Federal Jury Conviction in Lindsey Case

10 May 2011 Publication

On May 10, 2011, a jury in the federal court in the Central District of California found all defendants in the Lindsey case guilty on all counts for their alleged roles in a scheme to pay bribes to Mexican government officials at the Comisión Federal de Electricidad (CFE), a state-owned utility company. The guilty verdicts against Lindsey Manufacturing Company, a California-based manufacturer of equipment used by electrical utility companies, two of its executives, and a Mexican intermediary came after the jury deliberated for one day following a five-week trial.

Keith E. Lindsey, 66, and Steve K. Lee, 60, both California residents, were each convicted of one count of conspiracy to violate the FCPA and five counts of FCPA violations. In addition, Angela Maria Gomez Aguilar, 56, of Cuernavaca, Mexico, was convicted of one count of money laundering conspiracy. Angela Aguilar’s husband, Enrique Aguilar, 56, also of Cuernavaca, Mexico, is charged with conspiracy to violate the FCPA, violations of the FCPA and money laundering violations, but remains a fugitive.

Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division said of the conviction that the “guilty verdicts are an important milestone in our Foreign Corrupt Practices Act (FCPA) enforcement efforts. Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last. Foreign corruption undermines the rule of law, stifling competition and the health of international markets and American businesses. As this prosecution shows, we are fiercely committed to bringing to justice all the players in these bribery schemes – the executives who conceive of the criminal plans, the people they use to pay the bribes, and the companies that knowingly allow these schemes to flourish. Bribery has real consequences.”

According to the DOJ’s press release on the verdict, the Aguilars (both directors of Grupo Internacional de Asesores S.A.) paid bribes to CFE officials in order to obtain contracts for Lindsey Manufacturing from approximately February 2002 until March 2009. Specifically, Lindsey Manufacturing, Keith Lindsey, and Lee paid Enrique Aguilar a 30 percent commission on all the goods and services Lindsey Manufacturing sold to CFE, which was a significantly higher commission than previous sales representatives for the company had received. It was alleged that part of the inflated commission would be used to pay bribes to Mexican officials in exchange for CFE awarding contracts to Lindsey Manufacturing.

According to the DOJ press release, evidence at the trial showed that Keith Lindsey and Lee wired approximately $5.9 million directly to Grupo, and that amongst other things, Angela Aguilar authorized money in the Grupo account to be used to buy a CFE official a $297,500 Ferrari Spyder and a $1.8 million yacht, as well as to pay more than $170,000 towards the official’s credit card bills. She also authorized the transfer of $500,000 to the brother and mother of another CFE official.

Sentencing for Lindsey Manufacturing, Lindsey and Lee is scheduled for Sept. 16, 2011, and Angela Aguilar’s sentencing is scheduled for Aug. 12, 2011. The defendants face a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost on the FCPA conspiracy charge. Each of the five FCPA counts carries a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The money laundering conspiracy count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The government is seeking forfeiture against all defendants.

The case was notable for Judge Matz’s pre-trial decision denying a motion to dismiss filed by Lindsey Manufacturing, Keith Lindsey, and Lee, which challenged the DOJ’s interpretation of the “foreign official” element of the FCPA that employees of state owned enterprises are “foreign officials” for FCPA liability purposes. In its decisions denying the motion to dismiss, the court held that “a state-owned corporation having the attributes of CFE may be an ‘instrumentality’ of a foreign government within the meaning of the FCPA, and officers of such a state-owned corporation, as Messrs. Nestor Moreno and Arturo Hernandez are alleged to be, may therefore be ‘foreign officials’ within the meaning of the FCPA.”