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    United States Attorney's Office
    Central District of California

    Thom Mrozek
    Public Affairs Officer

    (213) 894-6947

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    Release No. 07-084

    June 22, 2007


    A former executive of Santa Ana, Calif.-based Pacific Consolidated Industries LP (PCI) has been arrested for allegedly violating the Foreign Corrupt Practices Act (FCPA) as part of a conspiracy to bribe a United Kingdom Ministry of Defence official in order to obtain lucrative contracts with the U.K. Royal Air Force.

    Leo Winston Smith, 71, of Newport Beach, was arrested on June 18 and will make his initial appearance this afternoon in United States District Court in Santa Ana. Smith was initially indicted by a federal grand jury in Santa Ana on April 25. That indictment was unsealed today when Smith first court appearance was scheduled.

    The indictment alleges that Smith conspired to pay more than $300,000 in bribes to the U.K. Ministry of Defence official in exchange for equipment contracts for Pacific Consolidated Industries worth more than $11 million. In addition to the FCPA violations, the indictment also charges Smith with money laundering and tax offenses.

    PCI was a private company that manufactured air separation units (ASUs) and nitrogen concentration trolleys (NCTs) for defense departments throughout the world. ASUs and NCTs generate oxygen and nitrogen in remote, extreme and confined locations for aircraft support and military hospitals.

    Smith, a United States citizen, was the executive vice president and director of sales and marketing at PCI. Smith’s main responsibility was to obtain business from and negotiate equipment contracts with various domestic and international defense departments, including the U.K Ministry of Defence. Smith was a founder of PCI and had been employed by the company for more than 25 years.

    The indictment alleges that from1999 through 2003, Smith conspired with others to bribe an official at the Ministry of Defence, referred to in the indictment as the project manager. The project manager was directly involved in the procurement of ASUs and NCTs on behalf of the Ministry of Defence and, as a result of his position, was able to influence the awarding of the ASU and NCT contracts to PCI.

    More than $300,000 in payments allegedly were made on behalf of the project manager. The payments allegedly included wire transfers from PCI bank accounts in California to banks in England and Spain. The indictment alleges that payments to the Spanish banks went towards the purchase of a Spanish villa for the project manager.

    PCI was ultimately awarded the ASU and NCT contracts valued at more than $11 million. Smith also received more than $500,000 in commissions from PCI relating to the NCT and other contracts. Smith allegedly did not report those and other payments on his 2003 U.S. tax return.

    In late 2003, after the conduct alleged in the indictment, PCI was acquired by a group of investors and re-named Pacific Consolidated Industries, LLC. PCI, LLC referred this matter to the Department of Justice and fully cooperated in the government’s investigation.

    Smith is charged in an 11-count indictment with one count of conspiracy, four counts of violating the FCPA, conspiracy to commit money laundering, four counts of money laundering and one count of making a false statement in a tax return.

    The conspiracy and FCPA charges each carry a maximum sentence of five years in prison. The money laundering charges each carry a maximum sentence of 20 years in prison. The tax charge carries a maximum sentence of three years in prison.

    An indictment contains allegations that a defendant has committed a crime. All defendants are presumed innocent until and unless proven guilty in a court of law.

    This case is being prosecuted by Department of Justice Trial Attorney Jonathan E. Lopez of the Fraud Section of the Criminal Division and Assistant U.S. Attorney Jennifer Waier (213) 894-3550).

    The criminal case was investigated by agents with the Federal Bureau of Investigation, Santa Ana Resident Agency, and IRS-Criminal Investigation Division, Los Angeles Field Office.

    The Justice Department acknowledges and expresses its appreciation of the assistance provided by the authorities of the United Kingdom, including the U.K. Ministry of Defence Police and the Crown Prosecution Service.



    Release No. 07-084
    Return to the 2007 Press Release Index