Och-Ziff Enters into Three-Year Deferred Prosecution Agreement; Subsidiary Pleads Guilty to Conspiracy to Violate the Foreign Corrupt Practices Act

A New York-based alternative investment and hedge fund manager, Och-Ziff Capital Management Group LLC (Och-Ziff), and its wholly-owned subsidiary, OZ Africa Management GP LLC (OZ Africa), entered into resolutions to resolve criminal charges and agreed to pay a criminal penalty of more than $213 million in connection with a widespread scheme involving the bribery of officials in the Democratic Republic of Congo (DRC) and Libya.     

Principal Deputy Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office made the announcement. 

“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” said Principal Deputy Assistant Attorney General Bitkower.  “In its pursuit of profits, Och-Ziff and its agents paid millions in bribes to high-level officials across Africa.  By exposing corruption in this industry, the Criminal Division’s Fraud Section continues to root out wrongdoing of all types in the financial sector.”

“Och-Ziff, one of the largest hedge funds, positioned itself to profit from the corruption that is sadly endemic in certain parts of Africa, including in Libya, the Democratic Republic of the Congo, Chad and Niger,” said U.S. Attorney Capers.  “Despite knowing that bribes were being paid to senior government officials, Och-Ziff repeatedly funded corrupt transactions.  One Och-Ziff employee was so bold as to order the removal of language from their African joint venture’s internal audit report that called for an investigation of suspected bribery payments by a business partner.  Today’s corporate resolutions, which include a more than $213 million criminal penalty and an independent compliance monitor, hold Och-Ziff accountable for placing profits above the law and will help ensure that the conduct brought to light here never happens again at this company.”   

“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form,” said Assistant Director in Charge Sweeney.  “Doing so with the intention of influencing a foreign official in his or her capacity is nothing short of corruption.  In this scheme, payments of millions of dollars were paid out to senior officials within certain parts of Africa in exchange for access to profitable investment opportunities.  This type of behavior can’t and won’t be tolerated.  I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”

“Today’s plea and deferred prosecution agreement result from the unraveling of complex financial transactions orchestrated by Och-Ziff Capital Management Group LLC and its subsidiary to facilitate illegal payments to foreign government officials,” said Chief Weber.  “IRS-CI will continue to investigate pervasive bribery schemes used by corporations in the pursuit of attractive international investment opportunities.”

Och-Ziff entered into a deferred prosecution agreement in connection with a criminal information charging the company with two counts of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), one count of falsifying its books and records and one count of failing to implement adequate internal controls.  Pursuant to its agreement with the department, Och-Ziff agreed to pay a total criminal penalty of $213,055,689.  Och-Ziff also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.

OZ Africa pleaded guilty to a one-count criminal information filed today and assigned to U.S. District Judge Nicholas G. Garaufis of the Eastern District of New York, charging the company with a conspiracy to violate the anti-bribery provisions of the FCPA.  Sentencing has been scheduled for March 29, 2017.

In related proceedings, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Och-Ziff Capital Management Group LLC and OZ Management LP, whereby Och-Ziff agreed to pay approximately $199 million in disgorgement to the SEC, including prejudgment interest.  Thus, the combined total amount of U.S. criminal and regulatory penalties paid by Och-Ziff is approximately $412 million.

The DRC Bribery Scheme

According to the companies’ admissions, in late 2007, Och-Ziff employees began discussions with a businessman operating in the DRC about entering into a partnership based on special access to lucrative investment opportunities in the DRC involving the country’s diamond and mining sectors.  Och-Ziff employees learned that the businessman gained access to these attractive investment opportunities by making corrupt payments to senior government officials in the DRC, the companies admitted.  According to the plea agreement, between 2008 and 2012, Och-Ziff entered into several DRC-related transactions in conjunction with the businessman, understanding that Och-Ziff’s funds would be used, in part, to pay substantial sums of money to high-ranking DRC officials to secure access to, and preference for, the investment opportunities.  In late 2008, after an Och-Ziff employee was alerted that an audit of the businessman’s records revealed payments to DRC officials, that employee instructed that any references to those payments be removed from a final report of the audit, the companies admitted.  According to the plea agreement, the businessman paid tens of millions of dollars in bribes to DRC officials in exchange for investment opportunities that resulted in more than $90 million in profits for Och-Ziff. 

The Libya Bribery Scheme

Och-Ziff also admitted that, beginning in 2007, it engaged a third-party agent to assist the company in securing an investment from the Libyan Investment Authority (LIA), that country’s sovereign wealth fund, knowing the agent would need to pay bribes to Libyan officials.  The agent was engaged without formal approval or any due diligence, according to court documents.  The company admitted that, beginning in February 2007, the agent worked on behalf of Och-Ziff to obtain an asset placement from the LIA, including setting up a meeting between a senior Och-Ziff employee and the Libyan official empowered to make investment decisions for the LIA.  According to court documents, in late November 2007, Och-Ziff received a $300 million investment from the LIA into the company’s hedge funds.  Och-Ziff admitted that it subsequently entered into an agreement to pay the agent a “finder’s fee” of $3.75 million, knowing that all or a portion of the fees would be paid to Libyan officials in return for their assistance in obtaining the LIA’s investment.  In addition, Och-Ziff admitted that it falsified its books and records and attempted to conceal and disguise the bribes paid through the agent by paying the “finder’s fee” through a sham consulting agreement.

Internal Controls Failures and Falsified Books and Records

Och-Ziff also failed to implement and maintain adequate internal accounting controls, which allowed its employees, agents and business partners to misappropriate assets, the company admitted.  As a result of its failure to conduct due diligence on its partners and the lack of financial controls, Och-Ziff failed to prevent bribe payments from being made in the DRC, Libya, as well as in Chad and Niger, where an Och-Ziff joint venture made mining-related investments, according to admissions in court documents.     

The Corporate Resolutions

The department entered into this resolution in part due to Och-Ziff’s failure to voluntarily self-disclose the companies’ misconduct to the department.  The resolution also reflects the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials and the involvement of a high level employee within Och-Ziff.  Notwithstanding, the criminal penalty reflects a 20 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Och-Ziff’s cooperation with the government’s investigation.

*          *          *

In connection with the government’s investigation, Samuel Mebiame, 43, a Gabonese national, was charged on Aug. 16, 2016, with conspiring to bribe foreign government officials to obtain mining rights in Chad, Niger and Guinea.  According to the criminal complaint, Mebiame allegedly worked as a “fixer” for a mining company owned by a joint venture between Och-Ziff and an entity incorporated in Turks and Caicos.  The complaint alleges that Mebiame paid bribes to high-ranking government officials in Niger and Chad to obtain mining rights for the joint venture.  The charges against Mebiame are merely allegations, and he is presumed innocent unless and until proven guilty. 

The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case.  The department appreciates the significant cooperation and assistance provided by the SEC in this matter.  The Swiss Federal Office of Justice, the British Virgin Islands Central Authority, the Maltese judicial authorities and authorities in Jersey and Guernsey also provided assistance.

Assistant Deputy Chief Leo Tsao and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys James P. Loonam, Jonathan P. Lax and David Pitluck of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided significant assistance.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

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Parallel Resolutions with the Securities and Exchange Commission and Brazilian Authorities Equaling $97 Million in Disgorgement Also Announced Today

Brazilian aircraft manufacturer Embraer S.A. (Embraer) entered into a resolution to resolve criminal charges and agreed to pay a penalty of more than $107 million in connection with schemes involving the bribery of government officials in the Dominican Republic, Saudi Arabia and Mozambique, and to pay millions more in falsely recorded payments in India via a sham agency agreement.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Special Agent in Charge William J. Maddalena of the FBI’s Miami Field Office made the announcement.

“Embraer paid millions of dollars in bribes to win government aircraft contracts in three different continents,” said Assistant Attorney General Caldwell.  “But this prosecution shows that the Criminal Division will hold accountable those who treat corruption as a mere cost of doing business.  Between U.S., Brazilian and Saudi authorities, bribe payers and bribe takers alike have been brought to justice for their wrongdoing.”

“Embraer tried to bribe their way into several profitable aircraft contracts around the world,” said Assistant Special Agent in Charge Maddalena.  “Instead of reaping a nice profit, their criminal conduct earned the Brazilian aircraft manufacturer a substantial penalty that more than wiped out their gains from these contracts.  Crime does not pay!”

According to the company’s admissions, Embraer executives and employees paid bribes to government officials and falsified books and records in connection with aircraft sales to foreign governments and state-owned entities in multiple countries.  In 2008, Embraer paid $3.52 million to an influential government official in the Dominican Republic via a false agency agreement to secure a contract to sell the Dominican Air Force eight military aircraft for approximately $92 million.  In 2010, Embraer paid $1.65 million to an official at a Saudi Arabian state-owned and -controlled company via a false agency agreement to secure that instrumentality’s agreement to purchase three aircraft from Embraer for approximately $93 million.  In 2008, Embraer paid $800,000 via a false agency agreement with an intermediary designated by a high-level official at Mozambique’s state-owned commercial airline, Linhas Aéreas de Moçambique S.A. (LAM), to secure LAM’s agreement to purchase two aircraft from Embraer for approximately $65 million.  In 2009, Embraer paid an agent $5.76 million pursuant to a false agency agreement with a shell company in connection with a contract it secured to sell the Indian Air Force three aircraft for approximately $208 million. 

In total, Embraer earned profits of nearly $84 million on the foregoing aircraft sales. 

Embraer entered into a three-year deferred prosecution agreement (DPA) to resolve the case.  As part of the DPA, Embraer admitted to its involvement in a conspiracy to violate the FCPA’s anti-bribery and books and records provisions and to its willful failure to implement an adequate system of internal accounting controls.  Embraer agreed to pay a criminal penalty of $107,285,090; continue to cooperate with the department’s investigation; enhance its compliance program; implement a more adequate system of internal accounting controls; and retain an independent corporate compliance monitor for a term of three years. 

The Criminal Division’s Fraud Section reached this resolution based on a number of factors, including the fact that Embraer did not voluntarily disclose the FCPA violations, but did cooperate with the department’s investigation after the Securities and Exchange Commission (SEC) served it with a subpoena.  After Embraer began cooperating, it did so fully and disclosed all relevant, non-privileged facts known to it, including about individuals involved in the misconduct.  Embraer did not, however, engage in full remediation.  It disciplined a number of company employees and executives engaged in the misconduct, but did not discipline a senior executive who was aware of bribery discussions in emails in 2004 and had oversight responsibility for the employees engaged in those discussions.  As a result, the criminal penalty in this case is 20 percent below the bottom of the applicable range under the U.S. Sentencing Guidelines, a discount that reflects Embraer’s full cooperation but incomplete remediation.

In related matters, Embraer reached settlements with both the SEC and Brazilian authorities.  Embraer reached a settlement with the SEC, under which it agreed to pay $83.8 million in disgorgement and $14.4 million in prejudgment interest.  The SEC has agreed to credit the disgorgement that Embraer pays to Brazilian authorities.  Embraer also reached a settlement with Brazilian authorities under which it agreed to pay $20 million in disgorgement.  With the cooperation of U.S. authorities, Brazilian authorities have charged 11 individuals for their alleged involvement in Embraer’s misconduct in the Dominican Republic.  Saudi Arabian authorities have charged two individuals for their alleged involvement in Embraer’s misconduct in Saudi Arabia. 

The FBI’s Miami Field Office investigated the case.  Senior Trial Attorney Jason Linder and Trial Attorney John-Alex Romano of the Criminal Division’s Fraud Section prosecuted the case. 

The Fraud Section appreciates the cooperation and assistance provided by the SEC in this matter.  Authorities in Brazil, the Dominican Republic and South Africa also provided assistance and cooperation.  The Criminal Division’s Office of International Affairs also provided assistance during the investigation.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

WILMINGTON – The United States Attorney’s Office announced that today in federal court, the jury returned a verdict of guilty on all three corruption charges pending against the defendant, North Carolina Superior Court Judge ARNOLD OGDEN JONES, II.  The defendant was charged in a Superseding Indictment with Paying Bribes; Paying Gratuities; and Attempted Corrupt Influence of an Official Proceeding. 

Following a five-day trial, the jury began deliberations at 10:02 am, and returned a verdict at 10:35 am.  Sentencing of the defendant will occur during the court’s January 23, 2017 term.

United States Attorney John Stuart Bruce stated, “The jury’s verdict affirms a bedrock principle of the rule of law.  No person holding a postion of public trust in our legal system is permitted to subvert that system for his own personal objectives.”

“Corruption will not be tolerated, no matter the level of government, the complexity of the scheme, or the names of those committing the fraud.  Rooting out public corruption is the FBI’s top criminal investigative priority and we rely on our law enforcement partners and citizens to help us identify those offenders who put our democracy at risk,” said John Strong, Special Agent in Charge of the FBI in North Carolina.

During the trial, the evidence established that between October 10, 2015 and November 3, 2015 JONESgave, offered, and promised cases of beer and $100 to a Federal Bureau of Investigation Task Force Officer to influence him to compel Verizon to produce JONES’s wife’s text messages, and to disclose those messages to JONES, even though he was not permitted to receive them by law.  Upon being contacted by JONES, the Task Force Officer quickly reported it and, with FBI supervisory approval, a FBI investigation was initiated.  Evidence at the trial established that JONES, as a judge, was familiar with the processes and procedures law enforcement must undertake to obtain private text message content, including the need for the FBI to have an ongoing investigation and a legitimate law enforcement need for such text content.  The evidence further established that JONES desired the text messages to investigate his suspicions that his wife was having an affair.  Evidence presented at trial, including multiple recorded conversations, established JONES’s desire to conceal the FBI Task Force Officer’s involvement in obtaining the texts.  JONES agreed to destroy evidence of the crime, including a disk purported to contain the text messages, and text messages coordinating the exchange of cash and a disk.  The evidence in the case concluded with a video of JONES exchanging the cash and disk on the steps of the Wayne County Courthouse in his judicial robe.

     At sentencing, on the charge of Bribery, the defendant faces not more than 15 years in prison and up to $250,000 in fines.  On the charge of Gratuities, the defendant faces not more than 2 years in prison and up to $250,000 in fines.  On the charge of Attempting to Corruptly Influence an Official Proceeding, the defendant faces not more than 20 years in prison and a fine of up to $250,000. 

Investigation of this case was conducted by the Federal Bureau of Investigation.  Assistant United States Attorneys William M. Gilmore and Adam F. Hulbig prosecuted the case on behalf of the government.

            LOS ANGELES – Former California State Senator Ronald S. Calderon was sentenced today to 3½ years in federal prison after pleading guilty to a federal corruption charge and admitting that he accepted tens of thousands of dollars in bribes in exchange for performing official acts as a legislator.

            Ron Calderon, 59, of Montebello, received the 42-month sentenced this afternoon from United States District Judge Christina A. Snyder, who also ordered the defendant to serve 150 hours of community service.

            Ron Calderon pleaded guilty in June to one count of mail fraud through the deprivation of honest services. In a plea agreement filed in this case, Ron Calderon admitted accepting bribe payments from the owner of a Long Beach hospital who wanted a law to remain in effect so he could continue to reap tens of millions of dollars in illicit profits from a health care fraud scheme. Ron Calderon also admitted taking bribes from undercover FBI agents who were posing as independent filmmakers who wanted changes to California’s Film Tax Credit program.

            Ron Calderon’s brother, Thomas M. Calderon, 62, also of Montebello, a former member of the California State Assembly who became a political consultant, was sentenced last month to 10 months in custody for his conviction on a money laundering charge for allowing bribe money earmarked for his brother to be funneled through his company.

            “Former Senator Calderon repeatedly violated the trust of the voters by taking nearly $160,000 in bribes in exchange for abusing his position as an elected official,” said United States Attorney Eileen M. Decker. “The Calderons are now being punished for their roles in a bribery scheme that involved multiple forms of payments, as well as the attempted concealment of the scheme through money laundering and lies made to residents of his district. Politicians who violate their oaths by selling their offices will be discovered and will be prosecuted.”

            “Mr. Calderon used the power of the state Senate to dole out favors in exchange for bribe payments and a flashy lifestyle, rather than governing honestly for the people of California,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “I’m proud of the agents and prosecutors who made this case a success using innovative techniques to uncover a variety of schemes and abject corruption by a state official.”

            “At the heart of this case are two brothers – one a politician, the other the facilitator – who thought they were above the law and could exchange political favors for bribery payments,” stated IRS Criminal Investigation’s Acting Special Agent in Charge, Anthony J. Orlando. “Regardless of circumstances, no one is granted an exemption to commit crimes with impunity. As today’s sentence shows, the government will hold accountable those who use fraud and deceit to line their pockets with money, especially when those individuals are serving the California public.”

            Ron Calderon admitted participating in a bribery scheme involving two areas of legislation and the hiring of a staffer who was also an undercover FBI agent.

            In the first part of the bribery scheme, Ron Calderon took bribes from Michael Drobot, the former owner of Pacific Hospital in Long Beach, which was a major provider of spinal surgeries that were often paid by workers’ compensation programs. The spinal surgeries are at the center of a massive healthcare fraud scheme that Drobot orchestrated and to which he previously pleaded guilty. Ron Calderon was not charged in the healthcare fraud scheme that led to well over $500 million in fraudulent billings. Drobot, who was described in court papers filed by prosecutors as “a greedy fraudster robbing taxpayer-funded federal programs,” was a client of Tom Calderon’s political consulting firm.

            California law known as the “spinal pass-through” legislation allowed a hospital to pass on to insurance companies the full cost it had paid for medical hardware it used during spinal surgeries. As Drobot admitted in court, his hospital exploited this law, typically by using hardware that had been purchased at highly-inflated prices from companies that Drobot controlled and passing this cost along to insurance providers.

            Drobot bribed Ron Calderon so that he would use his public office to preserve this law that helped Drobot maintain a long-running and lucrative healthcare fraud scheme, which included Ron Calderon asking a fellow senator to introduce legislation favorable to Drobot and attempting to recruit other senators to support Drobot. The payments from Drobot came in the form of summer employment for Ron Calderon’s son, who was hired as a summer file clerk at Pacific Hospital and received a total of $30,000 over the course of three years, despite the son doing little actual work at the hospital.

            In another part of the bribery scheme, Ron Calderon accepted bribes from people he thought were associated with an independent film studio, but who were in fact undercover FBI agents. In exchange for the payments – including $30,000 in payments to Ron Calderon’s daughter for services she never provided – Ron Calderon agreed to support an expansion of a state law that gave tax credits to studios that produced independent films in California. The Film Tax Credit applied to productions of at least $1 million, but, in exchange for bribes, Ron Calderon agreed to support new legislation to reduce this threshold to $750,000, according to the plea agreement.

            Ron Calderon took several official actions with respect to reducing the threshold for the Film Tax Credit. Ron Calderon signed a letter on his official Senate letterhead indicating that he would propose legislation lowering the threshold, introduced a “spot bill” he told an undercover agent would be used to propose such legislation, and promised that he would vote in favor of that proposed legislation.

            In addition to the payments to his daughter for work she did not do, Ron Calderon had one of the undercover agents make a $5,000 payment toward his son’s college tuition and a $25,000 payment to Californians for Diversity, a non-profit entity that Ron Calderon and his brother used to improperly pay themselves.

            In a sentencing memorandum filed with the court, prosecutors write that Ron Calderon “sold his vote not just to help pay for the expenses of living beyond his means, but for the more banal and predictable aims of corruption -– fancy luxuries, fancy parties, and fancy people.”

            The memorandum further argues that a significant term of imprisonment was necessary to send a message to other political officials and the electorate because, without such a sentence, “the trust already eroded by individual detections of corrupt politicians will spread like cancer and threaten the fundamentals of a trusted democracy. It is not hyperbole to insist that nothing less is at stake in defendant’s sentencing.”   

            As part of the agreement with the undercover agents, Ron Calderon performed official acts that led to the hiring of another undercover agent as a staffer in his district office at an annual salary of $45,105.

            Ron Calderon “knowingly concealed his bribery scheme from the public by submitting a false Statement of Economic Interest, California Form 700, to the California Fair Political Practices Commission, which failed to disclose the money and other financial benefits defendant he had received from Drobot” and the undercover agents, Ron Calderon admitted in his plea agreement.

            Tom Calderon pleaded guilty to money laundering and admitted that he agreed to conceal bribe payments for his brother from the two undercover FBI agents by having the money go through his company, the Calderon Group. Tom Calderon allowed payments to be made to the Calderon Group “to conceal and disguise the fact that the money represented the proceeds of bribery,” according to his plea agreement.

            The investigation into the Calderons was conducted by the Federal Bureau of Investigation and IRS Criminal Investigation. The case was prosecuted by Assistant United States Attorney Mack E. Jenkins of the Public Corruption and Civil Rights Section.

WASHINGTON – The owner of two Arkansas mental health companies that provide inpatient and outpatient mental health services to juveniles was sentenced to serve 84 months in prison today for engaging in a scheme to bribe a former deputy director of the Arkansas Department of Human Services (ADHS), announced Assistant Attorney General Leslie R. Caldwell of the Department of Justice’s Criminal Division.

Theodore E. Suhl, 50, of Warm Springs, Arkansas, was previously convicted of two counts of honest services fraud, one count of federal funds bribery and one count of interstate travel in aid of bribery. In addition to his prison sentence, Suhl was ordered to pay a $200,000 fine.

The evidence presented at trial showed that Suhl bribed former deputy director of ADHS, Steven B. Jones, using intermediaries Phillip W. Carter and a local pastor. Beginning in approximately April 2007, Suhl, Jones and Carter periodically met at restaurants in Memphis, Tennessee, or in rural Arkansas in order for Suhl to request assistance for his companies from Jones in his capacity as deputy director of ADHS. Jones agreed to perform official acts that benefitted Suhl and Suhl’s businesses and provided internal ADHS information to Suhl. In exchange for Jones’s agreement to perform official acts, Suhl paid Jones by funneling cash payments through the pastor’s church and providing the bribe payments to Jones in cash so that the transactions would not be easily traceable. Putting Jones on Suhl’s illicit payroll paved the way for more than $1.5 million in profits for Suhl’s juvenile mental health counseling business.

Jones pleaded guilty to federal funds bribery and conspiracy for his involvement in the scheme and was sentenced to 30 months in prison. Carter pleaded guilty to conspiracy to commit federal funds bribery and honest services wire fraud and was sentenced to 24 months in prison.

The FBI’s Little Rock Field Office investigated the case. Trial Attorneys John D. Keller, Lauren Bell and Amanda R. Vaughn of the Criminal Division’s Public Integrity Section prosecuted the case.

An elected Trustee of Macomb Township was arrested by agents of the Federal Bureau of Investigation (FBI) today based on a criminal complaint charging him with demanding and taking bribes in exchange for his vote and official assistance on a municipal contract, United States Attorney Barbara McQuade announced.

McQuade was joined in the announcement by FBI Special Agent in Charge David P. Gelios and Manny J. Muriel, Special Agent in Charge, Internal Revenue Service-Criminal Investigation, Detroit Field Office.

Clifford Freitas, 43, of Macomb Township, is charged with engaging in a pattern of corrupt activity, including demanding and accepting money in exchange for official acts as a Trustee.  Freitas’ arrest is another part of an ongoing and long-running investigation into systemic corruption in multiple municipalities in southeast Michigan, primarily Macomb County.  The investigation has employed telephone wiretaps, consensual audio and video recordings by cooperative individuals, undercover operations, physical surveillance, telephone tracking warrants, and subpoenas of financial records and other documents. 

The complaint charges that Freitas demanded and accepted money from a municipal vendor in exchange for using his official position as a Trustee to get the vendor a municipal contract and to secure favorable terms for the company.  In July 2015, Macomb Township put out a request for proposal for a municipal contract.  Soon thereafter, Freitas approached a representative of a prospective vendor, and Freitas demanded money in return for Freitas’ support as a Trustee.  Freitas agreed to accept $7,500 from the vendor in return for his assistance in getting the contract.  Through his position as a Trustee, Freitas obtained sensitive bid information on the municipal contract in order to help the vendor, telling the vendor what bid was needed to beat out competing contractors.  After the vendor was awarded the contract by Macomb Township, Freitas demanded an additional $35,000 from the company representative for his additional assistance as a public official relating to the contract.  In May 2016, Freitas accepted $2,000 in cash from an undercover agent of the FBI, with the payment being video recorded.

“Bribery in municipal contracting undermines clean and effective government and erodes public trust,” said U.S. Attorney McQuade.

“The citizens of Michigan must be able to trust that government officials will perform their duties in the best interests of the communities they serve,” said David P. Gelios, Special Agent in Charge, Detroit Division of the Federal Bureau of investigation.  “Today’s arrest is another unfortunate reminder that some public officials have lost sight of that obligation choosing instead to utilize their positions of authority to serve their own interests.  The Detroit FBI along with its partners assigned to the Detroit Area Public Corruption Task Force remain committed to investigating those who criminally violate their oaths of office.  I would encourage anyone who has information about corrupt activity in Macomb County or any other community in Michigan to contact the Detroit FBI Public Corruption tip line at 313-965-2222.”

This investigation is being conducted by the Macomb Resident Agency of the FBI and the FBI Detroit Area Corruption Task Force, a multiagency task force led by the FBI Detroit Division and comprised of the Internal Revenue Service – Criminal Investigation Division, Michigan State Police, Michigan Attorney General’s Office, and several other local and federal law enforcement agencies.  It is being prosecuted by Assistant United States Attorneys R. Michael Bullotta and David A. Gardey.

Freitas will be in federal court this afternoon at 1pm for his initial appearance.

Upon conviction for a violation of Title 18, United States Code, Section 666, federal program bribery, Freitas faces a maximum of ten years in prison and a fine of up to $250,000.   

A complaint is only a charge and is not evidence of guilt.  Trial cannot be held on felony charges in a complaint.  When the investigation is completed a determination will be made whether to seek a felony indictment.