After a lengthy investigation, Giffen was indicted on March 28, 2003 for violating the FCPA. In addition, on March 15, 2004, federal prosecutors in New York charged Giffen with filing false tax returns by omitting $2 million in income related to his relationship with Mercator.
On September 18, 2003, Williams pled guilty to conspiracy and tax evasion and was sentenced to 46 months in prison. Williams was also ordered to pay a $25,000 fine, restitution in the amount of $3,512,000, and taxes on the $2 million kickback he received.
Giffen challenged subpoenas issued by the United States seeking certain foreign bank records in the possession of Giffen’s attorneys based upon the attorney work product doctrine. The United States District Court rejected the claim of privilege and ordered that the records be produced. Giffen appealed, and, on January 28, 2003, the United States Court of Appeals for the Second Circuit affirmed the lower court’s decision. In November 2004, the District Court granted Giffen’s request to access CIA documents to determine whether he had a viable public authority defense based on his claim that he was essentially a CIA asset when he made the payments in question. In October 2005, the District Court denied the government’s motion in limine to preclude Giffen from advancing a public authority defense and using classified documents to support that defense. The government filed an interlocutory appeal of this denial, and, in December 2006, the Second Circuit refused to hear the appeal on the ground that it was prematurely filed although it severely criticized in dicta the District Court’s interpretation of the public authority defense. Giffen’s trial had been scheduled for February 2007, but remained mired in discovery-related issues.
On August 6, 2010, the government filed a superseding information, dropping all charges against Giffen except for one count of filing a false tax return based on Giffen’s failure to disclose an interest in certain Swiss bank accounts. Giffen pleaded guilty to the tax-related misdemeanor charge pursuant to an agreement with the DOJ and was ordered to pay a penalty of $25. Under the plea agreement, Giffen relinquished any claims to funds in or taken from certain Swiss bank accounts, including the one funding charitable projects in Kazakhstan and nine other accounts in the names of various corporate entities.
Separately, on May 3, 2007, the government filed a civil forfeiture action against approximately $84 million, plus interest, on deposit in a Swiss bank account belonging to the government of Kazakhstan, alleging that the money in the account included the approximately $51.7 million in proceeds of the FCPA violations and wire frauds charged against Giffen. On May 31, 2009 the court granted the U.S. government’s application for a Stipulation and Order, which set forth its agreement with Kazakhstan to use the money to fund three programs to benefit Kazakhstan: one for programs to benefit poor children; the second to improve public financial management; and the third to implement a comprehensive strategy for transparency in the oil, gas, and mining industries there.
