United States v. Stuart Carson, Hong Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim (C.D. Cal. 2009)

• Case Name
• United States v. Stuart Carson, Hong Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim (C.D. Cal. 2009)

• Date Filed
• 04/08/2009

• Enforcement Agency
• DOJ

• Countries
• China, Korea, South, Malaysia, United Arab Emirates

• Foreign Official
• Employees of various state-owned entities, including, but not limited to:  Jiangsu Nuclear Power Corporation, Guohua Electric Power, China Petroleum Materials and Equipment Corporation, PetroChina, Dongfang Electric Corporation, and China National Offshore Oil Company (China); Korea Hydro Nuclear Power (South Korea); Petronas (Malaysia); and National Petroleum Construction Company (United Arab Emirates).

• Date of Conduct
• 2004 to 2005

• Nature of Business
• Stuart Carson and his five co-defendants are former executives of Control Components, Inc. (“CCI”), a California-based company that designs and manufactures severe service control valves used in the nuclear, oil and gas, and power generation industries.  Stuart Carson was Chief Executive Officer.  His wife, Hong Carson, a/k/a Rose Carson, was Director of Sales for China and Taiwan.  Paul Cosgrove was Executive Vice President.  David Edmonds was Vice President of Worldwide Customer Service.  Flavio Ricotti was Vice President and Head of Sales for Europe, Africa, and the Middle East.  CCI retained Han Yong Kim as a consultant to advise CCI operations in South Korea in 2005; from 1997 to 2005, he was President of CCI’s South Korea office.  The Carsons, Cosgrove, and Edmonds are U.S. citizens.  Ricotti is a citizen of Italy and Kim is a citizen of South Korea.

• Influence to be Obtained
• From 2003 through 2007, federal prosecutors allege that Carson and his co-defendants approved, and in some cases personally made, payments totaling approximately $4.9 million to officers and employees of numerous state-owned customers for the purpose of influencing the award of contracts and project technical specifications.  From these payments, CCI derived approximately $31.7 million in net profits.  
   
  During the same period, prosecutors allege that the defendants made corrupt payments of approximately $1.95 million to employees of privately owned companies.  In total, the defendants allegedly made approximately 236 corrupt payments in over 30 countries.
   
  Carson is the alleged “prime architect” of CCI’s “friend-in-camp” sales model through which the defendants rewarded customers’ employees for the award of contracts to CCI with money, expensive gifts, tuition payments, and extravagant overseas holidays to destinations including Disneyland, Las Vegas, and Hawaii under the guise of training and inspection trips.  
   
  In 2004, Stuart Carson, Hong Carson, Edmonds, and Kim allegedly interfered and provided false and misleading information in connection with an internal audit of CCI commission payments carried out by CCI’s parent company, IMI plc.  According to the indictment, Edmonds created false invoices and spreadsheets to cover up illicit payments.  In 2007, Hong Carson, Cosgrove, Edmonds, and Ricotti allegedly provided false and misleading information about CCI’s commission payments to internal investigators.  Also, during the 2007 internal investigation, Hong Carson allegedly flushed documents down a toilet to prevent their discovery
   

• Enforcement
• On April 8, 2009, a federal grand jury indicted all six defendants for conspiracy to violate the FCPA and the Travel Act (through commercial bribery of employees of private companies in violation of California state law).  Stuart Carson was also indicted on two counts of bribery under the FCPA.  Hong Carson was indicted on five counts of bribery under the FCPA as well as one count for obstruction of justice for intentionally destroying records.  Cosgrove was indicted on six counts of bribery under the FCPA and one count under the Travel Act.  Edmonds was indicted on three counts of bribery under the FCPA and two counts under the Travel Act.  Ricotti was indicted on one count of bribery under the FCPA and three counts under the Travel Act.  Kim was indicted on two counts of bribery under the FCPA.  
   
  German authorities arrested Ricotti in Frankfurt, Germany in February 2010; he was extradited to the U.S. on July 2, 2010 and first made an appearance in the case on July 12, 2009.  Kim made an appearance on March 4, 2011. 
   
  On May 18, 2011, the Court denied the defendants’ motion to dismiss Counts 1-10 which argued that the definition of “foreign official” in the FCPA did not include the employees of state-owned enterprises.  Kim is considered a fugitive after his failed motion for leave to file a special appearance, and U.S. officials continue to seek his extradition.  He filed a renewed motion to file a special appearance in May 2013.
   
  On April 16, 2012, Stuart and Hong Carson each pleaded guilty to separate one-count superseding informations charging them with making a corrupt payment to a foreign government official in violation of the FCPA.  Stuart Carson was sentenced to four months in prison and ordered to pay a fine of $20,000.  Hong Carson was sentenced to three years’ probation and ordered to pay a fine of $20,000.  
   
  Flavio Ricotti pleaded guilty on April 28, 2011, and was sentenced on March 18, 2013 to time served.  Cosgrove pleaded guilty on May 29, 2012, and on September 13, 2012 was sentenced to three years’ probation and a $20,000 fine.  Edmonds pleaded guilty on June 15, 2012, and on December 17, 2012, was sentenced to 4 months in prison followed by 4 months’ home confinement, with a $20,000 fine.
   

• Amount of the Value
• $4,900,000.

• Amount of Business Related to Payment
• Not Stated.

• Intermediary
• Consultants

• Total Sanction
• $ 80,000

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Related Enforcement Actions
• United States v. Control Components, Inc. (C.D. Cal. 2009)
  United States v. Mario Covino (C.D. Cal. 2008)
  United States v. Richard Morlok (C.D. Cal. 2009)
  United States v. Control Components, Inc. (C.D. Cal. 2009)
  

Stuart Carson

• Citation
• United States v. Carson, et al., No. 8:09-cr-00077 (C.D. Cal. 2009).

• Date Filed
• 04/08/2009

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Anti-Bribery

• Disposition
• Plea Agreement

• Defendant Jurisdictional Basis
• Domestic Concern, Agent of Domestic Concern

• Defendant's Citizenship
• United States

• Individual Sanction
• 4-Months Imprisonment; $20,000 Criminal Fine.

Hong Carson

• Citation
• United States v. Carson, et al., No. 8:09-cr-00077 (C.D. Cal. 2009).

• Date Filed
• 04/08/2009

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Anti-Bribery

• Disposition
• Plea Agreement

• Defendant Jurisdictional Basis
• Domestic Concern, Agent of Domestic Concern

• Defendant's Citizenship
• United States

• Individual Sanction
• 3-Years Probation; $20,000 Criminal Fine.

Paul Cosgrove

• Citation
• United States v. Carson, et al., No. 8:09-cr-00077 (C.D. Cal. 2009).

• Date Filed
• 04/08/2009

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Anti-Bribery

• Disposition
• Plea Agreement

• Defendant Jurisdictional Basis
• Domestic Concern, Agent of Domestic Concern

• Defendant's Citizenship
• United States

• Individual Sanction
• 3-Years Probation; $20,000 Criminal Fine.

David Edmonds

• Citation
• United States v. Carson, et al., No. 8:09-cr-00077 (C.D. Cal. 2009).

• Date Filed
• 04/08/2009

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Anti-Bribery

• Disposition
• Plea Agreement

• Defendant Jurisdictional Basis
• Domestic Concern, Agent of Domestic Concern

• Defendant's Citizenship
• United States

• Individual Sanction
• 4-Months Imprisonment; $20,000 Criminal Fine.

Flavio Ricotti

• Citation
• United States v. Carson, et al., No. 8:09-cr-00077 (C.D. Cal. 2009).

• Date Filed
• 04/08/2009

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Conspiracy: Anti-Bribery

• Disposition
• Plea Agreement

• Defendant Jurisdictional Basis
• Agent of Domestic Concern

• Defendant's Citizenship
• Italy

• Individual Sanction
• Time Served

Han Yong Kim 

• Citation
• United States v. Carson, et al., No. 8:09-cr-00077 (C.D. Cal. 2009).

• Date Filed
• 04/08/2009

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Conspiracy: Anti-Bribery

• Other Statutory Provision
• Conspiracy (Wire Fraud); Conspiracy (Travel Act); Aiding and Abetting (Travel Act); Travel Act.

• Disposition
• Fugitive

• Defendant Jurisdictional Basis
• Agent of Domestic Concern

• Defendant's Citizenship
• Korea, South

• Individual Sanction
• Pending