In USA V. Enrique Faustino Aguilar Noriega, Et Al.,( CDCA, CR-1031(A)-AHM), the first Foreign Corrupt Practices Act ("FCPA") criminal prosecution against a corporation to proceed to jury trial, the Court was asked to vacate the convictions and dismiss the Indictment because of alleged prosecutorial misconduct. In a dramatic ruling, the Court granted the dismissal -- and with harsh language for the government's conduct.
In the Beginning
On September 15, 2010, federal prosecutors indicted Angela Maria Gomez Aguilar ("Angela Aguilar") and her husband Enrique Faustino Aguilar Noriega ("Enrique Aguilar"). Enrique was accused in four counts of violating the FCPA, in a fifth count of conspiracy to do the same, in a sixth count of conspiring to launder money and in a seventh count of money laundering. Angela was named only in the sixth and seventh counts relating to money laundering.
First Superseding Indictment
On October 21, 2010, a First Superseding Indictment ("FSI") was filed charging Defendants Keith E. Lindsey, Steve K. Lee, and Lindsey Manufacturing Company ("the Lindsey Defendants") with both violations of and conspiracy to violate the FCPA. Lindsey Manufacturing Company ("LMC") is a relatively small, privately-owned company that manufactures equipment used by electrical utility companies. Keith Lindsey is its President and CEO. Lee is LMC's Vice-President and CFO.
The FSI essentially charged the Lindsey Defendants with 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 was accused of allegedly funneling the bribes to CFE employees Nestor Moreno and Arturo Hernandez, via payments to Grupo International ("Grupo"), a company owned and controlled by co-Defendants Enrique Faustino Aguilar Noriega ("Enrique Aguilar") and his wife, Angela Maria Gomez Aguilar ("Angela Aguilar"). It was further alleged that the payments from LMC to Grupo were falsely characterized as commissions for services performed by Enrique Aguilar in his capacity as LMC's sales representative in Mexico.
SIDE BAR-- Prosecutors alleged that large portions of the so-called "commission" payments were used to bribe Messrs. Moreno and Hernandez, and that such bribes were largely facilitated through the purchase of an expensive Ferrari and a fancy yacht for Moreno, payment of his American Express bills, and a number of other payments benefiting Hernandez and him.
READ the procedural history of this case.
Motion to Vacate
On September 15, 2010, federal prosecutors indicted Angela Maria Gomez Aguilar ("Angela Aguilar") and her husband Enrique Faustino Aguilar Noriega ("Enrique Aguilar"). Enrique was accused in four counts of violating the FCPA, in a fifth count of conspiracy to do the same, in a sixth count of conspiring to launder money and in a seventh count of money laundering. Angela was named only in the sixth and seventh counts relating to money laundering.On November 29, 2011, the Court conducted a hearing on the Motion to Vacate. In its December 1, 2011, Order Granting the Motion to Dismiss, the Court rule in stark, stunning language:
In this Court's experience, almost all of the prosecutors in the Office of the United States Attorney for this district consistently display admirable professionalism, integrity and fairness.2 So it is with deep regret that this Court is compelled to find that the Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court's rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.
Consequently, the Court throws out the convictions of Defendants Lindsey Manufacturing Company, Keith E. Lindsey and Steve K. Lee and dismisses the First Superseding Indictment.
Page 2 of the Order
In analyzing the unique challenges posed to the Defendants in this case, the Court explained that:
The fast pace of pre-trial preparation and the almost non-stop, often acrimonious motion practice that took place from October 2010 through the return of the verdicts on May 10, 2011, is important for at least two reasons. First, it meant that each side forced the other to divert resources away from trial preparation. Although that undoubtedly handicapped each side to some extent, the Defendants were hurt more. While furiously preparing for trial they also had to seek to discover information about the investigation and the evidence supporting the charges.Yet, as is demonstrated below, they were often thwarted. In contrast, the Government had been investigating the case since 2008. On the Government's trial team were three experienced prosecutors, some paralegals, and a large number of FBI agents. Once an indictment has been returned, the Government is presumed to be ready to proceed to trial, even if, as was apparently the case here, the Government was compelled to indict some Defendants (the Lindsey Defendants) sooner than it would have preferred because it already had indicted some other Defendants (the Aguilars).
Page 5 of the Order
Among the Pre-Indictment aspects of the government's misconduct cited by the Court were false statements in the Affidavits submitted in connection with requests for both search and seizure warrants; the government's failure to properly search electronically stored information; an unauthorized search of premises by the FBI; and false and misleading Grand Jury testimony by an FBI agent. Pointedly, the Court admonishes that:
The foregoing summary of the unfounded and erroneous portions of the grand jury testimony of FBI Co-Case Agent Guernsey does not necessarily establish that she knowingly committed perjury. Perhaps she was sloppy, or lazy, or ill-prepared by the prosecutive team. In any event, in the Court's considered opinion, once the prosecutors secured the First Superseding Indictment and certainly by the time they were gearing up to present their case at trial, they concluded not only that Guernsey would be an exceedingly poor witness - - as she turned out to be - - but also that its investigation was terribly flawed. Indeed, outside the presence of the jury, the Government acknowledged in open court that, as the Court put it, the prosecutors "didn't want someone who was part of the investigation [to testify], so there wouldn't be questions about the investigation." April 15, 2011, R.T. at 1698. So the prosecutive team decided to keep Guernsey far away from the witness stand - - indeed, from the courtroom. Neither she nor her Co-Case Agent Binder was permitted to sit at the prosecution table, a most unusual and telling sign that something was seriously remiss in the Government's case.
Pages 13-14 of the Order
Post Indictment, the Court cited even more troubling prosecutorial failures, among which was a failure to timely produce Grand Jury testimony. The Court seemed incensed that the government had wrongfully obtained a Defendant's privileged communications and then misrepresented to the Court the circumstances.
The Court dismisses any suggestion that it dismissed the Indictment solely because of misconduct before the Grand Jury and notes that while that was a critical component, "the prosecution of this case was marred by a much wider range of misconduct."
The Court notes that:
[T]he prejudice here is palpable once the prosecution and trial are assessed as a whole. Beginning even before the jury was selected and continuing throughout trial, the Defendants 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.Within only one year after the return of the First Superseding Indictment - - an unusually brief period for this kind of case - - the docket had almost 700 entries,many of which consist of the motions, ex parte applications, oppositions, hearings,and rulings necessitated by the prosecution's astonishing number of "mistakes" (as the Government chooses to characterize them) discussed above.
Page 36 of the Order
Finally, in one last parting shot -- more of a body blow than the back-handed slap of an annoyed judge -- the Court lambastes the government's case and its conduct:
The unavoidably dry recital of the background and prosecution of this case set forth above does not fully account for the real impact of the Government's conduct. Dr. Lindsey and Mr. Lee were put through a severe ordeal. Charges were filed against them as a result of a sloppy, incomplete and notably over-zealous investigation, an investigation that was so flawed that the Government's lawyers tried to prevent inquiry into it. In some instances motives, statements and conduct were attributed to them that were wholly unfounded or were obtained unlawfully, such as the statements attributed to Dr. Lindsey that were suppressed because of Miranda violations and Agent's Guernsey's grand jury testimony that Lee "didn't want to know" what Aguilar would do with the commission payments. The financial costs of the investigation and trial were immense, but the emotional drubbing these individuals absorbed undoubtedly was even worse. As for LMC, the very survival of that small, once highly-respected enterprise has been placed in jeopardy. That is not to say that the Lindsey Defendants are entitled to a finding of factual innocence; they are not. Moreover, the hardships described in the preceding paragraph are the plight of many defendants who go to trial. . .
Page 40 of the Order