Paul Cosgrove, the former head of worldwide sales at California-based valve manufacturer Control Components Inc. (CCI) pleaded guilty yesterday to violating the Foreign Corrupt Practices Act (FCPA).  Cosgrove is the fourth of six company executives to plead guilty to violating or conspiring to violate the FCPA.

Cosgrove was previously scheduled to stand trial on June 26th of this year, but changed his plea following U.S. District Court Judge James V. Selna’s denial of his motion to suppress evidence two weeks ago.  In the motion, Cosgrove and his co-defendant David Edmonds unsuccessfully had argued that statements they made to CCI’s outside counsel (Steptoe & Johnson) during the course of Steptoe’s investigation on CCI’s behalf should be suppressed on the grounds that Steptoe’s attorneys purportedly qualified as state actors because they had acted on the Government’s behalf during the course of the company’s investigation.  In rejecting defendants’ motion, Judge Selna found that the facts at bar did not support that “Steptoe’s actions were so intertwined with the Government” as to render them de facto state actors.  

Conduct

  • In 2009, CCI pleaded guilty to a three-count criminal information that charged two counts of violating the antibribery provisions of the FCPA and one count of conspiracy to violate the FCPA and Travel Act.
  • CCI violated the FCPA by making corrupt payments totaling approximately US$4.9 million to officers and employees of state-owned enterprises (SOEs) – “foreign officials” under the FCPA – in China, South Korea, UAE and Malaysia for the purpose of obtaining or retaining business. CCI generated approximately US$31.7 million in net profits as a result of these corrupt payments.
  • Cosgrove served as CCI’s head of worldwide sales from 1997 to 2007 and also as its Executive Vice President from 2002 to 2007. 
  • Pursuant to the plea agreement, Cosgrove admitted that, in 2003, “CCI bid on an order to provide a valve to Sichuan Chemical in China” and that Cosgrove “approved via email the payment of $7,500” to a third party conduit which then redirected the payment to the SOE Sichuan Chemical in order for CCI to obtain business.  Cosgrove further admitted that “[a]s a result of this payment, CCI earned profits of approximately $5,625 in connection with the sale of the valve.”

Penalties

  • Under the plea agreement, the Government and Cosgrove agreed to make a joint sentencing recommendation to the Court of no more than 15 months imprisonment, three years supervised release, and a fine of $20,000.  This recommended sentence is substantially less than the statutory maximum punishment of 5 years imprisonment and a $100,000 fine per count of violating the FCPA that Cosgrove could have faced had he proceeded to trial.  Sentencing is set for August 27, 2012.

The Justice Department’s press release on this matter can be found here.