Criminal Complaint Charges Virginia Physicist With FCPA Violations, Among Other Charges

30 September 2008 Publication

In September 2008, Shu Quan-Sheng (a naturalized U.S. citizen and President, Secretary, and Treasurer of AMAC International ("AMAC"), a high tech company located in Virginia with an office in Beijing, China) was charged in a criminal complaint (and arrested) for offering bribes to Chinese government officials in violation of the FCPA. In addition, Shu was also charged with violating the Arms Export Controls Act.

According to an FBI affidavit in support of the criminal complaint, Shu and AMAC entered into a written agency agreement with a division of a French Company to be the division's sole representative in China. Under the agreement, AMAC was entitled to a success fee of 10-15% (or higher if necessary) on sales in the territory. According to the affidavit, the French Company is headquartered in Paris, has significant operations in the U.S., and has American Depositary Receipts traded on a U.S. Exchange and is thus an "Issuer" under the FCPA.

The affidavit details projects Shu was pursuing on behalf of the French Company with several Chinese government entities including the People's Liberation Army's General Armaments Department, the 101st Research Institute (a research institute within the China Academy of Launch Vehicle Technology), and the Beijing Special Engineering Design Research Institute, a Chinese government entity responsible for the procurement of liquid storage tanks for a launch facility. The affidavit alleges that prior to the French Company being awarded an approximate $4 million contract by the various Chinese entities listed above, Shu, acting on behalf of the French Company, offered payments to various individuals within these entities to induce the officials to award the contract to the French Company. The affidavit alleges that AMAC was paid approximately $250,000 (USD) in commissions for its work and the affidavit cites extensive negotiations between Shu and the Chinese officials as to the percentage of the contract value the officials should receive should they award the contract to the French Company. In addition, the affidavit alleges that Shu, after learning that certain of the Chinese officials had children, advised the officials that he could help their children study abroad.

If convicted on the FCPA charges, Shu could face five years in a U.S. prison.