End of the Year Brings A Burst of Settlements With Justice Department

By Carrie Johnson
Washington Post Staff Writer
Friday, January 2, 2009

The Justice Department has reached more than a dozen business-related settlements since the presidential election, with more in the pipeline for January, prompting lawyers and interest groups to assert that companies are seeking more favorable terms before the new administration arrives.

The climate for business settlements could grow more harsh when Obama appointees seize the reins at the Justice Department, corporate lawyers say. They point to statements by Attorney General-designate Eric H. Holder Jr., who told an audience last month that he would expand the focus of federal prosecutors into corporate suites.

A review of 15 agreements involving corporations since early November suggests that much of the alleged misconduct dates back five years or more, provoking questions about why the cases took so long to mature and why resolutions are coming with only weeks left in President Bush's term.

"What they obviously are trying to do is take advantage of an administration that's deemed to be more friendly to business," said Cono R. Namorato, a Washington defense lawyer who ran the Internal Revenue Service's office of professional responsibility earlier in the Bush administration. "I know of no tax reason for doing it now."

Justice Department officials said there is nothing unusual about end-of-year settlements. They defend their record in investigating and prosecuting corporate misdeeds. In recent weeks, they announced indictments against five Blackwater Worldwide security guards for their role in a 2007 ambush that killed or injured 34 Iraqi civilians. Justice Department officials also rolled out their second-largest price-fixing settlement, a $585 million penalty shared by three companies that make high-tech liquid crystal display panels for computer monitors, televisions and cellphones.

"The department makes its enforcement decisions based solely on the facts and the law, after conducting a thorough investigation," spokesman Peter Carr said. "A look at previous months and years show a steady stream of cases that have been resolved by settlement or plea agreement. While the department reaches these kinds of agreements throughout the year, it's not unusual for parties to resolve enforcement matters by the end of the calendar year."

Since November, the Justice Department has announced 19 settlements or plea deals with companies, compared with 16 in the same time frame the year before. In 2006, department officials announced five business settlements in the same time frame.

Three lawyers who routinely represent companies before the Justice Department said they began to take notice shortly after the Nov. 4 election, when authorities announced a $725,000 environmental deal with Plantation Pipe Line. The number of settlements and plea agreements accelerated from there.

By mid-November, Britain's Aibel Group agreed to pay $4.2 million to resolve accusations that the oil and gas services company had flouted a probation agreement signed a year earlier, covering bribes its executives allegedly spread to Nigerian customs officials between 2002 and 2005.

A few weeks later came a case that authorities described as "unprecedented in scale and geographic reach." Siemens committed to pay $450 million in criminal fines, in a pact that left the German conglomerate eligible to bid for and win lucrative U.S. government contracts.

Two days before Christmas, Justice Department officials rolled out more settlements: a $1.7 million deal with Spartan Motors, which allegedly paid kickbacks to win a contract to make chassis for military vehicles; a $6.1 million deal with a subsidiary of Exxon Mobil, accused of violating the Clean Water Act in connection with a 15,000-gallon diesel oil spill in Massachusetts; and a $7.6 million pact with Yale University to settle charges that it overbilled federal agencies on research grants between 2000 and 2006.

Corporate lawyers and public interest groups pointed to several other reasons contributing to the burst in settlements, including a desire by businesses to avoid negative publicity by timing their deals to the holiday season, and a push by government attorneys to complete big cases before they leave for private-sector work.

"This is traditionally the time to ram a settlement through because no one notices," said Patrick Burns, a spokesman for Taxpayers Against Fraud, a nonprofit group that supports whistleblowers and their lawyers. "Putting it out between Christmas and New Year's is brilliant."

For Siemens, the trouble began with a 2006 raid by Munich prosecutors, who were searching for evidence connecting the electronics and engineering company to a wide-ranging series of corrupt payments that helped grease the skids for international projects.

Employees in far-flung operations routinely visited "cash desks" to withdraw millions of dollars and paid business consultants to serve as middlemen and slip the funds to foreign government officials in Argentina, Venezuela, Bangladesh and elsewhere, the company reported. In all, the joint probe by the U.S. and German governments uncovered $1.36 billion in payments, including $805 million in bribes to officials, since 1999, according to court papers.

At a recent news conference, federal prosecutors described the criminal fine as "strong medicine" and cited "extraordinary steps" that Siemens took to uncover the scope of the bribery and to restructure its operations.

The company hired a law firm and accounting experts to probe its problems, ultimately paying more than $776 million to advisers who reviewed millions of documents and interviewed 1,750 employees, according to a statement from Siemens.

Elizabeth Cho, a spokeswoman for the company, said recently that Siemens has made progress in complying with U.S. and international fraud laws. A lawyer for Siemens was traveling and could not be reached for comment.

Ellen S. Podgor, a law professor at Stetson University who tracks corporate fraud developments, said the timing of the Siemens case raised questions about "an end-of-the-year crunch."

"It seemed to me to be interesting coming at the end of the year," Podgor said in a telephone interview.

On her blog devoted to developments in white-collar crime, Podgor has bestowed a 2008 "best timing" award on Siemens for reaching a plea deal with the government before a change in presidential administration.

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