In the run-up to the first trial of a corporation charged
with violating the Foreign Corrupt Practices Act, Lindsey
Manufacturing and its lead counsel, Jan Handzlik, put up as
vigorous a defense as you can imagine. Handzlik (then at
GreenbergTraurig and now at Venable) worked with Janet Levine
of Crowell & Moring (counsel for Steve Lee, Lindsey's former
CFO) to challenge the government's conduct, its evidence, even
its interpretation of the FCPA's language. It was to no avail.
In May, after a five-week trial and seven hours of
deliberation, a Los Angeles federal jury convicted Lindsey
Manufacturing, chairman and CEO Keith Lindsey, and CFO Lee on
all counts. For Handzlik and Levine, who were convinced the
prosecution's allegations that their clients funneled bribes to
officials of a Mexican state-owned electric company were
meritless, the conviction was devastating.
So you can image their joy Thursday, when U.S. District
Judge A. Howard Matz in Los Angeles vacated the convictions and
threw out the indictment against their clients. Matz dismissed the government's case with prejudice, which means that unless
the U.S. Court of Appeals for the Ninth Circuit overturns his
ruling, the Lindsey defendants cannot be recharged.
Matz based his decision on numerous examples of government
misconduct, beginning with falsehoods in search-and-seizure
warrant applications, extending to false and misleading grand
jury testimony by an FBI agent, and compounded by prosecutors'
failure to turn over some of that testimony to the defense.
Handzlik, Levine, and their teams had alerted the judge to much
of the misconduct before the jury reached a verdict, but Matz
said the magnitude of the government's behavior became clear
only in retrospect.
"When a trial judge managing a large docket is required to
devote a great deal of time and effort to a fast-moving case
that requires numerous rulings, often the judge will miss the
proverbial forest for the trees," Matz wrote. "That is what
occurred here ... . The government has acknowledged making many
'mistakes,' as it characterizes them. 'Many' indeed. So many,
in fact, and so varied, and occurring over so lengthy a period
(between 2008 and 2011) that they add up to an unusual and
extreme picture of a prosecution gone badly awry."
The question is whether the Lindsey defendants' stunning
reversal of fortune is a victory just for them and their
lawyers, or whether there are lessons for other FCPA
defendants. A recent Gibson, Dunn & Crutcher report on FCPA,
after all, said that more FCPA defendants -- including
corporate defendants -- are choosing to go to trial rather than plead guilty. Is the Lindsey ruling so fact-specific that those
defendants can't benefit from it?
Both Handzlik and Levine told me Friday that there are, in
fact, encouraging lessons in the Lindsey story for defendants
facing FCPA charges, even though Matz's ruling won't have a
direct impact on anyone else's case. "The message is the same
as it is in any of these high-profile cases," said Levine.
"When the government cares too much about winning and forgets
fairness and justice are supposed to be the hallmarks of
prosecution, [it makes] decisions that should not have been
made." As the Justice Department has made a priority of FCPA
prosecution in the last few years, Levine said, it has brought
questionable cases. (She pointed, by way of example, to the
July mistrial in a multidefendant FCPA trial stemming from a
government sting operation in Africa.)
"We've become a nation of cooperators," Handzlik said. He
agreed with Levine that the Lindsey case shows it's important
to test the strength of FCPA prosecution -- even for corporate
defendants, not just individuals. "We approached this case from
the beginning with the attitude that we were going to fight,"
he said. Lindsey is in some regards a typical FCPA defendant,
according to Handzlik, who said that in addition to charging
huge multinationals with bribing foreign officials, the Justice
Department "has made a practice of going after small companies
with a limited ability to fight -- they have no choice but to
roll over because it's a matter of life and death."
And choosing to defend itself cost Lindsey dearly, Handzlik
said. The 66-year-old privately-owned company, which
manufactures a particular type of utility tower, has been on
the brink of collapse for a year and would not have survived if
the Lindsey family had not sunk their own money into the
business. After it was indicted, Lindsey lost contracts and
customers, and struggled to keep its 100 employees on the
payroll. "But one thing made the decision to fight easy,"
Handzlik said. "My clients are not guilty."
The other lesson from Lindsey's defense, according to
Handzlik, is that the FCPA statute needs to be tested in
litigation. His challenges to the government's interpretation
of the law's definition of a foreign official and of
instrumentality didn't make much headway with Matz, but they
were essentially the first such challenges in the FCPA's
history. (As I've reported, FCPA defendants that followed
Lindsey's lead have also hit roadblocks in arguments that
executives of state-owned businesses are not "foreign
"Many of the crucial terms have not been defined or
constructed by courts," Handzlik said. "The Justice Department
has been permitted to read whatever it wanted into the law."
And unless defendants litigate those issues through appellate
courts, he said, the government's definitions prevail.
(Reporting by Alison Frankel)
Follow Alison on Twitter: @AlisonFrankel
Follow us on Twitter: @ReutersLegal