Over the past two months, two former executives of a California-based control valve manufacturer for the nuclear, oil and gas, and power generation industries, identified by the media as Control Components, Inc. (“CCI”),20 pleaded guilty to conspiring to bribe employees of stateowned customers in exchange for lucrative contracts. On January 8, 2009, Mario Covino, an Italian citizen and US resident, pleaded guilty to one count of conspiring to violate the FCPA, in connection with his role in the payment of at least $1 million in bribes.21 On February 3, 2009, US resident, Richard Morlok, pleaded guilty to the same charge as a result of his participation in the conspiracy. According to the stipulated facts set forth in the Plea Agreements with the Department,22 from in or about March 2003 through in and about 2007, Covino was the Director of Worldwide Factory Sales for CCI, responsible for overseeing new construction projects and the replacement of existing valves at customer plants in over thirty different countries. Morlok was CCI’s Finance Director, responsible for, among other things, approving certain commission payments and signing off on wire transfers to the recipients of such payments. Both Covino and Morlok admitted that they caused employees and agents of CCI to make corrupt payments, disguised as “commissions,” to employees of state-owned customers in order to win business. Covino acknowledged causing at least $1 million in improper payments to be made resulting in approximately $5 million in profits for the company, while Morlok admitted to causing $628,000 in improper payments to be made resulting in approximately $3.5 million in profits to the company. As a result of the conduct of both former executives, bribe payments were made to officials from China National Offshore Oil Company, PetroChina, KHNP (Korea), Petrobras (Brazil), Dingzhou Power (China), Datang Power (China), China Petroleum, China Resources Power, Maharashtra State Electricity Board (India), Petronas (Malaysia), Dolphin Energy (United Arab Emirates), Abu Dhabi Oil Company for Oil Operations, Jiangsu Nuclear Power Corporation (China), Rovinari Power (Romania), and Safco (Saudi Arabia). In the case of each defendant, at least one of the illicit payments was paid from CCI’s bank account in California.
Aside from their admissions to paying bribes to foreign officials, both defendants admitted to providing false and misleading statements to internal auditors, and, in the case of Morlok, external auditors as well, with regard to the nature of the payments. Covino further acknowledged that he obstructed an internal audit by deleting, and instructing others to delete, emails that referred to the bribes. Morlok and Covino, who are scheduled for sentencing on July 10 and July 20, 2009, respectively, each face up to five years in prison in connection with the charges. As part of their plea, each defendant has agreed to cooperate with the Department’s ongoing investigation.