* Defendants netted in phony African arms sale sting
* 250 FBI agents involved in probe
* 21 arrested at Las Vegas gun show (Adds further details of alleged scheme, quotes from officials, bylines)
By Dan Margolies and Jeremy Pelofsky
WASHINGTON, Jan 19 (Reuters) - An executive for Smith & Wesson Holding Corp SWHC.O and 21 others have been charged with violating federal bribery laws involving the sale of weapons and protective gear, the U.S. Justice Department said on Tuesday.
The indictments accused the individuals, including Smith & Wesson Vice President for Sales Amaro Goncalves, with violating the Foreign Corrupt Practices Act, or FCPA, and conspiracy to commit money laundering involving the sale of items including guns and body armor.
The FCPA prohibits the payment of bribes to foreign officials in order to secure business contracts.
The Federal Bureau of Investigation set up sting operations that ensnared the 22 individuals on charges that they tried to bribe a purported African defense minister to win contracts.
Twenty-one of the men were arrested in Las Vegas, where they were attending the SHOT Show, a large shooting-sports and hunting convention. The 22nd defendant was arrested in Miami.
“This is one case where what happens in Vegas didn’t stay in Vegas,” Assistant Attorney General Lanny Breuer said at a news conference.
The indictments, returned on Dec. 11, were unsealed by a U.S. judge on Tuesday in U.S. district court in Washington.
Among those charged was the chief executive of Protective Products of America Inc PPA.TO, R. Patrick Caldwell, who previously worked for the U.S. Secret Service for 27 years and was in charge of the division for the vice president’s protection.
An attempt to reach Protective Products was not immediately successful. Protective Products filed for bankruptcy protection last week and sought approval to be acquired by an affiliate of the private investment firm Sun Capital Partners Inc.
A representative for Smith & Wesson was not immediately available for comment.
Most of the defendants were expected to be arraigned later on Tuesday in Las Vegas.
As part of the FBI sting operation, an unidentified business associate who was a former executive for an arms manufacturer arranged a meeting between the arms sales representatives and undercover FBI agents who posed as representatives of an African country’s minister of defense.
The agents told the sales representatives that in order to win a contract, they had to add a 20 percent “commission” to price quotes, half of which would go to the purported minister of defense and the rest would be split between the others.
In the case of the Smith & Wesson executive, Goncalves gave price quotes for two sales, a small one of 25 guns and a larger one with 1,800 pistols. He gave two price quotes for the transactions, including one that had its price inflated by 20 percent, the Justice Department said.
The two-and-a-half-year-long investigation involved 250 FBI agents, according to Mark Mendelsohn, deputy chief of the Justice Department’s fraud division. In connection with the indictments, 150 agents executed 14 search warrants across the country and British police executed another seven, Justice Department officials said.
Three of the defendants worked for unnamed British companies; another worked for an unnamed Israeli company, according to the indictments. The defendants sought to obtain contracts for the sale of products ranging from grenade and tear gas launchers to pistols, ammunition and explosive detection kits.
Breuer said the investigation was the largest action ever undertaken by the Justice Department against individuals in an FCPA case. He also said it marked the department’s first large-scale use of undercover techniques in an FCPA investigation.
“We’re steadily pushing this unacceptable practice out of the business playbook by prosecuting companies and individuals who ignore the law, as well as by working with our international counterparts in their efforts to prevent and prosecute foreign bribery,” Breuer said.
He said the Justice Department currently has 140 open FCPA investigations. Kevin Perkins, assistant director of the FBI’s criminal investigative division, said 20 agents were working on FCPA cases full time.
The cases are in the U.S. District Court for the District of Columbia, Nos. 09-335 through 09-350. (Reporting by Dan Margolies and Jeremy Pelofsky, editing by Gerald E. McCormick and Tim Dobbyn)