Articles Posted in White Collar Crime Highlights

On January 30, 2009, Peter Baci, a former executive at a freight service company, was sentenced to 48 months in jail and agreed to pay a criminal fine of $20,000. This sentence marks the longest jail sentence ever imposed for a single antitrust charge.

On October 20, 2008, Mr. Baci pled guilty to his role in a conspiracy to raise prices and eliminate competition for the movement of goods such as heavy equipment, medicines and consumer goods, on scheduled ocean voyages between the U.S. and Puerto Rico. On October 1, 2008, four U.S. shipping company executives including Peter Baci of Jacksonville, FL, Kevin Gill and Gregory Glova of Charlotte, NC, and Gabriel Serra of San Juan, Puerto Rico pled guilty for their role in a broad conspiracy to rig bids, fix prices, and allocate market share for customers transporting goods between the United States and Puerto Rico. A fifth shipping executive, Alexander Chisholm, of Jacksonville, FL was charged with obstruction of justice. He agreed to plead guilty and serve jail time. Sentences are still pending for Mr. Gill, Mr. Glova, Mr. Serra, and Mr. Chisholm

Andre Barlow

On January 22, 2009, three air cargo airlines, LAN Cargo S.A. (“LAN”), a Chilean company, Aerolinhas Brasileiras S.A. (“ABSA”), a Brazilian company, and EL AL Israel Airlines Ltd. (“EL AL”), an Israeli company, each pled guilty for their role in a worldwide conspiracy to fix prices in the air cargo industry and agreed to pay criminal fines totaling $124.7 million. LAN, which owns a substantial portion of ABSA, agreed to pay a criminal fine of $109 million while EL AL agreed to pay a criminal fine of $15.7 million.

According to the charges, the three air cargo airlines allegedly conspired in the United States and elsewhere to eliminate competition by fixing the cargo rates charged to customers for international air shipments, including to and from the United States. LAN and ABSA allegedly participated in the conspiracy from February 2003 to February 2006. EL AL participated in the conspiracy between January 2003 and February 2006.

As a part of this same investigation, nine other airlines, including British Airways, Korean Air Lines, Quantas Airways, Japan Airlines, Cathay Pacific Airways, Martinair Cargo, Air France, and KLM Royal Dutch Airlines, and a former Quantas executive have been charged in the DOJ’s ongoing investigation in the air cargo industry. More than $1.2 billion in criminal fines have been imposed.

On January 15, 2009, Chang Suk (“C.S.”) Chung, former Vice President of Monitor Sales for LG Display Co. Ltd. (“LG”), Chieng-Hon Lin (“Frank”), former Chairman and Chief Executive Officer for Chunghwa Picture Tubes Ltd. (“Chunghwa”), Chih-Chun Liu (“C.C.”), former Vice President of LCD Sales for Chunghwa, and Hseuh-Lung Lee (“Brian”), former executive of Chunghwa, all pled guilty to their roles in a global conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) panels. They also agreed to serve jail time and pay criminal fines.

TFT-LCD panels are used in computer monitors, notebooks, televisions, mobile phones, and other electronic devices. Worldwide sales in 2006 were $70 billion.

C.S. agreed to serve a seven-month prison term and pay a criminal fine of $25,000. Frank agreed to serve a nine-month prison term and pay a criminal fine of $50,000. C.C. agreed to serve a seven-month prison term and pay a criminal fine of $30,000. Brian agreed to serve a six-month prison term and pay a criminal fine of $20,000.

On January 15, 2009, Ronald K. Johnston, a former employee of Home Depot, pled guilty to conspiring to commit wire fraud and for two counts of filing false tax returns in an attempt to defraud Home Depot.

The conspiracy took place between 2005 and 2007. Specifically, Mr. Johnston received kickbacks from foreign suppliers seeking to do business with Home Depot. In return, Mr. Jonhnston purchased supplies on behalf of Home Depot on less than the most advantageous terms for Home Depot. Anthony Tesvich, a former Home Depot employee convicted in June 2008 on similar charges, passed on kickbacks to Mr. Johnston worth thousands of dollars and paid for home improvement expenses for Mr. Johnston’s residence. As a part of the same investigation, on July 11, 2008, James P. Robinson, a former Divisional Merchandising Manager for Flooring at Home Depot, pled guilty to one count of conspiracy to commit wire fraud and two counts of tax evasion related to a scheme to defraud Home Depot.

Andre Barlow

On December 22, 2008, Theresa J. Baker, a major in the U.S. Army Reserve, pled guilty for her role in two conspiracies to commit bribery involving U.S. Department of Defense (“DOD”) contracts at Camp Victory, Iraq.

As a part of the same investigation, on June 3, 2008, Raman International Inc. (“Raman”), a defense contractor, pled guilty to one count of conspiracy to commit bribery. It agreed to pay the maximum criminal fine for a corporation charged with conspiracy to commit bribery of $500,000 and restitution fees amounting to $327,192 to the DOD.

As a part of the first conspiracy, Raman, headquartered in Cypress, TX, and Eric Chidiac, one of its former employees already indicted for two counts of conspiracy to commit bribery, allegedly paid Ms. Baker money and gifted her a Harley Davidson to steer DOD contracts to Raman. Mr. Chidiac is currently a fugitive. Camp Victory is the main component of the Victory Base Plaza located near the Baghdad International Airport. Mr. Chidiac gave part of the payments made by DOD to Raman as kickbacks to the military officer.

On December 18, 2008, Zul Tejpar, a former employee at Bennett Environmental Industries (“BEI”), a Canadian soil treatment company, pled guilty for defrauding the U.S. Environmental Protection Agency (“EPA”) at the EPA-designated Superfund site, Federal Creosote in Manville, NJ and agreed to pay a criminal fine of $1 million and help in the ongoing investigation.

The cleanup of the Federal Creosote site, funded by the EPA and Army Corps of Engineers, was contracted out to private companies that oversaw the removal, treatment and disposal of contaminated soil, as well as other operations at the site.

Mr. Tejpar allegedly provided inflated invoices and kickbacks worth $1.3 million to employees of the prime contractor of the EPA, who were co-conspirators. In exchange for the kickbacks, the prime contractor allocated $27 million in sub contracts for the removal, treatment and disposal of contaminated soil at the site. The conspiracy took place from December 2001 to spring 2004.

On December 15, 2008, Yong Zhu, the president of Chino, an import-export company that provides Chinese supplies to U.S. companies, pled guilty for his role in a conspiracy to commit honest services wire fraud.

Mr. Zhu allegedly paid an employee of a manufacturing company that did business with Chino as sum of $10,000. In return Mr. Zhu received the assurance that his company Chino would receive subcontracting awards from the manufacturing company. The conspiracy took place between 2002 and 2004.

This is the tenth plea agreement arising from the ongoing investigation into the military restraints industry.

On December 11, 2008, Cynthia K. Ayer, Bambarg County (South Carolina) School District’s former technology coordinator, pled guilty for her role in a conspiracy to defraud the Federal Communication Commission’s E-Rate Program and agreed to serve two years in jail and pay a criminal fine of $468,496.

The Telecommunication Act of 1996 authorized the E-Rate Program to provide economically disadvantaged school districts and libraries with funds to connect to the Internet.

Ms. Ayer allegedly committed mail fraud by requesting funds she was not entitled to and caused Universal Service Administrative Company (“USAC”) to mail her a $25,243 check made payable to her company, Go Between. Initially indicted in April 2006 by a federal grand jury in Colombia, SC, Ms. Ayer will also pay a restitution fee to USAC.

On December 10, 2008, Misao Hioki, general manager of International Engineered Products, pled guilty to his role in a conspiracy to rig bids, fix prices and allocate market shares of marine hose in the United States. He also pled guilty for his role in another conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”) by making corrupt payments to government officials in Latin America and elsewhere to obtain and retain business. He has agreed to serve two years in jail, pay a criminal fine of $80,000 and help in the Department of Justice’s (“DOJ”) investigation.

Although he is the ninth individual to be charged in this investigation, he is the first charged in the FCPA conspiracy. Both conspiracies took place from January 2004 to May 2007. Since May 2007, there have been eight other foreign executives arrested in Houston and San Francisco and charged for their role in the marine hose cartel.

On June 11, 2008, Peter Whittle and David Brammar, two executives of Dunlop, and Bryan Allison, who acted as an independent consultant to Dunlop, pled guilty for running a cartel in UK’s first criminal prosecution for rigging bids for the supply of marine hose and related equipment in the UK. Mr. Allison and Mr. Whittle were both sentenced to three years in prison while Mr. Brammar received a two and a half year sentence.

On December 10, 2008, Randall Lee Rahal, the owner and president of Intramark USA Inc., a New Jersey wholesaler of food ingredients, was charged for his role in conspiracies involving racketeering, price fixing, bid rigging and contract allocation, and with money laundering, in the processed tomato products industry. Mr. Rahal agreed to forfeit $600,000 as well.

According to the indictment, which was filed in the U.S. District Court in Sacramento, CA, alleged that Mr. Rahal served as a sales broker and oversaw various sales contracts between S.K. Foods, L.P. (“S.K.”) and its customer companies which included food product manufacturers, distributors and retail outlets throughout the United States. S.K. is a grower and processor of tomato products and other food products with operations in Monterey, Williams, Ripon and Lemoore, California.

Specifically, the indictment alleges that Mr. Rahal paid bribes to purchasing agents of customers of S.K. in order to ensure that those customer companies bought products at an inflated price from S.K. instead of its competitors and forced the purchasing agents to turnover to S.K. the bidding information of S.K.’s competitors. The money laundering charge stems from these bribes paid by Mr. Rahal to the purchasing agents. This conspiracy took place from January 2004 to April 2008, while the conspiracy to allocate customers and rig bids took place between February 2006 and April 2008.