Exhibit 10.1


 


 


CAROL C. LAM


United States Attorney


ERIC J. BESTE


Assistant U.S. Attorney


California State Bar No. 226089


STEVEN E. STONE


Assistant U.S. Attorney


California State Bar. No.
186533


Federal Office Building


880 Front Street, Room 6293


San Diego, California
92101-8893


Telephone: (619) 557-5104


 


JOSHUA R. HOCHBERG


Chief, Fraud Section


MARK F. MENDELSOHN


Acting Deputy Chief, Fraud
Section


United States Department of
Justice


Criminal Division


10th &
Constitution Ave. NW (Bond 4000)


Washington, D.C. 20530


Telephone: (202) 514-7023


 


Attorneys for Plaintiff


United States of America


 


 


UNITED STATES DISTRICT COURT


 


SOUTHERN DISTRICT OF CALIFORNIA


 


	
  UNITED
  STATES OF AMERICA,

  	
  )

  	
  Case No. 05CR0314
  - BEN

  
	
   

  	
  )

  	
   

  
	
  Plaintiff,

  	
  )

  	
   

  
	
   

  	
  )

  	
  PLEA
  AGREEMENT

  
	
  v.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  TITAN
  CORPORATION,

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Defendant.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  



 


IT IS HEREBY
AGREED between the plaintiff, UNITED STATES OF AMERICA, through its counsel,
Carol C. Lam, United States Attorney, and Eric J. Beste, Assistant United
States Attorney, and Steven E. Stone, Assistant United States Attorney, and
Joshua R. Hochberg, Chief, Fraud Section, U.S. Department of Justice, Criminal
Division, and Mark F. Mendelsohn, Acting Deputy Chief,


 





















 


Fraud Section, U.S. Department
of Justice, Criminal Division, and defendant, TITAN CORPORATION, with the
advice and consent of Roger M. Witten and Martin J. Weinstein, counsel for
defendant, as follows:


 


I


 


THE PLEA


 


Defendant
agrees to waive Indictment and plead guilty to an Information charging
defendant with:


 


Count 1: 
Making use of interstate and foreign instrumentalities corruptly in
furtherance of unlawful payments to a foreign official for the purpose of
influencing his acts and decisions to assist TITAN CORPORATION in obtaining and
retaining business, in violation of Title 15, United States Code, Section
78dd-1;


 


Count 2: 
Falsifying the books and records of TITAN CORPORATION in violation of
Title 15, United States Code, Sections 78m(b)(2)(A) and 78m(b)(5); and


 


Count 3: Wilfully aiding and assisting in the
preparation or presentation of a false or fraudulent tax return for TITAN
CORPORATION in violation of Title 26, United States Code, Section 7206(2).


 


Defendant
agrees that this Plea Agreement will be executed by an authorized corporate
representative and counsel, and that the certifications contained at Exhibits 1
and 2 of this Plea Agreement will be executed prior to the filing of this Plea
Agreement with the Court.  Defendant
further agrees that a Resolution duly adopted by the defendant’s Board of
Directors, in


 


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the form attached to this Plea
Agreement as Exhibit 3, or in a substantially similar form, represents that the
signatures on this Plea Agreement by TITAN CORPORATION and its counsel are
authorized by the Board of Directors of TITAN CORPORATION.


 


The Government
agrees not to initiate any additional criminal charges against the defendant or
its subsidiaries or affiliates under the Foreign Corrupt Practices Act
(“FCPA”), under any other federal criminal statutes that are the basis for an
alternative charge to the FCPA (including 18 U.S.C. sections 2, 3, 4, 371,
1341, 1343, 1952, 1956 and 1957), or under any criminal provisions of Title 26
of the United States Code, for the conduct charged in the Information and set
forth in the Factual Basis in section II.B herein or any other foreign
transactions or events disclosed in writing (including in documents produced)
by or on behalf of the defendant to the United States Department of Justice on
or before the date of this Plea Agreement, except for any crimes of violence
which may have been committed by the defendant. This Plea Agreement applies to
the defendant only and does not prevent the United States Department of Justice
from investigating or prosecuting any other individuals or entities.


 


Nothing in
this Plea Agreement shields the defendant from prosecution for perjury, the
giving of a false statement to a federal agent, or obstruction of justice in
the event that it commits such an offense after the date of this Plea Agreement.  Should the defendant commit perjury, give a
false statement to a federal agent, or obstruct an investigation, then the
United States will be free to prosecute TITAN CORPORATION for that


 


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offense and will be free to
withdraw from this Plea Agreement or be relieved of its obligations, if any,
under this Plea Agreement.


 


II


 


NATURE OF THE OFFENSES


 


A.                                   ELEMENTS
EXPLAINED


 


Defendant
understands that the offenses to which defendant is pleading guilty have the
following elements:


 


Count 1:
Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1)


 


1.                                       That
the defendant acted corruptly;


 


2.                                       That
the defendant made use of the mails or any means or instrumentalities of
interstate commerce in furtherance of an unlawful act under the Foreign Corrupt
Practices Act;


 


3.                                       That
the defendant offered, paid, promised to pay, or authorized the payment of
money or anything of value;


 


4.                                       That
the payment was to a person knowing that such money would be offered, given, or
promised, directly or indirectly, to a foreign public official;


 


5.                                       That
the payment was to influence any act or decision of the foreign public
official, to induce the foreign public official to do or omit to do any act in
violation of his lawful duty, to induce the foreign public official to use his
or its influence with a foreign government or instrumentality thereof to affect
or influence any act or decision of


 


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such
government or instrumentality; or to obtain any improper advantage; and


 


6.                                       That
the payment was made to assist the defendant in obtaining or retaining business
for or with, or directing business to, any person.


 


Count 2:
Falsifying Books & Records (15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(5))


 


1.                                       That
the defendant was an “issuer” under the federal securities laws and therefore
required to make and keep books, records, and accounts which, in reasonable
detail, accurately and fairly reflected the transactions and disposition of its
assets;


 


2.                                       That
the defendant knowingly falsified its books, records, and accounts; and


 


3.                                       That
the defendant acted willfully.


 


Count 3:
Aid or Assist in Filing of False Return (26
U.S.C. § 7206(2))


 


1.                                       That
the defendant willfully aided, assisted, procured or advised in the preparation
of an income tax return that was false; and


 


2.                                       That
the return was false as to any material matter – that is, a matter that was
necessary to a determination of whether income tax was owed.


 


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B.                                     ELEMENTS
UNDERSTOOD AND ADMITTED - FACTUAL BASIS


 


Defendant has
fully discussed the facts of this case with defense counsel.  Defendant has committed each of the elements
of the crime, and admits that there is a factual basis for this guilty
plea.  The following facts are true and
undisputed:


 


1.                                       Defendant
TITAN CORPORATION maintained and continues to maintain its headquarters and
principal place of business in San Diego, California.  TITAN CORPORATION and its subsidiaries,
including Titan Wireless, Inc., Titan Africa, Inc., and Titan Africa, S.A.
(hereinafter collectively referred to as “TITAN”), were engaged in, among other
things, the business of developing and constructing wireless telephone systems
for, among others, certain developing nations.


 


2.                                       TITAN
CORPORATION was an “issuer” of securities within the meaning of the Securities
and Exchange Act of 1934, and, as such, was subject to the provisions of the
Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1 and 78m(b).


 


3.                                       Titan
Wireless, Titan Africa, Inc., and Titan Africa, S.A., although separately
incorporated, (a) shared employees, officers, and personnel with TITAN
CORPORATION; and (b) undertook the acts set forth herein and alleged in the
Information with the authorization and subject to the control of TITAN
CORPORATION.


 


TITAN ACTIVITIES IN BENIN


 


Background


 


4.                                       In
1998, TITAN embarked on a project to develop a telephone system in the African
nation of the Republic of Benin and to generate revenue from operating the
system for a number of years.  TITAN
generally understood that this project, and related


 


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contracts and legal agreements,
were subject to governmental approval in Benin, including approval by the
Council of Ministers, which included the President of Benin.


 


5.                                       In
November 1998, certain TITAN personnel, including a TITAN CORPORATION officer,
went to Benin and discussed their proposal with the Benin Minister of
Telecommunications and the Director General of the Postal and
Telecommunications Office of the Republic of Benin (“OPT”), an office under the
Benin Ministry of Telecommunications. 
During this visit, the TITAN personnel and a consultant were introduced
to a Beninese national (“The Benin Agent”) and told that he had access to the
President of Benin.


 


6.                                       On
or about July 28, 1999, with the consent of the OPT, TITAN acquired from an
African company named Afronetwork, Ltd. 
all of Afronetwork’s rights and obligations under various prior
agreements with the OPT to develop and operate a wireless telephone system in
Benin.


 


7.                                       On
or about July 28, 1999, the same date as Afronetwork’s assignment of its rights
to TITAN, TITAN entered into a Consulting Agreement with the Benin Agent making
him TITAN’s agent in Benin.  Under the
Consulting Agreement, the Benin Agent purportedly was to assist TITAN in
marketing, to identify potential business, and to advise TITAN on financing
requirements in Benin.  TITAN did not
conduct any formal due diligence regarding the Benin Agent’s background,
qualifications, other employment, or relationships with foreign government
officials before or after engaging him.


 


8.                                       Prior
to engaging the Benin Agent – and no later than April 1999 –  TITAN employees were aware that the Benin
Agent was


 


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the “Head of State’s business
advisor.”  In fact, at all relevant
times, the Benin Agent was an advisor to the President of Benin.  While working with the Benin Agent, at least
one officer of a TITAN subsidiary believed that the Benin Agent traveled on a
diplomatic Benin passport.


 


9.                                       The
Consulting Agreement stated that the Benin Agent would be paid a percentage of
the price of equipment installed.  On
August 3, 1999, before virtually any equipment was installed, and only six days
after signing the consulting agreement, the Benin Agent submitted an invoice to
TITAN for $399,919, which invoice detailed extensive services purportedly
performed by the Benin Agent and various sub-agents and consultants.


 


10.                                 One
week later, on August 10, 1999, with written approval from a then-senior TITAN
CORPORATION officer, TITAN CORPORATION paid the Benin Agent’s invoice by
sending a wire transfer in the amount of $400,000 from a TITAN bank account in
San Diego, California, to a bank account in Contonou, Benin held in the name of
a relative of the Benin Agent.  TITAN
made the payment without any evidence that the purported services actually were
performed or expenses actually incurred by the Benin Agent.


 


11.                                 On
August 17, 1999, TITAN entered an agreement with the OPT, known as the “BCT
Contract,” under which TITAN would build a wireless telephone network that
would be transferred to the Benin government after TITAN was paid in full for
equipment and services provided by TITAN. 
Under the BCT contract, the OPT had to obtain sites for
telecommunications facilities, to secure authorization for use of specific
frequencies, and to assist in the exoneration


 


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of all customs, duties and taxes
on equipment and products which TITAN imported into Benin for the BCT project.


 


12.                                 On
November 18, 1999, TITAN assigned its rights under the BCT Contract to Titan
Africa, Inc.


 


13.                                 For
the BCT Contract, the parties established a supervisory group known as the BCT
Steering Committee, which was comprised of several senior officers of TITAN
CORPORATION and its subsidiaries, the Benin Agent, and the Director General of
the OPT.  The Steering Committee met
either in the United States or in Paris, France, approximately every three
months between February 2000 and March 2001.


 


Payments to Benin Presidential Campaign


 


14.                                 Afronetwork’s
1996 agreement to build a telecommunications network in Benin obligated
Afronetwork (and TITAN upon assignment of the contract) to pay “part of its
profits as subsidies for development” of certain “sectors” in Benin, such as
health, education, and agriculture. 
TITAN was to determine the practical methods of carrying out these
subsidies in consultation with the Benin cabinet departments responsible for
those sectors.  A then-officer of TITAN
CORPORATION and certain TITAN employees were aware that these subsidies, which
they referred to as “social payments,” were required under the agreement assigned
to TITAN.


 


15.                                 On
or around December 19-20, 2000, at a BCT Steering Committee meeting in Paris,
France, the Benin Agent and the Director General of the OPT demanded that TITAN
accelerate the “social payments” and insisted that they be paid before the next
election in March 2001.  Under the terms
of the 1996 agreement, the social payments were not yet due, nor had there been
any


 


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coordination or consultation
with Benin cabinet departments, as required under the 1996 agreement.


 


16.                                 In
or about December 2000, the BCT Steering Committee, including a then-senior
officer and employees of TITAN,  agreed
to pay to the Benin Agent some $2 million in expedited “social payments.”  This payment was to be made in exchange for,
and contingent upon, the agreement of the OPT that TITAN’s management fee under
the BCT Contract be increased from 5% to 20% of the value of the equipment that
TITAN provided under the contract.


 


17.                                 In
or about December 2000, TITAN had reason to believe that the accelerated “social
payments” demanded by the Benin Agent and the Director General of OPT would not
be used for the purposes identified in the BCT Contract.  Nevertheless, a then-senior officer of TITAN
caused the requested payments to be made to the Benin Agent, caused the
payments to be made incrementally (rather than in one lump sum), and caused the
payments to be supported by false invoices from the Benin Agent.


 


18.                                 In
late January 2001, the Benin Agent submitted two invoices totaling
$2,381,551.  Neither invoice mentioned
“social payments” or “subsidies” but instead falsely identified the purpose of
the payments as customs exoneration and other services.  Neither invoice reflected the true purpose of
the requested payments – to provide funds for the benefit of the Benin
President’s re-election campaign.


 


19.                                 Between
January 2001 and May 2001, TITAN made seven payments to the Benin Agent
totaling approximately $2.1 million, during which period TITAN knew that the
“social payments” in fact would be used to support the Benin President’s
re-election effort.


 


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20.                                 At
the direction of a then-senior TITAN CORPORATION officer, on or around March 6,
2001 and April 10, 2001, TITAN wired two payments of $500,000 each to the Benin
Agent’s offshore account in the Principality of Monaco from a TITAN bank
account in San Diego, California.


 


21.                                 TITAN
made the remaining five payments, totaling approximately $1.1 million, to the
Benin Agent in cash in Benin.  This was
accomplished by the issuance of checks, drawn on a bank account of Titan
Africa, S.A., made payable to employees of either Titan Africa, Inc., or Titan
Africa S.A.  TITAN issued these checks
knowing that most of the cash proceeds from these checks would be given to the
Benin Agent to support the re-election of the President of Benin, in the
following approximate amounts (in U.S. dollars) and on the following dates:


 


A.                                   $400,000
on or around January 24, 2001;


 


B.                                     $500,000
on or around February 2, 2001;


 


C.                                     $107,500
on or around March 6, 2001;


 


D.                                    $107,500
on or around March 7, 2001; and


 


E.                                      $70,000
on or around May 29, 2001 (which funds were drawn from petty cash rather than
by check).


 


22.                                 At
least a portion of the “social payments” that TITAN made through the Benin
Agent were funneled to the re-election efforts of the Benin President.  For example, these funds were used to
purchase T-shirts bearing a picture of the President of Benin and instructing
Beninese citizens to vote for him.  Those
T-Shirts with voting instructions were distributed to the electorate just prior
to the Benin presidential election.


 


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23.                                 The
use of most of the purported “social payments” to support the re-election of
the Benin President was known by then-employees of TITAN prior to the
completion of the payments. 
Additionally, in November 2001, an officer of Titan Africa, Inc., stated
in an “aide memoire” that the approximately $2 million in “social payments” had
been made to purchase T-shirts and related items.


 


24.                                 In
or about March 2001, TITAN demanded that the OPT approve an increase of TITAN’s
management fee under the BCT Contract as a condition to its continuing to make
“social payments.”


 


25.                                 On
March 25, 2001, the incumbent President of Benin was announced as the winner of
the Benin presidential election.


 


26.                                 On
or around March 29, 2001, a then-senior officer of TITAN CORPORATION and
employees of TITAN CORPORATION and its subsidiaries met with the Benin Agent
and representatives of the OPT in Paris, France at a BCT Steering Committee
meeting.  During the meeting, the
Director General of the OPT reaffirmed that TITAN’s management fee for
operating the wireless telephone system in Benin would be increased from 5% to
20%.


 


27.                                 On
or around March 29, 2001, the Director General of OPT signed a letter to a
then-senior TITAN CORPORATION officer increasing TITAN’s project management
fees from 5% to 20%.  Thereafter, as
detailed above, TITAN made two additional “social payments” to the Benin Agent
totaling $570,000.


 


28.                                 On
or around June 25, 2001, TITAN and the OPT signed an agreement that, among
other things, falsely stated that TITAN had made “substantial contributions to
social programs in Benin” when


 


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in fact most of such payments
had been to assist in the re-election campaign of Benin’s President.  The agreement also confirmed the retroactive
increase in TITAN’s management fee from 5% to 20%.


 


29.                                 On
January 23, 2003, TITAN submitted a Request for Arbitration under the BCT
Contract and claimed that the entire 20% management fee was worth “not less
than $9,100,000.”  Based on this claim,
the increase in TITAN’s management fee from 5% to 20% was worth approximately
$6,825,000.


 


30.                                 Beginning
in 2001, TITAN CORPORATION falsely characterized the payments to the Benin
Agent as “social payments” under the BCT Contract and, despite knowing that
most of the payments to the Benin Agent would be and were used to support the
re-election of the President of Benin, maintained those false books through at
least January 1, 2004.


 


TITAN’S INTERNAL CONTROLS


 


FCPA Compliance


 


31.                                 In
its 23 years of existence prior to 2004, TITAN has never had a FCPA compliance
program or procedures.  TITAN’s only
related “policy” is a statement in TITAN CORPORATION’s Code of Ethics, which
all TITAN employees were required to sign annually, stating “employees must be
fully familiar with and strictly adhere to such provisions as the Foreign
Corrupt Practices Act that prohibit payments or gifts to foreign government
officials for the purpose of influencing official government acts or assistance
in obtaining business.”  TITAN did not
enforce that policy nor did it provide its employees with any information concerning
the FCPA or its purposes.


 


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32.                                 TITAN
never conducted any FCPA compliance training. 
Moreover, although Titan Wireless employees were required to sign the
TITAN CORPORATION Code of Ethics when hired, employees of wholly-owned
subsidiaries Titan Africa, Inc., and Titan Africa, S.A., were not so required.


 


33.                                 From
1999 to February 2004, TITAN did not maintain any due diligence files on its
foreign agents.  Prior to making any of
the millions of dollars of payments to the Benin Agent, TITAN failed to perform
adequate due diligence on the Benin Agent. 
In fact, there is no evidence that TITAN conducted any due diligence
prior to or after retaining foreign agents and consultants.


 


Internal Controls in Benin


 


34.                                 TITAN
had knowledge of a serious lack of internal controls in certain of its African
subsidiaries.  Such notice came from,
among other things:


 


A.                                   A Management Letter from TITAN’s external
auditor for fiscal year 2000 stated that there was a “need to establish
standard policies and procedures to be followed by the entities reporting to
Titan Wireless;”


 


B.                                     Written allegations sent to certain TITAN
officers in 2001 and 2002 claiming that a Titan Wireless employee in Benin had
forged invoices and bills and paid bribes in Benin; and


 


C.                                     Written notification in 2002 from the
external auditor of Titan Africa, S.A., that it was unable to issue an opinion
on the financial statements for either of fiscal years 2000 and 2001 because it
was unable to substantiate payments made by Titan Africa, S.A., citing


 


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$1.8 million in
“missing cash” and highlighting the lack of internal controls within Titan
Africa, S.A.


 


D.                                    A draft “process review” report on “Titan
Africa” issued by TITAN CORPORATION’s external auditor on or about August 29,
2001, which stated that “there is no accounting system set up in the company,”
that the system used to compute accounting data “is not reliable,” and that
there were risks at “Titan Africa” such as “intentional mistake: loss of cash,”
“fraud,” and “loss of data.”


 


TITAN failed to properly
investigate these warnings, take corrective action, or report these issues to
TITAN CORPORATION’s audit committee.


 


Additional Internal Controls and Books & Records Issues


 


35.                                 In
2001, TITAN CORPORATION acquired Datron Systems Inc. (“Datron”) and thereafter
operated it as a subsidiary.  TITAN
CORPORATION did not perform any FCPA due diligence on Datron’s foreign agents
prior to or subsequent to the acquisition.


 


36.                                 Prior
to its acquisition by TITAN CORPORATION, Datron did have a written FCPA policy,
which required that all payments to its foreign agents be made in the name of
the recipient and generally should be made in-country.  The Datron FCPA policy also required Datron
to compile and keep a diligence file on each of its foreign agents.  Datron and its employees, both before and
after its acquisition by TITAN CORPORATION, ignored this policy.


 


Improper Deduction of Payments to the Benin Agent


 


37.                                 The
United States Internal Revenue Code (“the Code”) typically allows taxpayers to
deduct from income all ordinary and


 


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necessary expenses incurred in
the operation of any trade or business. 
However, the Code specifically prohibits taxpayers from deducting any
direct or indirect payment made to an official or employee of any government,
or of any agency or instrumentality of any government, if the payment
constitutes an illegal bribe or kickback or is unlawful under the FCPA.  26 U.S.C. § 162(c).


 


38.                                 As
described more fully above, TITAN recorded on its books and records
approximately $2.1 million in improper payments made to the Benin Agent, and
falsely characterized these payments as customs exonerations and other
apparently legitimate business expenses. 
Because of this improper characterization, the $2.1 million in “social
payments” were recorded on the books and records of Titan Wireless as an
account receivable entitled “Reimbursable Operating Expenses.”  In or about July 2002, the amount of the
total accounts receivable related to the BCT Contract stood at approximately
$50 million, a portion of which was the remaining balance of the “Reimbursable
Operating Expenses.”


 


39.                                 In
or about July 2002, in conjunction with TITAN CORPORATION’s decision to exit
all of its worldwide telecommunications business, TITAN CORPORATION agreed to
settle its outstanding accounts receivable with the OPT of Benin for
approximately $30 million.  Also during
2002, TITAN CORPORATION wrote-off the remaining accounts receivable related to
the BCT Contract valued at approximately $20 million, a portion of which
contained the remaining balance of the “Reimbursable Operating Expenses.”  This bad debt expense write-off included some
portion of the Benin payments made by TITAN CORPORATION in violation of


 


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the FCPA.  TITAN CORPORATION deducted on the company’s
tax returns the entire $20 million write-off of accounts receivable related to
the BCT Contract, including the remaining balance of the “Reimbursable
Operating Expenses.”


 


40.                                 In
or about September 2003, TITAN CORPORATION willfully caused to be filed with
the U.S. Internal Revenue Service a consolidated Form 1120, U.S. Corporate
Income Tax Return, for tax year 2002, that included on Line 15, Bad Debts, the
amount of $76,214,512.00, knowing that it included a portion of the improper
Benin payments which could not be claimed as a deduction on TITAN CORPORATION’s
income tax return.


 


III


 


PENALTIES


 


Defendant
understands that the crimes to which defendant is pleading guilty carry the
following penalties:


 


Count 1:
Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1)


 


A.                                   a
maximum fine of the greater of $2,000,000 (15 U.S.C. § 78ff(c)(1)(A)) or twice
the gross pecuniary gain derived from the offense or twice the gross pecuniary
loss suffered by a person other than the defendant as a result of the offense
(18 U.S.C. § 3571);


 


B.                                     a
maximum term of probation of up to five years (18 U.S.C. § 3561(a), (c)); and


 


C.                                     a
mandatory special assessment of $400 per count (18 U.S.C. § 3013(a)(2)(B)).


 


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Count 2:
False Books & Records (15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(5))


 


A.                                   a
maximum fine of the greater of $25,000,000 (15 U.S.C. § 78ff(a)) or twice the
gross pecuniary gain derived from the offense or twice the gross pecuniary loss
suffered by a person other than the defendant as a result of the offense (18
U.S.C. § 3571);


 


B.                                     a
maximum term of probation of up to five years (18 U.S.C. § 3561(a), (c)); and


 


C.                                     a
mandatory special assessment of $400 per count (18 U.S.C. § 3013 (a)(2)(B)).


 


Count 3:
Aid or Assist in Filing of False Return (26
U.S.C. § 7206(2))                  


 


A.                                   a
maximum fine of $500,000 and the costs of prosecution (26 U.S.C. § 7206);


 


B.                                     a
maximum term of probation of up to five years (18 U.S.C. § 3561(a),(c)); and


 


C.                                     a
mandatory special assessment of $400 per count (18 U.S.C. § 3013 (a)(2)(B)).


 


IV


 


DEFENDANT’S WAIVER OF TRIAL RIGHTS


 


Defendant
understands that this guilty plea waives the right to:


 


A.                                   continue
to plead not guilty and require the Government to prove the elements of the
crime beyond a reasonable doubt;


 


B.                                     a
speedy and public trial by jury;


 


C.                                     the
assistance of counsel at all stages of trial;


 


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D.                                    confront
and cross-examine adverse witnesses;


 


E.                                      present
evidence and to have witnesses testify on behalf of defendant; and


 


F.                                      not
testify or have any adverse inferences drawn from the failure to testify, to
the extent authorized by law.


 


V


 


DEFENDANT ACKNOWLEDGES NO PRETRIAL RIGHT TO BE


PROVIDED WITH IMPEACHMENT AND AFFIRMATIVE DEFENSE INFORMATION


 


The Government
represents that any information establishing the factual innocence of defendant
known to the undersigned prosecutor in this case has been turned over to
defendant.  The Government will continue
to provide such information establishing the factual innocence of defendant.


 


Defendant
understands that if this case proceeded to trial, the Government would be
required to provide impeachment information relating to any informants or other
witnesses.  In addition, if defendant
raised an affirmative defense, the Government would be required to provide
information in its possession that supports such a defense.  Defendant acknowledges, however, that by
pleading guilty defendant will not be provided this information, if any, and
defendant also waives the right to this information.  Finally, defendant agrees not to attempt to
withdraw the guilty plea or to file a collateral attack based on the existence
of this information.


 


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19





















 


VI


 


DEFENDANT’S REPRESENTATION THAT GUILTY


PLEA IS KNOWING AND VOLUNTARY


 


Defendant
represents that:


 


A.                                   Defendant
has had a full opportunity to discuss all the facts and circumstances of this
case with defense counsel, and has a clear understanding of the charges and the
consequences of this plea;


 


B.                                     No
one has made any promises or offered any rewards in return for this guilty
plea, other than those contained in this Plea Agreement or otherwise disclosed
to the court;


 


C.                                     No
one has threatened defendant to induce this guilty plea; and


 


D.                                    Defendant
is pleading guilty because in truth and in fact defendant is guilty and for no
other reason.


 


VII


 


AGREEMENT LIMITED TO U.S. ATTORNEY’S OFFICE


SOUTHERN DISTRICT OF CALIFORNIA,


THE FRAUD
SECTION, AND THE TAX DIVISION


 


This Plea
Agreement is limited to the United States Attorney’s Office for the Southern
District of California; the Fraud Section of the United States Department of
Justice, Criminal Division; and the Criminal Enforcement Sections of the United
States Department of Justice, Tax Division. 
This Plea Agreement cannot bind any other federal, state, or local prosecuting,
administrative, or regulatory authorities, although the Government will bring
this Plea Agreement to the attention of other authorities if requested by
defendant.


 


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VIII


 


APPLICABILITY OF SENTENCING GUIDELINES


 


Defendant
understands the sentence imposed will be based on the factors set forth in 18
U.S.C. § 3553(a).  Defendant understands
further that in imposing the sentence, the sentencing judge must consult the
United States Sentencing Guidelines (“Guidelines”) and take them into
account.  Defendant has discussed the
Guidelines with defense counsel and understands that the Guidelines are only
advisory, not mandatory, and the court may impose a sentence more severe or
less severe than otherwise applicable under the Guidelines, up to the maximum
in the statute of conviction.  Defendant
understands further that the sentence cannot be determined until a presentence
report has been prepared by the U.S. Probation Office and defense counsel and
the Government have had an opportunity to review and challenge the presentence
report.  Nothing in this Plea Agreement
shall be construed as limiting the Government’s duty to provide complete and
accurate facts to the district court and the U.S. Probation Office.


 


IX


 


SENTENCE IS WITHIN SOLE DISCRETION OF JUDGE


 


This Plea
Agreement is made pursuant to Federal Rule of Criminal Procedure
11(c)(1)(B).  Defendant understands that
the sentence is within the sole discretion of the sentencing judge.  The Government has not made and will not make
any representation as to what sentence defendant will receive.  Defendant understands that the sentencing
judge may impose the maximum sentence provided by statute, and is also aware
that any estimate of the probable


 


21





















 


sentence by defense counsel is
a prediction, not a promise, and is not binding on the Court.  Likewise, the recommendation made by the
Government is not binding on the Court, and it is uncertain at this time what
defendant’s sentence will be.  Defendant
also has been advised and understands that if the sentencing judge does not
follow any of the parties’ sentencing recommendations, defendant nevertheless
has no right to withdraw the plea.


 


X


 


PARTIES’ SENTENCING RECOMMENDATIONS


 


A.                                   SENTENCING
GUIDELINE CALCULATIONS


 


Although the
parties understand that the Guidelines are only advisory and just one of the
factors the court will consider under 18 U.S.C. § 3553(a) in imposing a
sentence, the parties will jointly recommend the following Base Offense Level
and Adjustments under the Guidelines effective as of November 1, 2002:


 


1.                                       Calculation of Offense Level:


 


a.                                       Count 1: Foreign Corrupt
Practices Act (15 U.S.C. § 78dd-1)


 


	
  Base Offense Level (U.S.S.G. § 2C1.1(a)):

  	
   

  	
  10

  	
   

  
	
  Benefit received or to be received of more
  than $2,500,000 but less than $7,000,000

  (U.S.S.G. §§ 2C1.1(b)(2)(A), 2B1.1(b)(1)(J))

  	
   

  	
  +18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL OFFENSE LEVEL:

  	
   

  	
  28

  	
   

  



 


///


 


///


 


///


 


///


 


///


 


///


 


22





















 


b.                                      Count 2: False Books &
Records (15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(5))


 


	
  Base Offense Level (U.S.S.G. §
  2B1.1(a)(2)):

  	
   

  	
  6

  	
   

  
	
  Loss of more than $2,500,000 but less than
  $7,000,000

  (U.S.S.G. §2B1.1(b)(1)(J))

  	
   

  	
  +18

  	
   

  
	
  TOTAL OFFENSE LEVEL:

  	
   

  	
  24

  	
   

  



 


c.                                       Count 3: Aid or Assist in Filing
of False Return (26 U.S.C. § 7206(2))


 


	
  Base Offense Level (U.S.S.G. §
  2T1.4(a)(2)):

  	
   

  	
  6

  	
   

  
	
  TOTAL OFFENSE LEVEL:

  	
   

  	
  6

  	
   

  



 


d.                                      Application of Multiple Count
Grouping Rules


 


Because the
offense levels of all three counts are largely determined based on the total
amount of harm or loss, the counts are grouped together under U.S.S.G. §
3D1.2(d).  Accordingly, pursuant to
U.S.S.G. 3D1.3(b), the TOTAL OFFENSE LEVEL is 28.  There are no additional levels to be added under
U.S.S.G. § 3D1.4.


 


2.                                       Calculation of Culpability Score:


 


	
  Base Score (U.S.S.G. § 8C2.5(a))

  	
   

  	
  5

  	
   

  
	
  Involvement in or tolerance of criminal
  activity in an organization of 5,000 or more employees and an individual
  within high level personnel of the organization participated in, condoned, or
  was willfully ignorant of the offense (U.S.S.G. § 8C.2.5(b)(1)(A))

  	
   

  	
  +5

  	
   

  
	
  Self-reporting, cooperation, acceptance of
  responsibility (U.S.S.G. § 8C2.5(g)(1))

  	
   

  	
  -5

  	
   

  
	
  TOTAL CULPABILITY SCORE:

  	
   

  	
  5

  	
   

  



 


3.                                       Calculation of Fine Range:


 


	
  Base Fine Based on Pecuniary

  	
   

  	
   

  	
   

  
	
  Gain to Defendant from Offense

  (U.S.S.G. § 8C2.4(a)(2)):

  	
   

  	
  $

  	
  6,825,000

  	
   

  
	
  Multipliers (U.S.S.G. § 8C2.6):

  	
   

  	
  1.00 / 2.00

  	
   

  
	
  Fine Range (U.S.S.G. § 8C2.7):

  	
   

  	
  $6,825,000-$13,650,000

  	
   

  
					



 


23





















 


B.                                     ACCEPTANCE
OF RESPONSIBILITY


 


Notwithstanding
paragraph A above, the Government will not recommend any adjustment for Self
Reporting, Cooperation, Acceptance of Responsibility if defendant:


 


1.                                       Fails
to admit a complete factual basis for the plea at the time it is entered, or


 


2.                                       Denies
involvement in the offense, gives conflicting statements about that
involvement, or is untruthful with the Government, the court or probation
officer, or


 


3.                                       Fails
to appear in court, or


 


4.                                       Engages
in additional criminal conduct, or


 


5.                                       Attempts
to withdraw the plea, or


 


6.                                       Refuses
to abide by any lawful court order.


 


C.                                     NO
OTHER ADJUSTMENTS ARE RECOMMENDED


 


The parties
agree not to recommend any upward or downward adjustments other than those
listed above.


 


D.                                    NO
DEPARTURES ARE RECOMMENDED


 


The parties
agree not to recommend any upward or downward departures.


 


E.                                      “FACTUAL
BASIS” AND “RELEVANT CONDUCT” INFORMATION


 


Defendant
agrees that the facts in the “factual basis” paragraph of this Plea Agreement
are true, and may be considered as “relevant conduct” under U.S.S.G. § 1B1.3
and as the nature and circumstances of the offense under 18 U.S.C. §
3553(a)(1).


 


F.                                      SPECIAL
ASSESSMENT/FINE


 


Special Assessment. The parties will jointly
recommend that defendant pay a special assessment in the amount of $1200 to be


 


24





















 


paid forthwith at time of
sentencing.  The special assessment shall
be paid through the office of the Clerk of the District Court by bank or
cashier’s check or money order made payable to the “Clerk, United States
District Court.”


 


Fine. 
The parties will jointly recommend that defendant pay a fine in the
amount of $13,000,000 to be paid forthwith at the time of sentencing.  This fine is within the recommended
Guidelines ranges set forth in paragraph A above.  The parties believe this fine appropriately
recognizes the defendant’s conduct and cooperation.  The fine shall be paid through the Office of
the Clerk of the District Court by bank or cashier’s check or money order made
payable to the “Clerk, United States District Court.”


 


G.                                     ORGANIZATIONAL
PROBATION


 


The parties
agree that organizational probation is appropriate in this case and shall
include, as a condition of probation, the implementation of a compliance
program as set forth below.  The parties
recommend a term of probation of 3 years.


 


H.                                    COMMUNITY
SERVICE


 


The parties
agree that community service need not be ordered in this case.


 


I.                                         FORFEITURE


 


The parties
agree that forfeiture need not be ordered in this case.


 


XI


 


COOPERATION & REMEDIATION


 


A.                                   COOPERATION


 


Defendant
agrees to cooperate fully with the Fraud Section and the United States
Attorney’s Office and, as directed by the


 


25





















 


Fraud Section and the United
States Attorney’s Office, with any other federal, state, or local or foreign
law enforcement agency.  This cooperation
requires defendant to:


 


1.                                       Provide
full disclosure of all information known to defendant or its outside counsel as
of the date of this Plea Agreement of foreign payments and the accounting
thereof;


 


2.                                       Produce
voluntarily all documents, records, or other tangible evidence relating to such
payments about which the Fraud Section or the United States Attorney’s Office,
or their designee, inquires;


 


3.                                       Recommend
orally and in writing that all TITAN CORPORATION officers, directors,
employees, agents, and consultants cooperate fully with any investigation or
prosecution conducted by the Fraud Section or the United States Attorney’s
Office relating to such payments, including appearing for interviews and
testimony in the United States;


 


4.                                       Provide
access to copies of original documents and records relating to such payments;


 


5.                                       Provide
access to defendant’s outside accounting consultants as well as the records,
reports, and documents of those outside accounting consultants relating to such
payments disclosed to the Fraud Section or the United States Attorney’s Office
as of the date of this Plea Agreement; and


 


6.                                       Provide
all memoranda of interviews compiled and prepared by TITAN CORPORATION’s
counsel, outside


 


26





















 


counsel,
consultants, accountants or other agents of interviews with individuals
relating to such payments disclosed to the Fraud Section or the United States
Attorney’s Office as of the date of this Plea Agreement.


 


B.                                     REMEDIATION


 


Defendant
TITAN CORPORATION agrees to implement and maintain a compliance and ethics
program that includes, at a minimum,
the basic components set forth in Exhibit 4, which are hereby incorporated
herein.  TITAN CORPORATION’s program must
be designed to detect and deter violations of the Foreign Corrupt Practices Act
and other anti-bribery statutes, both domestic and foreign, and to ensure that
its books, records, and accounts, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of its assets, and that it has a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management’s
general or specific authorization, (ii) transactions are recorded as necessary
(I) to permit preparation of financial statements in conformity with generally
accepted accounting principles or any other criteria applicable to such
statements, and (II) to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.


 


TITAN
CORPORATION agrees to file a correct and accurate amended U.S. Corporate Tax
Return for the 2002 tax year.  If in


 


27





















 


the course of preparing the
amended return, TITAN CORPORATION discovers other amounts that were improperly
deducted, and it correctly accounts for such deductions on its amended return,
the Government will not initiate criminal charges against TITAN CORPORATION for
those amounts.  TITAN CORPORATION further
agrees to cooperate fully with any future Internal Revenue Service audit.


 


XII


 


DEFENDANT WAIVES APPEAL AND COLLATERAL ATTACK


 


In exchange
for the Government’s concessions in this Plea Agreement, defendant waives, to
the full extent of the law, any right to appeal or to collaterally attack the
conviction and sentence.  If defendant
believes the Government’s recommendation is not in accord with this Plea
Agreement, defendant will object at the time of sentencing; otherwise the
objection will be deemed waived.


 


XIII


 


BREACH OF THE PLEA AGREEMENT


WILL PERMIT THE GOVERNMENT TO RECOMMEND A


HIGHER SENTENCE OR SET ASIDE THE PLEA


 


This Plea
Agreement is based on the understanding that, prior to defendant’s sentencing
in this case, defendant has not committed any offense not known to the
Government prior to defendant’s sentencing. 
This Plea Agreement is further based on the understanding that defendant
will commit no additional criminal conduct before sentencing.  If defendant has engaged in or engages in
additional criminal conduct during this period, or breaches any of the terms of
any agreement with the Government, the Government will not be bound by the recommendations
in this Plea Agreement, and may recommend any lawful sentence.  In


 


28





















 


addition, at its option, the
Government may move to set aside the plea.


 


XIV


 


ENTIRE AGREEMENT


 


This Plea
Agreement embodies the entire Plea Agreement between the parties and supersedes
any other Plea Agreement, written or oral.


 


XV


 


MODIFICATION OF PLEA AGREEMENT MUST BE IN WRITING


 


No
modification of this Plea Agreement shall be effective unless in writing signed
by all parties.


 


XVI


 


DEFENDANT AND COUNSEL FULLY UNDERSTAND PLEA AGREEMENT


 


By signing
this Plea Agreement, defendant certifies that defendant has read it.  Defendant has discussed the terms of this
Plea Agreement with defense counsel and fully understands its meaning and
effect.


 


///


 


///


 


///


 


///


 


///


 


///


 


///


 


///


 


///


 


29





















 


XVII


 


DEFENDANT SATISFIED WITH COUNSEL


 


Defendant has
consulted with counsel and is satisfied with counsel’s representation.


 


	
   

  	
  CAROL C. LAM

  
	
   

  	
  United
  States Attorney

  
	
   

  	
   

  
	
   

  	
   

  
	
  2/28/05

  	
   

  	
  /s/ Eric J. Beste

  	
   

  
	
  DATED

  	
  ERIC J.
  BESTE

  
	
   

  	
  Assistant
  U.S. Attorney

  
	
   

  	
   

  
	
   

  	
  STEVEN E.
  STONE

  
	
   

  	
  Assistant
  U.S. Attorney

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JOSHUA R.
  HOCHBERG

  
	
   

  	
  Chief, Fraud
  Section

  
	
   

  	
  U.S.
  Department of Justice

  
	
   

  	
  Criminal
  Division

  
	
   

  	
   

  
	
   

  	
   

  
	
  2/28/05

  	
   

  	
  /s/ Eric J. Beste
  for

  	
   

  
	
  DATED

  	
  MARK F.
  MENDELSOHN

  
	
   

  	
  Acting
  Deputy Chief

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Martin
  J. Weinstein/Roger M. Witten

  	
   

  
	
  DATED

  	
  ROGER M.
  WITTEN

  
	
   

  	
  MARTIN J.
  WEINSTEIN

  
	
   

  	
  Attorneys
  for Defendant

  
	
   

  	
  TITAN
  CORPORATION

  
					



 


 


IN
ADDITION TO THE FOREGOING PROVISIONS TO WHICH TITAN CORPORATION AGREES, I SWEAR
UNDER PENALTY OF PERJURY ON BEHALF OF TITAN CORPORATION THAT THE FACTS IN THE
“FACTUAL BASIS” PARAGRAPH ABOVE ARE TRUE.


 


 


	
  February 22,
  2005

  	
   

  	
  /s/ David W.
  Danjczek

  	
   

  
	
  DATED

  	
  DAVID W.
  DANJCZEK

  
	
   

  	
  Vice
  President

  
	
   

  	
  TITAN
  CORPORATION

  
	
   

  	
  Defendant

  



 


30