Case 1:14cr00240DLC Document 35 Filed 03/20115 Page 1 of 18fcpa.stanford.edu/fcpac/documents/4000/002637.pdf · Case 1:14-cr-00240-DLC Document 35 Filed 03/20115 Page 4 of 18 Pre-Sentence

Case 1:14cr00240DLC Document 35 Filed 03/20115 Page 1 of 18

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

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UNITED STATES OF AMERICA,

14 Cr. 240 (DLC)

BENITO CHINEA and JOSEPH DEMENESES,

Defendants.

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GOVERNMENT'S CONSOLIDATED SENTENCING MEMORANDUM

PREET BHARARA United States Attorney Southern District of New York Attorney for the United States of America

Harry A. Chernoff/Jason H. Cowley Assistant United States Attorneys

ANDREW WEISSMAN Chief, Fraud Section, Criminal Division United States Department of Justice

James M. Koukios/Kevin R. (I}ingras Trial Attorneys


UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

--------------------------x

UNITED STATES OF AMERICA,

14 Cr. 240 (DLC)

BENITO CHINEA and JOSEPH DEMENESES,

Defendants.

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GOVERNMENT'S CONSOLIDATED SENTENCING MEMORANDUM

The Government respectfully submits this memorandum in connection with the

forthcoming March 27, 2015, sentencings of co-defendants Benito Chinea ("Chinea") and Joseph

Demeneses ("Demeneses"). 1 As set forth herein, the Government requests that each defendant be

sentenced to a term of 60-months imprisonment, the stipulated sentencing range for both

defendants under the United States Sentencing Guidelines ("Guidelines" or "U.S. 5G."). Given

the massive nature of this bribery scheme and the significant role played by each defendant, the

Government believes that sentences at the stipulated range are reasonable, appropriate, and

necessary given the nature and seriousness of the offense. As discussed below, such a sentence is

sufficient, but not greater than necessary, to serve the legitimate purposes of sentencing.

In order to avoid repetition of many of the same facts and arguments, the Government files this consolidated brief relating to both defendants.

1

Case 1:14-cr-00240-DLC Document 35 Filed 03/20115 Page 3 of 18

FACTUAL BACKGROUND

A. Procedural History

On or about April 10, 2014, a grand jury sifting in the Southern District of New York

returned a 16-count indictment (the "Indictment") charging Chinea and Demeneses (together, the

"defendants") with multiple offenses. The Indictment charged the defendants with conspiring to

violate the Foreign Corrupt Practices Act (the "FCPA") and the Travel Act, along with multiple

substantive violations of the FCPA and the Travel Act. The Indictment further charged the

defendants with conspiring to commit money laundering and substantive money laundering

offenses. The Indictment also charged Demeneses with conspiring to obstruct justice. On

December 17, 2014, each of the defendants pled guilty to Count One of the Indictment, which

charged them each with conspiring to violate the FCPA and the Travel Act.

Prior to Chinea and Demeneses being charged, several other participants in the bribery

scheme, including the primary bribe recipient, pled guilty and cooperated with the Government's

investigation. These co-conspirators include Ernesto Lujan ("Lujan"), Tomas Alberto Clarke

Bethancourt ("Clarke"), Jose Alejandro Hurtado ("Hurtado"), and Maria Dc Los Angeles

Gonzalez Dc Hernandez ("Gonzalez").

B. The Offense Conduct

During the relevant time period, both defendants were affiliated with an entity called

Direct Access Partners ("DAP"). DAP was an SEC-registered brokerage firm with its principal

place of business on Wall Street. DAP provided fixed-income trading services for institutional

clients, including the purchase and sale of foreign sovereign debt. Chinea was the chief executive

officer of DAP. Demeneses served as managing director of a group within DAP referred to as the

Global Markets Group ("GMG") that handled DAP's fixed income trading business. See Chinea


Pre-Sentence Report ("Chinea PSR") at ¶J 18-20; Demeneses Pre-Sentence Report ("Demeneses

PSR") at ¶J 18-20. Lujan and Clarke worked in DAP's Miami office, and Hurtado was at varying

times employed by, or otherwise affiliated wit, DAP as well. Id. at ¶J 21-23.

At all relevant times, Gonzalez served as either the vice president of finance or the

executive manager of finance and funds administration at an entity Banco de Desarrollo

Economico y Social de Venezuela ("BANDES"). BANDES was a state-owned and state-

controlled economic development bank in Venezuela that operated under the direction of the

Venezuelan People's Ministry of Planning and Finance. BANDES acted as the financial agent of

the Venezuelan government with the stated purposes of promoting economic and social

development, serving as the trustee for agencies of the public sector, and supporting the

expansion and diversification of Venezuela's infrastructure. During the relevant time period,

Gonzalez oversaw BANDES's trading abroad and was authorized to purchase and sell significant

amounts of bonds for BANDES's portfolio. PSR ¶J 24-25.

The charge to which the defendants each pled guilty arose from a massive bribery scheme

that, while sometimes complicated in its execution, was simple in concept: the defendants and

their co-conspirators arranged for millions of dollars in bribe payments to be made to Gonzalez so

that she would direct BANDES trading business to DAP in exchange. As a result, DAP generated

over $60 million in revenue from trading with BANDES and the defendants themselves also

profited handsomely. Id. at 27. Bribe payments were generally sent to bank accounts controlled

by Gonzalez in Switzerland and elsewhere. In an effort to conceal the bribe payments to

Gonzalez, funds were transferred from DAP to be deposited in offshore accounts controlled by

Luj an, Hurtado, and Clarke, with a portion then being sent to accounts controlled by Gonzalez.

Most of these payments were concealed as payments to "foreign finders" or "foreign associates"


of DAP, who could receive commissions from DAP. Members of the conspiracy controlled

accounts held in the names of these offshore foreign finders. Id. at ¶ 28.

The origins of this bribery scheme began in 2008, when Hurtado, who worked in private

banking, was introduced to Gonzalez. Hurtado and Gonzalez discussed an arrangement by which

Gonzalez would direct BANDES's bond trading business to a particular entity in exchange for a

fee. Hurtado broached the possibility of executing BANDES trades with employees of DAP's

Miami office; when Hurtado explained to Lujan and Clarke the nature of the arrangement and

they agreed to participate in the scheme. Id. at ¶ 29. By some point in 2009, Demeneses came to

learn the nature of this arrangement, and Chinea also became aware of the bribe arrangement that

had been established.

Beginning in 2009, Hurtado's then-girlfriend and future spouse, Haydee Pabon (a U.S.

citizen), was designated as a "foreign finder" by DAP, which, if properly designated, would have

enabled her to receive fees from DAP. In reality, this designation served as a vehicle for bribe

payments to be routed through Pabon and Hurtado and on to Gonzalez. Between April 2009 and

August 2009, DAP sent Pabon approximately $8 million in purported finder's fees. A portion of

these funds were then sent to an account controlled by Hurtado in Switzerland. A portion was

then sent to accounts controlled by Gonzalez. Id. at ¶ 30. As Pabon's impending marriage to

Hurtado made the fiction of her being a foreign finder more difficult to maintain, Hurtado was

placed on salary at DAP. Placing Hurtado on the payroll served as a means of routing funds to

Hurtado to further make payments to Gonzalez. Despite his lacking a bond-broker's license,

Hurtado instantly became one of the highest-compensated DAP employees, "earning" in his first

full year, 2010, approximately $4,384,616 in salary and bonuses to fund the scheme.


Later, in order to establish an alternative mechanism to make payments to Gonzalez,

Demeneses, Lujan, and Clarke began directing bribe payments to Gonzalez through Swiss

accounts for a Panamanian company called ETC Investments SA ("ETC"). ETC was controlled

by Clarke, and its president was one of Clarke's relatives. Previously, Demeneses, Lujan, and

Clarke had set up ETC as a foreign finder of DAP as a means of siphoning funds from DAP.

Demeneses, Lujan, and Clarke ultimately planned to keep the funds in this undeclared Swiss

account for their own personal use. Id. at ¶J 32-33. DAP also cut checks, sometimes signed by

Chinea, to Clarke's relative (the purported president of ETC) as a "foreign associate." These

checks would be deposited in ETC accounts and used to make bribe payments. In turn,

Demeneses and Clarke used their designated funds in the ETC accounts to pay Gonzalez.

Demeneses and Clarke subsequently demanded of Chinea that they be reimbursed for the funds

used to pay Gonzalez. Chinea agreed to make them whole for the money they expended on bribe

payments. To do so, Chinea caused DAP (or its parent company) to make payments to Clarke

and Demeneses (or entities they controlled) and caused them to be falsely described internally as

"loan repayments." Id. at ¶ 34.

The defendants and their co-conspirators occasionally communicated with each other

through personal email accounts about the scheme. As referenced in the Indictment, on July 31,

2011, and again on August 1, 2011, the two defendants exchanged emails in which they discussed

various "Topics of Concerns," including payments to Gonzalez. These emails stated, in part,

"Man [Gonzalez] [is] asking for her funds. Estimated to be $554,000." The emails went on to

state: "Tomas [Clarke] is ready to pay when given the go ahead" and "Joe [Demeneses] has paid

in $1,022,000."


Based on BANDES's business with DAP, Chinea and Demeneses received a total of

approximately $3,636,432 and $2,670,612, respectively, in the form of commissions and/or

bonuses. These amounts were directly tied to revenue generated from corrupt BANDES trades.

BANDES eventually ceased trading with DAP, largely based on Gonzalez's displeasure

with the timeliness of the receipt of her payments. In response, Chinea attempted to maintain a

relationship with Hurtado in the hopes of, among other things, reviving the DAP business

relationship with Gonzalez. For example, Chinea invited Hurtado to an elaborate meal in New

York in January 2012, after which they together called Gonzalez from Chinea's cell phone, with

Hurtado serving as Gonzalez's interpreter. Chinea's interest in reinitiating a relationship with

BANDES in 2012 is supported by email documentation, including an email dated May 31, 2012

that Chinea sent to another DAP partner and a DAP employee. The email stated:

Alejandro is telling me we will be starting up with Bandes in the next couple of weeks[.] he is coming to town to discuss with us. Truth is we have heard this story before, but in the event it happens can we trade for Bandes through Pershing?

Ultimately, the bribery scheme was unearthed in the course of a periodic SEC review of

the firm, in which the large payments of purported salary and bonus to Hurtado provoked

questions. Based on evidence that the co-conspirators used their personal email accounts to

discuss the scheme, the Government was able to obtain a search warrant for several personal

email accounts from which additional evidence of the scheme was gathered.

The investigation became public with the arrests of Gonazalez, Hurtado and Clarke. After

these three defendants began to cooperate with the Government, Lujan was next arrested. He also

pled guilty pursuant to a cooperation agreement, after which Chinea and Demeneses were

indicted.


DISCUSSION

As discussed below, the Government respectfully submits that after applying the

sentencing factors to the defendants' conduct, a sentence for each defendant at the stipulated

guidelines range of 60 months' is reasonable and appropriate.

A. Application of the Sentencing Guidelines

The Government and each of the defendants have stipulated to an identical Guidelines

calculation in their respective plea agreements and as set forth in their respective PSR.

The stipulated application of the Guidelines for each defendant is as follows:

• The Guideline applicable to the offense charged in Count One is U.S.S.G. § 2C1.l. Pursuant to U.S.S.G. § 2C1. 1(a)(2), the base offense level is 12;

• Because the offense involved more than one bribe, the offense level is increased by two levels to 14, pursuant to U.S.S.G. § 2C1.l(b)(1);

• Because the value of the benefit received was approximately $60 million, the offense level is increased by 24 levels to 38, pursuant to U.S.S.G. §§ 2C1. 1(b)(2) and 2131.1;

• Because the offense involved a public official in a high-level decision-making or sensitive position, the offense level is increased by four levels to 42, pursuant to U.S.S.G. § 2C1.l(b)(3);

• Assuming the defendant's clear acceptance of responsibility, a three-level reduction is warranted pursuant to U.S.S.G. § 3E1.1, resulting inapplicable Guidelines offense level of 39.

Because each of the defendants is in Criminal History Category I, each defendant's guidelines

range would be 262 to 367 months' imprisonment. In addition to being stipulated to by the

parties, this calculation was adopted by the Probation Office for each of the defendants. Chinea

PSR at ¶J 62, 65; Demeneses PSR at ¶J 60, 63. Because each defendant pled guilty to a count

carrying a statutory maximum term of 60 months' imprisonment, each defendant's stipulated

Guidelines sentence is 60 months -- the sentences that the Probation Office recommends.


B. The Section 3553(a) Factors

1. The Nature and Circumstances of the Offense

The FCPA

The FCPA was enacted by Congress in 1977 to combat corruption harmful to foreign

economies and governments, to enhance the United States' public image worldwide, and to level

the playing field for companies whose refusal to pay bribes placed them at a competitive

disadvantage. As the House Report accompanying the bill stated: "The payment of bribes to

influence the acts or decisions of foreign officials, foreign political parties or candidates for

foreign political office, is unethical. It is counter to the moral expectations and values of the

American public. But not only is it unethical, it is bad business as well. It erodes public

confidence in the integrity of the free market system." House Report No. 95-640 (1977) at 4.

"Bribery of foreign officials by some American companies casts a shadow on all U.S.

Companies." Id. at 5. Moreover, as discussed in the accompanying Senate Report, revelations of

bribery by American businesses at that time had produced

severe adverse effects. Foreign governments friendly to the United States . . . have come under intense pressure from their own people. The image of American democracy abroad has been tarnished. . . . Corporate bribery is bad business. In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet. Corporate bribery of foreign officials takes place primarily to assist corporations in gaining business. Thus foreign corporate bribery affects the very stability of overseas business. Foreign corporate bribes also affect our domestic competitive climate when domestic firms engage in such practices as a substitute for healthy competition for foreign business.

S. Rep. No. 95-114(1977) at 3-4, reprinted in 1977 U.S.C.C.A.N. 4098.

In the three decades since Congress enacted the FCPA, the extent of corporate bribery has

become clearer and its ramifications in a transnational economy starker. See Department of

Justice and Securities and Exchange Commission, "FCPA: A Resource Guide to the U.S. Foreign

Case 1:14-cr-00240DLC Document 35 Filed 03120/15 Page 10 of 18

Corrupt Practices Act (2012) at 2 ("Corruption impedes economic growth by diverting public

resources from important priorities such as health, education, and infrastructure. It undermines

democratic values and public accountability and weakens the rule of law. And it threatens

stability and security by facilitating criminal activity within and across borders, such as the illegal

trafficking of people, weapons, and drugs. International corruption also undercuts good

governance and impedes U.S. efforts to promote freedom and democracy, end poverty, and

combat crime and terrorism across the globe.") (citations omitted) . 2 Fortunately, since its

passage, the FCPA has been at the forefront of a spreading international norm that has now been

adopted in most developed countries. Prohibitions against bribery of foreign officials in

international business transactions have been made binding through international conventions and

through the policies of multilateral institutions. See Stuart H. Deming, "The Foreign Corrupt

Practices Act and the New International Norms" (American Bar Association Section of

International Law 2005), at 93-94.

The bribery scheme at issue in this case spanned three continents and resulted in millions

of dollars being paid to a corrupt official and, in turn, tens of millions of dollars in illicit revenue

for DAP and millions of dollars in personal gain to the defendants. Additionally, try as they

might to describe their respective roles as "limited" (Chinea Br. at 24) or "supporting"

2 The White House has also recently stated: "Preventing corruption preserves funds for public revenue and thereby helps drive development and economic growth. By contrast, pervasive corruption siphons revenue away from the public budget and undermines the rule of law and the confidence of citizens in their governments, facilitates human rights abuses and organized crime, empowers authoritarian rulers, and can threaten the stability of entire regions. The United States views corruption as a growing threat to the national security of our country and allies around the world." White House, Office of the Press Secretary, Fact Sheet: The U.S. Global Anticorruption Agenda," (Sept. 24, 2014), available at https ://www.whitehouse. gov/the-press- office/20 14/09/24/fact-sheet-us-global-anticorruption-agenda

Case 1:14cr-00240DLC Document 35 Filed 03120/15 Page 11 of 18

(Demeneses Br. at 16), the roles that each defendant played in the scheme were integral to its

success. While the Government agrees that neither of the defendants were involved in the scheme

at its absolute inception, they nevertheless readily joined the scheme and took steps to ensure its

success, as set forth below. Moreover, once members of the conspiracy, they advanced its goals

without reluctance and shared fully in its spoils: Chinea and Demeneses respectively received

approximately $3,636,432 and $2,670,612 from the revenue generated by BANDES trades.

Chinea

With regard to Chinea, DAP's CEO, there is a factual disagreement between the parties as

to when Chinea became aware of the scheme. But even if it were correct that Chinea joined the

scheme in 2011, his conduct was nonetheless egregious, especially when considering he was

serving as the Chief Executive Officer of an SEC-registered broker-dealer at the time. First,

Chinea was unquestionably aware of the great significance of BANDES and Gonzalez as a DAP

client. When Gonzalez visited the offices of DAP in New York in 2010, she met with Chinea and

others in the DAP offices and received a gift before being shown various tourist attractions.

Chinea understood the importance of BANDES to DAP and personally took steps relating to

reimbursing Clarke and Demeneses for funds they had used to make bribe payments to Gonzalez.

These steps involved Chinea's making false "loan "payments (and describing them as such in

company records) to Clarke and Demeneses, knowing full well that he was laundering company

money to make his co-conspirators whole for their corrupt payments to Gonzalez.

Chinea's conduct was hardly a momentary lapse of judgment. The bribe reimbursement

payments, for example, continued into 2012. Additionally, far from viewing BANDES and

Gonzalez as a "ticking time bomb" (Chinea Br. at 2) that Chinea hoped to defuse and put in the

Notably, the stipulated Guidelines calculation for each defendant does not include any reduction for playing a minimal or minor role in the scheme.

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past, Chinea continued to actively pursue business opportunities with Hurtado and explore the

viability of DAP reinitiating trading with BANDES long after Chineajoined the bribery scheme.

In 2012, for example, Chinea continued to cultivate a business relationship with Hurtado, the

person that brought the so-called "time bomb" to DAP. In January 2012, while riding together in

Chinea's car following a meal between them, Chinea and Hurtado called Gonzalez from Chinea's

phone. Additionally, in May 2012, approximately a year after Chinea concedes he became

involved in the bribery scheme, he continued to discuss with others at DAP the prospect of

reinitiating a trading relationship with BANDES through Hurtado and ensuring that the trading

infrastructure was in place in the event that BANDES resumed trading with DAP. As late as least

May 2012, Chinea remained interested in reengaging trades with BANDES. At this time, while

reaching out to others to ensure DAP's ability to execute BANDES's trades, Chinea continued to

facilitate payments to Clarke and Demeneses to reimburse them for past bribe payments. 4

Chinea also urges that the Court credit his efforts to cooperate over the course of three

proffers with the Government and the SEC, as the case law permits. See United States v.

Fernandez, 443 F.3d 19, 33 (2d Cir. 2006) (Chinea Br. at 24). While the Government was willing

to explore in multiple proffer sessions Chinea's ability to assist in the investigation and

prosecution of others at DAP who may have participated in this scheme and to afford him a

cooperation agreement, ultimately we were unable to corroborate or credit key points that might

have made such an agreement possible. Accordingly, however many hours Chinea spent in

proffers, no sentencing benefit is warranted.

q These facts contradict Chinea's contention (Chinea Br. at 18-19) that he only reluctantly agreed to reimburse the other conspirators, after they expressed concern for their safety and out of fear that all of his employees would lose theirjobs.

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Demeneses

With regard to Demeneses, the managing director of DAP, his criminal conduct was also

integral and egregious. In addition to engaging in the bribery scheme, Demeneses, along with

Lujan and Clarke, arranged to siphon funds from DAP to ETC through ETC's listing as a foreign

finder for DAP. Once DAP funds were laundered through the ETC account in Switzerland,

Demeneses and the others ultimately planned simply to keep a portion of these funds (tax free)

for their own use and benefit. Demeneses and Clarke were also able to use their funds in the ETC

account as a secure means of making payments to Gonzalez. As set forth in emails sent in the

summer of 2011, Demeneses used over $1 million of "his cash" to make payments to Gonzalez.

Demeneses then insisted, successfully, that he be made whole by DAP for this use of these

essentially embezzled funds to make bribe payments to Gonzalez.

Furthermore, apparently not content with their share of the fees generated by the corrupt

scheme, Demeneses, along with Lujan, Clarke, and Hurtado, decided to skim from the bribes they

had agreed to pay Gonzalez by falsifying the trade prices they shared with her so it appeared that

the commissions DAP earned had been smaller. Thus, like Chinea, Demeneses's role in the

scheme was significant and long term, even if he was not involved at the scheme's inception.

2. The History and Characteristics of the Defendant

The defendants' history and characteristics also support a substantial term of

imprisonment in this case. Unlike many criminals who come before the Court, Chinea and

Demeneses each enjoyed significant advantages. Notwithstanding the financial and professional

successes each had obtained, Chinea and Demeneses nevertheless affirmatively decided to engage

in the bribery scheme. Moreover, as discussed above, the defendants' criminal conduct was not

an isolated, aberrant act, but was a sustained effort to build a pipeline of corrupt fees.

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Accordingly, the defendants' history and characteristics militate in favor of a substantial term of

imprisonment.

3. The Need To Afford Adequate Deterrence

Under Section 3553(a), the need for a sentence to "afford adequate deterrence to criminal

conduct," 18 U.S.C. § 3553(a)(2)(B), must also be considered. This factor also strongly counsels

in favor of a substantial sentence of imprisonment.

The legislative history of 18 U.S.C. § 3553 demonstrates that "Congress viewed

deterrence as 'particularly important in the area of white collar crime." United States v. Martin,

455 F.3d 1227, 1240 (11th Cir. 2006) (citing S. Rep. No. 98-225, at 76(1983), reprinted in 1984

U.S.C.C.A.N. 3182, 3259); see also United States v.Mueffelnian, 470 F.3d 33,40(1st Cir. 2006)

(deterrence of white-collar crime is "of central concern to Congress"). As the Martin Court

noted: "Congress was especially concerned that prior to the Sentencing Guidelines, '[miajor white

collar criminals often [were] sentenced to small fines and little or no imprisonment.

Unfortunately, this creates the impression that certain offenses are punishable only by a small fine

that can be written off as a cost of doing business." Martin, 455 F. 3d at 1240 (citation omitted).

The need for substantial terms of imprisonment to accomplish deterrence is particularly

present in FCPA prosecutions. Violations of the FCPA are especially difficult to detect, since

there is rarely an identifiable victim who becomes aware of the crime and comes forward to

implicate the willing bribe-payer and the willing bribe-taker. Meaningful sentences for high-level

corporate officers and employees send a powerful message of deterrence to others who are

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similarly situated. Indeed, because this case involves individuals in the financial sector, it has

been and will be closely watched in the legal and business community. 5

4. The Need To Avoid Unwarranted Sentenciiw Disparities

Under 18 U.S.C. § 3553(a)(7), the Court should consider the "need to avoid unwarranted

sentencing disparities." In an effort to advocate for a non-custodial sentence, Chinea points to a

number of sentences in other FCPA cases to argue that a low sentence is required to avoid

sentencing disparities. In furtherance of this argument, Chinea presents a chart which summarizes

the sentences imposed in seventy-three FCPA cases against individuals across the country. He

does not, however, distinguish between the sentences of cooperators who received SKi. 1

departures, and those, like the defendants here, who provided little to no help to the Government.

He also does not distinguish between the roles of the defendants (CEOs, officers, passive

investors, etc.) or the size of the bribes in each case. And he does not distinguish the sentences

that were imposed before the U.S. Sentencing Guidelines took effect or those imposed under a

See, e.g., Jones Day, "FCPA Year in Review: 2014," February 2015 ("In 2014, the DOJ and the SEC also carried out their pledges to bring enforcement actions against top executives . . Specifically, the DOJ filed or announced charges against [among others] the former CEO and a managing director of Direct Access Partners LLC ....); Wilmer Hale, Foreign Corrupt Practices Act Alert, January 27, 2015 ("The DOJ and the SEC have for the past few years been actively signaling - though both their public statements and enforcement actions - that they are increasingly focused on the prosecutions of culpable individuals, including corporate executives

In April, the DOJ indicted two additional employees of broker dealer Direct Access Partners ); Morrison Foerster, "Top Ten International Anti-Corruption Developments for December

2014," January 7, 2015; Norton Rose Fulbright, "FPCA Caution to Individuals: Two more former employees of Direct Access Partners plead guilty to FCPA and Travel Act Violations," December 2014 (describing this as "a case that underscores the U.S. Department of Justice's continued commitment to prosecuting individuals for violation the US FCPA"); Miller Chevalier, FCPA Summer Review 2014, "Two More from Direct Access Partners Charged for Giving Kickbacks to Venezuelan Bank Official," July 23, 2014; Gibson Dunn, "2014 Mid-Year FCPA Update: More Direct Access Partners Defendants," July 7, 2014; Davis Polk Client Memorandum, "DPC and SEC Announce Filing of FCPA Enforcement Action Against Broker-Dealer Executives," April 29, 2014.

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more lenient Guideline manual, before the Guideline range for FCPA offenses was increased to

treat FCPA crimes identically to domestic bribery offenses. 6

Limiting our specific analysis for the sake of brevity to those six cases Chinea cites in the

Second Circuit, most are easily distinguishable from the present case. 7 In the 1998 case of United

States v. Tannenbaum, Herbert Tannenbaum, a 78-year-old man who headed a company that

manufactured garbage incinerators, offered a bribe to an undercover FBI agent to induce the

purchase of a garbage incinerator by a purported Argentinian procurement officer. The

conspiracy at issue there was easily dwarfed by the BANDES conspiracy, and yet even

Tannenbaum was sentenced by Judge Griesa to a year of imprisonment.

In the case of both United States v. Farrell and United States v. Lewis, Chinea overlooks

the fact that the defendants were both cooperators who benefited from 5K 1. 1 motions by the

Government (one after extensive trial testimony in Bourke). Thomas Farrell had been an all-

purpose henchman in a bribery scheme centered in Azerbaijan, where his services included

providing translation services, security, and on occasion delivering bags of money. Even if the

6 In 2002, the Sentencing Commission amended the statutory index of offenses located at U.S.S.G. Appendix A to specifically key FCPA's anti-bribery violations to U.S.S.G. § 2C1.1, the same guideline used for domestic bribery offenses. See Amendments to the Sentencing Guidelines, Policy Statements, and Official Commentary (May 1, 2002), at 3 (explaining the need to impose comparable sentences in both domestic and foreign bribery cases in order to comply with the mandate of a multilateral treaty entered into the by the United States, the Convention on Combating Bribery of Foreign Public Officials in International business Transactions); see also Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ("OECD Convention"), Art. 3, section 1 ("The bribery of a foreign public official shall be punishable by effective, proportionate and dissuasive criminal penalties. The range of penalties shall be comparable to that applicable to the bribery of the Party's own public officials."), reprinted in 37 I.L.M. 1(1998).

The case of United States v. Bourke cannot be so easily distinguished. There, the first and only FCPA trial defendant in this District was sentenced to a year and a day, over the Government's objections. Judge Scheindlin based the sentence on, among other things, the fact that the Court viewed the defendant as a passive investor who went along with the scheme rather than having been involved from the inception. The Government subsequently filed a protective notice of cross-appeal of the sentence, but ultimately did not pursue its appeal.

15


scheme had succeeded, which it did not, Farrell did not stand to profit like Chinea did from this

scheme. Clayton Lewis's main role was as an investor for a major fund called Omega, for which

he invested over $100 million into a scheme formulate by others. While Omega was a much

more prominent entity on Wall Street than Direct Access Partners, Lewis was not, like Chinea,

the CEO of the company.

In United States v. Peterson, the defendant was convicted in the Eastern District of

New York only of one count of conspiring to circumvent the books-and-records requirements of

the FCPA, rather than a substantive FCPA offense or a conspiracy to violate the FCPA, and Judge

Weinstein sentenced Peterson to nine months' imprisonment.

In United States v. Mason, the defendant, who was sentenced to probation in the

District of Connecticut after a plea, had paid kickbacks to a West German procurement official

who purchased "anti-bugging" devices. The total amount of kickbacks paid was relatively small,

$225,680, and the defendant was sentenced to probation and a fine.

In contrast to these prior prosecutions listed in Chinea's exhibit, this case involved

millions of dollars in payments to the bribe recipient, generating over $60 million in illicit

revenue for DAP, and resulting in seven-figure personal profits for the two defendants before the

Court, the chief executive officer and managing director. Accordingly, sentencing each defendant

to the stipulated Guidelines range of 60 months will in no way result in an unfair sentencing

disparity.

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CONCLUSION

For the reasons set forth above, the Government respectfully submits that a sentence of 60

months' imprisonment for each defendant is reasonable and appropriate to serve the legitimate

purposes of sentencing.

Respectfully submitted,

PREET BHARARA United States Attorney

Is! Harry A. Chernoff By:

Harry A. Chernoff/Jason H. Cowley Assistant United States Attorneys

ANDREW WEISSMAN Chief, Fraud Section, Criminal Division United States Department of Justice

James M. Koukios/Kevin R. Gingras Trial Attorneys

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Documents

Case 1:14cr00240DLC Document 35 Filed 03/20115 Page 1 of 18fcpa.stanford.edu/fcpac/documents/4000/002637.pdf · Case 1:14-cr-00240-DLC Document 35 Filed 03/20115 Page 4 of 18 Pre-Sentence