South Korean businessman Tongsun Park first burst on the scene in the 1970s when he was indicted on influence-peddling charges in the Koreagate contributions scandal, although the charges were eventually dropped after he fled the United States. With the United Nations’ Oil-for-Food program designed to get humanitarian aid into Iraq during the embargo after the first Gulf War, Park got involved in helping the Iraq government try to bribe UN officials, including then-Secretary General Boutros-Ghali, to set up the program in a way that favored the Iraqi government.. The government of Saddam Hussein gave Park $1 million in cash, much of which went into a company owned by a UN official. In July 2006, Park was convicted of conspiracy to act as an unregistered agent of the Government of Iraq. U.S. District Judge Denny Chin sentenced Park to the maximum five-year prison term authorized for his conviction (see USAO press release here), stating that "[y]ou either bribed a U.N. official or you were acting as if you were going to bribe a U.N. official." Park was immediately taken into custody at the end of the sentencing hearing. A Washington Post story (here) reviews the case and Park’s history of involvement in various lobbying efforts. (ph)
Category: Corruption
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A press release of the DOJ reports that "a former Department of Defense (DOD) employee, pleaded guilty to accepting illegal gratuities while serving as an operational support planner in the Future Operations Division of the U.S. Army Headquarters, Special Operations Command–Europe (HQSOCEUR)." This case comes out of the recent National Procurement Fraud Initiative. The case appears to involve $24,000 and a job offer by an individual who "served in the U.S. Air Force until January 2005, when he left active duty and began work as a DOD civilian employee." One question is whether this plea and others will be used to secure indictments of individuals who are in higher roles. Another question is whether there were adequate compliance programs in effect to avoid the cases being examined by the National Procurement Fraud Initiative.
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Newly-elected Nevada Governor Jim Gibbons is being investigated by the FBI for possible bribery and unlawful gratuities received from a friend and campaign contributor whose company received substantial military contracts. Warren Trepp allegedly provided the gifts to Gibbons while he was in the House of Representatives, including a Caribbean cruise and private jet flight that was not reported on the required Congressional disclosure statements. An e-mail exchange between Trepp and his wife has surfaced in which she purportedly wrote "[p]lease don’t forget to bring the money you promised Jim and Dawn [Gibbons]" a few days before the cruise. Trepp responded, “Don’t you ever send this kind of message to me! Erase this message from your computer right now!” Unfortunately, the "Delete" key does not get rid of this kind of evidence, which may go a long way in the government’s investigation. Governor Gibbons has denied any impropriety in his relationship with Trepp. An AP story (here) discusses the FBI’s confirmation of the existence of the investigation. (ph)
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The Office of Legislative Services (OLS) for the New Jersey State Legislature is fighting a federal grand jury subpoena seeking records related to possible conflicts of interest in the state budgeting process, according to an article in the Newark Star-Ledger (here). The investigation grows out of an earlier investigation of Medicaid and Medicare fraud at the University of Medicine and Dentistry of New Jersey (UMDNJ) that was settled with a substantial penalty and appointment of a monitor. A report by the monitor identified a possible no-show job for a state Senator at UMDNJ, and federal prosecutors are now looking at a wider range of possible corruption involving the award of discretionary grants by legislators. OLS, which is a non-partisan arm of the legislature that received the subpoena, asserts that the records sought, including e-mails and internal memos, are confidential, and seeks to quash the subpoena.
The problem the state legislature faces is that federal grand juries are entitled — in a time-worn phrase sure to appear in the district court’s decision — "to every man’s evidence." A state confidentiality statute is unlikely to win out over the authority of a federal grand jury to compel the production of records, and state legislative privileges are not recognized under the federal Speech or Debate Clause, so that road is unavailable to prevent enforcement of the subpoena. Public corruption investigations of state and local officials always raise sensitive issues of federal authority, and the fact that a Republican U.S. Attorney leads the office investigating the actions of Democratic state officials makes it even more complicated. But on the narrow issue of the enforceability of a federal grand jury subpoena, the smart money is usually on the federal government getting what it demands. (ph)
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The former number three official at the Central Intelligence Agency was indicted in San Diego on eleven counts of conspiracy, honest services fraud, conflict of interest, and money laundering. Kyle "Dusty" Foggo is accused of accepting gifts from Brent Wilkes in exchange for steering contracts to Wilkes’ Southern California company, ADCS Inc. Foggo was executive director of the CIA until he resigned suddenly in May 2006. Wilkes was charged in a thirty-five count indictment with bribery, conspiracy, honest services fraud, and money laundering involving not only Foggo, but also former San Diego Congressman Randy "Duke" Cunningham, who is serving an 8+ year prison sentence after pleading guilty to corruption charges in 2006. A third defendant was charged with obstruction of justice for lying to a grand jury about Wilkes paying off a $500,000 second mortgage on Cunningham’s home. The indictments come at the end of the term of U.S. Attorney Carol Lam, one of the seven federal prosecutors forced from office by the Department of Justice, some for supposed "performance issues" that have not been further identified. She’s certainly going out with a bang. A CNN.com story (here) discusses the indictments. (ph)
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UPDATE: The two indictments are available below.
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The federal indictment of powerful Pennsylvania state Senator Vincent Fumo on corruption, tax evasion, and obstruction of justice charges has sparked a vigorous response from his lawyer, Richard Sprague. The government unveiled a 139-count, 267-page indictment against Fumo and three aides alleging a range of fraudulent schemes involving alleged abuse of his office and diversion of funds from non-profits. Sprague held a press conference (audio available here) in which he belittled the prosecution as politically motivated by Republicans in Washington, D.C. — Fumo is a Democrat from Philadelphia — and described the charges as "full of twists and distortions, venal and salacious entries, deliberate statements out of context — all for the purposes of having an effective public relations campaign by the prosecutor’s office." A Philadelphia Inquirer story (here) notes that a U.S. Attorney’s Office spokesman responded to Sprague, stating that the "comments are inaccurate and regrettable and we will present our case in court."
While the case is barely a day old, it is the product of a four-year investigation that has already involved an appeal to the Third Circuit over privilege issues related to a grand jury subpoena to an attorney (United States v. Doe, 429 F.3d 450 (3d Cir. 2005)). Philadelphia has seen its fair share of corruption cases the past two years, with a former Treasurer and City Council member convicted. Its politics can occasionally show some rough edges, much like a Phillies crowd during a losing streak, so don’t look for the the case to go away quietly. (ph)
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The U.S. Attorney in Rhode Island, Robert Clark Corrente, seems to be making alleged public corruption on the state level a major focus of his office. According to an article by Mike Stanton in the Providence Journal, this U.S. Attorney has been busy investigating cases that may now number "’14 active investigations’ of 7 politicians and 7 corporations for possible influence peddling."
This is also an office that seems to be looking at other white collar crimes. Just this week Corrente’s office had a sentencing hearing that came from a plea in another white collar case involving an individual pleading to 6 counts of bankruptcy fraud. The press release from his office states that the defendant was sentenced to "eight months in prison, followed by eight months home confinement, for making false statements and concealing real estate assets in a bankruptcy filing." There was also the sentences received by former executives of the Roger Williams Medical Center (see here).
Although there have been many federal investigations of state activity, this most recent public corruption investigation is one to definitely watch.
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The fallout from the bribery of former Representative Randy "Duke" Cunningham looks like it is about to hit, according to an article in the North County Times (here). Brent Wilkes, who Cunningham admitted paid him substantial bribes to win no-bid defense contracts, has been under investigation by the U.S. Attorney’s Office for the Southern District of California for over a year, and government "sources" are saying that charges are imminent. U.S. Attorney Carol Lam was among the seven federal prosecutors forced out by the Department of Justice, and before she closes the books on her tenure, she reportedly has asked that the Wilkes indictment be finalized.
One aspect of the media reports may be a bit troublesome for the U.S. Attorney’s Office, however. The North County Times story has the following quotes:
"I know we are so close," said one official, who agreed to speak with the North County Times on the condition that his name not be published. A preliminary draft indictment is under review by "many eyes on what is going to be proposed to the grand jury," according to the source.
Talking about a draft grand jury indictment and stating how "close" it is looks like a violation of the grand jury secrecy requirement of Federal Rule of Criminal Procedure 6(e), which provides that any government attorney or agent "must not disclose a matter occurring before the grand jury." A decision to seek an indictment likely comes within the scope of a "matter occurring before the grand jury," which is not limited to just what takes place in the grand jury room. Rule 6(e)(7) states that "[a] knowing violation of Rule 6 . . . may be punished as a contempt of court." Wilkes’s attorney is Mark Geragos, who is known for defending Scott Peterson and Barry Bonds’ former trainer, Greg Anderson, and he has not been shy in advocating on behalf of his clients. This type of disclosure to the media from an unnamed government source is likely to trigger a call by Geragos for an internal investigation of the prosecutors and agents involved in the case to learn who violated Rule 6. These types of investigations are never pleasant, to be sure, and probably would draw the reporter into the inquiry, raising once again issues related to confidential sources. (ph)
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A former finance official for the Coalition Provisional Authority in southern Iraq received a nine-year sentence on corruption, money laundering, and weapons charges. Robert Stein worked for the CPA in administering the rebuilding effort, and engaged in a wide-ranging corruption scheme to award contracts to favored companies. According to a Department of Justice press release (here):
Stein admitted to participating in a complex bribery, fraud and money laundering scheme while serving as the Comptroller and Funding Officer for the CPA-SC. From December 2003 through December 2005, Philip H. Bloom, a U.S. citizen who owned and operated several companies in Iraq and Romania, Bruce D. Hopfengardner, a Lieutenant Colonel in the U.S. Army Reserves, and numerous public officials, including several high-ranking U.S. Army officers, conspired to rig the bids on contracts being awarded by the CPA-SC so that all of the contracts were awarded to Bloom. In return, Bloom provided the public officials with over $1 million in cash, SUVs, sports cars, a motorcycle, jewelry, computers, business class airline tickets, liquor, future employment with Bloom, and other items of value.
In addition, Bloom laundered over $2 million in currency that Stein and his co-conspirators stole from the CPA-SC that had been designated to be used for the reconstruction of Iraq. Bloom then used his foreign bank accounts in Iraq, Romania and Switzerland to send the stolen money to Stein, Hopfengardner and other public officials in return for the awarded contracts. In total, Bloom received over $8.6 million in rigged contracts.
Bloom, one of the coconspirators identified in the government statement, also entered a guilty plea and is scheduled to be sentenced on February 16, 2007.
This is not the only front in the investigation of corruption and contract abuse involving the Iraqi reconstruction. The House Oversight and Government Reform Committee will be conducting hearings on the topic, and a statement on the Committee website (here) states:
Rep. Waxman and other members of Congress have been seeking information on contracts entered into by the Administration for reconstruction and development work in Iraq, including several billion dollar contracts with a subsidiary of Halliburton Corporation. Many questions have been raised about the Iraq contracting process, including questions on the seemingly inflated prices charged by Halliburton to import gasoline from Kuwait into Iraq and Halliburton’s admission of kickbacks to company officials.
Needless to say, the change in control on Capitol Hill will make these hearings quite contentious. (ph)
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Federal prosecutors in Cleveland charged three former officials with the Cleveland Housing Network, a non-profit that rented houses primarily to low-income tenants, on bribery charges for demanding kickbacks from contractors. Two defendants were Regional Coordinators with CHN and the third was a maintenance supervisor, and a press release (here) describes the alleged corruption:
[C]ertain contractors hired to perform repair and rehabilitation work on CHN properties were required to kickback a portion of money CHN paid them to a Regional Coordinator in return for continuing to receive business from CHN. The Regional Coordinators also required certain contractors to seek payment from CHN for work that the contractors had never performed and to give these payments to the Regional Coordinator in return for continuing to receive business from CHN. At times, portions of these improper payments were shared with [one defendant]. Defendants also required certain contractors to perform repair work without compensation at Defendants’ personal residences and Defendants’ relatives residences in return for continuing to receive business from CHN.
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