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The Anticorruption Blog

John Joseph O’Shea Acquitted of All Substantive FCPA Counts

Posted in Foreign Corrupt Practices Act, Mexico

Conduct

  • Following the close of the prosecution’s case on a trial for charges arising under the Foreign Corrupt Practices Act (“FCPA”), John Joseph O’Shea (“O’Shea”) was acquitted of all substantive FCPA counts, with the court (Southern District of Texas) finding that O’Shea’s conduct could be reasonably explained by lawful motives.
  •  O’Shea, a former general manager of ABB, Inc., a Texas-based business that provided products and services to electrical utilities, was arrested in 2009 for his alleged role in a conspiracy to bribe Mexican government officials to secure contracts with the Comisión Federal de Electricidad (CFE), a Mexican state-owned utility company, through a Mexican sales agent, Esimex.  One of O’Shea’s responsibilities was approving payments to sales representatives.  O’Shea was charged with money laundering, falsification of records in a federal investigation, conspiracy to violate the FCPA, and twelve substantive counts of violating the FCPA.
  •  The indictment alleged that ABB, Inc. contracted with Esimex to serve as its sales representative in Mexico, whereby Esimex received a percentage of the revenue generated from business with Mexican governmental utilities, including CFE.
  • In December 1997, CFE awarded ABB with a contract to upgrade Mexico’s electrical network system.  Then, in 2003 CFE awarded ABB with a multi-year contract for maintenance and upgrades of the 1997 contracts.
  • For the 2003 contract, the indictment alleged that O’Shea, officials at CFE, and others agreed that approximately ten-percent of the revenue ABB received from CFE would be returned to CFE officials as corrupt payments.  It was also allegedly agreed that O’Shea would receive approximately one-percent of the of the contract revenue as kickback payments.
  • O’Shea and others allegedly used false invoices from Mexican companies as a basis to make international wire transfers, presenting such transfers as legitimate payments for technical services and maintenance support services.  The indictment alleged that these were actually corrupt wire transfers to companies that did not do any work for ABB.
  • According to the indictment, O’Shea authorized more than $900,000 in corrupt payments to CFE officials before an internal investigation by ABB’s parent company stopped the transfers and then voluntarily disclosed the payment to the DOJ and SEC.
  • The indictment alleged that after O’Shea was terminated from ABB, he conspired with others to conceal the illegal nature of payments, and created fake, back-dated correspondence as well as false documentation purporting to substantiate the work companies claimed to have performed.

Penalties

  • On January 17, 2012, the court granted a defense motion for acquittal, and O’Shea was found not guilty of all substantive FCPA charges.  The motion was granted at the close of the federal prosecutors’ case, and the jury was dismissed.
  • In a press release, O’Shea’s counsel noted that when announcing his ruling, U.S. District Judge Lynn Hughes found that “the Government’s chief witness, an Esimex principal awaiting sentencing on conspiracy charges, could not tie Mr. O’Shea to the alleged crimes,” and that “O’Shea’s conduct, including efforts to renew an ABB-Esimex contract, was reasonably explained by lawful motives.”
  • In 2010, ABB, Inc. pled guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA.  Also in 2010, ABB, Inc.’s parent company, ABB Ltd., reached a $58 million settlement with DOJ and the SEC.
  • In 2009, Fernando Maya Basurto, a Mexican citizen and principal of Esimex, pled guilty to a one-count information charging him for his role in the conspiracy.  He admitted that he conspired to make corrupt payments to CFE officials, helped launder bribe monies, and engaged in a cover up to obstruct the investigations of the DOJ and SEC.  He further admitted that he submitted false invoices and helped fabricate correspondence in anticipation of federal investigations into the bribery.