By Sara Kropf
For years now, the calling card of a big-firm white-collar lawyer has been, “I do FCPA work.” But all the focus on foreign bribery work overlooks the domestic bribery schemes that are regularly pursued by the federal government. FCPA work may sound exciting—and involve travel to far-flung and developing nations to visit the outposts of U.S. companies—but most bribery of government officials happens right here in the good ol’ U.S. of A.
Take, for example, Oh Sung Kwon, also known as Thomas Kwon. Mr. Kwon was recently sentenced in connection with a government bribery arrangement in a case before Judge Emmet Sullivan of the federal district court for my home town, the District of Columbia.
Mr. Kwon pleaded guilty to one count of bribery of a public official, one count of conspiracy to commit bank fraud, and one count of willful failure to file a tax return. In return, the sentencing judge imposed a sentence of more than seven years. In addition to serving two consecutive forty-six month periods of incarceration and thirty-six months supervised release for the bribery and bank fraud counts, Mr. Kwon has been ordered to pay restitution of nearly $1.2 million.
Public Official C and the Prime Contract
The criminal information in the case concealed most of the players’ identities. Alongside names like Employee G-1 and Company F, a government official referred to only as “Public Official C” holds one of the most prominent roles in the scheme. Working out of Seoul, South Korea, Public Official C was an Assistant Project Manager for Defense Communications Army Transmission Systems. In that role, he helped award contracts to outside companies for building the U.S. Army’s information management systems. One of these contracts, a “Prime Contract” for the Eighth United States Army, became one of the major targets for Mr. Kwon’s bribery scheme.
In 2008, a man referred to in government documents as “Co-Conspirator 4” worked for Unisource Enterprise Inc. (UEI). At that time, UEI held the Prime Contract. However, as the year progressed, Co-Conspirator 4 noticed that UEI had trouble fulfilling its contractual obligations. In 2009, he approached Mr. Kwon and encouraged him to set up a company that would bid for government subcontracts. In response, Mr. Kwon founded Avenciatech, Inc. (AI). He gave himself the title of Chief Financial Officer for himself and awarded Co-Conspirator 4 the position of AI Vice President-Operations.
Together Mr. Kwon and Co-Conspirator 4 agreed that Mr. Kwon should offer Public Official C an ownership interest in the company in return for preferential selection in government contracts. Public Official C agreed and, once he acquired a 40% interest in the company, he began funneling confidential bid information to both Mr. Kwon and Co-Conspirator 4. With Public Official C’s help, AI won the Prime Contract, which swelled to a value of nearly $2 million by the end of 2011.
More Bribes For Public Official C
In 2011, Mr. Kwon met with the president and CEO of a prime government contractor. In the meeting, Mr. Kwon shared confidential bid information from Public Official C with the understanding that AI would be chosen to work as the prime contractor’s subcontractor. In return for a steady stream of confidential information, Mr. Kwon and AI provided a number of benefits to Public Official C:
- Mr. Kwon paid Public Official C a lump sum of $40,000 in cash;
- Mr. Kwon paid nearly $1700 for a hotel stay at the W Hotel in Fort Lauderdale, FL;
- Mr. Kwon and one other jointly paid $30,000 for Public Official C and seven family members to stay in the Atlantis Hotel in Nassau, Bahamas;
- Mr. Kwon gave Public Official C a cell phone and cell phone contract;
- Mr. Kwon paid more that $1,500 for a rental van for Public Official C and his family members;
- Mr. Kwon allowed an unemployed Public Official C’s family member to falsely represent that he was an employee of Mr. Kwon’s in order to get financing for a luxury car;
- Mr. Kwon financed a luxury car valued at nearly $70,000, intended for the use of Public Official C’s family members;
- Mr. Kwon paid $7,000 per month to Public Official C for several months;
- Mr. Kwon paid for Public Official C’s female escort services in Seoul, New York City, and Atlanta.
Finally, Mr. Kwon helped Public Official C make a down payment of $230,000 on a home in Fairfax Station, Virginia. For those of you not from the D.C. area, real estate in the suburbs can be expensive, making it difficult for government employees to buy a nice home. According to Trulia the average sales price for homes in Fairfax Station over the last year was about $728,000. Not awful for a private lawyer; out of reach for your typical government employee.
Public Official C was hesitant to open his bank statements to scrutiny because his accounts had been receiving a number of large cash deposits. So, Public Official C came up with another solution: First, secretly transfer the money to an AI employee using Mr. Kwon’s assistance. Second, the employee would falsely state that Public Official C was his cousin and execute a fake gift letter to transfer the $230,000 back into Public Official C’s possession. This chain allowed Public Official C to make what appeared on its face to be a clean down payment on the home.
Faced with these facts set out by the government’s information, Mr. Kwon pleaded guilty to bribery of a public official.
Conspiracy to Commit Bank Fraud & Willful Failure To File A Tax Return
In addition to his bribery scheme, Mr. Kwon pleaded guilty to conspiracy to bank fraud and the willful failure to file a tax return. Mr. Kwon’s bank fraud came about in connection with his mortgage brokerage company, Onyx Financial Services. Through Onyx Financial, Mr. Kwon and others improperly structured a number of residential property refinancing and sales. They recruited “straw buyers” who did not provide requisite cash at settlement, did not plan to pay the mortgages themselves, and did not intend to live in the properties after purchase.
After lining up a straw buyer, Mr. Kwon and his co-conspirators would submit false documents to banks like ING and Bank of America, who would provide the money financing the property sale. These bank loans they were inadequately secured, and many had hidden liens on the property. Thus, the bank loaning the money would be unaware of claims to the securing properties that could undermine their claim in the event of non-payment.
After lining up straw buyers and preparing documents falsely attesting to the state of the property, Mr. Kwon had more than $1 million in loans fraudulently wired to his accounts. The money from the loans was given to straw buyers under the condition that they be used to pay off the existing liens on five different properties in Virginia. However, in the case of each sale, the straw buyers simply wired the loan amount to Mr. Kwon.
The Guilty Plea and Sentence
At the end of the proceedings, Mr. Kwon had plead guilty to one of each count against him: bribery of a public official, conspiracy to commit bank fraud, and failure to file his tax return. At sentencing, the judge seems to have taken a small amount of pity on Mr. Kwon, however. Though he imposed two consecutive terms of forty-six months imprisonment for the bribery and bank fraud, Mr. Kwon will serve his twelve-month tax evasion sentence concurrently with his bank fraud sentence.
A Somewhat Ruthless Prosecution
The government certainly didn’t cut Mr. Kwon any slack, even going after him for failure to file his 2010 tax return with the IRS. All that said, this was a particularly brazen bribery scheme. It is, I suppose, only a matter of time before we see the sentence (and plea deal) of the government official who must have cooperated to bring down Mr. Kwon. Given the breadth of this scheme, it is doubtful he will be allowed to go gently into that good night (credit: Dylan Thomas).