Merchant Bank Pleads Guilty to FCPA Charge

The focus on the FCPA continues with the Department of Justice filing another case in which the defendant pleaded guilty and obtaining another guilty plea in a related action. Last Friday, the Department settled two FCPA actions in conjunction with the SEC, discussed here.

In U.S. v. Mercator Corp., (S.D.N.Y. Filed Aug. 6, 2010), the defendant merchant bank pleaded guilty to one count of making corrupt payments in violation of the FCPA. At the same time, the Department resolved a long running case against the Chairman of the bank, James Giffen. U.S v. Giffen, 1:03-mj-06663 (S.D.N.Y. Filed April 2, 2003).

According to the court papers, the merchant bank was an adviser to the government of Kazakhstan in connection with various transactions relating to the sale of part of the oil and gas wealth of the country. Three senior government officials had the ability to influence whether Mercator obtained and retained lucrative business. Those officials also had the authority to cause the merchant bank to be paid. In view of these facts, the government concluded that Mercator was dependent on the good will of these officials. To maintain its lucrative position, in November 1999 Mercator purchased two snowmobiles and shipped them to Kazakhstan for delivery to one of the officials.

James Giffen, the Chairman of the bank, pleaded guilty to failing to indicate on his tax return that he had a Swiss bank account in 1997. In 2007, a civil forfeiture action was brought against $84 million on deposit in Switzerland. The complaint claimed the funds were traceable to unlawful payments to senior Kazakh officials in connection with oil and gas transactions arranged by Mercator for Kazakhstan. Under a 2007 agreement involving the United States, Switzerland and Kazakhstan, the funds were used by a non-government organization to benefit underprivileged Kazakh children.

The dates for sentencing have not been set.

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