Covino, Mario; Morlok, Richard; Carson, Stuart; Carson, Hong (a/k/a Rose); Cosgrove, Paul; Edmonds, David; Kim, Han Yong; Control Components, Inc.
In addition to FCPA violations, Ricotti was indicted for conspiracy to violate and direct violation of the Travel Act by using interstate and foreign commerce to facilitate commercial bribery, an unlawful act under California Penal Code Section 641.3. Thus, the DOJ is prosecuting Ricotti for bribery of employees of foreign private companies as well as foreign government officials.
United Arab Emirates
2003; 2004; 2005; 2006; 2007
Employees of various state-owned companies
Flavio Ricotti, former Vice President and Head of Sales for Europe, Africa, and the Middle East for Control Components Inc. ("CCI"), a California based valve manufacturing company, is one of six defendants indicted for alleged involvement in a corruption scheme involving approximately 236 payments in over 30 countries totaling approximately $6.85 million. From 2003 to 2007, these payments included $4.9 million to officers and employees of state-owned companies and $1.95 million to officers and employees of private companies. According to the indictment, these corrupt payments resulted in approximately $46.5 million in profits for Ricotti's employer.
The indictment lists CCI's state-owned customers who received corrupt payments as including but not limited to: Jiangsu Nuclear Power Corporation ("JNPC") (China), Guohua Electronic Power (China), China Petroleum Materials and Equipment Corporation ("CPMEC"), PetroChina, Dongfang Electric Corporation (China), Chuna National Offshore Oil Corporation ("CNOOC"), Korea Hydro and Nuclear Power ("KHNP"), Petronas (Malaysia), and National Petroleum Construction Company ("NPCC") (United Arab Emirates).
The indictment alleges that Ricotti participated in CCI's "friend-in-camp ('FIC') sales model" by cultivating "special relationships" with employees of state-owned and private companies to win business through gifts of money, vacations, and lavish entertainment. Personally, Ricotti is indicted for his alleged role in making approximately $750,000 in payments to employees of public entities and $380,000 in payments to private companies.
As an overt act in furtherance of the conspiracy, Ricotti allegedly caused CCI to wire $100,000 to an Arab Bank account in the United Arab Emirates for an NPCC official for the purpose of securing a contract. Based on this alleged payment, Ricotti was also indicted on one count of bribery under the FCPA. In addition he was indicted under three counts of violating the Travel Act. Following the related pleas entered by CCI employees Morlok and Covino in early 2009, the South Korean government announced plans to expand a probe of KHNP kickbacks for CCI contracts.
Defendants filed a petition for a writ of mandamus from the Ninth Circuit regarding their ability to compel the government to produce documents in the possession of a cooperating witness. The court denied a request to stay the case pending that petition.
Ricotti pleaded guilty on April 28, 2011. On March 18, 2013, Ricotti was sentenced to time served (11 months previously spent in U.S. custody) and a $100 special assessment but no fine.
On April 16, 2012, Carson and his wife, Hong "Rose" 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 imprisonment 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. Cosgrove pleaded guilty on May 29, 2012, and on September 14, 2012 was sentenced to 13 months home confinement 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.