payments were corrupt; no evidence of furtive conduct (except perhaps for disputed bookkeeping reclassification of one contract). The Court stated that the circumstantial evidence, at best, was murky.
Charges Against Defendants Were Result of Sloppy, Flawed Investigation
The Court stated the charges filed against Keith Lindsey and Steve Lee were a result of a "sloppy, incomplete and notably over-zealous investigation" that was so flawed that the government’s lawyers tried to prevent inquiry into it. The financial costs of the investigation and trial were immense, as well as the emotional hardship the individuals endured. As for LMC, the Court stated that the very survival of that small, once highly-respected enterprise has been placed in jeopardy.
The Court stated that the government should not be permitted to escape the consequences of its conduct. However, the Lindsey defendants are not entitled to a finding of factual innocence. Instead the Court found a dismissal of the FSI was justified not only as a deterrent but also to release the defendants from further anguish and uncertainty.
1LMC is a relatively small, privately-owned company that manufactures emergency restoration systems and other equipment used by electrical utility companies. Keith Lindsey is its President and CEO. Lee is LMC’s Vice-President and CFO.
(See ITT's Online Archives 11051117 for summary of the May 2011 conviction of the Lindsey defendants.
See ITT's Online Archives 10102510 for summary of the October 2010 indictment of the Lindsey defendants and 11030842 for summary of the Lindsey defendants' motion to dismiss the indictment.)
Court document is available via email by sending a request to documents@brokerpower.com.