Prosecutors in Lindsey Foreign Bribery Trial Face New Misconduct Allegations; Judge Issues Written Ruling on FCPA 'Foreign Official' Definition

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The Los Angeles judge presiding over the government's foreign bribery case against Lindsey Manufacturing has had a lot on his plate since the start of the trial three weeks ago. As we've reported, lawyers for Lindsey and other defendants choked the docket with motions to dismiss based on alleged Brady violations and prosecutorial misconduct before the case reached a jury. And the lawyers haven't let up since the trial began, with the latest attack focused on alleged misconduct by prosecutors and a federal agent who helped obtain the defendants' indictment.

Prosecutors accuse Lindsey and two of its executives of paying a sales representative to bribe employees of a Mexican utility, Comisión Federal de Electricidad. The government's October 2010 superseding indictment names the Lindsey defendants, the sales representative, and his wife. (The sales representative is still at large.)

On the eve of trial, Los Angeles federal district court judge Howard Matz refused to suppress evidence obtained through a 2008 warrant and denied defense motions to dismiss based on allegations that prosecutors withheld exculpatory information. Ruling from the bench, Judge Matz also rejected a closely-watched defense challenge to the government's interpretation of "foreign official" under the Foreign Corrupt Practices Act.

But those setbacks don't appear to have slowed down the defense. Lawyers from Greenberg Traurig, Crowell & Moring, and Girardi Keese now allege that the Federal Bureau of Investigation agent who secured the indictments perjured herself before the grand jury. They say FBI agent Susan Guernsey, who was the government's summary witness before the grand jury, blatantly mischaracterized evidence, and prosecutors didn't reveal the alleged misstatements until after the trial was underway. The defense lawyers also claim that a prosecutor from the Los Angeles U.S. attorney's office improperly coached and misled grand jurors.

Judge Matz ordered prosecutors to produce Guernsey's grand jury testimony at an April 15 hearing, finding that it was "in the interest of justice" to compel the transcript's release based on the defendants' misconduct allegations. He also chided prosecutors for suggesting that they would be able to rest their case by April 26. "It's fanciful...to think that you're going to be resting this case on Tuesday...in light of all that's happened here, and now all that's before me," Judge Matz said.

The defendants have not (yet) moved to dismiss the government's case based on the latest allegations of misconduct. Guernsey was scheduled to appear and be cross-examined before the jury in Judge Matz's courtroom on Friday.

Meanwhile, Judge Matz on Thursday issued his much-anticipated written ruling on the defendants' "foreign official" motion. The defense had challenged the government's position that state-owned companies are "instrumentalities" of foreign governments under the FCPA and that payments to employees of such companies may therefore be criminal bribes under the law. The judge ruled that the legislative history of the FCPA is "inconclusive" as to the scope of its application to state-owned companies. However, he concluded, "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...may therefore be 'foreign officials' within the meaning of the FCPA."

In an e-mail, Lindsey defense lawyer Jan Handzlik of Greenberg Traurig told us that Judge Matz's ruling still requires prosecutors to show that the Mexican utility actually does satisfy the requirements of the FCPA. "While we are disappointed by the ruling, we continue to believe that a correct reading of the FCPA would limit its application to departments and agencies of foreign governments," Handzlik said. "The judge did say that the government must now prove the nature of CFE to the jury, which they are attempting to do now."

Greenberg's Handzlik and Janet Levine of Crowell & Morning represent the Lindsey defendants. Defendant Angela Aguilar is represented by Stephen Larson of Girardi Keese.

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