us v. cci plea agreement

8/9/2019 Us v. CCI Plea Agreement

1/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 2 of 53Case 8:09-cr-00162 Document 7

THOMAS P. O'BRIENUnited Sta tes AttorneyCHRISTINE C. EWELLChief , Criminal Divis ionROBB C. ADKINSChief , Santa Ana OfficeDOUGLAS F. McCORMICK (180415)Ass i s t an t United Sta te s Attorney

Filed 07/24/2009 Page 1 of 52

411 West Fourth St ree t , Sui te 8000Santa Ana, Cal i forn ia 92701Telephone: (714) 338-3541Facsimi le : (714) 338-3564E-mail: [email protected] F. MENDELSOHN, Acting ChiefHANK BOND WALTHER, Ass i s t an t ChiefANDREW GENTIN, Tr ia l AttorneyFraud Sect ionCriminal Divis ion, U.S. Department of Jus t i c e1400 New York Avenue, N.W.Washington, DC 20005Telephone: (202) 353-3551Facsimi le : (202) 514-0152E-mail: andrew.gentin@usdoj .govAttorneys fo r Pla in t i f fUnited Sta tes of America

UNITED STATES DISTRICT COURTFOR THE CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISIONUNITED STATES OF AMERICA, SA CR NO. 09-162

P la in t i f f , PLEA AGREEMENTv.

CONTROL COMPONENTS, INC.,Defendant.


2/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 3 of 53Case 8:09-cr-00162 Document 7 Filed 07/24/2009 Page 2 of 52

The United St a t e s of America, by and through i t s a t to rneys ,A ss i s t an t Chief Hank Bond Walther and Tr ia l Attorney AndrewGentin, United St a t e s Department of Jus t i ce , Criminal Divis ion,Fraud Sect ion , and A ss i s t an t United St a t e s Attorney fo r theCent ra l D is t r i c t of Cal i fo rn ia Douglas F. McCormick(co l l ec t ive ly , th e "Depar tment") , and the Defendant , CONTROLCOMPONENTS, INCORPORATED ("CCI" or "Defendant" ) , by and throughi t s a t to rn ey s Pa t r i ck M. Norton and Brian M. Heber l ig o f Step toeand Johnson LLP and David Esseks of Allen and Overy LLP, andpursuan t to au thor i ty granted by the CCI Board of Direc to r s , haveen tered in to a plea agreement ( the "Agreement") , pursuan t to Rule11 (c) (1) (C) of the Federa l Rules of Criminal Procedure , the termsand condi t ions o f which a re as fo l lows:

The Defendant's Agreement1. CCI agrees to waive indic tment and plead gu i l ty to a

th ree-count c r iminal informat ion f i l ed in th e Cent ra l D is t r i c t ofCal i fo rn ia charging CCI with : (1) conspi racy to commit offensesaga ins t the United Sta te s , t ha t i s , to vio la t e the an t i -b r ibe ryprov is ions o f the Foreign Corrupt Prac t i ces Act o f 1977 ("FCPA"),as amended, 15 U.S.C. 78dd-2, and the Travel Act , IS U.S.C. 1952, a l l i n v io l a t ion o f IS U.S.C. 371 (Count One); and (2)tw o subs tan t ive vio la t ions of an an t i -b r ibe ry prov is ion of theFCPA, 15 U.S.C. 7Sdd-2 (Counts Two and Three) . Defendantfu r the r agrees to p e r s i s t in t h a t plea through sentencing and, as

2


3/52


s e t fo r th below, to fu l ly cooperate with the Department in i t si nves t iga t ion in to a l l mat ters r e la ted to th e conduct charged inthe Information .

2 . Defendant unders tands and agrees t h a t t h i s Agreement i sbetween the Department and eel, and does not bind any otherd iv i s ion or sec t ion o f the Department o f Jus t i ce o r any otherfedera l , s t a t e , o r l o c a l prosecu t ing , admin i s t ra t ive , orregu la to ry au thor i ty . This Agreement does not apply to any o th e rcharges o th e r than t hose s p ec i f i c a l l y mentioned h ere in . However,the Department w i l l br ing t h i s Agreement and the coopera t ion ofeel, i t s d i r ec t o r i n d i r ec t a f f i l i a t e s , subs id i a r i e s , and paren tcorpora t ions , to the a t ten t ion of other prosecu t ing au thor i t i e so r o th e r agencies , if reques ted .

3. Defendant agrees t h a t t h i s Agreement w i l l be executedby an au thor ized corpora te rep re sen ta t ive . Defendant fu r the ragrees t ha t a Resolut ion duly adopted by the eel Board ofDirec to rs , in the form a t tached to t h i s Agreement as Exhib i t 3,or in a subs tan t ia l ly s imi l a r form, represen t s t h a t thes igna tu res on t h i s Agreement by eel and i t s counsel a reau thor ized by th e eel Board of Di rec to rs , on b eh a l f of eel.

4. Defendant agrees t h a t it has the fu l l l ega l r igh t ,power and au t h o r i t y to en te r i n to and perform a l l of i t sobl iga t ions under t h i s Agreement.

5. Defendant agrees to abide by a l l terms and obl iga t ions

3


4/52


of t h i s Agreement as descr ibed here in , inc lud ing but not l imi tedto the fo l lowing:

a. To plead g u i l t y as se t for th in t h i s Agreement;b. To abide by a l l sentencing s t ipu la t ions conta ined

in t h i s Agreement;c . To appear , th rough i t s duly appoin ted

rep re sen ta t ive s , as ordered fo r a l l cour t appearances , and obeyany o th e r ongoing cour t o rder in t h i s mat te r ;

d. To commit no fu r t h e r cr imes;e . To be t r u t h fu l a t a l l t imes with th e Court;f . To pay the app l icab le f ine and sp ec i a l assessment ;g. To c rea te and implement a Compliance Code which,

a t a minimum, contains a l l of th e ob l iga t ions and prov is ionsdescr ibed in the Compliance Code a t tached as Exhib i t 2 here to andincorpora ted here in ; and

h. To ensure t h a t in the event CCI s e l l s , merges o rt r ans fe r s a l l or subs tan t ia l ly a l l of i t s bus iness opera t ions asthey e x i s t as of the date o f t h i s Agreement, whether such sa le (s )i s / a r e s t ruc tu red as a s tock o r asse t sa le , merger or t r ans fe r ,CCI sha l l inc lude in any co n t r ac t fo r sa le , merger, or t r ans fe r aprov is ion fu l ly binding th e purchase r ( s ) or any successor ( s ) ini n t e r e s t the re to to the obl iga t ions descr ibed in t h i s Agreement,inc lud ing the obl iga t ions descr ibed in Exhib i t 2 with respec t toa Compliance Code.

4


5/52


6. eel agrees to cont inue to cooperate fu l ly with th eDepartment and th e Federa l Bureau o f Inves t iga t ion , in a mannerco n s i s t en t with the non-waiver agreement between the p a r t i e s ,dated October 18, 2007, and co n s i s t en t with app l icab le law andregu la t ions including labor , data p ro t ec t i o n , and pr ivacy laws.At the reques t o f the Department, eel s h a l l a l so cooperate fu l lywith fo re ign law enforcement au th o r i t i e s and agencies . eel s h a l lt r u t h fu l l y disc lose to the Department a l l non-pr iv i legedinformat ion with r e sp ec t to the a c t iv i t i e s of eel and i t sa f f i l i a t e s , i t s p resen t and former d i r e c t o r s , o f f i ce r s ,employees, agen t s , consu l t an t s , con t rac to rs and subcont rac to rs ,concerning a l l mat ters r e la t ing to corrup t payments to fore ignpubl ic o f f i c i a l s or to employees of pr iva te customers inconnect ion with t h e i r opera t ions about which eel has anyknowledge and about which the Department , the Federal Bureau ofInves t iga t ion , or, a t t he reques t of the Department, any fo re ignlaw enforcement au th o r i t i e s and agenc ies , s h a l l inqu i re . Thisobl iga t ion of t r u t h fu l disc losure inc ludes the obl iga t ion of eelto provide to the Department, upon r eq u es t , any non-priv i legeddocument, record, or o ther tang ib le evidence r e la t ing to suchco r ru p t payments to fo re ign pub l ic of f i c i a l s or to employees o fp r i v a t e customers about which the aforement ioned au thor i t i e s andagencies sha l l inqu i re o f eeI, sub jec t to the di rec t ion of theDepartment .

5


6/52


7. Defendant agrees t ha t any f ine or r e s t i t u t i o n imposedby the Court wi l l be due and payable with in ten (10) bus inessdays from th e date o f sentencing, and Defendant wi l l not a t temptto avoid o r delay payments . Defendant fu r the r agrees to pay theClerk o f the Court fo r the United Sta tes D is t r i c t Court fo r theCen t ra l D is t r i c t o f Cal i fo rn ia , Santa An a Divis ion, th e mandatoryspec ia l assessment within ten (10) bus iness days from the da te o fsen tencing .

8. Defendant agrees t ha t if th e company, i t s paren tcorpora t ion , o r any o f i t s d i r ec t o r i n d i r ec t a f f i l i a t e s orsubs id i a r i e s i s su es a p res s re lease in connect ion with t h i sAgreement, Defendant sha l l f i r s t consu l t with the Department todetermine whether (a) th e t ex t of the r e l ea se i s t rue andaccura te with r e sp ec t to mat ters between the Department and theDefendant; and (b ) th e Department has no objec t ion to there l ea se . Statements a t any press conference concerning t h i smat te r sha l l be co n s i s t en t with t h i s p res s r e l ea se .

The United S ta t e s ' Agreement9. In exchange fo r the corpora te gui l ty plea o f CCI and

th e complete fu l f i l lmen t o f a l l of its obl iga t ions under t h i sAgreement, the Department agrees not to f i l e add i t iona l cr iminalcharges ag a in s t CCI r e la t ing to (i) any of th e conduct descr ibedin th e Sta tement of Facts a t tached as Exhib i t 1, or ( i i )i n format ion disc losed by CCl or i t s paren t company IMl plc to the

6


7/52


Department p r i o r to t he da te o f t h i s Agreement . This Agreementwi l l not c lo se or preclude th e i n v es t i g a t i o n or p rosecu t ion ofany l e g a l o r n a t u ra l per sons , i nc lud ing any o f f i ce r s , di rec to rs ,employees, agents or co n su l t an t s of CCI, who may have beeninvo lved in any of the ma t t e r s s e t fo r th in th e Information ,Sta tement of Facts or in any o th e r ma t t e r s . Fina l ly , theDepartment agrees t h a t it wi l l f i l e a Sentenc ing Memorandum insuppor t of the proposed agreed-upon sentence t ha t w i l l inc lude ad esc r i p t i o n o f (a) r e l ev an t fac t s , (b ) the natu re of theoffenses , and (c ) CCI's coopera t ion and compliance andremedia t ion measures .

Fac tu a l Basi s10. Defendant i s pleading gui l ty because it i s gui l ty of

the charges conta ined in th e Informat ion. Defendant admits ,agrees and s t i p u l a t e s t ha t th e fac tua l a l l eg a t i o n s s e t fo r th inthe Sta tement of Facts a t tached as Exhib i t 1 a re t rue andco r rec t , t h a t it i s respons ib le fo r the ac t s of i t s formero f f i ce r s and employees desc r ibed in the Sta tement of Fac t s , andt h a t th e Sta tement of Facts accura te ly r e f l e c t s CCI's cr iminalconduct .

Waiver o f Rights11. Federa l Rule of Criminal Procedure 11(f ) and Federa l

Rule of Evidence 41 0 l imi t the ad mi ss i b i l i t y of s ta tements made

7


8/52


in the course of p l ea proceedings or p lea d i scuss ions in bothc i v i l and cr iminal proceedings, if the gui l ty plea i s l a t e rwithdrawn. Defendant express ly warrants t h a t it has discussedthese ru l e s with its counsel and unders tands them. Sole ly to theex ten t se t fo r th below, Defendant volun ta r i ly waives and gives upthe r igh t s enumerated in Federa l Rule of Criminal Procedure 11(f )and Federa l Rule of Evidence 410. Spec i f i ca l ly , Defendantunders tands and agrees t h a t any s t a t ement s t h a t it makes in thecourse o f i t s g u i l t y plea o r in connect ion with the Agreement a readmissible ag a i n s t it fo r any purpose in any u .S . f ed e ra lcr iminal proceeding i f , even though th e Department has fu l f i l l e da l l of i t s o b l i g a t i o n s under t h i s Agreement and the Court hasimposed the agreed-upon sentence , Defendant n ev er th e l e s swithdraws i t s g u i l t y plea .

12. CCI knowingly, i n t e l l i g e n t l y , and volun ta r i ly waivesi t s r i g h t to appeal the convict ion in t h i s case . CCI s imi l a r lyknowingly, i n t e l l i g e n t l y , and volun ta r i ly waives the r i g h t toappeal th e sentence imposed by the cour t , provided such sentencei s consi s t en t with th e terms of t h i s Agreement. In add i t ion , CCIknowingly, i n t e l l i g e n t l y , and volun ta r i ly waives the r i g h t tobring any c o l l a t e r a l chal lenge , inc lud ing chal lenges pursuant to28 U.S.C. 2255, chal lenging e i t h e r the convict ion, or thesentence imposed in t h i s case , excep t fo r a claim of i ne f fec t iveass i s t an ce o f counse l . eCI waives a l l defenses based on th e

8


9/52


s t a t u t e of l i m i t a t i o n s and venue with r e sp ec t to any prosecu t iont h a t i s not t ime-barred on the da te t h a t t h i s Agreement i s s ignedin the event t ha t : (a) t he convic t ion i s l a t e r vaca ted fo r anyreason; (b) CCI v i o l a t e s t h i s Agreement; or (c) the p lea i s l a t e rwithdrawn. The Department i s f ree to t ake any p o s i t i o n on appealor any o th e r pos t- judgment mat ter .

Pena l ty Range13. The s t a t u t o ry maximum sentence t h a t the Cour t can

impose fo r a vio la t ion of Ti t l e 18, United St a t e s Code, Sect ion371, i s a f ine of $500,000 o r twice the gross pecunia ry ga in o rgross pecuniary l o ss re su l t ing from the of fense , whichever i sg re a t e s t , 18 U.S.C. 3571; f ive years ' proba t ion , 18 U.S.C. 3561; and a mandatory sp ec i a l assessment of $400, 18 U.S.C. 3013. The s t a t u t o ry maximum sentence t ha t the Court can imposefo r each vio la t ion o f T i t l e 15, United St a t e s Code, Sec t ion 78dd-2, i s a f ine o f $2,000,000 o r twice the gross pecunia ry ga in orgross pecuniary l o ss re su l t ing from the of fense , whichever i sg re a t e s t , 15 U.S.C. 78dd-2 (g) (1) (A), 18 U.S.C. 357l ; f iveyears ' proba t ion , 18 U.S.C. 3561; and a mandatory sp ec i a lassessment o f $400, 18 U.S.C. 3013. The s t a t u t o ry maximumsentences fo r mul t ip le counts can be aggregated and may runconsecu t ive ly .

14. Calcu la t ion of Fine . The p a r t i e s s t i p u l a t e t h a t the2007 United St a t e s Sentencing Guide l ines Manual ("U.S.S.G. H )

9


10/52


appl ies to t h i s mat te r and to th e f ac tua l p r ed ica te s se t for thbelow and t ha t the fol lowing i s th e proper appl ica t ion of thesentencing guidel ines to the o f fenses charged in the Informat ion:

a. Calcu la t ion of Offense Level:Base Offense Level (U.S.S.G. 2C1.1(a) ) : 12More than one br ibe (U.S.S.G. 2C1.1(b) (1)) : +2Benef i t rece ived o f more than $20 m il l ionbu t l e s s than $50 mil l ion (U.S.S.G. 2C1.1 (b) (2) (a) , 2B1.1 (b) (1) (L)) :TOTAL OFFENSE LEVEL:

b. Calcu la t ion o f Culpab i l i t y Score:

+2236

Base Score (U.S.S.G. 8C2.5(a) ) : 5Involvement in or t o l e r ance of c r imina l ac t iv i tyin an organiza t ion of 20 0 or more employees andan i nd iv idua l with in high l eve l personnel of theorganiza t ion par t i c ipa ted in , condoned, or waswi l l fu l ly ignoran t o f the offense (U.S.S.G. 8C2.5(b)(3)(A)) : +3Sel f - repor t i ng , cooperat ion , acceptanceo f r e spons ib i l i ty (U.S.S.G. 8C2.5(g) (1)) : -5TOTAL CULPABILITY SCORE: 3

c . Calcula t ion of Fine Range:Base Fine: Grea te r o f the amount from t ab l e inU.S.S.G. 8C2.4(a) (1 ) & (d ) corresponding to offensel e v e l of 36 ($45,500,000) , o r the pecuniary gain to theorganiza t ion from the o f fense ($46,500,000)(U.S.S.G. 8C2.4 (a) (2) ) : $46,500,000M ul t ip l i e r s (U.S.S.G. 8C2.6): 0.6 - 1.2Fine Range (U.S.S.G. 8C2.7) :$27,900,000 - $55,800,000

d. The p a r t i e s agree and s t ipu la t e t h a t fo r purposes

10


11/52


of U.S.S.G. 8C2.4, the b e n e f i t rece ived byDefendant CCI from the conduct charged in theInformat ion i s $46,500,000. The p a r t i e s a l soagree t h a t the offenses o f convic t ion should begrouped t o g e th e r fo r purposes o f sentencingpursuant to U.S.S.G. 3Dl .2 .

Sentencing Factors15. The p a r t i e s agree t h a t pursuan t to United St a t e s v.

Booker, 543 U.S. 220 (2005), the Cour t must determine an advisorysen tenc ing guide l ine range pursuant to the United Sta tesSentencing Guide l ines . The Court w i l l then determine areasonable sentence wi th in the s t a tu to r y range a f t e r consider ingthe advisory sen tencing gu ide l ine range and th e fac to rs l i s t e d in18 U.S.C. 3553(a) . The p a r t i e s ' agreement here in to anyg u id e l in e sentencing fac to rs c o n s t i t u t e s proof o f those fac to rss u f f i c i en t to sa t i s fy the ap p l i cab le burden of proof .

Sentencing Recommendation16. Fine and Assessment . Pursuant to Fed. R. Crim. P.

11 (c) (1) (C), th e Department and Defendant agree t ha t theappropr ia te sentence in the case i s a cr iminal f ine in the amountof $18,200,000 and a sp ec i a l assessment of $1,200, a f t e rcons idera t ion o f the fol lowing f ac t o r s : (a ) the appropr ia tecons idera t ion o f th e Sentencing Guidel ines; (b) Defendant ' sr eco g n i t i o n and a f f i rma t i v e acceptance of re spons ib i l i t y fo r i t scr iminal conduct ; (c) Defendant ' s volun ta ry disc losure ofevidence obta ined as a r e s u l t of its extensive i n t e rna l

11


12/52


i nves t iga t ion and i t s subs tan t i a l coopera t ion in the Department ' si nves t iga t ion and prosecu t ion ; (d) Defendant ' s s u b s t a n t i a lcompliance and remediat ion e f fo r t s , inc lud ing : (i) implement ingand cont inu ing to implement a compliance and e th ics programdesigned to d e t ec t and preven t poten t i a l v io l a t ions of th e FCPA,U.S. commercial br ibery laws and fo re ign b r i b e ry laws throughoutits opera t ions , ( i i ) t e rminat ing a l l CCI o f f i ce r s and employeespr imar i ly involved in the conduct out l ined in the Sta tement o fFac t s and di sc ip l in ing and t r a in ing others who were under t h e i rsuperv is ion , ( i i i ) reforming i t s deal ings with agents paid bycommission, inc lud ing te rminat ing re l a t ionsh ips with numerousagents and conduct ing extensive due d i l i g en ce and t r a in ing fo ra l l remaining o r new agen ts , and (iv) making subs tan t i a ldisc losures to i t s customers of the i ssues under i n v es t i g a t i o nand engaging in extensive due di l igence before accept ing newbus iness ; and (e) appropr ia te con s idera t ion o f the o ther fac to rsse t fo r th in 18 U.S.C. 3553(a) . Although the agreed-uponsentence represen ts a f ine amount below the advisory sentencingg u id e l in e range , the p a r t i e s agree and s t i p u l a t e th a t the fac to rsmentioned above represen t mit iga t ing circumstances "o f a kind, orto a degree , not adequate ly t aken i n to cons idera t ion by theUnited St a t e s Sentencing Commission." 18 U.S.C. 3553(b) (1) .The Par t ies agree t h a t t h i s $18,200,000 f ine and $1,200 sp ec i a lassessment s h a l l be paid to the Clerk of Court , United Sta tes

12


13/52


D is t r i c t Cour t fo r the Cen t ra l D is t r i c t of Cal i fo rn i a , Santa AnaDivis ion , within ten (10) business days a f t e r sen tencing .Defendant acknowledges t h a t no tax deduct ion may be sought inconnect ion wi th the payment of t h i s $18,200,000 f ine .

17. Court i s Not Bound. Defendant unders tands tha t , if th eCourt r e j e c t s t h i s Agreement, th e Court must (a) inform thepar t i es t h a t th e Court r e j ec t s the Agreement, (b) adviseDefendant t h a t the Court i s no t requ i red to fol low the Agreementand a f fo rd Defendant the oppor tun i ty to withdraw i t s plea , and(c ) advi se Defendant t h a t if the p lea i s not withdrawn, the Court

may di spose o f th e case l e s s favorably toward Defendant than theAgreement contempla ted. Defendant fu r t h e r unders tands t h a t ifthe Court re fuses to accep t any prov is ion of t h i s Agreement,n e i t h e r pa r ty s h a l l be bound by the other p rov is ions o f theAgreement.

18. The p a r t i e s agree not to seek any adjustments to , ordepar tu res from, the agreed upon payment of $18,200,000 as se tfo r th here in .

19. Organiza t iona l Proba t ion . Th e p a r t i e s agree t h a t ath ree-year term of organ iza t iona l proba t ion i s appropr ia te int h i s case and s h a l l inc lude , as a condi t ion of probat ion, there t en t ion o f an independent corpora te monitor as desc r ibed inExhib i t 4, as wel l as any other condi t ions ordered by the Court .CCI agrees to c rea te and implement a Compliance Code which, a t a

13


14/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 15 of 53Case B:09-cr-00162 Document 7 Filed 07/24/2009 Page 14 of 52

minimum, contains a l l of the obl iga t ions and prov is ions descr ibedin Exhib i t 2.requ i red .

The p a r t i e s fu r the r agree t h a t r e s t i t u t i on i s not

20. Corporate Monitor. CCI agrees to engage an independentcorpora te monitor (" the Monitor") with in s ix ty (60) ca lendar daysof s igning t h i s Agreement. Within t h i r t y (30) calendar daysa f t e r the s ign ing o f t h i s Agreement, and a f t e r consu l t a t ion withthe Department, CCI wi l l recommend to th e Department a pool ofth ree qua l i f i ed Monitor cand ida tes . The Monitor s h a l l have, a t aminimum, the fol lowing qua l i f i ca t ions :

a . demonstra ted exper t i se with respect to th e FCPA,inc lud ing exper ience counsel ing on FCPA i s su es ;

b. exper ience designing and/or reviewing corporatecompliance p o l i c i e s , procedures and in te rna l con t ro l s , inc lud ingFCPA-specific p o l i c i e s , procedures and i n t e r n a l con t ro l s ;

c. the a b i l i t y to access and deploy resources asnecessary to discharge the Monitor ' s dut ies as described in theAgreement; and

d. su f f i c i e n t independence from CCI to ensuree f f ec t i v e and impa r t i a l performance o f the Monitor ' s dut ies asdescr ibed in t h i s Agreement.

21. The Department r e ta ins th e r igh t , in i t s so ledi sc re t ion , to accept or r e j e c t any Monitor proposed by CCIpursuan t to th e Agreement. In the event the Department r e j ec t s a

14


15/52


proposed Monitor , CCl s h a l l propose another candidate within ten(10) ca lendar days a f t e r receiving not ice of the r e jec t ion . Thisprocess s h a l l cont inue u n t i l a Monitor acceptable to a l l p a r t i e si s chosen. The Department may a lso propose th e names ofqua l i f i ed Monitor candidates for considerat ion . The Term of th eMonitorship , as se t fo r th in Exhibi t 4, sha l l commence upon theDepar tment ' s acceptance o f a Monitor candidate proposed by CCl.

22. The Monitor wi l l be re ta ined by CCl fo r a per iod ofth ree (3) years , su b j ec t to cer ta in condi t ions pursuant to whichth e Department may e i t h e r reduce or extend th e term. The Term o fth e Monitorship , inc lud ing the circumstances which may suppor t areduct ion o r ex tens ion o f the term, as well as the Monitor 'spowers , dut ies and respons ib i l i t i e s wil l be as se t fo r th inExhib i t 4, which i s a t t ached . CCl may not employ or bea f f i l i a t e d with th e Monitor fo r a period of not l e s s than oneyear from the da te of the te rminat ion of the moni torship .

23. Community Serv ice . The p a r t i e s agree t h a t communityserv ice need not be ordered in t h i s case .

24. For fe i tu re . The p a r t i e s agree tha t fo r fe i tu re need notbe ordered in t h i s case .

25. Waiver of Pre-Sentence Report . The p a r t i e s fu r theragree , with th e permission o f th e Court , to waive the requirementfo r a pre-sen tence r ep o r t pursuant to Federa l Rule of CriminalProcedure 32 (c) (1) (A), based on a f inding by th e Court t ha t the

15


16/52


record con ta ins informat ion su f f i c i e n t to enable the Court tomeaningfu l ly exerc i se i t s sentencing power. However, the p a r t i e sagree t h a t in the event the Court orders the p rep a ra t io n of ap re - sen ten ce r ep o r t p r io r to sen tenc ing , such order wi l l no ta f f ec t th e agreement se t fo r th h ere in .

26. Entry of Gui l ty Plea and Sentencing. The p a r t i e sfu r t h e r agree to ask the Cour t ' s permiss ion to combine the en t ryof the plea and sentencing i n to one proceeding, and to conductth e plea and sentencing hear ings of Defendant in one proceeding.However, th e p a r t i e s agree t h a t in the event the Court orderst h a t th e en t ry of the gui l ty plea and sentencing hear ing occur a tsep a ra t e proceedings , such an order wi l l not a f f ec t the agreementse t fo r th here in .

27. Ful l Disc losure /Reserva t ion o f Rights . In the eventth e Cour t d i rec t s the prepara t ion o f a pre-sen tence repor t , theDepartment wi l l fu l ly inform th e preparer o f the pre-sentencerepor t and the Court of the f ac t s and law re l a t ed to CCI's case .Except as se t fo r th in t h i s Agreement, the p a r t i e s re se rve a l lother r igh t s to make sentencing recommendations and to respond tomotions and arguments by the oppos i t ion .

Breach o f Agreement28. Defendant agrees t h a t if it breaches t h i s Agreement,

commits any federa l crimes subsequent to the date of t h i sAgreement, o r has provided or provides de l ibe ra t e ly fa l se ,

16


17/52


incomple te , o r mis lead ing informat ion under t h i s Agreement, theDepartment may, in i t s so le di sc re t ion , charac te r i ze such conductas a breach o f t h i s Agreement. In th e event of such a breach ,(a) th e Department w i l l be free from i t s obl iga t ions under theAgreement and may take whatever pos i t ion it bel ieves appropr ia teas to th e sentence; (b ) Defendant w i l l not have th e r i g h t towithdraw the gu i l ty plea ; (c ) Defendant s h a l l be fu l ly sub jec t tocr iminal prosecu t ion fo r any o th e r cr imes which it has committedor might commit, if any, i nc lud ing p e r j u ry and o b s t ru c t io n o fj u s t i c e ; and (d) th e Department wi l l be free to use ag a in s tDefendant , d i r ec t l y and i n d i r e c t l y , i n any c r imina l o r c i v i lproceeding any o f th e informat ion o r ma te r i a l s provided byDefendant pursuant to t h i s Agreement, as well as the admit tedSta tement of Facts .

29. In th e event o f a breach o f t h i s Agreement by CCI, ifthe Department e l ec t s to pursue cr iminal charges , or any c i v i l orad min i s t r a t i v e ac t ion t h a t was not f i l ed as a r e s u l t of t h i sAgreement, then:

a. CCI agrees t h a t any app l icab le s t a tu t e o fl imi t a t ions i s t o l l ed between the da te o f CCI's s ign ing o f t h i sAgreement and t he d i scovery by th e Department o f any breach bythe Defendant ; and

b . CCI gives up a l l defenses based on the s t a tu t e ofl imi t a t ions , any cla im of p re - ind ic tment delay, o r any speedy

17


18/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 19 of 53Case 8:09-cr-00162 Document 7 Filed 07f24f2009 Page 18 of 52

tr ia l claim with respect to any such prosecut ion or action,except to the extent tha t such defenses exis ted as of the date ofth e signing of this Agreement.

Complete Agreement30. This document stat 'es the ful l extent of the agreement

between the part ies . There are no other promises or agreements,express or implied. Any modification of this Agreement shal l beval id only i f se t forth in writing in a supplemental or revisedplea agreement signed by a l l part ies .

AGREED:FOR DEFENDANT CCI:

PATRICK M. NORTON, E S Q ~ BRIAN M, HEBERLIG, ESQ.S t e p - ~ o ~ & I b ~ n s p n LLPwaShip9tO)''/DCj 20036' / W l l ~ ;. / /il l' J Vf..../DAViD ESSEKS, ESQ.Allen & OVery LLPNew York, N.Y. 10020Counsel for Defendant CCI

19

Date

Date

Date '


19/52


FOR THE DEPARTMENT OF JUSTICE:FRAUD SECTION, CRIMINAL DIVISIONU.S. DEPARTMENT OF JUSTICEMARK F. MENDELSOHNActing ChieflIt ..J 1-J1.114..HANK BOND WALTHERAss i s t an t ChiefANDREW GENTINT r i a l At torney

UNITED STATES ATTORNEY'S OFFICE

Filed 07/24/2009 Page 19 of 52

Date

FOR THE CENTRAL DISTRICT OF CALIFORNIAP. O'BRIENS t a t e s At torne

DOUGLAS F. McCORMICKAss i s t an t Uni ted Sta t e s Attorr iey

19

Date


20/52


EXHIBIT 1STATEMENT OF FACTS

The following Statement of Facts i s incorporated byreference as par t of the Plea Agreement (the "Agreement") betweenthe United Sta tes Department of Jus t ice (the "Department") andControl Components, Inc. ("CCI"), and the par t i es hereby agreeand s t ipulate tha t the following information i s true andaccurate. As se t for th in Paragraph 11 of the Agreement, CCIadmits, accepts, and acknowledges tha t it i s responsible for theacts of i t s former off icers and employees described below.

I f th is matter were to proceed to t r i a l , the United Stateswould prove beyond a reasonable doubt, by admissible evidence,the fol lowing:Control Components. Inc .

1. At a l l t imes re levant to th i s matter , CCI was aDelaware corporation headquartered in Rancho Santa Margarita,California , tha t designed and manufactured control valves fo r usein the nuclear, o i l and gas, and power generation industr iesworldwide. CCI was a wholly-owned subsidiary of IMI pIc, acompany organized under the laws of England and Wales. CCI soldi t s products to both state-owned and pr ivate companies in overth i r ty countr ies around the world. Because CCI was organizedunder the laws of a s ta te of the United States and had i t spr incipal place of business in the United States , i t was a

1


21/52


"domestic concern" as tha t term i s defined in the Foreign CorruptPract ices Act ("FCPA"), Ti t le 15, United States Code, Section78dd-2.CCI's senior Management

2. Stuart Carson ("S. Carson") was the Chief ExecutiveOfficer ("CEO") of CCI from in or around 1989 through in oraround 2005. S. Carson was the prime archi tect of CCI's friend-in-camp ("FIC") sales model, in which CCI employees and agentscult ivated relat ionships with employees of state-owned andprivate customers. In many instances, CCI employees and agentsmade corrupt payments to the FICs fo r the purpose of obtainingand re ta in ing business for CCI. From in or around January 2003through in or around August 2005, S. Carson caused CCl employeesand agents to make corrupt payments to ta l ing approximately $4.3mill ion to off icers and employees of state-owned companies, andcorrupt payments to ta l ing approximately $1.8 mill ion to off icersand employees of pr iva te companies.

3. Hong Carson, also known as "Rose Carson" ("R. Carson"),was CCI's Manager of Sales fo r China and Taiwan from in or around1995 through in or around 2000 and then served as the Director ofSales for China and Taiwan from in or around 2000 through in oraround 2007. R. Carson was the wife of S. Carson. From in oraround 2003 through in or around 2007, R. Carson caused CCIemployees and agents to make corrupt payments total ing

2


22/52


approximately $1 mill ion to officers and employees of state-ownedcompanies, and corrupt payments to ta l ing approximately $43,000 tooff icers and employees of pr ivate companies.

4. Paul Cosgrove ("Cosgrove") was Executive Vice Presidentof CCl from in or around 2002 through in or around 2007 andserved as the Head of CCl's Worldwide Sales Department from in oraround 1992 through in or around 2007. cosgrove was the secondhighest ranking executive a t CCl an d was responsible forapproving many of the corrupt payments made by employees andagents of CCl to off i cers and employees of state-owned andpr ivate companies. From in or around 2003 through in or around2007, Cosgrove caused CCI employees and agents to make corruptpayments to ta l ing approximately $1.9 mill ion to off icers andemployees of state-owned companies, and corrupt payments total ingapproximately $300,000 to off icers and employees of privatecompanies.

5. David Edmonds ("Edmonds") was the Vice-President ofWorldwide Customer Service a t eel from in or around 2000 throughin or around 2007. In th is capacity, Edmonds oversaw CCl'sreplacement parts sa les and the servicing of exist ing valves.From in or around 2003 through in or around 2007, Edmonds causedCCl employees and agents to make corrupt payments total ingapproximately $430,000 to off icers and employees of state-ownedcompanies, and corrupt payments total ing approximately $220,000

3


23/52


to o f f i ce r s and employees of pr iva te companies.6 . Flavio R i c o t t i ("Rico t t i " ) served as e e I ' s Vice-

Pres iden t and Head of Sa les fo r Europe, Afr ica , and th e MiddleEas t from i n o r around 2001 through in o r around 2007. From ino r around 2003 through i n o r around 2007, Rico t t i caused eCIemployees and agen ts to make co r ru p t payments to ta l ingapproximate ly $750,000 to of f ice r s and employees of s ta te-ownedcompanies, and cor rup t payments to ta l ing approximate ly $380,000to o f f i ce r s and employees of pr iva te companies.

7. Han Yong Kim ("Kim") was the Pres iden t o f eeI-Koreafrom in o r around 1997 through i n o r around 2005. From in o raround 2005 through in o r around 2007, Kim served as a consu l tan tto eeI-Korea . From i n o r around 2003 through in o r around 2007,Kim caused ee l employees and agents to make corrup t paymentst o t a l i n g approximate ly $200,000 to o f f i ce r s and employees ofs tate-owned companies, and corrup t payments to ta l ingapproximate ly $350,000 to of f ice r s and employees of pr iva tecompanies.

8. Richard Morlok ("Morlok") was e e I ' s Finance Direc to rfrom in o r around 2002 through in o r around 2007. In t h i scap ac i ty , Morlok oversaw the Finance Department and had thedut i e s of a Chief Financia l Off icer . From in o r around 2003through in o r around 2006, Morlok caused ee l employees and agentsto make corrup t payments to ta l ing approximate ly $628,000 to

4


24/52


off icers and employees of state-owned companies .9. Mario Covino ("Covino") was CCl' s Director of Worldwide

Factory Sales from in or around March 2003 through in o r around2007. In th is capacity , he was responsible fo r overseeing CCI'snew construct ion projec ts and the replacement of exis t ing valvesmade by other companies and ins ta l led a t CCI's customer's plants .From in or around 2003 through in or around 2007, Covino causedCCl employees and agents to make corrupt payments to ta l ingapproximately $1 mill ion to off icers and employees of state-ownedcompanies.

10. CCl's state-owned customers included, but were notl imited to , Jiangsu Nuclear Power Corporation (China), GuohuaElect r ic Power (China), China Petroleum Materials and EquipmentCorporation, PetroChina, Dongfang Elect r ic Corporation (China),China National Offshore Oil Company, Korea Hydro and NuclearPower, Petronas (Malaysia), and National Petroleum ConstructionCompany (United Arab Emirates). Each of these state-ownedent i t i es was a department, agency, or inst rumental i ty of aforeign government, within the meaning of the FCPA, Tit le 15,United States Code, sect ion 78dd-2(h) (2) (A). The off icers andemployees of these en t i t i e s , including but not l imited to theVice-Presidents, Engineering Managers, General Managers,Procurement Managers, and Purchasing Officers , were "foreignoff ic ia ls" within the meaning of the FCPA, Ti t l e 15, United

5


25/52


26/52


executives S. Carson, R. Carson, Cosgrove, Edmonds and othersins t i tu ted a sales approach a t CCl tha t encouraged CCIsalespeople to cul t ivate FICs, who were typica l ly employees ofCCI's state-owned and pr iva te customers who had the authori tye i ther to award contracts to CCI or to inf luence the technicalspecif icat ions of an order in a manner that would favor CCI.Beginning in or around 1998 and continuing through in or around2007, CCl executives and employees caused payments to be -made toFICs to obtain and re ta in business. CCI persorinel sometimesreferred to these corrupt payments as "flowers." Such paymentswere approved, and in some cases personally made and negotiated,by CCI senior execut ives.

13. In some instances, CCl employees made corrupt paymentsdirect ly to employees of customers. In other instances, CCIemployees made corrupt payments through CCI's representat ives byinf la t ing the fee paid by CCI to the representat ive by the amountof the corrupt payment. In other instances, CCI used a"consultant" as a pass-through for corrupt payments. Theseconsultants would perform few, i f any, legi t imate services forCCI and were often owned e i ther by the recipient of the corruptpayment or a fr iend or re la t ive of the rec ipient .

14. S. Carson, R. Carson, Cosgrove, Edmonds, Ricott i , Kim,Morlok, Covino and others caused CCI to make payments to FICs a tnumerous state-owned ent i t ies in order to as s i s t in obtaining or

7


27/52


retaining business including, but not l imited to , Jiangsu NuclearPower Corporation (China), Guohua Elect r ic Power (China), ChinaPetroleum Materials and Equipment Corporation, PetroChina,Dongfang Electr ic Corporation (China), China National Offshoreo il Company, Korea Hydro and Nuclear Power, Petronas (Malaysia),an d National Petroleum Construction Company (United ArabEmirates)

15. S. Carson, R. Carson, Cosgrove, Edmonds, Ricot t i , Kim,Morlok, Covino and others caused CCI to make corrupt payments toFICS a t numerous pr ivate companies in order to ass is t inobtaining or re ta ining business.

16. S. Carson, R. Carson, Cosgrove, Edmonds, Ricot t i an dCovino also part ic ipated in and arranged for the purchase ofoverseas holidays to places such as Disneyland and Las Vegas foroff icers and employees of state-owned and pr ivate customers underthe guise of t ra ining or inspection t r ips . The actual purposesof the t r ips were to reward the customers' off icers and employeesfor causing the i r employers to purchase CCI products, retaincurrent business fo r CCI, or obtain new business for CCI.

17. S. Carson an d R. Carson arranged for the purchase ofnumerous extravagant vacations for themselves and executives ofboth state-owned and pr ivate customers for the purpose ofassis t ing in obtaining an d retaining business an d charged a l lexpenses, including those of the customers, to CCI. Such

8


28/52


expenses included f i r s t -c lass a i r fa re to dest inat ions such asHawaii, f ive-s tar hotel accommodations, char ter boat t r ips , ands imilar luxuries . S. Carson and R. Carson also caused CCl to paythe college tu i t ion of the children of a t l eas t two executives a tCCI's customers fo r the purpose of obtaining and retainingbusiness.

18. CCl frequently held lavish sales events to entertaincurrent or potent ia l state-owned and private customers fo r thepurpose of assis t ing in obtaining and re ta in ing business. CClpaid for a large port ion of the t ravel expenses, hotel costs,meals, and greens fees for golf . CCl senior management,including R. Carson and S. Carson, also frequently gave expensiveg i f t s to employees of state-owned and pr ivate customers for thesame purpose.The Audit and Interna l Invest igat ion

19. In or around August 2004, CC1's parent company, IMlpIc, conducted an in ternal audi t of CC1's commission payments.S. Carson attempted to prevent the in ternal audi t and told thevis i t ing audi tors tha t they were not welcome a t CC1'sheadquarters in Cal i fornia and that they should go back to theunited Kingdom.

20. After learning tha t the August 2004 audi t wouldproceed, Cosgrove ins t ruc ted CCl employees to withholdinformation from the auditors.

9


29/52


21. In or around August 2004, R. Carson, Edmonds, Kim,Covino, and Morlok provided false information to the in terna lauditors in connection with th is audi t of commission payments,denied tha t corrupt payments had been made, an d provided falseand misleading responses to the auditors .

22. In or around August 2004, Edmonds caused the creat ionof false invoices in an attempt to demonstrate to the in ternalauditors that cer ta in commission payments made to CClts customerswere legi t imate.

23. Following the in ternal audi t , Cosgrove, Edmonds,Ricot t i , Covino, and Morlok continued to encourage and approvecorrupt payments, but instructed employees not to use terms suchas \\FIC, I I \\flowers II or \\special arrangement" in emails .

24. In or around August 2007, R. Carson, Cosgrove, Edmonds,Ricot t i , an d Covino provided false and misleading information toattorneys hired by CCI to perform an in terna l invest igat ion intoCeI 's commission payments., an d fa lsely denied tha t corruptpayments had been made.

25 . In or around August 2007, R. Carson destroyed documentsrelevant to CCI's in terna l invest igat ion into CCI's commissionpayments by, among other things, taking such documents to the CCIladies ' room, tear ing up the documents, and flushing them downthe to i le t .

10


30/52


Corrupt Deal ings wi th China Nat ional Offshore o i l Company("CNOOC") O ff i c i a l s26. On o r about December 30, 2003, a CCI sa l e sp e r so n in

China sen t an emai l to R. Carson propos ing t h a t a co r ru p t paymentbe made to an employee of CNOOC, a s ta te-owned e n t i t y in China,in connect ion wi th the Chunxiao Gas Complex Development. Theemai l s t a t ed t h a t "the customer agreed to marked up the pr ice to$250,000, and requ i red $65,000 feedback bes ide th e 2% o f thecommission. . . Therefore th e t o t a l commission i s $68,700. Thed i s t r i b u t i o n of t h i s commission as fo l lowing: $3700 as consu l t an tfee to th e Design In s t i t u t e ; $65,000 as commission to theenduser.1I

27. On o r about Ap r i l 14, 2004, Cosgrove sen t an emai lregarding t h i s same Chunxiao Gas Complex Development p ro j ec t toS. Carson s t a t i n g th a t "Rose says we need to t ake t h i s fo r fu tu reoppor tun i t i es I need your approva l . "

28. On o r about Apri l 15, 2004, S. Carson approved thepayment of the "commission" from CCI to an o f f i c i a l o f CNOOC fo rthe purpose of as s i s t i n g in obta in ing and re t a in ing CNOOC'sbusiness in connect ion wi th the Chunxiao Gas Complex Developmentin China, s t a t ing in an emai l t h a t " I t i s my unders tanding t h a tt h i s job has been delayed by us fo r 3 months. I au thor izeengineer ing procurement and manufactur ing to begin. I make t h i sau thor iza t ion based on my agreement t h a t Rose w i l l reducecommissions payable and c lean up the T&C's on t h i s j ob . "

11


31/52


29. On o r about Apri l 16, 2004, R. Carson ' s as s i s t an t sen tan email to S. Carson, cosgrove, Morlok and others s t a t i n g"Here in a f t e r i s th e message from Rose: The commission included inthe con t rac t p r i c e i s ac tua l ly what th e customer added on ourquota t ion which won ' t in f luence our margin . [CCIsa lesperson in China] - Rose i n s t ruc ted you to exp la in thed e t a i l s regard ing commission to a l l the gent lemen on the aboveemail l i s t . "

30. On o r about Ap r i l 18, 2004 - - which was Apri l 17, 2004,in the United Sta te s - - the CC I sa lesperson in China explainedthe arrangement to S. Carson, R. Carson, Morlok, and Cosgrove byemai l : "Our f i n a l decis ion pr i ce i s $185k and inc lud ing 2%commission. Customer marked up to $250k a s f i n a l con t rac t p r i ceand requ i red the balance feedback as commission, t h e re fo re thet o t a l commission i s $68.7k."

31. On o r about Apri l 17, 2004, S. Carson forwarded theabove emai l to R. Carson and others asking: "What i s est imatedp ro f i t a t $185k?"

32. On o r about January 14, 2005, S. Carson, R. Carson,Cosgrove, and Morlok caused CCI to wire a commission payment ofapproximate ly $58,500 from i t s Wells Fargo bank account inCal i fo rn ia to a bank account a t Hang Seng Bank in China fo r thepurpose of making a co r ru p t payment to a CNOOC o f f i c i a l inconnect ion with th e Chunxiao Gas Complex Development in China.

12


32/52


33. As a resu l t of the approximately $58,500 corruptpayment made by CCI to a CNOOC off ic ia l , CCI earned approximately$142,975 in net prof i t s from the Chunxiao Gas Complex Developmentproject .Corrupt Deal ings with Korea Hydro and Nuclear Power ("KHNP")Off ic ia l s

34. On or about November 1, 2003, S. Carson sent an emailto Kim discussing new orders being placed by KHNP and wrote:"Please t ry very hard to find a Friend in Camp for us on ShinKori/Wolsong. Use your contacts , [President of CCI'srepresentat ive in China], [CCI employee], anybodies, but get us aFIC who can help us win th is order. I'm will to pay big moneyfor a FIC/Consultant [sic]."

35. On or about November 4, 2003, Kim wrote a return emailto S. Carson s ta t ing "The biggest problem i s not the volume offlower or how close we are with those guys. The problem is theoveral l climate of KHNP and Korean society. The former presidentof KHNP, Mr. [foreign off ic ia l ] who i s a good friends of CCI, wasf i red because he helped some vendors. Everybody is talking tha the must go to j a i l . . We need a strong guy who can take therisk but there i s no one nowadays. The possibi l i ty i s notso high but [President of CCI's representat ive in Korea] and I ams t i l l t rying very hard to get the consul tant ."

36. On or about April 21 , 2004, Morlok, Edmonds, and Kimcaused CCI to wire a payment of approximately $57,658 from CCI's

13


33/52


Wells Fargo bank account in California to a eel-Korea account a tIndus tr ia l Bank in Korea as a purported "bonus" fo r a CCI-Koreaemployee, knowing tha t the money would actua l ly be used to make acorrupt payment to a KHNP off ic ia l re la ted to the Wolsong and YGNprojec t s .

37. On or about Apri l 29 , 2004, in order to conceal thecorrupt payment made to the KHNP off ic ia l , Edmonds, Kim, andMorlok caused CCI to wire approximately $17,000 to the CCI-Koreaemployee so tha t he could pay taxes on the purported "bonus" tha the never actua l ly received. This money was invoiced as an"employee welfare reimbursement."

38. In or around August 2004, a f t e r being questioned aboutthe KHNP payments in connection with the 2004 in te rna l audit ,Edmonds caused the creat ion of two fa l se invoices to ta l ing$57,173 to cover up the corrupt payments to the KHNP off i c i a lrelated to the Wolsong and YNG projects in Korea.

39. As a r e su l t of the approximately $57,173 in corruptpayments made by ee l to the KHNP off ic ia l in connection with theWolsong and YGN projec ts , eCI earned approximately $503,000 innet prof i t s .Conclusion

40. Based upon the fac ts se t for th above, ee l admits thati t i s a "domestic concern" within the meaning of the ForeignCorrupt Pract ices Act, 15 U.S.C. 78dd-2{h) (1) (B) and tha t i t s

14


34/52


off icers , employees and agents made use of and caused the use ofthe mails and means and ins t rumenta l i t ies of in te rs ta te commercecorruptly in furtherance of offers , payments, promises to pay,and the authorizat ion of the payment of money while knowing thata l l or a port ion of the money would be given, direct ly orindirec t ly , to foreign government off ic ia l s for the purpose ofinf luencing acts and decisions of such foreign off ic ia l s in the i rof f ic ia l capaci t ies , inducing such foreign off ic ia l s to do oromit to do any ac t in viola t ion of the lawful duty of suchoff ic ia l s , and securing an improper advantage fo r CCI, in orderto as s i s t CCI in obtaining and retaining business.

AGREED:

FOR DEFENDANT CCI:

THOMAS WALSHGeneral CounselFOR CCI's COUNSEL:

PATRICK M. NORTON, ESQ.BRIAN M. HEBERLIG, ESQ.Steptoe & Johnson LLPWashington, DC 20036

DAVID ESSEKS, ESQ_Allen & overy LLPNew York, N.Y. 10020Counsel for Defendant CCI

Date

Date

Date

15


35/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 36 of 53ase B:09-cr-00162 Document 7 Filed 07/24/2009 Page 35 of 52

off icers , employees and agents made use of and caused the use ofthe mails and means and instrumentalities of interstate commercecorruptly in furtherance of offers, payments, promises to pay,and the authorization of th e payment of money while knowing thata l l or a portion of the money would be given, direct ly orindirect ly, to foreign government off ic ia ls for the purpose ofinfluencing acts and deoisions of such foreign off ic ia ls in theiroff ic ia l capacit ies, inducing such foreign off ic ia ls to do oromit to do any act in violation the lawful duty of suchoff icials , and securing an improper advantage for CeI, in orderto ass is t CC! in obtaining and retaining business.

AGREED:FOR DEFENDANT ccr:

PATRICKM. NORTON, EB R ~ I M,r HEBERLIQ, ESQ.St\ , 0 t' J9hnson LLPWp:sh n ,{ DC 20036:" /;' " ' / ....... ; . ,v/, DA D SSB S, ESQ.Allen & Overy LLPNew York, N,Y. 10020Counsel for Defendant ccr

Date'

Date

Date i

15


36/52


FOR THE DEPARTMENT OF JUSTICE:FRAUD SECTION, CRIMINAL DIVISIONU.S. DEPARTMENT OF JUSTICEMARK F. MENDELSOHNActing Chief

: : ! : : ! N D / ! ~ ~ '; Nn IAss i s t an t ChiefANDREW GENTINTr ia l Attorney

UNITED STATES ATTORNEY'S OFFICE

Filed 07/24/2009 Page 36 of 52

Date

FOR THE CENTRAL DISTRICT OF CALIFORNIATHOMAS P. O'BRIENUni ed Sta te s

DOUGLAS F. McCORMICKAss i s t an t United Sta t e s Attorney

16

Date


37/52


EXHIBIT 2COMPLIANCE CODE

Defendant CCI represents and agrees, as a term and conditionof the Plea Agreement, that it wil l , a t a minimum, adopt an ant i -corruption compliance code ("Compliance Code"), as describedfur ther below, that i s designed to detect and de te r violat ions ofthe FCPA, commercial bribery laws and other appl icable foreignbribery laws (col lec t ive ly the "ant i -corrupt ion laws"). Theant i -br ibery Compliance Code applicable to CCl wil l cons is t ofthe following elements, a t a minimum:

1. A clear ly ar t icula ted corporate pol icy againstviolat ions of the anti-corruption laws;

2. Promulgation of compliance standards andprocedures designed to reduce the prospect of viola t ions of theanti-corruption laws and CCl's Compliance Code. These standardsand procedures sha l l apply to a l l direc tors , off i cers andemployees and, where necessary and appropriate, outside par t iesact ing on behalf of CCI in foreign jur isdic t ions , includingagents, consul tants , representat ives , dis t r ibutors , teamingpartners and jo in t venture par tners (collectively "agents andbusiness partners") ;

3. The assignment of responsibi l i ty to one or moresenior corporate off ic ia ls of CCI fo r the implementation andoversight of compliance with pol ic ies , standards and proceduresregarding the anti-corruption laws. Such corporate off ic ia l (s)


38/52


shal l have the author i ty to report matters direct ly to CCI'sBoard of Directors or any appropriate committee of the Board ofDirectors ;

4. Mechanisms designed to ensure that the pol ic ies ,standards and procedures of CCI regarding the anti-corruptionlaws are effect ively communicated to a l l direc tors , off icers ,employees and, where necessary and appropriate, agents an dbusiness par tners . These mechanisms sha l l include: (a) periodict ra ining fo r a l l such directors , off i cers , employees, and, wherenecessary and appropriate, agents and business partners; and(b) annual cer t i f ica t ions by a l l such directors , off icers ,employees, and, where necessary and appropriate, agents an dbusiness par tners , cer t i fying compliance with the t ra iningrequirements;

5. An effect ive system for reporting suspectedcriminal conduct and/or violat ions of the compliance pol ic ies ,standards and procedures regarding the ant i -corrupt ion laws fordi rectors , off i cers , employees, and, as necessary an dappropriate, agents an d business partners;

6. Appropriate discipl inary procedures to address,among other things, violat ions of the ant i -corrupt ion laws andCCI's Compliance Code by directors , off icers and employees;

7. Appropriate due dil igence requirements pertainingto the re tent ion and oversight of agents and business partners;

2


39/52


8. Standard provisions in agreements, contracts , andrenewals thereof with a l l agents and business partners tha t aredesigned to prevent viola t ions of the anti-corruption laws, whichprovisions may, depending on the circumstances, include: (a)anti-corruption representat ions and undertakings re la t ing tocompliance with the anti-corruption laws; (b) r ights to conductaudits of the books and records of the agent or business partnerto ensure compliance with the foregoing; and (c) r ights toterminate an agent or business partner as a resu l t of any breachof anti-corruption laws, and regulations or representat ions andundertakings re la ted to such matters; and

9. Periodic tes t ing of the compliance Code, standardsand procedures designed to evaluate the i r ef fect iveness indetecting and reducing viola t ions of the ant i -cor rupt ion laws andCCI's Compliance Code.


40/52


EXHIBIT 3CERTIFICATE OF CORPORATE RESOLUTIONS

I , Thomas Walsh, do hereby cer t i fy that I am the GeneralCounsel of Control Components, Inc. ("CCI" or "the company"), aDelaware corporation, and that the following i s a true, correctan d accurate copy of resolutions adopted by the Board ofDirectors of CCI by unanimous written consent on J u l y ~ , 2009:WHEREAS, CCI has been engaged in discussions with the UnitedStates Department of Justice in connection with issues ar is ing inre la t ion to certa in corrupt payments to foreign off ic ia ls andemployees of pr iva te companies to fac i l i t a t e the award ofcontracts and obtaining of business for CCI; andWHEREAS, in order to resolve such discussions, it i s

proposed tha t the company enter into a certain agreement with theUnited States Department of Just ice ; an dWHEREAS, the company's General Counsel, together withinvest iga t ive and outside counsel for the company, have advisedthe Board of Directors of the company's r ights , possibledefenses, the Organizational Sentencing Guidelines ' provisions,and the consequences of entering in to such agreement with theUnited States Department of Justice;Therefore, th i s Board hereby RESOLVES tha t :1. The company (i) consents to the f i l ing in the UnitedStates Dis t r ic t Court for the Central Distr ic t of California,Santa Ana Division, of a three-count Information charging CCIwith conspiracy to commit offenses against the United States, inviolation of 18 U.S.C. 371, speci f ical ly , an anti-briberyprovision of the Foreign Corrupt Pract ices Ac t of 1977 ("FCPA"),15 U.S.C. 78dd-l , e t seq. , and the Travel Act, 18 U.S.C. 1952 (Count One); and two substant ive counts of violating ananti-bribery provision of the FCPA, in violation of 15 U.S.C.

78dd-2 (Counts Two and Three), re la t ing to i t s off icers an demployees making corrupt payments of money to .certain foreignoff ic ia ls and employees of private companies in order to causethe award to CCI of certain contracts ; (ii) agrees to waiveindictment on such charges an d enter in to a Plea Agreement withthe United Sta tes Department of Jus t ice; ( i i i ) agrees to enter aplea of guil ty as to a l l charges in the Information; an d (iv)further agrees to accept a criminal fine against Cel of$18,200,000 and to pay $18,200,000 to the United States withrespect to the conduct described in the Information.2. The General Counsel, or his delegate, i s hereby


41/52


authorlzed, empowered and dlrected, on behalf of the company, toexecute the Plea Agreement and the Statement of Facts attached asExhlbit 1 to the Plea Agreement substant ia l ly in such form asreviewed by this Board of Directors with such changes as theGeneral Counsel, or his delegate, may approve;3. The General Counsel, or his delegate, is herebyauthorized, empowered and directed to take any and a l l actions asmay be necessary or appropriate, and to approve the forms, termsor provisions of any agreement or other documents as may benecessary or appropriate to carry out and effectuate the purposeand intent of the foregoing resolut ions; and4. All of the actions of the General Counsel, ~ l h i c h actlons would have been authorized by the foregoing resolut ionsexcept that such actlons were taken pr lor to the adoption of such

r ~ s o l u t l o n s , are hereby severally ra t i f ied , conflrmed, approvedand adopted as actlons on behalf of the company.I further cer t l fy tha t the foregoing resolut lons have notbeen al tered, modified, revoked or rescinded, and tha t the sameremain in fu l l force and effect on the date hereof.IN WITNESS HEREOF, I have executed th is document on July ~ / , 2009.

THOMAS WALSHGeneral CounselControl Components, Inc.


42/52


EXHIBIT 4CORPORATE COMPLIANCE MONITOR

The dut ies and au thor i ty o f the Corpora te ComplianceMonitor ( the "Monitor") , and the obl iga t ions o f Contro lComponents, Inc . ("CCl")" wi th r e sp ec t to th e Monitor and theDepartment, are as descr ibed below:

1 . CCI sh a l l r e t a i n th e Monitor fo r a pe r iod of three (3 )years , sUbject to ce r t a in condi t ions spec i f i ed below whichwould, in the so le d i sc re t ion of the Department , allow fo r areduct ion o r ex tens ion o f the term ( the "Term o f theMoni to rsh ip" ) .

2. The Monitor ' s pr imary r espons ib i l i ty i s to assess andmoni tor CCI's compliance with the terms of t h i s Agreement so asto s p ec i f i c a l l y address and reduce th e r i sk of any recurrence ofCCI's misconduct . During th e Term of the Monitorsh ip , theMonitor wi l l ev a lu a t e , in the manner se t fo r th in paragraphs 3through 10 below, th e e f f ec t i v en ess and implementa t ion of thecorpora te compliance program, i n t e rn a l co n t ro l s and f inanc ia l

I A ll r e fe ren ces to "CCI" inc lude a l l a f f i l i a t e d en t i t i e sorganized in o t h e r j u r i s d i c t i o n s t h a t s e l l se rv i ce valves underthe CCI t rademark . These a f f i l i a t e d e n t i t i e s inc lude , but arenot l imi ted to , CC l AG, a Swiss corporat ion; CCl ValveTechnology AB, a Swedish corpora t ion ; CCI Valve Technology AG,an Aust r i an corpora t ion ; CCI KK, a Japanese corpora t ion ; CCILimited , a Korean corpora t ion ; Contro l Components Ind ia PtyLtd . , an Ind ian corpora t ion ; and CCI (Shanghai) Co. Ltd. , aChinese corpora t ion .


43/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 44 of 53ase 8:09-cr-00162 Document 7 Filed 07/24/2009 Page 43 of 52

report ing pol ic ies and procedures of CCl as they re la te to eCl 'scurrent and ongoing compliance with the ant i -br ibery provisionsof the FCPA and other anti-corruption laws appl icable to eCl(col lect ively, the "anti-corruption laws") and take suchreasonable steps as, in his or her view, may be necessary tofu l f i l l the foregoing mandate (the "Mandate").

3. CCl shal l cooperate ful ly with the Monitor, and theMonitor shal l have the authori ty to take such reasonable stepsas, in his view, may be necessary to be ful ly informed aboutCCl's compliance program within the scope of the Mandate inaccordance with the principles set for th herein and applicablelaw, including data protect ion and labor laws and regulationsappl icable to Cel. To tha t end, cel shall : (a) provide theMonitor access to ceI ' s documents and resources; (b) not l imi tsuch access, except as provided in th is paragraph; and (c)provide guidance on applicable laws (such as re levant dataprotect ion and labor laws). CeI sha l l provide the Monitor withaccess to a l l information, documents, records, fac i l i t i es and/oremployees, as requested by the Monitor, tha t f a l l within thescope of the Mandate of the Monitor under th is Agreement. Anydisclosure by Cel to the Monitor concerning corrupt paymentssha l l not rel ieve eCl of any otherwise applicable obligation tot ru thful ly disclose such matters to the Department.

- 2 -


44/52


a . The p a r t i e s agree t ha t no a t t o r n ey - c l i en tre l a t ionsh ip s h a l l be formed between eel and the Monitor .

b. In th e even t t ha t eel seeks to withhold from theMonitor access to informat ion, documents, records , f ac i l i t i e sand /or employees of eel which may be su b j ec t to a claim ofa t t o rn e y -c l i e n t p r iv i l eg e o r to the a t t o rn ey work-productd o c t r in e , o r where eel reasonably bel ieves p roduct ion wouldotherwise be i ncons i s t en t with app l icab le law, eel s h a l l workcoopera t ive ly with the Monitor to reso lve the mat t e r to thes a t i s f ac t i o n of th e Monitor . I f the mat te r cannot be resolved,a t the reques t of th e Monitor , eel s h a l l prompt ly providewri t t en not ice to the Monitor and the Department . Such not ices h a l l include a g en era l descr ip t ion of the na tu re of theinformat ion, documents , records , f a c i l i t i e s an d /o r employeest h a t a re being wi thhe ld , as well as the b as i s fo r the c la im.The Department may then consider whether to make a fu r t h e rreques t fo r access to such information , documents, records ,f a c i l i t i e s and /or employees. To the ex t en t eel has providedinformat ion to the Department in the course of the inves t iga t ionl ead ing to t h i s ac t ion pursuant to a non-waiver of pr iv i l egeagreement , eel and th e Monitor may agree to produc t ion of suchinformat ion to th e Monitor pursuant to a s i m i l a r non-waiveragreement .

- 3 -


45/52


4. To ca r ry ou t the Mandate during the Term o f th eMonitorship, the Monitor s h a l l conduct an i n i t i a l review andprepare an i n i t i a l repor t , fol lowed by up to two (2) fol low-upreviews and r ep o r t s as descr ibed below. with respec t to eachreview, a f t e r consu l t a t ion wi th CCI and the Department , theMonitor s h a l l prepare a w r i t t en work plan, which s h a l l besubmit ted no fewer than s ix ty (60) ca lendar days p r i o r tocommencing each review to CCI and the Department fo r comment,which comment s h a l l be provided no more than t h i r t y (30)ca lendar days a f t e r rece ip t of the wri t t en work plan . TheMonitor ' s work plan fo r th e i n i t i a l review s h a l l i nc lude suchs teps as a re reasonably necessary to conduct an ef fec t ivei n i t i a l review in accordance with the Mandate, includingdeveloping an understanding, to the ex ten t th e Monitor deemsappropr ia te , o f th e fac ts and circumstances sur rounding anyvio la t ions t h a t may have occurred before the date o f acceptanceof t h i s Agreement by the Cour t . In developing suchunder s tanding , th e Monitor i s t o re ly to the ex ten t poss ib le onava i l ab le i n format ion and documents provided by CCI, and it i snot in tended t h a t the Monitor w i l l conduct h is own inqu i ry in tothose h i s t o r i c a l even ts . In developing each work p lan and incarry ing ou t the reviews pursuan t to such plans , the Monitor i sencouraged to coord ina te with ce I personnel , inc lud ing aud i to rsand compliance personnel , and, to the ex ten t the Moni tor deems

- 4 -


46/52


appropriate, he or she may rely on CCI processes, on the resul tsof s tudies , reviews, audi ts and analyses conducted by or onbehalf of CCI and on sampling and tes t ing methodologies. Anydisputes between CCI and the Monitor with respect to the workplan shal l be decided by the Department in i t s sole discret ion.

5. The i n i t i a l review shal l commence no l a t e r than onehundred twenty (120) calendar days from the date of theengagement of the Monitor (unless otherwise agreed by CCI, theMonitor and the Department), and the Monitor sha l l issue awrit ten report, within one hundred twenty (120) calendar days ofin i t i a t ing the i n i t i a l review, set t ing forth the Monitor 'sassessment and making recommendations reasonably designed toimprove the effec t iveness of CCI's program for ensuringcompliance with the ant i -corrupt ion laws. The Monitor isencouraged to consult with CCl concerning h is other findings andrecommendations on an ongoing basis , and to consider and ref lec tCCI's comments and input to the extent the Monitor deemsappropriate. The Monitor need not in i t s i n i t i a l or subsequentreports rec i te or descr ibe comprehensively CCI'S his tory orcompliance pol ic ie s , procedures and pract ices , but ra ther mayfocus on those areas with respect to which the Monitor wishes tomake recommendations fo r improvement or which the Monitorotherwise concludes meri t par t icular a t tent ion. The Monitorshal l provide the report to the Board of Directors of CCI and

- 5 -


47/52

Case 8:09-cr-00077-JVS Document 101-5 Filed 09/04/2009 Page 48 of 53ase B:09-cr-00162 Document 7 Filed 07/24/2009 Page 47 of 52

contemporaneously t ransmit copies to Mark F. Mendelsohn (or h issuccessor), Deputy Chief, Fraud Section, Criminal Division, u.S.Department of Jus t ice , 10th and Const i tut ion Ave., N.W., BondBuilding, Fourth Floor, Washington, De 20530. Afterconsul ta t ion with ceI , the Monitor may extend the time periodfor issuance of the report for up to s ix ty (60) calendar dayswith pr ior writ ten approval of the Department.

6. within one hundred and twenty (120) calendar daysa f te r receiving the Monitor 's report , ceI sha l l adopt a l lrecommendations in the report ; provided, however, tha t withins ix ty (60) calendar days a f te r receiving the report , CCI shal lnotify the Monitor and the Department in writ ing of anyrecommendations that eel considers unduly burdensome,inconsistent with loca l or other applicable law or regulation,impractical , unduly cos t ly or otherwise inadvisable. Withrespect to any recommendation tha t eel considers undulyburdensome, inconsis tent with local or other applicable law orregulat ion, impract ical , unduly costly or otherwise inadvisable,eel need not adopt tha t recommendation within tha t time butshal l propose in writ ing an al ternat ive policy, procedure orsystem designed to achieve the same object ive or purpose. As toany recommendation on which eel and the Monitor do not agree,such par t i es sha l l attempt in good fa i th to reach an agreementwithin forty-f ive (45) calendar days a f te r eel serves the

- 6 -


48/52


wri t t en no t ice . In the event e e l and th e Monitor a re unable toagree on an accep tab le a l t e r n a t i v e proposal , ee l s h a l l promptlyconsu l t with th e Department . Any dispu tes between ee l , on theone hand, and th e Monitor, on th e o t h e r hand, with respec t tothe recommendations sha l l be decided by the Department in i t sso le d i s c r e t i o n . The Department may cons ide r th e Monitor ' srecommendation and e e l ' s reasons fo r not adopt ing th erecommendation in determining whether ee l has fu l l y compliedwith its obl iga t ions under t h i s Agreement. Pending suchdeterminat ion, e e l s h a l l ho t be requ i red to implement anycon tes ted recommendation(s) . With respec t to any recommendationt h a t the Moni tor determines cannot reasonably be implementedwithin one hundred and twenty (120) calendar days a f t e rrece iv ing the repor t , the Moni tor may extend th e t ime per iod fo rimplementat ion with p r io r wri t t en approval of the Department.

7. The Moni tor s h a l l under take up to tw o (2 ) fol low-upreviews to ca r ry o u t the Mandate. I f , reasonably promptly a f t e rcomple t ing the f i r s t fol low-up review, the Monitor and ee lmutual ly agree t h a t e e l ' s compliance program i s reasonablydesigned and implemented t o d e t ec t and preven t vio la t ions of thean t i -co r rup t ion laws and i s func t ion ing e f f ec t i v e ly , and t h a tfu r t h e r monitor ing and review i s not warranted , th e Monitor mayapply to th e Department fo r permission to forego fu r the r fol low-up reviews. I f the Department approves, the Term o f the

- 7 -


49/52


Monitorship sha l l be reduced accordingly. Conversely, i f ,reasonably promptly a f te r completing the second follow-upreview, the Monitor and the Department mutually agree tha t CCIhas not by tha t time successfully sa t i s f ied i t s obl igat ionsunder the plea agreement with respect to the Monitor 's Mandate,the Term of the Monitorship shal l be extended for one addi t ionalyear, and the Monitor sha l l undertake a th i rd follow-up reviewin accordance with the procedures for such follow-up reviews se tout in the Agreement.

8. Within one hundred and twenty (120) calendar days ofin i t ia t ing each follow-up review, the Monitor shal l :(a) complete the review; (b) cer t i fy whether the complianceprogram of CCI, including i t s pol ic ies and procedures, i sreasonably designed and implemented to detect and preventviolat ions within eel of the anti-corruption laws and i sfunctioning effec t ive ly; and (c) repor t on the Monitor 'sfindings in the same fashion as se t for th in paragraph 5 withrespect to the i n i t i a l review. The f i r s t follow-up review shal lcommence one year af te r the in i t i a l review commenced. Thesecond follow-up review, unless one i s deemed unnecessary by theDepartment, sha l l commence one year a f te r the second follow-upreview commenced. After consultat ion with eCI, the Monitor mayextend the time period fo r these follow-up reviews fo r up to

- 8 -


50/52


s ixty (60) calendar days with pr ior writ ten approval of theDepartment.

9. In unde'rtaking the assessments and reviews describedin paragraphs 4 through 8 of th i s Agreement, the Monitor shal lformulate conclusions based on, among other th ings:(a) inspect ion of re levant documents, including CCI's currentanti-corruption pol ic ies and procedures; (b) on-s i te observationof selected systems and procedures of CCI a t sample s i tes ,including in te rna l cont rol s and record-keeping and in terna laudi t procedures; (c) meetings with, and interviews of , relevantemployees, off i cers , di rec tors and other persons a t mutuallyconvenient times and places; and (d) analyses, s tudies andtes t ing of CCI's compliance program with respect to the ant i -corruption laws.

10. Should the Monitor, during the course of h is or herengagement, discover tha t questionable or corrupt payments orquestionable or corrupt t ransfers of property or in te res t s mayhave been offered, promised, paid or authorized by any ent i ty orperson within CCI, or any ent i ty or person working direc t ly orindirec t ly for CCI, e i t he r (a) af te r the date on which th isAgreement i s accepted by the Court or (b) tha t have not beenadequately dea l t with by CeI (col lect ively, "improperac t iv i t i e s " ) , the Monitor sha l l promptly report such improperac t iv i t i e s to CCI's General Counsel for fur ther act ion. I f the

- 9 -


51/52


Monitor bel ieves tha t any improper act ivi ty or ac t iv i t i e s mayconst i tu te a s ignif icant viola t ion of law, the Monitor shal lalso repor t such improper ac t iv i ty to the Department. TheMonitor sha l l disc lose improper ac t iv i t i es in his or herdiscre t ion di rec t ly to the Department, and not to the GeneralCounsel, only i f the Monitor believes tha t disclosure to CCI'sGeneral Counsel would be inappropriate under the circumstances,and in such case should disclose the improper ac t iv i t i es toCCI's General Counsel as promptly and completely as the Monitordeems appropriate under the circumstances. The Monitor shal laddress in his repor t s the appropriateness of CCl's response toa l l improper ac t iv i t i e s , whether previously disclosed to theDepartment or not . Further, in the event tha t CCl, or anyent i ty or person working direct ly or indirec t ly within eCI,refuses to provide information necessary for the performance ofthe Monitor 's responsibi l i t ies , i f the Monitor bel ieves thatsuch refusa l i s without jus t cause, the Monitor sha l l disclosetha t fac t to the Department. CCl sha l l not take any action tore ta l ia te aga ins t the Monitor for any such disclosures or forany other reason. The Monitor may report any criminal orregulatory viola t ions by CCl or any other ent i ty discovered inthe course of performing his or her duties in the same manner asdescribed above.

- 10 -


52/52


~ ~ . At l eas t annually, and more frequently i f appropriate,representat ives from CCI and the Department wil l meet togetherto discuss the monitorship and any suggestions, comments orimprovements CCI may wish to discuss with or propose to theDepartment.

~ 2 . The Monitor sha l l enter into an undertaking with IMI,pIc, the United Kingdom parent company of CCI, in accordancewith applicable United Kingdom securi t ies laws and regulations,concerning his/her recogni t ion of ins ider t ra ining res t r i c t ionsrelevant to him/her as a rec ip ient of information which might bepr ice-sens i t ive in re la t ion to IMI securi t ies .

us v. cci plea agreement

Documents