In an extraordinary ruling, Judge Howard Matz concluded
that "the Court throws out the convictions of Defendants Lindsey Manufacturing
Company, Keith E. Lindsey and Steve K. Lee and dismissed the First Superseding
Indictment." This ruling brought to an end the first FCPA case in which a
corporation had been convicted by a jury. U.S. v. Aguillar, 2:10-cr-01031
(C.D. Cal. Order Filed Dec. 1, 2011).
The case was brought against Lindsey Manufacturing, Its
owner and President, Keith Lindsey, Steve Lee, the CFO and vice president of
the company and Angela Aguilar, the wife of Enrique Aguilar of Grupo
International which served as an agent in Mexico for Lindsey. The company and
its employees were alleged to have paid bribes to the Comision Federal de
Electricidad or CFE in Mexico through Grupo. CFE is a state owned utility
company. Lindsey manufactures emergency restoration and other equipment used by
utilities. Many of its customers are foreign state owned utilities.
Lindsey, according to the government, initially was
unable to secure contracts from CFE. It then retained Grupo. Lindsey obtained
information, according to the government, suggesting that Mr. Aguilar had a
corrupt relationship with an official at the power company. Within months of
retaining Grupo in 2002, the company obtained business from CFE who eventually
became a significant client.
Following a jury trial the company and Messrs. Lindsey
and Lee were each convicted on one count of conspiracy and five counts of FCPA
violations. Ms. Aguilar was convicted on one count of conspiracy to commit
In ruling on the Lindsey defendants' post verdict
motions, the Court made it clear that it was reluctant to dismiss the
proceeding based on prosecutorial misconduct. The case here was fast moving
with multiple pretrial motions, some of which made allegations of prosecutorial
misconduct. In ruling on those motions the Court concluded that it had missed
the "proverbial forest for the trees." It saw the individual motions but missed
the overall pattern: "The Court was confronted with so many motions challenging
the Government's conduct that it was difficult to step back and look into
whether what was going on reflected not isolated acts but a pattern of
invidious conduct . . . the Court did issue orders granting various Defendants'
motions . . . it did not fully comprehend how the various pieces fit together .
. . And fit together they do ... they add up to an unusual and extreme picture of
a prosecution gone badly awry."
After carefully reviewing the evidence of misconduct
beginning before the trial and continuing through it, the court concluded that
the government had:
The prejudice from this misconduct, the Court found, is
"palpable once the prosecution and trial are assessed as a whole."
In concluding that the charges had to be dismissed the
Court considered two other points. First, the "case against the Lindsey
Defendants was far from compelling." The evidence was entirely circumstantial
and was "at best, was murky . . . regardless of what the Lindsey Defendants
knew or intended, for the most part there was no clear evidence that if Enrique
Aguilar bribed Moreno and Hernandez [of CFE] it was with .. . " Lindsey funds.
Finally, the Court considered the impact of the charges
and trial on the defendants: "Dr. Lindsey and Mr. Lee were put through a severe
ordeal. Charges were filed against them as a result of a sloppy, incomplete and
notably over-zealous investigation, an investigation that was so flawed that
the Government's lawyers tried to prevent inquiry into it . . .The financial
costs of the investigation and trial were immense, but the emotional drubbing
these individuals absorbed undoubtedly was even worse. As for LMC [Lindsey
Manufacturing], the very survival of that small, once highly-respected
enterprise has been placed in jeopardy. That is not to say that the Lindsey
Defendants are entitled to a finding of factual innocence; they are not." In
this case however, they are entitled to dismissal.
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
For more information about LexisNexis
products and solutions connect with us through our corporate site.