US: F.B.I. Charges Arms Sellers With Foreign Bribes

Publisher Name: 
New York Times

Sometimes the proposition was delivered in a quiet corner of the
Mandarin Oriental Hotel in Miami. Sometimes the setting was the elegant
Ritz-Carlton Hotel, a few blocks from the White House.

The topic might be grenade launchers, rifles, handguns, ammunition
or bulletproof vests - components of the basic Warlord Starter Kit.

But the question put to a succession of arms industry executives
last May was always the same: Would you pay bribes to get a piece of a
$15 million contract to equip the presidential guard of an African
country?

According to the Justice Department, almost two dozen executives
said yes, put it in writing and wrote checks - without realizing that
the African officials getting the bribes were actually undercover F.B.I. agents.

The play-acting ended on Tuesday, when 22 top-level executives,
including a senior sales executive at Smith & Wesson, were arrested
in what Justice Department officials called the first undercover sting ever aimed at violations of the federal ban on corporate bribes paid to get foreign business.

Even in its relatively quiet disclosure of the cases on Tuesday, the
Justice Department was careful to withhold any details that might
identify or endanger the undercover team, saying that the investigation
was continuing.

The case is the biggest prosecution of individuals for foreign
corporate bribery ever pursued by the Justice Department. The 16
indictments in the case are also the early fruits of a new initiative
for the Justice Department, Lanny A. Breuer, assistant attorney general
for the criminal division, said in an interview on Wednesday.

"This is the first time we've used the technique of an undercover
operation in a case involving foreign corporate bribery," Mr. Breuer
said. "The message is that we are going to bring all the innovations of
our organized crime and drug war cases to the fight against
white-collar criminals."

All of the defendants work at, or run, small companies that supply
the staples of military and law enforcement life everywhere - small
arms, uniforms, bullets - and that jockey for deals at a level well
below military industry giants like Lockheed or Boeing.

The arrests seemed orchestrated to deliver the Justice Department's
message directly to others in the business. All but one of the
defendants were arrested on Tuesday in Las Vegas, where they were
attending the Shooting, Hunting, Outdoor Trade Show and Conference,
known as the SHOT Show,
which is billed as "the world's premier exposition of combined
firearms, ammunition, archery, cutlery, outdoor apparel, optics,
camping and related products and services."

The drama began to unfold last spring in the sleek beachfront
glamour of the Mandarin Oriental Hotel in Miami. There, on May 13, the
curtain went up on a two-city sting worthy of a George Clooney caper.

After a closely guarded investigation that had taken more than two years, the cast was in place.

There was a mystery figure identified in the indictments as
"Individual 1," a former executive in the law enforcement and military
equipment industry who clearly lent credibility to the business deal
offered to the defendants, all described as business associates of his.

There was "Undercover Agent 1," an F.B.I. agent posing as a
representative of the defense minister of an unidentified African
nation, Country A. And there was "Undercover Agent 2," another agent
posing as a procurement officer who reported directly to the defense
minister.

Over two days in Miami, a number of executives sat down in separate
meetings with the undercover team to discuss a sales opportunity. A
week later, the undercover team moved to the Ritz-Carlton Hotel in
Washington, where more executives sat down to talk.

The script varied only in the products on the shopping list.

In each case, the former sales executive said that a friend of his,
a self-employed sales agent, was "tasked by Country A's minister of
defense with obtaining various defense articles for outfitting Country
A's presidential guard."

The two people with the shopping list were actually the undercover
agents. The goods would be shipped, not to Africa, but to a warehouse
in Virginia. The "bribes" would be paid into a government bank account.

According to the Justice Department, all the defendants agreed to
pay a 20 percent "commission" to the sales agent, even after being
clearly told that half would go into the defense minister's pocket, and
they sent e-mail messages that confirmed their decisions.

In each case, the indictments said, the defendants completed a small
"test" deal to reassure the fictional defense minister that he would
personally get half of the 20 percent commission - as a bribe.

According to one indictment, a Florida executive later showed the
deal to his company's outside law firm and sent the undercover team an
e-mail message rejecting the corrupt proposal. The same day, he called
and negotiated a way to do the deal anyway, the indictment said.

Another of the defendants is Amaro Goncalves, who is vice president for sales at Smith & Wesson in Springfield, Mass. The company confirmed on Wednesday that Mr. Goncalves was an employee and said it was "prepared to cooperate fully" with the investigation. Mr. Goncalves, free on bail, could not be reached for comment.

The individuals are being prosecuted under the Foreign Corrupt
Practices Act. That law, which dates to 1977, prohibits American
citizens and companies - and, since 1998, foreign citizens and
companies acting in the United States - from bribing foreign government
officials to get or keep business.

For many years, some Foreign Corrupt Practices Act experts
say, the United States waged a lonely battle against such transactions.
But Mr. Breuer of the Justice Department said on Wednesday that
"international cooperation is growing every day and getting better and
better." He particularly cited the help of British law enforcement
agents, who served related search warrants in London on Tuesday.

The work of the F.B.I. was the core of the case. Besides the
undercover team, more than 150 agents were involved in serving arrest
and search warrants on Tuesday, according to Kevin Perkins, the
assistant director of the bureau's Criminal Investigative Division.

The investigation was led by an F.B.I. squad in Washington that
specializes in foreign bribery investigations. New investigations are
under way in other parts of the country, as well - one law enforcement
source said that prosecutors in Brooklyn now have nearly a half-dozen
in the works, compared with none three years ago.

The latest defendants, none of whom have yet been formally
arraigned, are all accused of conspiring to violate the act; conspiring
to engage in money laundering; and violating the act. The maximum term
for the conspiracy and act violations is five years, while the money
laundering conspiracy charge carries a prison term of 20 years.

The defendants are scheduled to make their first appearances in
United States District Court in Washington on Feb. 3, a Justice
Department spokeswoman said. However, the department said in its
announcement that all were presumed innocent unless they had confessed
or had been convicted.

Mr. Breuer said the real success of the sting would come in the
months and years ahead. "From now on," he said, "would-be F.C.P.A.
violators should stop and ponder whether the person they are trying to
bribe might really be a federal agent."

Jenny Anderson contributed reporting.

AMP Section Name:War & Disaster Profiteering
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  • 185 Corruption