FBI Sting Nabs Firearms Execs in Las Vegas in Bribery Case

Undercover agent posed as sales agent for an African defense minister.

Jan. 19, 2010 — -- The Justice Department and the FBI announced the arrest and indictment of 22 executives and employees from 16 companies that supply equipment to law enforcement and the military. The government charged them with attempting to bribe officials of an African country.

There was no African country. The whole thing was a sting operation.

The arrests were the result of a 30-month undercover investigation by prosecutors and FBI agents which resulted in 21 individuals being arrested in Las Vegas and one more in Miami.

The defendants allegedly agreed to pay a 20 percent commission to a sales agent they believed represented the defense minister for an African country. They were trying to win a multimillion-dollar deal to outfit the presidential guard.

The sales agent was actually an undercover FBI agent, and no defense minister was involved at all. Several of the indictments in the probe disclosed that at least one other FBI agent was operating undercover, posing as a procurement officer for the ministry of defense of the African nation.

Among those arrested were Amaro Goncalves, the vice president of sales for the Smith & Wesson Holding Company, officials said.

Also charged is R. Patrick Caldwell, recently named CEO of Protective Products of America, Inc. He had previously worked for the U.S. Secret Service, where he was special agent in charge of protection of the vice president of the United States.

Stephen Giordanella, the former CEO of Protective Products of America, was also charged. Giordanella was the one suspect arrested in Miami.

'What Happens in Vegas....'

The individuals in Las Vegas were arrested while they were attending the annual Shot Show convention in Las Vegas and all were arrested at a Vegas location when they believed they would be meeting the defense minister to finalize their deals according to DOJ officials familiar with the case.

"This is one case where what happens in Vegas doesn't stay in Vegas," said Assistant Attorney General Lanny Breuer, head of the Justice Department's Criminal Division.

Representatives for Smith & Wesson and Protective Products of America, Inc. could not be reached by ABC News.

FBI Sting Operation Nails Gun Company Executives

According to Goncalves' indictment, "On or about May 21, 2009, at the Ritz-Carlton meeting in Washington, D.C., Goncalves agreed to proceed with the Country A deal, after being told that in order to win the Country A business, [Smith & Wesson] would need to add a 20 percent 'commission' to the invoices."

The cases involved two phases. In the first, the suspects allegedly sent test samples of weapons along with payments to the sales agent and minister to show that the minister would receive his cut of the bribes. Then, in the second phase, the final large payments would be made.

The cases involved two phases where the defendants would send test samples and payments to the sales agent and minister to show that the minister would receive his cut of the bribes. The Goncalves indictments allege that "Goncalves further agreed to proceed with the Phase One deal knowing that the purpose of the Phase One deal was to show Country A's Minister of Defense that the Minister of Defense would personally receive a 10 percent 'commission' on the deal."

The 22 individuals were charged in 16 indictments in an investigation run by the Justice Department, the U.S. Attorney's Office in Washington, D.C., and the FBI's Washington field office. Employees from a British and Israeli military supply company were also arrested in the sting.

Breuer said in a statement, "The fight to erase foreign bribery from the corporate playbook will not be won overnight, but these actions are a turning point."