After a series of unsuccessful trials against executives accused of bribing overseas officials, some critics believed the U.S. government would dial back its increasingly aggressive approach against foreign corruption. They were wrong.
In an attempt to catch an executive admitting to alleged bribe payments, the Federal Bureau of Investigation wired the businessman’s own corporate counsel –turned informant — with a secret camera attached to his body, recording their discussion inside the executive’s Miami condo. That executive, former PetroTiger CEO Joseph Sigelman, who maintains his innocence, will go to trial in April on charges that he bribed a Colombian official at state-run energy company Ecopetrol SAECOPETROL.BO -0.96% to win a contract for his oil services company. The Foreign Corrupt Practices Act makes it a crime to bribe overseas officials.
Wiring up a corporate counsel was a risky tactic for the government, experts say. Mr. Sigelman has already sought to have the evidence suppressed from court on the basis that Gregory Weisman, the government informant who made the recording, was his long-time corporate counsel, arguing that the conversation should be protected by attorney client privilege. Mr. Weisman has pleaded guilty to FCPA violations.
A New Jersey federal judge swiftly ruled that the recorded discussion was not an effort by Mr. Sigelman to obtain legal advice and was therefore not protected by attorney client privilege. That makes it fair game for the government to use in the coming trial. But experts say the recording shows that despite the earlier setbacks, the Justice Department is still willing to use high-risk, bare-knuckle tactics to bring FCPA cases. The tactic allowed agents to record Mr. Sigelman speaking to a trusted confidante and could help their case by capturing a candid conversation of the alleged misconduct, although throughout the recording the former chief executive steadfastly denied wrongdoing.
U.S. Justice Department officials have said that despite the setbacks, the use of aggressive law enforcement tactics would continue. Last September, Marshall L. Miller, the deputy chief of the Justice Department’s criminal division, said wiretaps, body wires and physical surveillance “have become a staple in our white collar investigations. I can promise you we will continue to use them.”
The Justice Department has had some recent success using these tactics. The French mining lobbyist Frederic Cilins pleaded guilty last March to obstructing an FCPA investigation. The government’s evidence against Mr. Cilins largely relied on wiretaps and an undercover cooperator’s secretly recorded conversations. Mr. Cilins was recorded telling the cooperator to “destroy everything, everything, everything,” referring to documents requested by the FBI.
But experts say recording a conversation between a corporate attorney and executive could play badly in a jury trial. “There is definitely a risk that the jury will get turned off by this type of tactic,” said William Jacobson, a partner at Orrick Herrington & Sutcliffe LLP, and a former prosecutor in the Justice Department’s FCPA unit.
The trial comes a few years after a string of losses for the Department of Justice in FCPA cases that were made using aggressive law enforcement tactics more closely associated with drug busts than white collar crime. In the case that came to be called the “Africa Sting,” FBI agents disguised themselves as corrupt officials from the nation of Gabon seeking bribes in order to close a deal for military hardware. The Department of Justice used recorded conversations from the sting to bring FCPA charges against 22 defense executives.
But concerns about the handling of the government’s informant, and the conduct of agents involved in the operation contributed to several acquittals and two mistrials, with the Justice Department dropping all remaining charges in 2012. The Washington, D.C., federal judge in the trials said the dismissals marked “the end of a long and sad chapter in the annals of white collar criminal enforcement.”
The previous year, in another stinging setback for the government’s anti-bribery efforts, a federal judge in Los Angeles tossed out the first-ever FCPA trial conviction against a company — Lindsey Manufacturing Co. The judge said the government had committed “flagrant” prosecutorial misconduct in allowing an agent to make false claims to obtain wiretaps and search warrants in the case. The many mistakes in the case “add up to an unusual and extreme picture of a prosecution gone badly awry,” the judge said. The judge dismissed the case with prejudice, prohibiting the government from again bringing the charges against the company.
Despite the setbacks, former prosecutors from the Justice Department’s FCPA unit say they are not surprised that the government has continued to use tough tactics, such as undercover informants, which they describe as a crucial part of making complex cases against individual executives. “That’s not going to stop just because of a few setbacks,” Mr. Jacobson said.
But the use of a general counsel as a wired informant is particularly aggressive, experts say, and could be viewed as an overreach by some jurors. “Jurors want to hold the government to a higher standard. They don’t want to think of the government using underhanded or deceptive tactics,” Mr. Jacobson said. “They want to think the government is above all that.”
Wiring up a general counsel with a hidden camera, is “surprising” and “quite aggressive,” likely requiring many levels of approval at the Justice Department that has strict guidelines on the use of undercover informants, said Kathleen Hamann, a partner at White & Case LLP and a former FCPA prosecutor. “There are many risks associated with it as we saw with the pretrial motions.”
Any secret recording can be a double-edged sword for prosecutors. Guilty or not, it’s rare for prosecutors to obtain clear-cut admissions of guilt in white collar recordings, experts say. In the hours-long recording, Mr. Sigelman continually denies having committed a crime, as the FBI informant Mr. Weisman probes for further elaboration. “It tends to be a lot grayer than agents and prosecutors hope for,” said Steven Tyrrell, who leads the white collar practice at Weil Gotshal & Manges LLP.
For prosecutors presenting secret recordings, Mr. Jacobson said, the key is to avoid giving jurors a false expectation that the recordings contain a clear-cut admission of guilt. Prosecutors need to clearly explain that the recording needs to be looked at alongside corroborating evidence. In that context he said, a recording “is maybe the most powerful form of evidence you can have,” he said.
Write to Joel Schectman at email@example.com