DOJ Carson Opposition - Declaration of FBI Special Agent Brian Smith

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ANDRÉ BIROTTE JR. United States AttorneyDENNISE D. WILLETTAssistant United States AttorneyChief, Santa Ana Branch OfficeDOUGLAS F. McCORMICK (180415)Assistant United States Attorney

411 West Fourth Street, Suite 8000 Santa Ana, California 92701 Telephone: (714) 338-3541

Facsimile: (714) 338-3564E-mail: [email protected]

KATHLEEN McGOVERN, Acting ChiefCHARLES G. LA BELLA, Deputy ChiefNATHANIEL B. EDMONDS, Assistant ChiefANDREW GENTIN, Trial Attorney Fraud Section Criminal Division, U.S. Department of Justice

1400 New York Avenue, N.W.Washington, DC 20005Telephone: (202) 353-3551Facsimile: (202) 514-0152E-mail: [email protected]

Attorneys for PlaintiffUnited States of America

UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

v.

STUART CARSON et al.,

Defendants.

)))))))))))

NO. SA CR 09-00077-JVS

DECLARATION OF SPECIAL AGENT BRIANSMITH IN SUPPORT OF GOVERNMENT’SOPPOSITION TO TO DEFENDANTS’AMENDED MOTION TO DISMISS COUNTSONE THROUGH TEN OF THE INDICTMENT

Plaintiff United States of America, by and through its

attorneys of record, the United States Department of Justice,

Criminal Division, Fraud Section, and the United States Attorney

for the Central District of California (collectively, “the

government”), hereby files the declaration of FBI Special Agent

Case 8:09-cr-00077-JVS Document 334 Filed 04/18/11 Page 1 of 32 Page ID #:3900

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Brian Smith in support of the government’s Opposition to

Defendants’ Amended Motion to Dismiss Counts One through Ten of

the Indictment.

DATED: April 18, 2011 Respectfully submitted,

ANDRÉ BIROTTE JR. United States Attorney

DENNISE D. WILLETTAssistant United States AttorneyChief, Santa Ana Branch Office

DOUGLAS F. McCORMICKAssistant United States AttorneyDeputy Chief, Santa Ana Office

KATHLEEN McGOVERN, Acting ChiefCHARLES G. LA BELLA, Deputy ChiefNATHANIEL B. EDMONDS, Assistant ChiefANDREW GENTIN, Trial Attorney Fraud Section, Criminal DivisionUnited States Department of Justice

/s/ DOUGLAS F. McCORMICKAssistant United States Attorney

Attorneys for PlaintiffUnited States of America

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DECLARATION OF FBI SPECIAL AGENT BRIAN SMITH

I, Brian Smi th, declare as follows:

l. I am a Special Agent with the Federal Bureau of

Investigation ("FBI"). I am currently assigned to the Washington

Field Office and focus on investigations of violations of United

States law, particularly those involving foreign bribery. I am

the lead Agent in the case of United States v. Stuart Carson, et

al. Presented below are some facts related to certain of the

entities involved in the above-listed case and information

pertaining to state-owned enterprises in China. Also presented

below are certain portions of legislative history related to the

Foreign Corrupt Practices Act ("FCPA").

2. In preparing this Declaration, I worked with other

government officials to gather facts from various sources related

to the relevant entities and review portions of the legislative

history of the FCPA. As part of the fact gathering process,

information was obtained from employees and foreign service

officers of the U. S. Department of State and employees of the

U. S. Commercial Service ("USCS"). uscs is the trade promotion

arm of the U. S. Department of Commerce's International Trade

Administration. See www.trade.gov/cs (attached as Exhibit l).

USCS operates in nearly 80 countries and offers services to U. s.

companies related to market intelligence, trade counseling,

business matchmaking, and trade advocacy. Id.


Overview of State-Owned Entities in China

3. State-owned entities! enterprises ("SOEs") playa key

role in China's economy. Kenneth A. Cutshaw et al., Corporate

Counsel's Guide to Doing Business in China at 377 (3d Ed. 2009)

("Guide to Doing Business in China") (attached as Exhibit 2) .

The major corporate entities in most industries in China are

controlled by the government, despite being listed on capital

markets exchanges. Id. SOEs listed on Chinese stock exchanges

haVe a market capitalization equal to 40% of China's Gross

Domestic Product. Corporate Governance of State Owned Enterprise:

A Survey of OECD Countries, Organization for Economic Co-

Operation and Development at 38 (2005) (attached as Exhibit 3) .

Specifically, from 2000 to 2005, 95.5% of the combined revenues

in the petroleum and natural gas industry in China were under

state ownership and 99.3% of revenues in the electricity, gas and

water industry were under ownership of the Chinese government.

Mikael Mattlin, The Chinese Government's New Approach to

Ownership and Financial Control of Strategic State-Owned

Enterprises, The Bank of Finland BOFIT Institute for Economies in

Transition, Oct. 2007 at 37 (attached as Exhibit 4) .

4. SOEs in China are managed by the State-owned Assets

Supervision and Administration Commission of the State Council

("SASAC"). See www.sasac.gov.cn/n2963340/n2963393!2965l20.html

(attached as part of Exhibit 5). SASAC's responsibilities

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include appointing and removing top executives at SOEs, managing

the state-owned assets of the enterprises, and supervising the

turn-over of state-owned capital gains to the state. Id. SASAC

is directly under the State Council of the People's Republic of

China. See www.gov.cn/english/2008-03!l6!content 92l873.htm

(attached as part of Exhibit 5). The State Council is "the

highest executive organ of State power, as well as the highest

organ of State Administration." See ww.gov.cn!english/2005-

08/05/content 20763.htm (attached as part of Exhibit 5). "The

State Council is responsible for carrying out the principles and

policies of the Communist Party of China ... and dealing with

such affairs as China's internal politics, diplomacy, national

defense, finance, economy, culture and education." Id. SASAC

recrui ts executives to:

implement the 'Decisions of the CPC (Communist Party ofChinaJ Central Committee Regarding Issues on Improvingthe System of the Socialist Market Economy,' the'Decision of the CPC Central Committee and the StateCouncil on Further Strengthening Personnel Selection,'the spirit of the national personnel selectionconference, and the 'Opinions of the State-owned AssetsSupervision and Administration Commission of the StateCouncil on Strengthening and Improving PersonnelSelection in the Enterprises under the CPC CentralCommittee,' and to propel the leadership selection andappointment system reform within State-ownedenterprises. . . .

See www.sasac.gov.cn/n2963340 !n29647l2!3050l94. html (attached as

Exhibit 6) .

5. There is a very strong link between the Communist Party

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of China ("CPC") and SOEs. Jonathan G. S. Koppell, Political

Control for China's State-Owned Enterprises: Lessons from

America's Experience with Hybrid Organizations, Governance: An

International Journal of Policy, Administration, and

Institutions, Vol. 20, No.2, April 2007, at 266 (attached as

Exhibit 7). Chinese SOEs have been described as "a vital

instrument for provision of social services and an instrument of

state policy." Id. at 258. The CPC maintains an official

position in most SOEs and has a significant amount of influence

in the decision-making process within SOEs. Id. at 266. The

government and communist party institutions of China appoint and

supervise the senior executives and management at SOEs. Guide to

Doing Business in China at 378 (attached as Exhibit 2) .

6. Article 93 of Section 3 of the Chinese Criminal Code

states as follows:

'State functionaries' as mentioned in this Law refersto persons who perform public service in State organs.Persons who perform public service in State-ownedcompanies or enterprises, institutions or people'sorganizations, persons who are assigned by Stateorgans, State-owned companies, enterprises orinsti tutions to companies, enterprises or institutionsthat are not owned by the State or people'sorganizations to perform public service and the otherpersons who perform public service according to lawshall all be regarded as State functionaries.

See Article 93 of Section 3 of the Chinese Criminal Code

(attached as Exhibit 8) .

7. Article l63 of Section 3 of the Chinese Criminal Code

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states as follows:

Where an employee of a company or enterprise who,taking advantage of his position, demands money orproperty from another person or illegally acceptsanother person's money or property in return for thebenefits he seeks for such person, if the amountinvolved is relatively large, he shall be sentenced tofixed-term imprisonment of not more than five years orcriminal detention; if the amount is huge, he shall besentenced to fixed-term imprisonment of not less thanfive years and may also be sentenced to confiscation ofproperty.Any employee of a company or enterprise who, violatingState regulations in economic activities, acceptsrebates or service charges of various descriptions andtakes them into his own possession shall be punished inaccordance with the provisions in the precedingparagraph.Any employee of a State-owned company or enterprisewho, being engaged in public service or who is assignedby a State-owned company or enterprises to engage inpublic service in a company or enterprise that is notowned by the State, commits any of the acts mentionedin the preceding two paragraphs shall be convicted andpunished according to the provisions in Articles 385and 386 of this Law.

See Article l63 of Section 3 of the Chinese Criminal Code

(attached as Exhibit 9).8. Article 385 of Section 3 of the Chinese Criminal Code

states as follows:

Any State functionary who, by taking advantage of hisposition, extorts money or property from anotherperson, or illegally accepts another person's money orproperty in return for securing benefits for the personshall be guilty of acceptance of bribes.Any State functionary who, in economic acti vi ties,violates State regulations by accepting rebates orservice charges of various descriptions and taking theminto his own possession shall be regarded as guilty ofacceptance of bribes and punished for it.


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(attached as Exhibit iO) .

9. Article 386 of Section 3 of the Chinese Criminal Code

states as follows:

Whoever has committed the crime of acceptance of bribesshall, on the basis of the amount of money or propertyaccepted and the seriousness of the circumstances, bepunished in accordance with the provisions of Article383 of this Law. Whoever extorts bribes from anotherperson shall be given a heavier punishment.


(attached as Exhibit ll) .LO. Article 388 of Section 3 of the Chinese Criminal Code

states as follows:

Any State functionary who, by taking advantage of hisown functions and powers or position, securesillegitimate benefits for an entrusting person throughanother State functionary's performance of his dutiesand extorts from the entrusting person or accepts theentrusting person's money or property shall be regardedas guilty of acceptance of bribes and punished for it.


(attached as Exhibit l2) .

ll. Article 389 of Section 3 of the Chinese Criminal Code

states as follows:

Whoever, for the purpose of securing illegitimatebenef i ts , gives money or property to a Statefunctionary shall be guilty of offering bribes.Whoever, in economic activities, violates Stateregulations by giving a relatively large amount ofmoney or property to a State functionary or by givinghim rebates or service charges of various descriptionsshall be regarded as guilty of offering bribes andpunished for it.Any person who offers money or property to a Statefunctionary through extortion but gains no illegitimate

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benefits shall not be regarded as offering bribes.


(attached as Exhibit l3).l2. Several SOE executives have been prosecuted for

official bribery in recent years. In November 20l0, Kang Rixin,

the former general manager of China National Nuclear Corporation,

was sentenced to prison for accepting 6.6 million yuan ($970,000)

in bribes between 2004 and 2009. See Former China Nuclear Head

Jailed for Life Over Bribes, BBC News, Nov. 19, 2010 (attached as

Exhibit l4). Kang was convicted of having abused his position,

enabled profits for others, and accepted large bribe payments.

Id. In relation to this misconduct, the Communist Party Central

Committee also stripped Rixin of his political rights for life.

Id. In 2009, Chen Tonghai, the former chairman of Sinopec (also

known as China Petroleum & Chemical corporation), was sentenced

to death with a two year reprieve after he was convicted of

illegally receiving 196 million yuan ($28.7 million) in bribes

between 1999 and June 2007. See Richard McGregor, Sinopec's

Corrupt Ex-Chief Gets Death Sentence, Financial Times, Jul. l6,

2009 (attached as Exhibit l5). The total bribes added up to "one

of the largest taken by a Chinese official, according to public

records." Id. Additionally, in 2006, the former chairman of

China Construction Bank was sentenced to l5 years in prison for

accepting more than $500,000 in bribes from International

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Business Machines, NCR, and Hitachi. See David Barboza, IBM. NCR

and Hitachi Named in China Bribe Verdict - Business -

International Herald Tribune, N.Y. Times, Oct. 30, 2006 (attached

as Exhibit l6) .

Entities Involved in Counts Two through Ten of the Indictment

A. Korea Hydro and Nuclear Power (Counts 2 and 3)

l3. According to the World Nuclear Association, "(fJ rom

1961 until April 200l, South Korea's sole electric power utility

was Korea Electric Power Company" ("KEPCO"), which was set up as

a government corporation. See www.world-

nuclear.org!info!inf8l.html (attached as Exhibit l7). In 200l,

the power generation part of KEPCO was split into six entities,

and all the nuclear generation capacity became part of Korea

Hydro & Nuclear Power Co. Ltd. ("KHNP"). Id. Since its

formation, KHNP has operated nuclear power plants and

hydroelectric plants in South Korea. Id.l4. According to USCS, KHNP is a wholly owned subsidiary of

KEPCO. Under the 1982 KEPCO Act, the South Korean government is

obliged to own at least 5l% of KEPCO's share capital. Because

KEPCO operates under the provisions of the KEPCO Act, it is a

virtual monopoly in the provision of electricity and assumes a

vital role in the national energy and security policies. No

civil service protection or government pensions are provided to

KHNP employees.

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l5. According to USCS, the primary ministry responsible for

developing electricity policy in South Korea is the Ministry of

Knowledge Economy ("MKE"). MKE, through the direct or indirect

government ownership of energy companies, utilities, and several

energy research institutes, has maintained a high degree of

control in all aspects of energy policy development and

implementation. MKE sets South Korea's electricity prices, which

are currently below KEPCO's production costs, and consumers are

billed according to a formula that differentiates the costs

according to KEPCO's different priorities - charging different

amounts for energy used for education purposes or for industrial

use.

l6. According to USCS, Article 32 of the KHNP Articles of

Incorporation provides:

(TheJ Nominating Committee nominates multiplecandidates for the (KHNPJ corporate presidency. Thesecandidates are reviewed and put to vote at theCommittee for Management of Public Institutions(established under the control of Minister of Strategyand Finance ("MOSF")), and again at the general meetingof shareholders. Upon the recommendation of theMinister of MOSF, the President of ROK (Republic ofKoreaJ makes the final appointment.

B. PetroChina Company Limited (Count 4)

l7. According to the company's website, PetroChina Company

Limited ("PetroChina") was founded in 1999 as a joint stock

company with limited liabilities by China National Petroleum

Corporation ("CNPC"). See

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www.petrochina.com.cn/Ptr/About PetroChina/Company Profile

(portions attached as Exhibit 18). It is the largest oil and gas

producer and distributor in China. Id. At the end of 2007, CNPC

possessed approximately 86% of PetroChina shares. Id. "(CNPCJ

is the sale sponsor and controlling shareholder of PetroChina....

CNPC is a large state-owned enterprise managed by the investment

organs authorized by the state and (SASACJ." Id.

l8. According to PetroChina' s most recent interim report

(attached as Exhibit 19), "CNPC, the immediate parent of the

Company, is a state-controlled enterprise directly controlled by

the PRC (People's Republic of ChinaJ government. The PRC

government is the Company's ultimate controlling party." See

2 aia Interim Report at l02. The other ten largest shareholders

include: National Council for Social Security Fund of the PRC,

Industrial Commercial Bank of China, China Life Insurance

Company, China Construction Bank, and the Bank of China. Id. at

9.

C. China Petroleum Materials and Equipment Corp. (Count 5)

19. According to USCS, China Petroleum Materials and

Equipment Corporation ("CPMEC") is a state-owned enterprise

specializing in the distribution of petrochemical products and

petroleum mechanical equipment. CPMEC is a subsidiary of China

National Petroleum Corporation. See portions of China National

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Petroleum corporation ("CNPC") Annual Report (2003) (attached as

Exhibit 20).

20. According to CNPC's website:

(theJ predecessor of CNPC was the Minister of PetroleumIndustry of the People's Republic of China, which wasfounded in July 1955, supervising the exploration anddevelopment of oil and gas resources in China. (CNPCJwas established on September l7, 1988 on the basis ofthe Minister of Petroleum Industry, mainly in charge ofoil and gas upstream operations. It is a state oilcompany endowed with certain governmentaladministrati ve functions.

See

www.cnpc.com.cn/en/aboutcnpc/companyprofile!history/default.htm

(attached as Exhibit 2l) .

D. China National Offshore Oil Corporation (Count 6)

2l. According to USCS, China National Offshore Oil

Corporation ("CNOOC") is a state-owned enterprise whose governing

body is SASAC. CNOOC was created under the Regulations of the

People's Republic of China on the Exploitation of Offshore

Petroleum Resources in Cooperation with Foreign Enterprises

(l982) (attached as Exhibit 22). The Regulations designate CNOOC

as "a state corporation with the qualification of a juridical

person which has the exclusive right to explore for petroleum

within the areas of cooperation and to develop, produce and

market it." See id. at Article 5.

22. In its latest credit rating for CNOOC Ltd., the core

operating subsidiary of CNOOC, Standard & Poor's ("S&P") noted

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CNOOC Ltd.' s "critical role to the government" and explained that

CNOOC Ltd. "plays a key role in helping the government ensure a

secured supply of energy to meet growing domestic demand." See

S&P: Rates CNOOC Ltd. Proposed Notes AA-, REUTERS. COM, Jan. l2,

20ll (attached as Exhibit 23). S&P also noted the company's

"very strong link to the government" and opined that "the

government is able to exert strong influence on CNOOC Ltd.' s

strategy through the appointment of board members and senior

management." Id. According to USCS, the senior officers of

CNOOC are appointed by the Chinese government.

E. National Petroleum Construction Company (Count 7)

23. According to the company's website, the National

Petroleum Construction Company ("NPCC") is a public j oint stock

company and provides services in the development of oil and gas

fields. See www.npcc.ae/NPCCSite/abo about us. aspx (attached as

Exhibi t 24). According to USCS, NPCC is owned by the General

Holdings Corporation ("GHC"), which holds a 70% interest, and the

Consolidated Contractors Group, which holds the remaining 30%.

GHC is a "public joint stock company" and is "fully owned by the

Higher Corporation for the Specialized Economic Zones in the

Emirate of Abu Dhabi" and is "exempted from the governmental fees

and taxes." See GHC Establishment Law (2004) (attached as

Exhibit 25).

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24. According to GHC's website, GHC is "the UAE's largest

industrial conglomerate and a prime mover in implementing the Abu

Dhabi government's industrial diversification policy." See

www.ghc.ae/cprofile.htm (attached as Exhibit 26)

25. Article 5 of the United Arab Emirates' Penal Code

states that "(tJ he following shall ipso jure be considered a

public official: . Chairmen and members of boards of

directors, managers and all other employees working in

associations and public corporations." See United Arab Emirates

Penal Code (l987) (attached as Exhibit 27). The Bribery

provisions of the Penal Code provide that "A prison term shall be

imposed upon any public official or person assigned to a public

service, who solicits or accepts for himself or for another

person, any gift or privilege of any kind, or any promise

thereof, in return for the performance of an act or its omission

in breach of his duties." See id. at Article 234.

F. Dongfanq Electric Corporation (Count 8)

26. According to USCS, Dongfang Electric Corporation

("Dongfang") is a state-owned enterprise that was established

wi th the approval of SASAC.

27. According to Dongfang's website, the company is "one of

the largest backbone enterprise groups under the direct

administration of Chinese Central Government." See

www.dongfang.com.cn/index.php/aboutdecs (attached as Exhibit 28).

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Dongfang "is appointed by the Central Government as one of the

most important state-owned enterprise groups concerning the

national economy of the country. As the national strategic base

for heavy-duty machinery and equipment, (DongfangJ possesses

comprehensive technical R&D abilities and is honored by the

Central Government as a National Research & Development Center."

Id.

G. Guohua Electric Power Company (Count 9)

28. Beij ing Guohua Electric Power Corporation's ("Guohua

Electric") website provides the following information:

According to national economic development planning,state industrial policies and market demands, GuohuaElectric Power, upon implementation of the scientificdevelopment concept and the group's advantage inintegrated coal, power and transportation operation,has focused on construction of power generationfacilities at coal mines, port, traffic hub and majorpower consumption regions. . .. For the future, GuohuaElectric Power will work hard to create value for thestate by keeping and increasing value of stateassets. . . .

See www.ghepc.com/Englishsite/contents/l 75/302. html (attached as

Exhibit 29) .

29. Guohua Electric was established on March ll, 1999, as

the electric power business unit under the Shenhua Group. Id.

According to Shenhua Group's website, Shenhua Group is "one of

the key central SOEs, with integrated operations against various

regions and industries" and "plays an important role in the

national economic development." See

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www.shenhuagroup.com.cn/english/aboutous/prileOofoshenhua/index. s

html (attached as Exhibit 30). Shenhua Group's Chairman makes

the following statement on the company's website:

(UJ nder the leadership of the CPC Central Committee andthe State Council, Shenhua Group, taking theopportunity of the nationwide campaign to study andimplement the scientific outlook on development,actively responded to the global financial crisis withstrengthened confidence and determination.. .. As oneof the SOEs we always keep in mind the political,economic as well as social responsibilities, adhere tothe harmony and win-win concept and do our best tomaximize the value for the related parties.

See

www.shenhuagroup.com.cn/english/aboutOus IgroupOleadership/chairma

n sOstatement/index. shtml (attached as Exhibit 30) .

H. Petronas (Count LO)

30. According to the company's website, Petroliam Nasional

Berhad ("Petronas") was incorporated in 1974 as "the national oil

company of Malaysia, vested with the entire ownership and control

of the petroleum resources in the country." See

www.petronas.com.my/about uS.aspx (attached as Exhibit 31).

According to USCS, the company's name translates to "National

Petroleum Limited," and the company is wholly owned by the

Malaysian government.

3 l. Section 3 of the Malaysian Petroleum Development Act of

1974, through which Petronas was established, provides that

"(PetronasJ shall be subj ect to the control and direction of the

Prime Minister who may from time to time issue such direction as

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he may deem fit." See Petroleum Development Act 1974 (200l

version) (attached as Exhibit 32). Section 4 of the Act provides

that" (iJ n return for the ownership and the rights, powers,

liberties and privileges vested in it by virtue of this Act,

(PetronasJ shall make to the Government of the Federation and the

Government of any relevant State such cash payment as may be

agreed between the parties concerned." Id. Section 6 of the Act

provides that "(nJ otwithstanding the provisions of any other

written law, no business of processing or refining of petroleum

or manufacturing of petro-chemical products from petroleum may be

carried out by any person other than PETRONAS unless there is in

respect of any such business a permission given by the Prime

Minister." Id.32. According to a March 2007 Rice University policy report

on the company,

Petronas is organized under a Chairman and Board ofDirectors who report directly to the Prime Minister.The Chairman is selected by the Prime Minister and hasconsiderable personal power.... The Board is composedof the Director General of the Economic Planning Unit,the General Secretary of the Ministry of Finance, theDirector of the Economic and Coordination Unit, and theindependent advocate and solicitor. There are alsofour members from Petronas: the President and CEO; theSenior Vice President of Finance; the Vice President ofCorporate Planning and Development; and the VicePresident of oil.

Fred von der Mehden and Al Troner, Petronas: A National oil

Company with an International Vision at l6-l7 (2007) (attached as

Exhibit 33) .

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33. Section 3 of Malaysia's bribery law states that a

"public body" includes "(a) the Government of Malaysia; (or)

(k) any company or subsidiary company over which or in which any

public body as is referred to (aboveJ has controlling power or

interest." See Malaysian Anti-Corruption Commission Act (2009),

Section 3, (attached as Exhibit 34)

Overview of Chinese Power and Nuclear Industry

34. According to the World Nuclear Association, Chinese

national utility companies are largely or wholly state-owned.

See World Nuclear Association: Nuclear Power in China, Appendix

l, Government Structure and Ownership at 1 (20ll), available at

www.world-nuclear. org/info/inf63ai chinanuclearstructure. html

(attached as Exhibit 35).

35. According to the World Nuclear Association,

The State-owned Assets Supervision and AdministrationCommission (SASAC) of the State Council was founded in2003 to take over the responsibilities of the formerState Economic and Trade Commission as investor ofstate-owned assets on behalf of the central governmentand in guiding state-owned enterprises' reform andmanagement. It aims to speed up restructuring ofstate-owned economy and push forward reform of state-owned enterprises, as well as harvesting dividends fromthem. At the end of 2007, l52 major enterprises weresubordinate to it, comprising the top two or three ineach sector, which gives SASAC great political andeconomic power. SASAC has a major role in nuclearpower expansion, along with (the National Developmentand Reform Commission), and supervises the ChinaNational Nuclear Corporation ("CNNC" J . . . .

Id.


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(CNNCJ controls most nuclear sector business includingR&D, engineering design, uranium exploration andmining, enrichment, fuel fabrication, reprocessing andwaste disposal. It also claims to be the maj orinvestor in all nuclear plants in China. Establishedby the State Council in 1988 as a self-supportingeconomic entity, it 'combines military production withcivilian production, taking nuclear industry as thebasis while developing nuclear power and promoting adiversified economy.'

Id. at 2-3.


(J the present China National Nuclear Corp (CNNC) wasestablished on 1 July 1999 upon approval of the StateCouncil. It is a conglomerate directly under theleadership of the central government, and also a largestate-owned enterprise directly under the supervisionand control of the State-owned Assets Supervision andAdministration Commission of the State Council. TheCNNC consists of over 100 member units, with a totalstaff of 100,000 and total assets of LLO billion Yuan.

See www. world-

nuclear.org/reference/portal/nuclear power utili ties. html

(attached as Exhibit 36).

Certain Entities involved in the Thirty Additional Transactions

I. Jiangsu Nuclear Power Corporation

38. According to CNNC's website, "Jiangsu Nuclear Power

Corporation was established on December l8, 1997, (and isJ mainly

responsible for the construction and operation of Tianwan

(Nuclear Power PlantsJ. The corporation consists of the

following three shareholders: China National Nuclear Corporation

(described above at paragraphs 36-37J (50% share), China Power

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Investment Corporation (30%) and Jiangsu Guoxin Group (20%)."

See www.cnnc.cn/tabid/l69 /Defaul t. aspx (attached as Exhibit 37)

J. Qinshan Nuclear Power Plant

39. The Qinshan Nuclear Power Company, established in 1983,

is a nuclear power company under the umbrella of the CNNC and the

main organization to implement the Qinshan Nuclear Power Plant

Proj ect in Zhej iang Province. See

www.fas.org/nuke/guide/china/contractor/cnnc.htm (attached as

Exhibit 38) .

K. China Guodian Corporation

40. According to the corporate profile on China Guodian

Corporation's website, it is one of the largest state-owned power

generation groups in China. See

www.cgdc.com.cn/en no use/en index.html (attached as Exhibit 39).

It engages in the development, investment, construction,

operation and management of power generation, and the production

and sales of electricity and heat. Id. China Guodian

Corporation is administered by SASAC. See

www.sasac.gov.cn/n296334 0 /n297ll2 /n4 956567 /index. html (attached

as Exhibit 40).

41. According to the company's President and the Party

Secretary, "China Guodian Corporation, as a key state-owned

enterprise with the vital importance on the national economy and

state energy safety, is responsible not only for keeping and

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increasing in state owned assets value by creating its material

wealth, but also for creating spiritual and intellectual wealth

to maximize economic and social benefits." See China Guodian

Company Brochure (attached as Exhibit 4l). The company was

established in 2002 and "keeps and adds value of state assets and

better fulfills the responsibility as a state-owned enterprise."

Id. The Guodian Shizuishan Power Plant is classified as a

Business Unit of Internal Accounting under China Guodian

Corporation. See www.cgdc.com.cn/en no use/en cm.html (attached

as Exhibit 42) .

L. Liqanq Power Plant

42. Ligang Power Plant is a coal fired power station

located in Jiangsu Province. See

www.citicpacific.com/eng/biz /infra/power /ligang. html (Attached as

Exhibit 43). CITIC Pacific owns 65.05% of Ligang Power Phases I

and II and 7 i . 35% of Phases III and IV. Id. CITIC Pacif ic is

incorporated in Hong Kong and publicly traded on the Hong Kong

Stock Exchange. See portions of

www.citicpacific.com/eng/about/about index. html (attached as

Exhibit 44). CITIC Pacific's ultimate holding company is CITIC

Group, a state-owned enterprise established under the Laws of the

People's Republic of China. Id. CITIC Group owns 58% of CITIC

Pac if ic . Id.

20


M. China National Machinery and Equipment Corporation

43. According to the company's website, China Machinery

Engineering Corporation was restructured and renamed from China

National Machinery and Equipment Import and Export Corporation

("CMEC") on January l8, 2 Ol1. See

www.cmec.com/en/contents/l2l/383.aspx (attached as Exhibit 45)

"Established in 1978, as the first large national corporation

integrating foreign trade with industry, CMEC is a large global

conglomerate with engineering contracting as its core business."

Id. The company's Chairman of the Board is the Secretary of

Committee of the Chinese Communist Party. Id. Two additional

members of the company's executive team are Deputy Secretaries of

Committee of the Chinese Communist Part. Id.

N. Taiwan Power Company

44. According to the company's website, Taiwan Power

Company ("Taipower") was organized on May 1, 1946. See

www.taipower.com. tx/eng/about us/Introduction (attached as

Exhibit 46). "(The companyJ is a public utility and the sole

integrated power industry in Taiwan. In compliance with the

government's economic development and the policy of ensuring the

people's well-being, the company will do its utmost on every

level to provide quality and stable electricity to the public."

Id. "Taipower is a state-owned enterprise under the Ministry of

Economic Affairs ('MOEA').... Organizational adjustments are

21


undertaken according to the regulations stipulated by the MOEA or

necessary business changes." Id.

45. According to Article 8 of the Administrative Law of

State-Run Enterprise, the competent authorities overseeing state-

owned enterprises have authority to establish, consolidate, and

dis sol ve the state-owned enterprise, approve operating

guidelines, appoint and remove important persons, inspect and

evaluate operations, and make financial plans. See

Administrative Law of State-Run Enterprise (2002) (attached as

Exhibit 47). Article l3 provides that" (sJ tate-run enterprisesshall turn over (their) profits to the National Treasury after

the year-end audit." Id. Article 37 provides: "With the

exception of the employment of special technical specialists, all

personnel appointments by state-run enterprises shall comply with

Article l2 of the Civil Service Appointment Law in order to

prevent favoritism." Id.o. Nigerian Gas Company Limited

46. According to the website of the Nigerian National

Petroleum Corporation ("NNPC"), the Nigerian Gas Company Limited

("NGCL") was "established in 1988 as one of the LL subsidiaries

of (NNPCJ. It is charged with the development of an efficient

gas industry to fully serve Nigeria's energy and industrial

feedstock needs through an integrated gas pipeline network and

also to export natural gas and its derivatives to the West

22


African Sub-region." See www.nnpc-nigeria.com/ngcl.htm (attached

as Exhibit 48). The Nigerian National Oil Corporation was

founded in 1971 and subsequently merged with the Ministry of

Petroleum Resources under Decree 33 of 1977, and changed its name

to NNPC. See www.nnpc-nigeria.com/nnpc.htm (attached as Exhibit

49) .

47. Section 2 of Nigeria's Corrupt Practices and other

Related Offences Act 2000 provides that "' Public Officer' means a

person employed or engaged in any capacity in the public service

of the Federation, State or Local Government, public corporations

or private company wholly on (sicJ jointly floated by any

government or its agency including the subsidiary of any such

company. . . ." See Corrupt Practices and other Related Offences

Act 2000 (attached as Exhibit 50).

P. Bharat Heavy Electricals Limited

48. Bharat Heavy Electricals Limited ("BHEL") was

established by the government of India in 1956 and is 68% state-

owned. See wVM.forbes.com/lists/20l0(37(fab-50-10 Bharat-Heavy-

Electricals KUVM.html (attached as Exhibit 5l). BHEL specializes

in thermal, gas, nuclear, and hydro power plants. Id.

49. The Prevention of Corruption Act of 1988 states that

"public servant" means, in part, "any person in the service or

pay of a corporation established by or under a Central,

Provincial or State Act, or an authority or a body owned or

23


controlled or aided by the Government or a Government company as

defined in section 617 of the Companies Act, 1956." See The

Prevention of Corruption Act of 1988 (attached as Exhibit 52).

Q. European Agency for Reconstruction

50. According to the European Union's website, the European

Agency for Reconstruction ("the Agency for Reconstruction") ,

whose mandate expired in 2008, was established in February 2000

by declaration of the Council of the European Union as the

European Union's main reconstruction arm in Kosovo and was later

expanded to Serbia, Montenegro, and Macedonia. See

www.ec.europa.eu/enlargement/archives/ear/agency/main/ag-main.htm

(attached as Exhibit 53). As an independent agency of the

European Union, the Agency for Reconstruction was accountable to

the European Union Council and the European Parliament and was

overseen by a Governing Board composed of representatives from

the European Union Member States and the European Commission.

Id.; see also Council Regulation No. 2667/2000 of 5 December 2000

on the European Agency for Reconstruction ("Council Regulation

No. 2667/2000") (attached as Exhibit 54).

5l. Article 2 of Council Regulation No. 2667/2000 states

that, among other tasks, the Agency for Reconstruction had

responsibility for preparing and evaluating invitations to

tender, signing contracts, concluding financing agreements, and

awarding contracts. Id. Article 10 of Council Regulation

24


2667/2000 states that the "Agency's staff shall be subject to the

rules and regulations applicable to officials and other servants

of the European Communities." Id. The Agency for

Reconstruction's emphasis evolved from "post-conflict

reconstruction to helping countries with reform in areas such as

justice and home affairs, public administration and public

finance, and economic development." See

www.ec.europa.eu/enlargement/archives/ear/agency/main/ag-main.htm


R. Abu Dhabi Marine Operating Company

52. According to USCS, the Abu Dhabi Marine Operating Areas

Limited ("ADMA Limited") was created in 1955 by British Petroleum

and Total, S.A. to develop the United Arab Emirates' ("UAE")

offshore oil and gas resources. In the early 1970s, the

Government of Abu Dhabi, through 100% state-owned Abu Dhabi

National Oil Company ("ADNOC"), became the owner of 60% of ADMA

Limited. In 1977, the Government of Abu Dhabi and the ADMA

Limited shareholders established a new company, called Abu Dhabi

Marine Operating Company ("ADMA-OPCO"), to succeed ADMA Limited

as operator of the concession. Currently, ADNOC owns 60i of

ADMA-OPCO, and British Petroleum, Total, S.A., and JODCO own the

remaining 40%.

25


S. Saudi Aramco

53. According to Saudi Aramco's website, in 1933 Saudi

Arabia granted an oil concession to an affiliate of Standard Oil

of California. See timeline at www.saudiaramco.com website

(attached as Exhibit 55) . In 1973, Saudi Arabia's Government

acquired a 25% participation interest in the company, which had

been renamed Aramco in 1944. Id. In 1980, the Saudi Government

acquired a LOO% participation interest in Aramco and purchased

almost all of the company's assets. Id. In 1988, the company

was renamed the Saudi Arabian oil Company ("Saudi Aramco"). Id.

54 . According to Saudi Aramco' s website,

Saudi Aramco reports to its owner, the Saudi ArabianGovernment, through the Supreme Council of Petroleumand Mineral Affairs, chaired by the Custodian of theTwo HOlY Mosques King 'Abd Allah ibn 'Abd al- 'Aziz AlSa' ud. The Supreme Council of Petroleum and MineralsAffairs sets the company's broadest policy andobjectives. Its members are drawn from the governmentand the private sector.Saudi Aramco' s Board of Directors, chaired by theminister of Petroleum and Mineral Resources, isresponsible for high- level planning, budgeting andproject decisions.

See portions of WWW. saudiaramco. com website (attached as Exhibit

55) .

55. Saudi Arabia's 1992 Combating Bribery Law defines a

public official to include, in part, (l) "a person employed by

the government or any public administrative authority," or (2) "a

person employed by a company that manages or operates a public

facili ty or performs a public service, or (is) employed by a

26


joint-stock company or company in which the government has a

holding...." See Robert Thomas and Sultan Al-Hejailan, Anti-

Corruption Regulation 2010 at l87 (Homer E. Moyer, Jr. Ed., 20l0)


Foreign Corrupt Practices Act Legislative History

56. Dr. Gordon Adams, Director of Military Research,

Counsel on Economic Priori ties, testified as follows at the

Hearings Before the Subcommittee on Consumer Protection and

Finance, House of Representatives, 95th Congress, First Session

(April 20 and 2l, 1977):

American Standard's report reflects the same problem:'In another subsidiary in a foreign country, paymentsin the form of excessive commissions were made tosalesmen of the subsidiary which the Registrantbelieves were probably paid by the salesman topurchasing agents or customers' employees, in part fororders received from government-owned businesses andagencies. f

See Exhibit 42 to Prof. Koehler Decl. at page l574 (emphasis

added) .

57. Senator Frank Church, Chairman of the Subcommittee on

Multinational Corporations of the Committee on Foreign Relations,

summarized testimony at the Hearings Before the Subcommittee,

94th Congress, First Session (July l7, 1975):

We further learn through Mr. Lehmann's testimony thatthe allocation was based upon the amount of oil thecompanies sold to the Italian electric utility company.The Italian electric utility, ENEL, is Governmentowned. It is a Government utility that is decidingwhether to build oil plants for generating electricityor nuclear plants and deciding what kind of fuel to

27


use. This government owned utility can either favoroil or adopt some other policy less to the favor ofoil. When it comes to repayment of the association'sborrowing for making poli tical payments to the partiesof Italy, and the interest that accrued on that loan,we find that money was channeled through ENEL and thatthe amount each company pays is based upon how mucheach company sold to ENEL.

Political Contributions to Foreign Governments, Hearings before

the Subcommittee on Multinational Corporations of the Committee

on Foreign Relations, 94th Congress, First Session (July 17,

1975) at page 330 (emphasis added) (attached as Exhibit 57) .

58. Congressman Timothy Wirth, Chairman of the Subcommittee

on Telecommunications, Consumer Protection and Finance Committee

on Energy and Commerce, requested information concerning the

Department of Justice's enforcement activities under the FCPA.

The response, included in The Foreign Trade Practices Act:

Hearings on H.R. 2157 Before the Subcommittee on International

Economic Policy and Trade of the House Committee on Foreign

Affairs, 98th Congress, First Session (April 18 & 25, July l2,

Oct. 6, 1983) contains several references to foreign officials in

the context of state-owned entities. One reference to an ongoing

investigation lists a "National Bank Officer" as a foreign

official having received payments. See Exhibit 66 to Prof.

Koehler Decl. at 3049. The description of "Investigation No. 27"

states: "A telephone call to the Department from an attorney

representing a group of American oil brokers, gave rise to the

possibility that the group might be considering the payment of a

28


large commission to a member of royalty in a Middle Eastern

country for assistance in purchasing oil from the government

owned oil company." Id. at 3054 (emphasis added) The

description of "Investigation No. 5l" states:

An American company in an energy related field informedthe SEC that it was approached by officials of a stateenterprise of a fLJ at in American country and told thatin order to obtain certain contracts, blank letters ofcredit would have to be deposited in a bank in theforeign country. The persons who could draw down onthese letters would be determined by officials of thestate enterprise. The American company subsequentlyadvised that they had determined not to go forward inseeking to obtain contracts with the country becausethey could not be sure that an official would not getthe bene fit of the funds.

Id. at 3057 (emphasis added).

59. Mr. Ian MacGregor, the chairman of the AMX Corporation

and chairman of the United States Council of the International

Chamber of Commerce, testified as follows at the Hearings Before

the Committee on Banking, Housing and Urban Affairs, United

States Senate, 94th Congress, Second Session (April 5, 7 and 8,

1976): "The biggest area of problem is the interface between our

business organizations and these Government and quasi-Government

industrial establishments." See Exhibit l3 to Prof. Koehler

Decl. at page 643.

60. Research Reports from the International Division of the

Chamber of Commerce of the United States included in the Hearings

Before the Committee on Banking, Housing, and Urban Affairs,

Senate, 99th Congress, Second Session on S. 430 (June la, 1986)

29


listed business foregone due to the FCPA: "A major U.S.

corporation refused sales valued at several hundred thousand

dollars to a Middle East quasi-government organization because it

would have been required to pay commissions to a private company

6l. I declare under penalty of perjury that the foregoing

in order to collect its account. The U. S. corporation could not

be certain that part of that payment would not be passed to some

government officials." See Exhibit 68 to Prof. Koehler Decl. at

page 3197 (emphasis added) .

is true and correct to the best of my knowledge and belief.

DATED: April 18, 2011 7:k~ /~~J--~~- /"/ ¿BR): SMITH//

30


Documents

DOJ Carson Opposition - Declaration of FBI Special Agent Brian Smith