Over the past two months, in what appears to be a developing trend, criminal charges related to violations of the FCPA have been brought in connection with investigations centered around other criminal activity. On November 17, 2008, Shu Quan-Sheng (“Shu”), a naturalized U.S. citizen, pleaded guilty to one count of violating the FCPA and two counts of violating the Arms Export Control Act,15 in connection with his illegal export of space launch technical data and defense services to the People’s Republic of China (“PRC”), and offer of bribes to Chinese government officials.16 On December 10, 2008, Misao Hioki, a citizen of Japan, pleaded guilty to a two count Information charging him with conspiracy to violate the FCPA, and conspiracy to violate the Sherman Act, in connection with his role in a marine hose cartel.17 He was sentenced the same day to two years in jail and ordered to pay an $80,000 fine.
According to the Department’s pleadings in the Shu case, Shu was the President, Secretary and Treasurer of AMAC International Inc. (“AMAC”), a high-tech company based in Newport News, Virginia, with offices in Beijing.18 The Information charged that from January 2003 through October 2007, Shu violated the Arms Export Control Act by willfully exporting a defense service from the United States to the PRC without first obtaining the required export license or written approval from the State Department. The service involved the provision of assistance to the PRC in the design and development of a cryogenic fueling system for launch vehicles to be used at a facility in Hainan, PRC. The Information also charged a second violation of the Arms Export Control Act as a result of Shu’s illegal export to the PRC of controlled military technical data on December 20, 2003. A third count of the Information involved violations of the anti-bribery provisions of the FCPA. According to the Information, Shu, acting on behalf of his company, AMAC, and a French company that he represented, offered to pay over $189,000 to foreign officials of the PRC to obtain a $4 million contract for the development of a liquid hydrogen tank system. By telephone from Virginia, three separate offers to pay money in the form of “percentage points” were allegedly made by Shu between February and May 2006. In January 2007, the sought-after contract was awarded to the French company that Shu represented. Shu, whose sentencing is scheduled for April 6, 2009, faces up to 15 years in prison and a fine of $2,250,000 in connection with the charges.
The Hioki case involves the ninth guilty plea by an individual in connection with the Department’s Antitrust Division investigation of bid rigging, price fixing and the allocation of market shares of marine hose, a flexible rubber hose used to transfer oil between tankers and storage facilities. It is the first guilty plea in the investigation involving an FCPA charge. According to the Information, from January 2004 until as late as May 2007, Hioki was the general manager of the International Engineered Products (“IEP”) Department of “Company-1,” a Japanese manufacturer of marine hose and other products sold in the United States and elsewhere.19 The Information further alleged that during the same time frame, Hioki participated in a bid rigging conspiracy which affected prices for hundreds of millions of dollars of marine hose both in the United States and internationally. According to the Information, Hioki also conspired to make corrupt payments to government officials in Latin America and elsewhere to obtain and retain IEP business on behalf of Company-1 and its U.S. subsidiary. The Information charged that Hioki, along with his co-conspirators, developed relationships and negotiated with officials in several Latin American countries, including at least Argentina, Brazil, Ecuador, Mexico and Venezuela, to make corrupt payments. According to the Information, where sales agents were used to facilitate the corrupt payments, Hioki and his co-conspirators, including employees of the U.S. subsidiary, concealed the payments as commissions. Given that Hioki has agreed to continue to cooperate with the Department’s ongoing investigation, there may be additional prosecutions involving FCPA charges forthcoming.
Both of the above cases highlight how foreign bribery often goes hand in hand with other forms of illegal conduct, which may itself expose corruption that may have gone undetected.