RAYTHEON COMPANY DEFRAUDED A Classic Multinational Fraud Case During the investigation and prosecution of a recently concluded commercial bribery case the Department of Justice sought evidence and investigative assistance from four foreign jurisdictions: Switzerland; the Cayman Islands, B.W.I. While these requests met with widely varying degrees of cooperation from the foreign authorities, the assistance that ultimately was provided proved crucial to the completion of the investigation and to the successful prosecution of the defendants. In essence, this case involved a commercial bribery scheme in which the two principals of a shipping company bribed two employees of a customer company to obtain shipping contracts with shipping charges inflated by approximately $2 million. The customer, the victim of this scheme, was the Raytheon Company. The funds from these inflated charges, the scheme proceeds, first were diverted to a Swiss bank account nominally held by a Liberian shell corporation. In fact, the Liberian corporation was controlled by the shipping company principals through a Swiss attorney in Geneva. The diversion of the funds to the Swiss account thus enabled the defendants to conceal and disguise the existence and subsequent distribution of the scheme proceeds. The defendants caused approximately $1 million of the scheme proceeds to be transferred by means of checks to another Swiss account held in the name of a Liechtenstein entity and to two bank accounts in the Cayman Islands. This Liechtenstein entity was controlled by the two recipients of the bribes through a Geneva attorney and a Liechtenstein attorney. The Cayman Islands bank accounts were held by two Cayman Islands companies, each of which was controlled by the bribe recipients. The bribers' share of the proceeds, approximately $1 million, was transferred to another Swiss account held by a Liechtenstein entity that they controlled and then, by wire transfers, to a Bermuda bank account in the name of a Cayman Islands company they owned. At least some of these funds were then "laundered" by means of sham loan arrangements involving a Netherlands bank; in these loan arrangements the funds were used to secure loans to the defendants. The Swiss Treaty request filed under the United States-Swiss Treaty on Mutual Assistance in Criminal Matters was the most complex and time-consuming for the Department of Justice prosecutors. In all, nearly three years were spent in pressing this request before all of the essential items of evidence were obtained. The formal request, which asked chiefly for bank account records, was filed with the Swiss Central Authority in September of 1978. On November 3, 1978, the targets of the investigation caused an 'opposition" to be filed with the Swiss authorities in which objections were raised to the exeception of our request. Thereafter, we filed both a response to the opposition brief as well as a supplemental request, which asked that a Swiss lawyer, whom we had just identified, be deposed about his activities in the fraud scheme. The Swiss Central Authority consolidated the original and supplemental requests and on April 10, 1979, rejected the oppositions filed against each of our requests. Pursuant to the Swiss implementing legislation, the opposing parties were granted thirty days in which to appeal the decision to the Swiss Federal Court and during this period appeals were filed. On August 8 the Swiss Federal Court began its deliberations on this matter and on September 28 it rejected the appeals; however, the implementing legislation provided for appeal to a special "consultative" commission and the opposing parties were granted leave to file their appeal briefs. The president of the consultative commission set the meeting of the commission for July 9, after which the appeals were rejected by a commission decree of August 26; the opposing parties then filed an administrative appeal with the Swiss Federal Council, a body somewhat akin to our federal cabinet. The Federal Council formally rejected the appeals on February 11, 1981, and on February 17 the Swiss Central Authority dispatched documents and testimony gathered pursuant to our request. Many of these documents had been redacted to remove the names of certain allegedly uninvolved third parties. In early May 1981 the Swiss Central Authority issued decrees denying the objections of three "uninvolved" parites to disclosure of their identities in certain of the bank account documents. The parties thereafter filed appeals with the Swiss Federal Court. In mid June the objection of a fourth party was denied; this decision likewise was subsequently appealed to the Federal Court. In the meantime, during mid May, the Department of Justice prosecutors attended the re-examination of the Swiss lawyer in Geneva. Although this deposition was much more fruitful, principally because the prosecutors were there to present the questioning, the Swiss lawyer refused to answer several crucial questions on grounds of attornetyclient privilege. Upon their return to the United States the prosecutors, acting through the U.S. Central Authority, the Office of International Affairs in the Department of Justice's Criminal Division, requested the Swiss Central Authority to cause the attorney-client assertion to be adjudicated and to compel the lawyer to answer the questions or face contempt. This request was relayed to the examining magistrate. Near the end of July 1981 the Department of Justice prosecutors were faced with a serious problem. The statute of limitations would run in late September on the first, and perhaps strongest, counts of the proposed indictment. The appeals of the four "uninvolved" parties were still pending before the Swiss Federal Court and there had been no adjudication of the attorney-client claim. Thus in late August the prosecutors and a member of the U.S. Central Authority returned to Switzerland for the additional depositions. As had been hoped, just as the depositions got underway the Federal Court issued its decrees rejecting the appeals of the four opposing parties. Thereupon the Swiss Central Authority identified each of the parties and handed over unredacted copies of documents relating to them. In addition, we also obtained original checks from the primary bank account.1/ Because the appeals were rejected at the early stages of the depositions, we were permitted to include in our questions references to the previously unidentified parties and thereby obtain significant evidence as to their complicity in the scheme and the ultimate disposition of the scheme proceeds. Although the Swiss lawyer continued to assert the attorney-client privilege, the Department of Justice prosecutors were successful in extracting from him, under intense questioning, much of the information that he was trying to shield. The evidence obtained during this trip was presented to a federal grand jury in early September and an indictment was returned on September 10, 1981, approximately ten days before the statute of limitations was to run out on the first counts. Although we pressed the Swiss authorities to adjudicate the validity of the Swiss lawyer's assertion of the attorney-client privilege, there was never any adjudication of this issue. Thus the targets of the investigation succeeded in preserving their anonymity in the scheme transactions carried out by their Swiss lawyer and, as a consequence, the Department of Justice prosecutors were compelled to rely soley on circumstantial evidence to implicate the defendants in the Swiss transactions. After the indictment of this case, depositions of the Swiss witnesses were taken in Switzerland for use at trial. Again, however, the Swiss lawyer refused to answer certain key questions on grounds of attorney-client privilege and again we were unable to obtain an adjudication of this issue by the Swiss judicial authorities. 1/ Fingerprint analysis identified a defendant's fingerprint on one of the checks obtained from the Swiss bank account. B. Liechtenstein After indictment, and at the government's request, a letters rogatory application was issued to the judicial authorities of Liechtenstein by the U.S. District Court for the District of Columbia, the Honorable Norma Holloway Johnson presiding. Shortly after the application was filed, a Liechtenstein court granted the requested assistance and during August 1982 the Liechtenstein witnesses were deposed in Vaduz, Liechtenstein. This testimony and related documentary evidence produced at the time of the depositions were introduced at trial by the government. C. Bermuda As British Colonies, both Bermuda and the Cayman Islands follow the general British practice of denying requests for investigative assistance in the pre-indictment stage of a case. Once the indictment was returned, however, our letters rogatory request for Bermuda was issued by our trial court. The attorney general of Bermuda received the letters rogatory papers and filed these with the court in Bermuda, which quickly granted the requested assistance. The subsequent deposition proceeding produced significant testimony and documentary evidence that was used at trial. D. Cayman Islands Our post-indictment experience with the Caymanian authorities was in marked contrast to the assistance rendered in Bermuda. Shortly after the indictment was returned, we learned that a businessman from the Cayman Islands, who had been associated with the defendants, was visiting in the United States. This individual was served with a subpoena and within a short time his U.S. counsel advised us that he would comply with the subpoena. At the same time, counsel requested that we assist the witness in obtaining from the Cayman Islands Grand Court a release from the provisions of the Cayman Island business and professional secrecy act. We agreed to do so provided the application for release did not produce unreasonable delay. In early October 1981 the case prosecutors met with the attorney general of the Cayman Islands and provided him and his associates a comprehensive three hour briefing on the case. After the briefing, the attorney general indicated that he was satisfied that we had a prima facie fraud case and that, as amicus to the Grand Court, he would advise the court that he had no objections to the witness' testifying in the United States. On the next day, the Grand Court issued an order permitting the witness to testify. Subsequently, the witness appeared in the United States and testified. Based on this positive precedent and with the approval of the Caymanian authorities, we filed with the Cayman Islands government a formal request under their business secrecy law. In the request we asked for assistance in obtaining bank records, local company records and testimony of witnesses in the Cayman Islands. The request was approved by the appropriate officials and by the executive committee of the legislature, which authorized the police to gather the requested evidence. At this point, however, complications developed. The banks refused to produce any documents unless compelled to by |