Former Finance Director of California Valve Company Pleads Guilty to Bribing Foreign Government Officials

WASHINGTON—The former finance director of an Orange County, CA. based valve company pleaded guilty today in connection with his role in a conspiracy to pay approximately $628,000 in bribes to numerous foreign government officials, Acting Assistant Attorney General Rita M. Glavin of the Criminal Division, U.S. Attorney Thomas P. O’Brien of the Central District of California, and Joseph Persichini Jr., Assistant Director in Charge of the FBI’s Washington Field Office, announced.

Richard Morlok, 55, a resident of Rancho Santa Margarita, CA., pleaded guilty before U.S. District Judge James V. Selna in Santa Ana, Calif., to a one-count information charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for the Orange County-based valve company from state-owned enterprises in several countries, including China, Korea, Romania and Saudi Arabia, in violation of the Foreign Corrupt Practices Act (FCPA).

According to court documents, the valve company designed and manufactured service control valves for use in the nuclear, oil and gas, and power generation industries worldwide. Morlok was the finance director at the valve company from 2002 through 2007. In this position, Morlok oversaw the finance department and had responsibility for approving certain commission payments and signing off on wire transfers to the recipients of those commission payments.

In connection with his guilty plea, Morlok admitted that from 2003 through 2006, he caused employees and agents of the valve company to make corrupt payments totaling approximately $628,000 to foreign officials employed at state-owned enterprises in order to assist in obtaining and retaining business for the valve company. Morlok also admitted that the valve company earned approximately $3.5 million in profits from the contracts it obtained as a result of these corrupt payments. According to the court documents, the corrupt payments were made to foreign officials at state-owned entities including, but not limited to, China National Offshore Oil Company, PetroChina, Jiangsu Nuclear Power Corporation (China), KHNP (Korea), Rovinari Power (Romania) and Safco (Saudi Arabia).

Morlok also admitted to providing false and misleading information to auditors during a 2004 internal audit of the valve company’s commission payments, and to providing false and misleading information to external auditors during a 2004 external audit.

As part of his plea agreement, Morlok has agreed to cooperate with the Department in its ongoing investigation. At sentencing, scheduled for July 10, 2009, Morlok faces a maximum of five years in prison.

In a related case, Mario Covino pleaded guilty on Jan. 8, 2009, to conspiring to make corrupt payments totaling approximately $1 million to numerous foreign government officials for the purpose of securing business for the same Orange County valve company from state-owned enterprises in several countries, including Brazil, China, India, Korea, Malaysia and the United Arab Emirates. Covino, an Italian citizen and resident of Irvine, Calif., was responsible for overseeing new construction projects for the valve company and for the replacement of existing valves made by other companies and installed at customer plants in more than 30 countries. Covino’s sentencing is scheduled for July 20, 2009.

The case was prosecuted by Assistant Chief Hank Bond Walther and Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Douglas McCormick of the U.S. Attorney’s Office for the Central District of California. The case was investigated by the FBI’s Washington Field Office.