New York Merchant Bank Pleads Guilty to FCPA Violation; Bank Chairman Pleads Guilty to Failing to Disclose Control of Foreign Bank Account
WASHINGTON – The Mercator Corporation, a merchant bank with offices in New York, pleaded guilty today in federal court in Manhattan, N.Y., to one count of making an unlawful payment to a senior government official of the Republic of Kazakhstan, in violation of the Foreign Corrupt Practices Act (FCPA), announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Preet Bharara for the Southern District of New York. Additionally, James H. Giffen, 69, of Mamaroneck, N.Y., and Mercator’s chairman, pleaded guilty today in federal court in Manhattan to one count of failing to disclose control of a Swiss bank account on his income tax return. Both pleas were before U.S. District Judge William H. Pauley III.
According to court documents, Mercator advised Kazakhstan in connection with various transactions related to the sale of portions of Kazakhstan’s oil and gas wealth. Three senior officials in the government of Kazakhstan had the power to substantially influence whether Mercator obtained and retained lucrative business, as well as the authority to pay Mercator substantial success fees if certain oil transactions closed, as well as to decide whether or not those transactions would close. According to court documents, Mercator was therefore dependent upon the goodwill of those senior officials, and in an effort to maintain its lucrative position, Mercator caused the purchase of two snowmobiles in November 1999. The snowmobiles were shipped to Kazakhstan for delivery to one of the officials.
According to the criminal information to which Giffen pleaded guilty, Giffen filed a U.S. Individual Income Tax Return, Form 1040, on March 27, 1997, for himself for the calendar year 1996, which failed to report that he maintained an interest in, and a signature and other authority over, a bank account in Switzerland in the name of Condor Capital Management, a British Virgin Islands corporation he controlled.
In 2007, the United States brought a separate, related civil forfeiture action in U.S. District Court in Manhattan against approximately $84 million on deposit in Switzerland. The civil complaint alleged that the funds were traceable to unlawful payments to senior Kazakh officials in connection with oil and gas transactions arranged by Mercator for Kazakhstan. According to a 2007 agreement between the United States, Switzerland and Kazakhstan, the funds are being used by a non-governmental organization in Kazakhstan, independent of the Kazakh Government, to benefit underprivileged Kazakh children.
Mercator faces a maximum fine of the greater of $2 million or twice the gross gain or loss resulting from the offense. Giffen faces a maximum sentence of one year in prison and a fine of up to $25,000.
The case was prosecuted by Assistant U.S. Attorneys Anirudh Bansal and Lee Renzin of the U.S. Attorney’s Office for the Southern District of New York and Trial Attorney James M. Koukios of the Criminal Division’s Fraud Section. Assistant U.S. Attorney Barbara A. Ward and Assistant Chief Daniel H. Claman of the Criminal Division’s Asset Forfeiture and Money Laundering Section are handling the related civil forfeiture proceedings. The Criminal Division’s Office of International Affairs provided assistance in this case. The matter was investigated by the FBI.