FOR IMMEDIATE RELEASE December 19, 1996
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PRESS RELEASE
Donald C. Smaltz, Independent Counsel In Re Espy, today announced:
In a case brought by this Office entitled United States v. Alvarez
T. Ferrouillet, Jr. and John J. Hemmingson, the jury today found defendant Alvarez T.
Ferrouillet, Jr., a Louisiana lawyer who was Chairman of the Henry Espy for Congress
Campaign debt retirement committee in 1993 and 1994, guilty on all of the 10 counts in
which he was charged. The jury also found Defendant Hemmingson, who was Chairman of the
Board and Chief Executive Officer of Crop Growers Corporation in 1994, guilty on three of
the four counts against him. Crop Growers Corporation is a publicly-traded company on the
NASDAQ and is the second-largest crop insurance company in the United States.
Both defendants were charged in Count One (18 U.S.C. § 2314) with
interstate transportation of a $20,000 check which was obtained from Crop Growers
Insurance, Inc. by fraud. The defendants used a false retainer letter from the New Orleans
law firm of Ferrouillet & Ferrouillet to conceal the true purpose of the transaction
-- that the $20,000 was an illegal corporate campaign contribution. Counts Three (18
U.S.C. § 1956) and Four (18 U.S.C. § 1957) charged both defendants with cashing the
$20,000 corporate check at a grocery store in the Algiers section of New Orleans,
Louisiana with the intent to conceal and disguise the money so it could be funneled to pay
down the then-existing $50,000 campaign debt of Henry Espy, a defeated congressional
candidate in the Second Congressional District in Mississippi.
The jury separately convicted defendant Ferrouillet on five
additional money-laundering Counts (Counts Two, Five, Six, Seven, and Eight) which related
to the $20,000 cash received from the grocery store, deposited in the Omni Bank in New
Orleans over a four-day period, and then wired to the First National Bank of Clarksdale to
pay down a campaign loan to Henry Espy. Defendant Hemmingson was acquitted on Count Eight.
In addition, defendant Ferrouillet was separately charged with lying
to agents from the FBI and the USDA Office of the Inspector General on one occasion, and
on another occasion with lying to an agent of the U.S. Customs Service concerning the
source of the $20,000 cash (18 U.S.C. § 1001). Ferrouillet initially stated that the
$20,000 was contributed by 46 individuals who made the $20,000 cash contribution. Later,
he stated the individuals were not contributors but, rather, pledgers.
Independent Counsel Don Smaltz was lead trial counsel for the
government. During the eight-day trial, at which 47 witnesses testified, the evidence
revealed the $20,000 was contributed as a result of a fundraiser for Henry Espy held at
the 116 Club in Washington, D.C. on March 31, 1994, and that Hemmingson's motive in
contributing was an effort to curry the favor of the then-Secretary of Agriculture, Mike
Espy, who was very concerned about his brother's outstanding campaign debt. Hemmingson, as
the Chief Executive Officer and largest shareholder of Crop Growers, had a significant
interest in the Federal Crop Insurance Reform Act, which was introduced by Secretary Espy
in March 1994, and was then pending before Congress. In fact, Hemmingson met with
Secretary Espy on at least three occasions regarding crop insurance and wrote Secretary
Espy three times regarding matters of concern to Hemmingson. The government successfully
argued that Hemmingson and Ferrouillet defrauded the shareholders of Crop Growers, who
were the true owners of the $20,000, by disguising the payment as a legal fee to defendant
Ferrouillet. The trial evidence revealed that in 1993, before the election, Hemmingson was
responsible for similar conduct -- reimbursing 26 $1,000-contributions by officers,
directors, and related parties of what became subsidiaries of Crop Growers when it went
public in 1994. The government argued that Hemmingson was also responsible for causing
these reimbursements, described in the financial records as travel advances, an advance on
crop loss adjustments, purchases of personal computers, expense account advances, and
consulting fees.
Mr. Smaltz stated:
It was a sincere privilege and pleasure to be back in the courtroom as a
federal prosecutor trying a case. I thank the jury for the time, attention, and full and
impartial consideration of all of the evidence presented by the 47 witnesses in this case.
The jury was thoroughly attentive throughout, and diligent in its deliberations.
This verdict demonstrates that the jury was not in the least bit misled by the
defendants' denials that they wilfully and repeatedly violated the federal criminal laws.
I am tremendously appreciative of the dedication, effort and commitment of the
lawyers, agents and staff who worked so hard and tirelessly on this investigation and
trial.
Judge Edith Brown Clement, who presided over the trial, has set a
sentencing date of March 5, 1996, at 3:00 p.m.
The statutes under which defendants were convicted provide the
following maximum penalties:
COUNTS |
ALVAREZ T.
FERROUILLET, JR. |
JOHN J.
HEMMINGSON |
Count 1
§ 2314 (Interstate Transportation of
Stolen Property) |
10 years x 1 count = 10 years
$250,000 x 1 count = $250,000 |
10 years x 1 count = 10 years
$250,000 x 1 count = $250,000 |
Counts 2, 3, 5 ,6, 7
§ 1956 (Money Laundering) |
20 years x 5 counts = 100 years
$500,000 x 5 counts = $2,500,000 |
20 years x 1 count = 20 years
$500,000 x 1 count = $500,000 |
Counts 4, 8
§ 1957 (Money Laundering) |
10 years x 2 counts = 20 years
$250,000 x 2 counts - $500,000 |
10 years x 1 count = 10 years
$250,000 x 1 count = $250,000 |
Counts 9, 10
§ 1001 (False Statements) |
5 years x 2 counts = 10 years
$250,000 x 2 counts = $500,000 |
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This is the second completed trial arising from this
investigation. In other matters previously filed by the Independent Counsel:
- In September 1996, Sun-Diamond Growers of California was convicted by a federal court
jury in the District of Columbia of fraud and making illegal gratuities to former
Secretary of Agriculture Mike Espy. Sentencing is set for February 7, 1997.
- In October 1995, James H. Lake, a former sun-Diamond lobbyist, pleaded guilty to
participating in a scheme at the request of Richard Douglas to circumvent the Federal
campaign contribution laws to make illegal contributions to the failed campaign of Mike
Espy's brother, Henry Espy. Mr. Lake has not yet been sentenced.
- In November 1996, Brook K. Mitchell, Sr. and 5M Farming Enterprises, Inc. each pleaded
guilty to four felony counts of conspiracy, false statements, and false entries in a
scheme to defraud the U.S. Department of Agriculture of more than $700,000. A sentencing
date has not yet been set.
Five additional cases have been filed by the Office of Independent
Counsel and are awaiting trial. These are:
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