Financial Transparency Coalition

Mexican Intermediary Pleads Guilty for His Role in Foreign Bribery Scheme

US Department of Justice

WASHINGTON – The former general manager of a Sugar Land, Texas-based business was arrested on Nov. 18, 2009, for his alleged role in a conspiracy to bribe Mexican government officials to secure contracts with the Comisión Federal de Electridad (CFE), a Mexican state-owned utility company, announced Lanny A. Breuer, Assistant Attorney General of the Criminal Division; Richard C. Powers, Special Agent-in-Charge of the FBI’s Houston Field Office; and Rodney E. Clarke, Special Agent-in-Charge of the Internal Revenue Service – Criminal Investigation’s (IRS-CI) Houston Field Office. In addition, a Mexican citizen has pleaded guilty for his role in the bribery scheme.

John Joseph O’Shea, 57, of Pleasanton, Calif., was charged in an 18-count indictment returned by a federal grand jury in the Southern District of Texas on Nov. 16, 2009, with conspiracy, violations of the Foreign Corrupt Practices Act (FCPA), international money laundering and falsification of records in a federal investigation. The indictment was unsealed upon his arrest. The indictment alleges that while acting as the general manager of a Texas business unit of a U.S. subsidiary of a Swiss corporation, O’Shea arranged and authorized payments to multiple officials at CFE in exchange for lucrative contracts. According to the indictment, the Texas unit’s primary business was to provide products and services to electrical utilities, many of them foreign state-owned utilities, for network management in power generation, transmission and distribution.

The indictment alleges that the Texas business unit managed by O’Shea contracted with a Mexican company to serve as its sales representative in Mexico, whereby the Mexican company received a percentage of the revenue generated from business with Mexican governmental utilities, including CFE. The Texas business unit, according to the indictment, received multiple contracts with CFE for goods and services related to CFE’s network while using the Mexican company as its sales representative. Fernando Maya Basurto, 47, of Mexico City, was a principal of the Mexican company, performing work for the Texas business unit on its contracts with CFE.

In December 1997, CFE awarded the Texas business unit a contract, known as the SITRACEN contract, to significantly upgrade the backbone of Mexico’s electrical network system. According to the indictment, the SITRACEN contract generated more than $44 million dollars in revenue for the Texas business unit. Then, in approximately October 2003, CFE awarded the Texas business unit a multi-year contract for maintenance and upgrades of the SITRACEN contract, referred to as the Evergreen contract.

For the Evergreen contract, the indictment alleges that O’Shea, Basurto, officials at CFE and others agreed that approximately 10 percent of the revenue the Texas business unit received from CFE would be returned to CFE officials as corrupt payments. The indictment alleges that the Evergreen contract, a sole source award, generated more than $37 million in revenue for the Texas business unit. The indictment alleges that it was also agreed that O’Shea would receive approximately one percent of the contract revenue as kickback payments. O’Shea, Basurto, and others allegedly used false invoices from Mexican companies as a basis to make international wire transfers that purported to be legitimate payments for “technical services” and “maintenance support services.” The indictment alleges these were actually corrupt payments and the companies did not do any work for the Texas business unit. O’Shea, Basurto and others allegedly also made additional “commission” payments to Basurto and his family that were further transferred to CFE officials. According to the indictment, in connection with the Evergreen contract, O’Shea authorized more than $900,000 in corrupt payments to CFE officials before an internal investigation by the Swiss corporation stopped the transfers. The Swiss corporation then voluntarily disclosed the payments to the Department of Justice and U.S. Securities and Exchange Commission (SEC) and said it is fully cooperating with their investigations.

In addition, the indictment alleges that O’Shea, Basurto and others engaged in a cover up after O’Shea was terminated from the Texas business unit, which included fabricating documents that purported to be evidence of a legitimate business relationship between the Texas business unit and the Mexican companies that provided the false invoices. According to the indictment, Basurto and O’Shea exchanged e-mails in which they discuss draft language for fake correspondence and a fake contract.

An indictment is merely an accusation, and O’Shea is presumed innocent until and unless proven guilty beyond a reasonable doubt.

The conspiracy count and the falsification of records in a federal investigation count each carry a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost. Each of the 12 FCPA counts carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The four international money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The indictment also gives notice of criminal forfeiture.

Basurto pleaded guilty on Nov. 16, 2009, before U.S. District Judge Lynn N. Hughes in Houston to a one-count information charging him for his role in the conspiracy. In his plea, Basurto admitted that while he acted as a sales representative for the Texas business unit, he conspired with others to make corrupt payments to CFE officials, helped launder the bribe monies, and engaged in a cover up to obstruct the investigations of the Department of Justice and the SEC. Basurto also admitted that he submitted false invoices and helped fabricate correspondence in contemplation of federal investigations into the bribery. As part of his plea agreement, Basurto has agreed to cooperate with the Department of Justice in its ongoing investigation.

Basurto was arrested in Dallas on April 25, 2009, on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements and subsequently detained. He was later indicted on the same charges on June 10, 2009.

The case was prosecuted by Trial Attorney Nicola J. Mrazek of the Criminal Division’s Fraud Section. The case was investigated by the FBI’s Houston Field Office and the IRS-CI Houston Field Office. The SEC provided substantial assistance and cooperation in this matter. The Department of Justice would also like to thank the Federal Republic of Germany for supplying evidence in connection with this investigation.

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Source: US Department of Justice