WASHINGTON (Reuters) - Wall Street executives may have personally escaped the wrath of the U.S. Department of Justice but executives at companies accused of foreign bribery schemes may not be so lucky.
Prosecutors say they are clearly shifting away from only big corporate settlements in such cases and are beginning to target more individuals. The numbers are not eye-popping. But officials say the results are encouraging and these cases may provide road maps for other financial fraud prosecutions.
“Certainly...there has been an increased emphasis on, let’s get some individuals,” said Leslie Caldwell, head of the Justice Department’s criminal division.
So far this year, the Justice Department has unsealed charges, or obtained convictions, against 15 people accused of engaging in bribery or related charges outside the United States. That compares to 11 such cases last year and only six in 2012. Some of the most recent defendants include a former executive of French engineering group Alstom SA, Ukrainian oligarch Dmytro Firtash, and an advisor to a company owned by Israeli billionaire Beny Steinmetz.
Justice Department officials credit their good fortune to a change in investigative techniques. Instead of utilizing corporate disclosures as a starting point, for example, investigators are using more body wires and wiretaps to gather evidence — methods that have been successful in building cases against organized crime syndicates — and some Wall Street inside traders.
They have also built up relationships with foreign counterparts so they can share information. Additionally, federal investigators have obtained court ordered search warrants issued to companies such as Yahoo Inc. and Microsoft Corp to get access to overseas emails.
It wasn’t always this way. Prosecutors began in the mid-2000s to vigorously pursue companies that violated the Foreign Corrupt Practices Act, a 1970s law that bars U.S.-linked companies and people from bribing foreign government officials in exchange for business.
The effort produced some major corporate settlements, but often based on information derived from investigations directed by the companies. Executives, meanwhile, often escaped criminal charges. FCPA prosecutors also suffered several big defeats in early cases they brought.
“I think we’ve recognized the fact that we were relying pretty heavily on corporate disclosures, and that it was in our best interest to be a little bit more proactive,” said John Blake, an FBI supervisory special agent who oversees the bureau’s international corruption unit.
One example of the government’s new regimen: investigators used a body wire attached to a business partner to ensnare Joseph Sigelman, a former Goldman Sachs Group Inc investment banker who had made millions in the outsourcing business.
Prosecutors zeroed in on Sigelman, also the founder of oil and gas company PetroTiger, in 2012 on allegations he paid bribes to a government official in Columbia. The business partner caught Sigelman on an audio recording at his Miami penthouse in December 2012, telling him they needed “to be like this” to evade law enforcement, while crossing his fingers, according to court documents.
Sigelman was indicted in May, and his case is scheduled to go to trial in January in Camden, New Jersey. A lawyer for Sigelman declined comment.
Why are corporate executives targets now? A big chunk of the credit goes to former prosecutor Chuck Duross who in 2010 took over the FCPA unit - and recruited assistant U.S. attorneys who had experience obtaining wiretaps and using other old-school investigative tools.
Of the some 20 prosecutors now in the section, around half are former assistant U.S. attorneys.
“The focus on individuals has been something the department has been trying to do for a number of years, but because these cases are so complex, it is like trying to turn a ship, it just takes a while to do,” said Duross, who is now a lawyer with Morrison & Foerster in Washington.
Since all FCPA cases involve conduct that occurred overseas, the department has also worked to build informal relationships, which it hadn’t systematically done before, with counterparts in London, Switzerland, Germany, Italy and elsewhere. The Organization for Economic Co-operation and Development held quarterly meetings at which U.S. authorities met and shared information with anti-bribery prosecutors.
The first person to be convicted under Canada’s foreign bribery law, Nazir Karigar, for example, came to the attention of Canadian authorities through a tip from the United States. Karigar sent anonymous emails to the Justice Department’s Fraud Section in 2007 and 2008 alleging that others had paid bribes for business with a government-run airline in India, and asked for leniency for his related actions. “What about my immunity?” he emailed, according to a judicial ruling in Canada about the case.
U.S. prosecutors turned the information over to their Canadian counterparts. He was sentenced in May to three years in prison; his lawyer didn’t respond to a request for comment.
Prosecutors contend the change in strategy is starting to pay off in others ways. One of the largest, and potentially most significant cases: the indictment of Dmytro Firtash, a Ukrainian oligarch who has close links to Russia and was charged by U.S. prosecutors, in papers unsealed in April, over a scheme to bribe government officials in India to obtain mining rights there. U.S. authorities had jurisdiction to bring the case because Firtash had allegedly agreed to sell the mined titanium products to a U.S. company.
Prosecutors in Washington and Chicago drew on their international relationships to build the case, including Austrian authorities who helped gather evidence and arrested Firtash when he traveled to Vienna. Firtash is facing extradition to answer the charges in Chicago. A lawyer for Firtash did not respond to requests for comment.
In addition, individuals at major U.S. corporations are also in prosecutors’ crosshairs. As previously reported, authorities are investigating allegations of foreign bribery at Wal-Mart Stores Inc and JPMorgan Chase & Co. People familiar with the probes said prosecutors are considering charges against individuals at those companies. Even Wall Street is being revisited. U.S. authorities have their eye on traders who worked at some of the world’s largest banks - Switzerland’s UBS AG, America’s Citigroup Inc, and Britain’s Barclays plc as they investigate the alleged manipulation of foreign exchange rates, people familiar with the investigations have said.
Still, critics such as some defense lawyers and lawmakers, are skeptical prosecutors have the guts, or stamina, over the long haul to go after big-fish executives, especially in the United States. They also wonder whether the Justice Department should spend its limited resources on policing overseas corruption.
Caldwell, for one, doesn’t agree and contends that the change in Justice’s practices are here to stay. “It’s very important for us to hold accountable individuals who engage in criminal misconduct” she said, “in white-collar (cases), as we do in every other kind of crime.”
Reporting by Aruna Viswanatha; Editing by Karey Van Hall and Hank Gilman