U.S. v. Aguilar

• Decision Date: 20 April 2011
• Docket Number: No. CR10–01031–AHM.,CR10–01031–AHM.
• Citation: 783 F.Supp.2d 1108
• Court: U.S. District Court — Central District of California
• Parties: UNITED STATES of Americav.Angela Maria Gomez AGUILAR, Lindsey Manufacturing Company, Keith E. Lindsey, Steve K. Lee, Defendants.

783 F.Supp.2d 1108

UNITED STATES of America

v.Angela Maria Gomez AGUILAR, Lindsey Manufacturing Company, Keith E. Lindsey, Steve K. Lee, Defendants.

No. CR10–01031–AHM.

United States District Court, C.D. California.

April 20, 2011.

Stephen Larson, Jan L. Handzlik, Janet Levine, for Defendants.

Proceedings: In Chambers

A. HOWARD MATZ, District Judge.I. INTRODUCTION

On October 21, 2010, the Government filed a First Superseding Indictment (“FSI”) charging defendants Keith E. Lindsey, Steve K. Lee, and Lindsey Manufacturing Company (“the Lindsey Defendants”) with conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”), as well as substantive violations of the FCPA.¹ The gist of the allegations in the FSI is that the Lindsey Defendants paid bribes to two high-ranking employees of the Comisión Federal de Electricidad (“CFE”), an electric utility company wholly-owned by the Mexican government. Lindsey Manufacturing Company (“LMC”) funneled the alleged bribes to these employees (Nestor Moreno and Arturo Hernandez) by making payments to Grupo International (“Grupo”), a company owned and controlled by the Aguilar Defendants. The payments from LMC to Grupo ostensibly were commissions for services performed by Enrique Aguilar in his capacity as LMC's sales representative in Mexico. In reality, according to the Government, large portions of those payments were used to bribe Messrs. Moreno and Hernandez.

The Government claims these alleged bribes violated the FCPA. As relevant here, the FCPA makes it unlawful for any American company or person acting on behalf of such company to provide money or other benefits to any foreign official in order to obtain or retain business. The FCPA defines a “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency or instrumentality, or for or on behalf of any such public international organization.” 15 U.S.C. § 78dd–2(h)(2)(A).

The Lindsey Defendants have moved to dismiss the charges against them. Angela Aguilar has joined their motion. The question presented by the motion is whether an officer or employee of a state-owned corporation can be a “foreign official” for purposes of FCPA liability.² Defendants argue that under no circumstances can such a person be a foreign official, because under no circumstances can a state-owned corporation be a department, agency, or instrumentality of a foreign government.³

The Court DENIES the motion to dismiss, because a state-owned corporation having the attributes of CFE may be an “instrumentality” of a foreign government within the meaning of the FCPA, and officers of such a state-owned corporation, as Messrs. Nestor Moreno and Arturo Hernandez are alleged to be, may therefore be “foreign officials” within the meaning of the FCPA.⁴

II. THE FIRST SUPERSEDING INDICTMENT

For purposes of this motion, Defendants “do not dispute the factual allegations in the FSI....” Reply at 2 (emphasis removed). The FSI alleges that “Comisión Federal de Electricidad (‘CFE’) was an electric utility company owned by the government of Mexico. During the time period relevant to this Indictment, CFE was responsible for supplying electricity to all of Mexico other than Mexico City. CFE contracted with Mexican and foreign companies for goods and services to help supply electricity services to its customers.” FSI at 2.

“Official 1 [now known to be Nestor Moreno] was a Mexican citizen who held a senior level position at CFE. Official 1 became the Sub–Director of Generation for CFE in 2002 and the Director of Operations in 2007. Official 1's position at CFE made him a ‘foreign official,’ as that term is defined in the FCPA, 15 U.S.C. § 78dd–2(h)(2).... Official 2 [now known to be Arturo Hernandez] was a Mexican citizen who also held a senior level position at CFE. Official 2 was the Director of Operations at CFE until that position was taken over by Official 1 in 2007. Official 2's position at CFE made him a ‘foreign official,’ as that term is defined in the FCPA, 15 U.S.C. § 78dd–2(h)(2).” Id. at 2–3.

“Defendant Lindsey Manufacturing Company ... was a privately held company incorporated in California and headquartered in Azusa, California.... Defendant Lindsey Manufacturing manufactured emergency restoration systems ... and other equipment that was used by electrical utility companies.... Many of defendant Lindsey Manufacturing's clients were foreign, state-owned utilities, including CFE....” Id. at 3.

“Defendant Keith E. Lindsey ... was the President of defendant Lindsey Manufacturing. In that position, defendant Lindsey had ultimate authority over all of defendant Lindsey Manufacturing's operations. Defendant Lindsey also had a majority ownership interest in defendant Lindsey Manufacturing.... Defendant Steve K. Lee ... was the Vice President and Chief Financial Officer of defendant Lindsey Manufacturing. In that position, defendant Lee controlled defendant Lindsey Manufacturing's finances....” Id. at 3, 4.

“Grupo Internacional De Asesores S.A. (‘Grupo’) was a company incorporated in Panama and headquartered in Mexico.... Grupo's purported business was to provide sales representation services for companies like defendant Lindsey Manufacturing that had business with CFE. Grupo was defendant Lindsey Manufacturing's sales representative in Mexico and received a percentage of the revenue Lindsey Manufacturing received from its contracts with CFE.... Defendant Enrique Aguilar ... was a Director of Grupo and was hired by defendant Lindsey Manufacturing to obtain contracts from CFE.... Defendant [Angela Aguilar] was a citizen of Mexico and was married to defendant Enrique Aguilar. [She] served as an Officer and Director of Grupo. In that position, [she] managed Grupo's finances....” Id. at 4, 5.

“[D]efendants Enrique Aguilar, Lindsey Manufacturing, Lindsey, and Lee, together with ... others known and unknown ... conspired, and agreed to [violate the FCPA].... The object of the conspiracy was carried out ... as follows: ... Defendants Lindsey Manufacturing, Lindsey and Lee would agree to pay defendant Enrique Aguilar a thirty percent commission on all of the goods and services defendant Lindsey Manufacturing sold to CFE ... knowing that all or a portion of that money would be used to pay Official 1 and others at CFE bribes in exchange for CFE awarding defendant Lindsey Manufacturing contracts.” Id. at 6, 7. The FSI further alleges five substantive FCPA violations committed by these defendants. Id. at 16–17. The FSI also alleges that Enrique Aguilar and Angela Aguilar conspired to commit money laundering and did launder money. Id. at 18–24.

III. ANALYSISA. The Foreign Corrupt Practices Act

The FCPA states: “It shall be unlawful for any domestic concern ... or for any officer, director, employee, or agent of such domestic concern or any stockholder thereof acting on behalf of such domestic concern, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of value to—(1) any foreign official for purposes of ... (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person....” 15 U.S.C. § 78dd–2(a).

As noted above, the FCPA defines “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.” Id. at § 78dd–2(h)(2)(A). The FCPA does not define “instrumentality.”

B. The Comisión Federal de Electricidad

For purposes of this motion, the Lindsey Defendants have not disputed the following facts, which were set forth in the Government's opposition papers (“Opp.”), as follows:

“Under the Mexican Constitution, the supply of electricity is solely a government function.... Specifically, Article 27 provides:

It is exclusively a function of the general Nation to conduct, transform, distribute, and supply electric power which is to be used for public service. No concessions for this purpose will be granted to private persons and the Nation will make use of the property and natural resources which are required for these ends.

Opp. at 3.

“Under [Mexico's] Public Service Act of Electricity of 1975, the organic law that created CFE, CFE is defined as ‘a decentralized public entity with legal personality and its own patrimony.’ ... Article 10 provides that CFE's Governing Board is composed of the Secretaries of Finance and Public Credit, Social Development, Trade and Industrial Development of Agriculture and Water Resources, and Energy, Mines, and State Industry, and Article 14 provides that the ‘President of the Republic shall appoint the Director General.’ ” Id. at 3–4.

Defendants further acknowledge that CFE is described as a governmental “agency” on its website, which also states that CFE is “a company created and owned by the Mexican government.” Motion at 2 n. 2, 3 n. 3.

C. Defendants' Categorical Motion

Defendants themselves acknowledge that, “[n]one of the issues raised by the instant motion rests on disputed facts and none is dependent on further finding of fact. Defendants argue that, no matter what other characteristics of CFE the government may attempt to prove at trial, and assuming that all of the...