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UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA

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iUNITED STATES OF AMERICA, ))Pla in t i f f , )

)v. ))

MAXWELL TECHNOLOGIES, INC. , )))Defendant. )-------------------------------)

Case No. '11&11 032* JMTi t l e IS, United Sta es Code,Sect ion 78dd-1 ForeignCorrupt Prac t i ces A t i Ti t l eIS, United s t a t e ~ Code,s e c t i o n s 7 8 m ( b ~ ( 2 ) (A) ,78m (b) (5) , and 78ff (aD - Booksand Records.

The United Sta te s charges t h a t l a t a l l t imes re levant to t h i sInformation:

GENERAL ALLEGATIONSINTRODUCTION

1 . Congress enacted the Foreign Corrupt Prac t i ces Act of1977, as amended, Ti t l e 15, United Sta tes Code, Sect ion 78dd-1, e tseq. ("FCPA"), fo r the purpose o f, among othe r th ings , making itunlawful fo r cer t a in c lasses of persons and e n t i t i e ~ to ac tcor rup t ly in fu r therance of an of fe r , promise , authori4at ionl orpayment of money or anything of value to a fo re ign governmento f f i c i a l fo r the purpose of obta in ing o r r e ta in ing busi,ness fo r ,or d i rec t ing bus iness to , any person.I I

Case 3:11-cr-00329-JM Document 1 Filed 01/31/11 Page 1 of 8


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2. In addi t ion , the FCPA, T i t l e IS , uni ted StatJes Code,Sect ion 78m(b} (2}(A), required every i s sue r of a secur i tyreg is tered pursuant to T i t l e IS, United Sta tes Code, Setion 781to make and keep books, records , and accounts t ha t a c c u r ~ t e l y andf a i r l y r e f l ec t t r ansac t ions and the d i s t r i bu t i on of the tompany'sIasse t s .

RELEVANT ENTITIES AND INDIVIDUALSThe Defendant

3 . MAXWELL TECHNOLOGIES, INC. ("MAXWELL"), a manufacturerof energy s torage and power del ivery produc ts , was incorpprated in

iDelaware, headquartered in San Diego, Cal i forn ia , and hadmanufacturing capabi l i t i es in the United Sta tes , Switzer land , and

IChina. MAXWELL's shares were r eg i s t e r ed with the s e c u r ~ t i e s andExchange Commission ("SEC") pursuant to Sect ion 12 ( b ~ of the,Secur i t i e s Exchange Act of 1934. MAXWELL's shares t r a d ~ d on theNASDAQ under the symbol "MXWL."

4. As an i s sue r of publ ic ly t raded secur i t i es 1egis teredpursuant to sec t ion 12(b) of the Secur i t i e s Exchange ACt' of 1934,Ti t le IS, uni ted Sta tes Code, Sect ion 781, MAXWELL was required tof i per iodic repor ts with the SEC under Sect ion 1$ theSecur i t ies Exchange Act, Ti t le 15 United St a t e s Code, Section 78m.Accordingly, MAXWELL was an " issuer" w i th in the m e a n i ~ g theFCPA, Ti t le IS, United Sta tes Code, Sec t ion 78dd-l . I

IOther Relevant Maxwell Ent i t i e s and Ind iv idua ls5 . MAXWELL TECHNOLOGIES S.A. ("MAXWELL S.A.") , previously

known as Montena Components Ltd . , was a wholly owned subs id ia ry ofMAXWELL t ha t manufactured and sold high-vol tage c a p a ~ i t o r s insevera l count r ies , inc luding China. MAXWELL S.A. was indorporated

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and headquar te red in Switzer land. MAXWELL S .A. ' s f inancia r e s u l t swere conso l ida ted with MAXWELL's throughout the re levan t period.MAXWELL S.A. , a l though separa te ly incorpora ted , shared e ployees ,o f f i ce r s , and personnel , and, where spec i f i ed , under took the ac tsse t fo r th here in with th e au thor iza t ion l knowledge and s tb j ec t to

Ithe con t ro l of MAXWELL.6 . "Execut ive A, II a c i t i z en of the un i t ed Sta te s , was a

sen ior execut ive a t MAXWELL in i t s San Diego o f f i ce during por t ionsof the re levan t per iod and, a f t e r res igna t ion , c o n t i n u e ~ to drawa sa la ry from MAXWELL fo r serv ices as a "corpora te p lanner ."

7 . IIExecutive B," a c i t i zen th e United Sta te s , was asen io r execut ive a t MAXWELL in i t s San Diego of f ice for r lPor t ionsof th e re levan t per iod . After Executive B ls res 'gna t ion ,IIExecutiveremainder

BIIof

cont inued tothe re levan t

work pa r t - t ime fo r MAXWper iod pursuan t to a

ELL fo r theT ~ a n s i t i o n

Agreement. I8. "Execut ive C," a c i t i zen of th e uni ted S ta t4s , was a

sen io r execu t ive a t MAXWELL in th e f inance depar tment in Isan Diegoduring por t ions of the re levan t per iod . '

9 . "Execut ive D, II a c i t i zen of th e United St a t e s , wasMAXWELL's "Operat ions Contro l le r , Europe" during por t iops of there levan t per iod and l a t e r became MAXWELL's Cont ro l l e r . I AlthoughExecutive D a t t imes worked in Switzerland, a t a l l t imes re levant ,Executive D was a MAXWELL employee.

10. "Execut ive E,II a c i t i zen of Swi tzer land , w a ~ MAXWELLS .A. ' s Vice Pres id en t and General Manager for por t ions of there levan t per iod . Executive E l a t e r became MAXWELL S.A. ' s SeniorVice Pres iden t and General Manager.

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11. "Agent 1 ," a Chinese nat iona l , was a th i rd -par ty agenttoespons ib le fo r MAXWELL S .A . ' s high-vol cap ac i t o r

Chinese customers from a t l e a s t 2002 u n t i l May 2009.Maxwell 's Customers

iI12 . Pinggao Group Co. Ltd. {formerly Pingdingshan HighIvol t a g e S w i t chgear Works) (\\Pinggao Group") was a s t a t e owned

manufacturer of e l e c t r i c - u t i l i t y i n f r a s t r u c tu r e in Henan Province,People ' s Republic of China ("PRC" o r \ \China").

13. New Northeas t Elec t r i c Shenyang HV Switchgear Co., Ltd.("Shenyang HV") was a s ta te-owned m anufacturer o f e l ec t r i c -u t i l i t yinf ras t ruc ture in Liaoning Province. PRe. !

14. Xi an XD High Voltage Appara tus Co., Ltd. a / ~ / a Xi'anIShinky High Voltage Elec t r i c Co., Ltd. (\\Xi-an XD") was l a s t a t e

owned manufacturer of e l e c t r i c - u t i l i t y i n f r a s t r u c tu r e ShaanxiProvince , PRC.

THE BRIBERY SCHEME

General ly15. From a t l e a s t Ju ly 2002 through in o r about kay 2009,

MAXWELL and i t s subs id i a r i e s paid approximately $2,789,131 to AgentI1 to be d i s t r i b u t ed to Chinese fo re ign o f f i c i a l s , in r ~ t u r n fo r

secur ing cont rac ts t h a t prof i t ed MAXWELL.16. MAXWELL and i t s subs id i a r i e s accomplished theSf payments

by using Agent 1 to market and s e l l MAXWELL's hig vol tagecapac i to rs to Chinese consumers of MAXWELL'S capac i to rs ,subs tan t ia l ly a l l of which were Chinese s ta te-owned e n t i t i e s .During the r e l ev an t per iod , Agent 1 reques ted quotes from MAXWELLS.A. on behal f of prospect ive Chinese s ta te-owned e n t i t i e s . UponAgent l's in s t ruc t ion , MAXWELL S .A. added an \ \extra" 20 ~ e r c e n t to

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I the quoted amounts to a r r ive a t a higher pr i ce fo r MAXWEtL S.A. ' shigh-vol tage equipment . MAXWELL S.A. then invoiced th1 Chinesestate-owned en t i t i e s fo r equipment a t th e higher -p r iced r a te , whichthe s ta te -owned e n t i t i e s paid upon r ece ip t of the equipmen:t. Agent1 invoiced MAXWELL S.A. fo r the "extra" 20 p ercen t added to quotedpr ices , which Agent 1 c lass i f i ed in Agent l i s invoices as e i t h e r"ex t ra amount" or "spec ia l arrangement" fees . Upon rece ip t , Agent1 d is t r ibu ted the "ex t ra amounts" to of f i c i a l s a t IthE! Chinesestate-owned e n t i t i e s , inc luding employees a t including PinggaoGroup, Shenyang HV, and Xi-an XD.Knowledge Within MAXWELL'S U.S. Management

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1 7 . MAXWELL's management with in the United Sta tes difcovered 't ac i t l y approved, concealed and caused to be concealed th br iberyscheme out l ined above. For ins tance :

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A. In October 2002, MAXWELL sen t Execut ive D a s s i s tIwith the i n t eg ra t ion of th e f inance funct ion as a r e s u l t of

MAXWELL's acqu i s i t i on of MAXWELL S.A. IB. On November 20, 2002, Executive D sen t an!I email to

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MAXWELL's most sen io r of f ice r s , then loca ted in thej SouthernD i s t r i c t of Cal i fo rn ia and elsewhere, repor t ing tha t ~ x e c u t i v e D discovered tha t " there i s a payment t h a t i s made to aChinese bank account in r e la t ion to se l l ing ... equipment ."

I!Execut ive D concluded tha t "[ iJ t would appear ~ h a t th i sIpayment i s a kick-back, pay-off , br ibe , whatever yor want to

c a l l it, given t h a t we cannot obta in an invo ice : or o th e rdocument t h a t i den t i f i e s what the payment i s for . This typeof payment i s in v io la t ion of US t rade laws." E x ~ c u t i v e D

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!then asked Execut ive A, Execut ive B, and Executiye C fo r!advice on how "we should handle t h i s s i tua t ion . " ,I

C. Execut ive B, then MAXWELL'S Chief operat ingl Off icer ,rep l i ed t h a t " th i s i s a wel l know [sic] i ssue" ;and t ha tExecut ive B would dispa tch ano ther MAXWELL employee who had" fami l ia r i ty with the i ssues and solu t ions H to a s s i s tExecut ive D. Execut ive B a l so in s t ruc ted tha t there be "[n]omore emai l s please . H18. lowing th e payments' discovery by MAXWELL's sen io r

management in the United Sta te s , under Execut ive E 's overs igh t andd i r ec t supervision, payments to Agent 1, which Agent 1 t h ~ n passedon to of f i c i a l s a t Chinese s ta te-owned e n t i t i e s only inbreased.In 2002, MAXWELL S.A. paid approximately USD$165 t OOO to hgent 1.In 2008, MAXWELL S.A. paid near ly USD$l . l mil l ion to Ageht 1.Accounting for "Extra Amounts" and "Spec ia l Arrangement"i Fees

19. For I re levan t per iods , MAXWELL pe r iod ica l ly f i l edand caused to be f i l ed with th e SEC f inanc ia l statements! andrepor t s d i sc los ing , among other th ings , MAXWELL's f inancl ial dataand an ana lys is of MAXWELL's f inanc ia l cond i t ion and r e s ~ l t s ofIioperat ions. MAXWELL's s ta tements and repor t s accounted iforpayments of "ex t ra amounts H and "sp ec i a l arrangement" paidas bribes to o f f i c i a l s a t s t a t e owned e n t i t i e s as sa l e s -commission expenses in MAXWELL's books, records , and acdounts.

IIn i t s Form 10-Q f i l ing fo r the quar te r ended March 31, 12009,IMAXWELL r e c l a s s i f i e d the amounts and fees fo r cur ren t and p r io rper iods as a reduct ion in revenue.I II I

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COUNT 1 Foreign Corrupt Pract ices Act - Bribery (15 U.S.C. 78dd-1) 20. Paragraphs 1 through 19 a re rea l leged and incrporated

by reference as though fu l ly s e t fo r th here in .21. From a t l e a s t in or about July 2002 through i n lo r about

May 2009, in th e Southern Dis t r i c t of Cal i fo rn ia and e+sewhere,defendant MAXWELL, an i s suer organized under th e laws of the UnitedSta tes , wi l l fu l ly and corru pt ly acted fur therance of of fe r ,payment, promise to pay, and author iza t ion of the payment I of money

Ito a person, whi le knowing t h a t 1 or a por t ion of s ~ c h moneywould be and had been offered , given, and promised, d i rec t ly o rind i rec t ly , to foreign of f i c i a l s , fo r purposes o f: (i) inf luencingac ts and dec i s ions of such - fo re ign o f f i c i a l s in t he i r o f f i c i a lcapac i t i e s ; ( i i ) inducing such fo re ign o f f i c i a l s to do anf omit todo ac ts in v io la t ion of the lawful dut i e s of such of f i c i a t s ; ( i i i )secur ing an improper advantage; and (iv) inducing s u c ~ ignof f i c i a l s to use t he i r in f luence with a foreign goverriment andi n s t rumenta l i t i e s - thereof t o a f f ec t and in f luence ~ c t s anddecisions of such government or in s t rumenta l i t i e s , in lorder to

ia s s i s t defendant MAXWELL and others in obtain ing and : retainingbus iness fo r and with , and di rec t ing business to , defendant MAXWELLand others ; to wit , MAXWELL made and caused to be made a se r ies ofpayments exceeding $2.7 mil l ion to Agent I , knowing t h a t a l l o r apor t ion o f those payments would be conveyed to o f f i c i a l s fore ignI,governments employed by s ta te-owned e n t i t i e s , inc luding Pinggao Group, Shenyang HV, and x i an XD, in an e f fo r t to secure and re t a in cont rac ts with ce r t a in s t a t e owned en t i t i e s . A ll in v io la t ion of Ti t l e IS, United Sta tes Code, Sectiom 78dd-1.

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COUNT 2 Foreign Corrupt Pract ices Act - Book and R e c o r d ~ (15 U.S .C . 78m) I22. Paragraphs 1 through 19 are rea l l eged and incbrpora ted

by reference as though fu l ly se t fo r th here in .23. From a t l e a s t in o r about Ju ly 2002 through i1 or about

March 2009, in the Southern Dis t r i c t of Cal i fo rn ia and ~ l s e w h e r e , Idefendant MAXWELL, an i s s ue r organized under the laws of th e UnitedIISta tes , knowingly f a l s i f i ed and caused to be f a l s i f i bd books,

records , and accounts required to , in reasonable de ta i l , tccurate lYand f a i r ly r e f l e c t the t ransac t ions and d i s pos i t i on o f ~ X W E L L and

Ii t s asse t s ; to w it MAXWELL mischaracter ized the "ext ra ambunts" and"spec ia l arrangement" fees pa id as br ibes as sales- lommiss ionexpenses in i t s books, records , and accounts .

A ll i n v io l a t i on of Ti t l e 15, United Sta tes Code Sect ions78m(b) (2) (A), 78m(b) (5) , and 78ff (a ) , and Ti t l e 18, United Sta tesICode, Sect ion 2.Dated: ~ B . k LAURA E DUFFYUNITED STATES ATTORNEY

l 2011.DENISCHIEF,CRIMINALU.S.

J . McINERNEYFRAUD SECTIONDIVISION IPARTMENT OF JUST]CE

By: By: vt...--~ ~ ~ ~ ~ ~ ~ ~ ~ ~ = = ~ ~RIC J ~ . ~ B - E - S - T ~ E ~ - - - - EN J .ASST. U.S. ATTORNEY TR L ATTrlLll'll.ln>:1&U. . DEPARTMENTCRIMINAL DIV., FRAWD SECTIOND.C. Bar No. 47701$SPECIAL ASST. U.S. ATTORNEYSOUTHERN DIST. OF yALIFORNIA

U.S. Department of J us t i c eFraud Sect ion , Criminal Divis ion1400 New York Avenue, N W.Washington, D.C. 20005 .Tel : (202) 307 -1423Fax: ( 2 02 ) 514 - 6118

OF JUSTICE

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