Two former officials of a California firm that bills itself as the “world’s leading provider” of specialty service control valves in global energy and industrial facilities will be sentenced on July 20 after pleading guilty to federal corruption charges for bribery and conspiracy. Six other former executives of Rancho Santa Margarita-based Control Components Inc., including ex-CEO Stuart Carson, were indicted last month by the U.S. Dept. of Justice on similar charges. Neither the firm, a unit of U.K.-based IMI plc, nor current managers were indicted.
DOJ charged Carson and the five other executives with multiple counts under the Foreign Corrupt Practices Act and related federal statutes. The April 6 indictment alleges the defendants made about 236 corrupt payments totaling more than $6 million in more than 30 countries between 1998 and 2007 that generated $46.5 million in net profits from resulting sales. The two other executives, Mario Covino, CCI’s ex-director of worldwide factory sales, and Richard Morlok, its onetime finance director, pleaded guilty earlier this year to making bribes totaling more than $1.6 million.
In a brief statement on its Website, IMI says it is cooperating with U.S. authorities but declined further comment. The firm says it “initiated an independent investigation into irregular payments” related to CCI contracts in 2007. In an April 22 filing, defendants’ attorneys blasted the generalized nature of the allegations and demanded specific information prior to trial. No date has been set.
“The government’s allegations are just that, unproven allegations,” says Carson’s attorney Nicola T. Hanna. She says Carson “is innocent and looks forward to his day in court.”
The indictment contends that, beginning around 1998, Carson implemented a sales model called “friends in camp,” in which CCI employees and their agents cultivated relationships with employees of state-owned and private companies. Bribes, sometimes referred to as “flowers,” were made to those with “authority to award contracts or influence technical specifications of an order” to favor CCI.
Of known bribes, the indictment alleges a total of $4.3 million paid to employees of state-owned companies, “including but not limited to” six state-owned power and industrial customers in China, and one each in Korea, Malaysia and the United Arab Emirates. About $1.8 million was allegedly paid to officials of private customers, who were not named.
The indictment claims defendants arranged for trips and holidays to places such as Disneyland and Las Vegas “under the guise of training and inspection trips,” as well as extravagant company-paid vacations to Hawaii. In at least two instances, Carson allegedly arranged to pay for the college tuition for children of two executives at state-owned companies.
The indictment also alleges the defendants stymied internal audits by CCI and its parent company. In addition to providing misleading statements and fake documents to cover up the conspiracy, the indictment alleges Rose Carson, Carson’s wife and former CCI sales director, “intentionally destroyed documents by flushing [them] down a toilet in the company’s ladies’ room.” For that offense, she faces a maximum penalty of 20 years in prison and a $250,000 fine. DOJ did not disclose other penalties defendants face.