Justice Dept. says they’re up to fighting corporate crime

Please, if any of you have any ability to help apply pressure to Justice to clean up their act and start doing their job(s), (which WILL support whistleblowers), of investigating and following through with prosecuting those who are committing fraud and other crimes against the American taxpayers and federal and corporate whistleblowers, please do make use of that ability now.  Thank you!  -GFS

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Justice Department Putting New Focus on Combating Corporate Fraud

By Carrie Johnson
Washington Post Staff Writer
Thursday, February 12, 2009; A06

Ten years ago, a Justice Department official drafted a set of guidelines for prosecuting corporate crime. Little noticed at the time, the strategy ultimately transformed the way prosecutors pursue corrupt businesses — by exhorting them to hire their own investigators and share the results with the government in exchange for leniency in plea deals.

The memo’s author was Eric H. Holder Jr., who has become the nation’s attorney general at the same time that a financial crisis is putting pressure on prosecutors to hold businesses accountable for fraud.

“I want to see people prosecuted,” Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) said yesterday at a hearing that examined the Justice Department’s handling of corporate corruption.

Senators from both parties are advocating that more federal resources be devoted to investigating business fraud, pointing out that such prosecutions plunged after the Sept. 11, 2001, attacks, when more than 2,000 FBI agents were diverted to protect national security.

Justice Department and FBI officials committed anew to weeding out fraud in the marketplace, telling lawmakers that they are looking into more than 530 cases of alleged corporate malfeasance. Among them are 38 investigations of name-brand businesses and financial institutions involved in the financial crisis, including American International Group, Countrywide Financial, Fannie Mae and Freddie Mac.

FBI Deputy Director John S. Pistole said the bureau is “doing a complete scrub of all resources” to ensure that enough agents are assigned to corporate investigations.

Prompted by the government’s bank bailouts and mounting taxpayer anger, Democrats have introduced two bills in recent weeks to fund the hiring of more agents and prosecutors to combat mortgage fraud and financial wrongdoing.

Any government crackdown on financial malfeasance is likely to tap into corporate resources, given the drain of years-long investigations on tight federal budgets. Many of the Justice Department’s largest ongoing fraud inquiries appear to be months if not years from reaching their targets, lawyers said yesterday. It is far easier for department officials to deputize companies to hire law firms and bear the cost of investigations of themselves. The companies are encouraged to turn over the results to the government, along with evidence against employees complicit in accounting fraud or other schemes.

That strategy has alienated some judges who argue that employers have sacrificed individuals to secure better deals for their companies. It also could rile lawmakers who already have put the Justice Department on notice about protecting employee rights.

While President Obama has decried corporate greed and fraud in recent weeks and during the presidential campaign, it is too early to know how his administration will approach such cases, and Holder has been difficult to read.

“We’re not going to go out on any witch hunts, and yet we’ll drill down and see” what evidence exists of fraud and other crimes, the attorney general told reporters after being sworn in last week.

Holder’s experience on both sides of the courtroom adds to interest in the legal community about how he will tackle the issue.

A decade ago, after Holder, who was deputy attorney general at the time, heard persistent complaints from corporate defense lawyers, he enlisted a group of government lawyers to draft guidelines for prosecutors handling business cases. The Holder memo instructed lawyers to take into account a company’s cooperation with authorities in deciding whether to bring an indictment. The government wields substantial leverage in negotiations, because even the threat of criminal charges can put some companies out of business, as happened to accounting firm Arthur Andersen more than six years ago.

In 2001, Holder left government and moved into a lucrative career in private law practice, conducting investigations for companies and then sharing the results with prosecutors in exchange for leniency.

Holder is not the only senior Justice Department official with experience defending corporate America. David W. Ogden, who is nominated to serve as the department’s second in command, represented media companies, government contractors and technology firms while in private practice. And Lanny A. Breuer, the nominee to lead the department’s criminal division, defended a host of businesses and individuals.

New Justice Department officials are still considering their options for policing corporate fraud. Among the questions is whether to create a national task force to standardize decisions about what criminal charges and prison sentences to pursue in cases against employees at mortgage companies and financial institutions, said Rita M. Glavin, acting chief of the department’s criminal division.

But authorities appear to sense that interest in the issue is peaking as the economy suffers. Ogden told senators at his confirmation hearing last week that on his watch, the department would undertake a “strong, law enforcement response” to crime on Wall Street.

“Serving jail time may well be an appropriate result, and it could be a deterrent in the future,” he said.

Link to original:  http://www.washingtonpost.com/wp-dyn/content/article/2009/02/11/AR2009021103674.html?wpisrc=newsletter&wpisrc=newsletter&wpisrc=newsletter

 

 

 

Key Witnesses to Be Interviewed in Prosecutor Firings

Thursday, February 12, 2009; A06

A federal prosecutor investigating the dismissal of nine U.S. attorneys during the Bush administration has issued a subpoena to former senator Pete V. Domenici (R-N.M.) and is preparing to interview key witnesses, lawyers following the case say.

Nora R. Dannehy, a public corruption prosecutor who helped convict Connecticut’s GOP governor four years ago, was named last year to go to Capitol Hill and the Bush White House, where government officials declined to provide voluntary testimony to the Justice Department inspector general probing the firings.

At the time, Inspector General Glenn A. Fine urged prosecutors to use their subpoena power to compel documents and testimony about the dismissal of New Mexico U.S. Attorney David C. Iglesias, whose pace on criminal investigations involving Democrats in the state drew complaints from Domenici and then-Rep. Heather A. Wilson (R-N.M.).

The Dannehy investigation appears to be intensifying with the disclosure that she will interview former White House political affairs deputy J. Scott Jennings as early as today, lawyers involved in the case said. Jennings worked alongside Karl Rove, a top aide to President George W. Bush.

Jennings will “cooperate to the best of his ability” and is not a target in the case, lawyer Mark R. Paoletta said yesterday.

Through lawyer Robert D. Luskin, Rove also has said he will cooperate with Dannehy’s investigation. K. Lee Blalack, an attorney for Domenici, declined to comment.

In recent weeks, Dannehy has requested documents through a grand jury operating out of the federal courthouse in Washington. When she was selected by then-Attorney General Michael B. Mukasey last year, she also was asked to examine public statements by former Justice Department officials about their knowledge of the firings.

n      Carrie Johnson

n      Link to original:  http://www.washingtonpost.com/wp-dyn/content/article/2009/02/11/AR2009021103673_pf.html

 

Halliburton, KBR Settle Bribery Allegations

By Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, February 12, 2009; D01

Halliburton and Kellogg Brown & Root have agreed to pay $579 million in fines related to allegations of foreign bribery, the biggest fines ever paid by U.S. companies in a foreign corruption case, federal authorities and the companies said yesterday.

The Securities and Exchange Commission and Department of Justice alleged that Houston-based Halliburton and KBR were part of a joint venture that spent $182 million to bribe Nigerian government officials over a 10-year period to win more than $6 billion in construction contracts.

Halliburton, which owned KBR during the time of the alleged actions and spun it off in April 2007, will be responsible for paying all but $20 million of the penalty.

KBR, one of the top U.S. government contractors, pleaded guilty to violating the federal law banning companies from paying bribes to get business in foreign countries. Halliburton did not admit or deny wrongdoing.

Federal authorities alleged that the companies used agents in Tokyo and Gibraltar to funnel money to Nigerian officials, who gave the companies contracts to build liquefied natural gas facilities on Bonny Island, on the Western African country’s coast.

The companies’ efforts to obtain the contracts, alleged in court documents, sound like scenes from a James Bond movie.

In June 2002, KBR’s then-chairman, Albert “Jack” Stanley, authorized a $23 million payment to a consultant in Gibraltar if a joint venture in which KBR participated won a contract to build natural gas facilities. Stanley intended that the fee would be used in part to pay bribes to Nigerian officials, with whom he had arranged for the bribes, according to the documents. The payment would wired to Swiss and Monaco bank accounts.

Two months later, a subcontractor hired by the consultant allegedly visited an official of the Nigerian National Petroleum Corp. in Abuja, Nigeria’s capital, with a pilot’s suitcase containing $1 million in $100 bills. In April 2003, the subcontractor drove $500,000 in Nigerian currency to an NNCP official. The car, filled with the cash, was left in a hotel parking lot until the NNCP official unloaded it, according to the documents.

The joint venture won the contract — to build a structure to pipe raw natural gas from wellheads, convert it to liquefied natural gas and deliver it to tankers.

Last year, Stanley pleaded guilty to conspiring to violate federal anti-bribery laws. He also settled with the SEC. His lawyer, Larry Veselka, yesterday said Stanley is cooperating with authorities and has no further comment. An official from the Nigerian embassy could not be reached for comment.

Under its agreement with the Justice Department, KBR agreed to retain an independent compliance monitor for three years to ensure the company follows anti-bribery regulations. The investigations began in 2003.

“Today’s guilty plea by KBR ends one chapter in the department’s long-running investigation of corruption in the award of $6 billion in construction contracts in Nigeria. This bribery scheme involved both senior foreign government officials and KBR corporate executives who took actions to insulate themselves from the reach of U.S. law enforcement,” said Rita M. Glavin, acting assistant attorney general.

The SEC’s complaint charged that KBR violated the Foreign Corrupt Practices Act and said that KBR and Halliburton committed violations related to maintaining their books, records and internal compliance systems.

The SEC has been bringing an increasing number of foreign corruption cases. It settled its largest case ever late last year, against the German corporation Siemens, which agreed to pay $800 million in fines in the United States and a similar amount to German authorities.

“Multinational companies should take heed that attempting to conceal bribes by funneling them through intermediaries or offshore entities will not be successful,” said Antonia Chion, associate director of the SEC’s division of enforcement.

KBR chief executive William Utt said yesterday he was pleased “to finally conclude this very difficult but necessary settlement.” He said it closes a “regrettable and unfortunate chapter in KBR’s rich and storied history. KBR has fully cooperated with the U.S. government through the extensive investigations over the last five years.”

Staff writer Dana Hedgpeth contributed to this report.

 

Link to original:  http://www.washingtonpost.com/wp-dyn/content/article/2009/02/11/AR2009021103400.html?wpisrc=newsletter&wpisrc=newsletter&wpisrc=newsletter

Many Are Caught, but Few Suffer for U.S. Military Fraud

Link to Original:  http://query.nytimes.com/gst/fullpage.html?res=9C0CE3D81E38F931A25752C1A966958260&sec=&spon=&pagewanted=all

By RICHARD W. STEVENSON

Published: November 12, 1990

 

Twenty-five of the 100 largest Pentagon contractors have been found guilty of procurement fraud in the last seven years, some more than once. Yet not one has been barred from Government contracting, and the renewed debate over how to discourage such fraud has produced no easy solutions.

The number of convictions and guilty pleas has accelerated in the last two years, with 16 cases involving 14 of the largest weapons makers. They include Boeing, Grumman and Teledyne, which made payoffs to obtain confidential Pentagon documents; Rockwell International and Emerson Electric, which overcharged the Government, and Fairchild Industries and Northrop, which failed to test certain weapons components or falsified the test results.

Prosecutors, members of Congress and Pentagon officials have long wrestled with how to punish contractors guilty of wrongdoing, trying to balance the extreme difficulty of cutting all ties to companies that build the nation’s most sophisticated weapons against the need to find an effective deterrent to fraud. The recent cases have focused more attention than ever on the topic, setting off a debate over whether the contractors should be permitted to continue doing business with the Government and whether there might be effective alternative sanctions. ‘Need to Find a Middle Ground’

“Debarment is such a draconian penalty that it’s almost never used,” said Representative Charles E. Schumer, the Democrat of Brooklyn who is chairman of the House subcommittee on criminal justice. “We need to find a middle ground so that thousands of jobs and the national security won’t be jeopardized but strong enough that it will serve as a deterrent.”

Spurred by the increase in fraud cases, Congressional committees have held numerous hearings in the last several months, and lawmakers are considering several proposals. One would ban a contractor from all Government business, a process known as debarment, for several years after a second fraud conviction. Another would prohibit companies from earning any profit on their Government work for a specified period. A third would call for a court-appointed “special master” to oversee all of a contractor’s operations. Congress adjourned without taking action on the proposals, but legislators said they plan to address the subject in the next term.

“Congress has allowed this issue to fester for too long,” said Representative Christopher Shays, the Connecticut Republican who is a member of the House subcommittee on legislation and national security. “We’re going to be bulldogs on this now, and there’s no question there’s bipartisan support.” Fines and Penalties for Fraud

In fraud cases contractors already face court-imposed criminal and civil fines and penalties, sometimes of millions of dollars. In some cases, the Pentagon has tried to discipline contractors through behind-the-scenes pressure to make management changes. Pentagon officials have long argued that it is impractical to go further, because in many cases a company is the sole builder of a weapon and it could take years, and enormous expense, to find alternative suppliers.

Many members of Congress and some prosecutors, however, are increasingly arguing that only the threat of being barred from Pentagon contracts for several years, or similar sanctions, is a sufficient deterrent.

Mr. Schumer has proposed what he says is a realistic middle ground. Under his proposal, the courts would be required to appoint an outside representative to oversee the activities of a contractor convicted of fraud twice within a specified period. The special master would have broad authority to insure the company was operating ethically and that it made full restitution for past crimes.

Mr. Shays said another alternative that deserves consideration in Congress is allowing existing contracts to be completed but barring any new contract awards for a period of several years if a company is convicted or found not to be cooperating fully with a Government investigation.

Small contractors are often barred by the Pentagon from doing business with the Government for several years. But the large contractors, on which the Pentagon relies most heavily, have never faced anything but temporary suspensions of their right to compete for contracts. The suspensions usually last a few months and inflict little, if any, financial pain. Suspensions are almost always limited to a specific company division.

The Pentagon, when faced with a big procurement scandal and pressure from Congress and the public to act against a contractor, sometimes quietly presses a company to make changes in its operations or in its management. After a series of scandals involving the General Dynamics Corporation during the late 1970’s and early 1980’s, the Pentagon put pressure on the company in various ways, including a brief suspension. The company brought in an outsider, Stanley C. Pace, as its new chief executive with a mandate to clean up its operations and image. Pentagon Policy

The Pentagon says its policy is to use suspension and debarment only to protect the Government and the taxpayer from further fraud, and not as punishment. Punitive action, it adds, is properly limited to the judiciary.

“The current system is working,” said Eleanor Spector, the Deputy Assistant Secretary of Defense for Procurement. “We have the tools to suspend or debar the companies involved, and anything that smacks of punishment should be the role of the courts.”

While the fines imposed in court cases are often substantial, many legislators and experts contend they do little to insure that contractors will not continue to cheat.

“Corporate executives who persistently engage in this kind of theft from taxpayers ought to know they will not just pay a fine that often doesn’t cover the cost of correcting the fraud, or throw an underling to the prosecutors,” said Representative George Miller, a California Democrat who has proposed legislation that calls for debarment for a company after two convictions in five years.

Mr. Miller and other supporters of stricter sanctions point to a recent case involving the Northrop Corporation. Northrop’s False Test Results

Northrop was indicted last year on charges of falsifying test results on missile and aircraft components. The Pentagon suspended the division of the company responsible for the tests. But because the suspension applied only to direct purchases by the Government, it did not interrupt the division’s work supplying a component to the companies that assemble the Harrier jet for the Marine Corps.

Although Northrop pleaded guilty to the test-fraud charges earlier this year, the Pentagon is now considering rescinding the ban altogether. Record of the Last Two Years

In half of the 16 cases involving large contractors in the last two years, the Pentagon took no action against the company. In the other cases, companies or their divisions were suspended for a period of months from receiving new contracts while the Pentagon sought assurances that they were operating responsibly.

In some cases, the companies lost a chance to win large new contracts during their suspensions.

As often as not, however, the suspensions had little effect. Teledyne Inc.’s electronics division was suspended last year for six months, after it was implicated in a Pentagon bribery scandal. Despite the suspension, the company was allowed to continue making its products and shipping them to the Government under existing contracts. Suspension’s Effect on Boeing

After admitting to trafficking in confidential Government documents, the Boeing Company’s office near Washington was suspended for three months starting last November, and personnel from that office were barred from dealing directly with the Pentagon.

Boeing assigned people from other offices to deal with the Pentagon, and, since the suspension did not affect any manufacturing plants or specific programs, there was no direct impact, a Boeing spokesman said.

Some companies do not even suffer the inconvenience of a suspension. The Emerson Electric Company pleaded guilty in May to four felony counts related to overcharging the Pentagon for some electronics components. The company paid a $40,000 criminal fine and a $14 million civil settlement but was not suspended.

Correction: November 16, 1990, Monday, Late Edition – Final

A front-page article on Monday about military contract fraud misstated the charges to which the Boeing Company pleaded guilty this year. Boeing admitted having illegally obtained two classified Pentagon budget documents, but the company did not admit having made payoffs to obtain them, and prosecutors said during the case that there was no evidence of monetary payoffs.