Latin Node Inc., Pleads Guilty to FCPA Antibribery Violation, Agrees to Pay $2 Million Fine
In April 2008, Latin Node, Inc. (“Latin Node”), a privately-held telecommunication services company headquartered in Miami, pled guilty to violating the FCPA’s anti-bribery provisions in connection with improper payments made to officials in Honduras and Yemen in order to obtain and retain business. The criminal information details Latin Node’s efforts to obtain and retain business with Hondutel (the Honduran government-owned telecommunications company) and TeleYemen (the Yemeni government-owned telecommunications company). According to the information, both Hondutel and TeleYemen are “instrumentalities” of their respective governments and their employees and directors are “foreign officials” under the FCPA.
Honduras
As detailed in the information, Latin Node sought out Official A (a Hondutel employee who headed the company’s evaluation committee responsible for awarding agreements with private telecommunication companies that wished to use Hondutel’s network) for her assistance in winning agreements with Hondutel. According to the information, despite recognized “financial weaknesses” in Latin Node’s proposal, Hondutel ultimately selected Latin Node for the agreement. Internal Latin Node e-mails indicate that company officials knew that Official A had significant influence in awarding Hondutel contracts and that Latin Node representatives were trying to influence Official A with a “prize” if she could steer the agreement to the company. Shortly after winning the Hondutel agreement, the information charges that Latin Node caused LN Comunicaciones (a wholly-owned Guatemalan subsidiary) and Servicios IP, S.A. (a Guatemalan company nominally owned by two LN Comunicaciones employees) to sign a purported consulting agreement with a company believed to be controlled by Official A’s brother. According to the information, Latin Node executives signed checks totaling $300,000 to Servicios IP knowing and intending that some or all of the money would be passed along to Hondutel officials, including Official A, who was ultimately hired by Latin Node and put in charge of the company’s business development activities in Latin America and the Caribbean.
The information further charges that, after Latin Node secured the Hondutel agreement, it sought a rate reduction and that internal Latin Node e-mails indicate that it would be necessary to give Hondutel officials money in order to obtain the rate reduction Latin Node desired. According to the information, Latin Node executives communicated directly with Official B (a senior Hondutel executive with broad-decision making authority and influence over the agreements and rates) and Official C (an attorney in the Hondutel legal department who worked directly for Official B) about payments in exchange for the favorable rate. The e-mail communications contained bank account information for Official B and Official C. The information charges that Latin Node made payments directly to Official B and Official C in the hopes that they would reduce the company’s rates. According to the information, Latin Node executives and the Officials entered into a verbal agreement to reduce the rate, but agreed to keep the written agreement the same to avoid detection.
In total, the information charges that Latin Node paid or caused to be paid approximately $1.1 million to Servicios IP, certain Latin Node employees, and certain Honduran officials for the purpose of paying bribes to Officials A, B, and C in exchange for obtaining and retaining the Hondutel agreement and the subsequent rate reductions.
Yemen
As detailed in the information, in 2004, Latin Node was seeking to enter the Yemeni market and learned that Yemen Partner A (a dual US-Egyptian citizen), through his privately owned company, had obtained an agreement with TeleYemen at a favorable rate. Latin Node sought to partner with Yemen Partner A to gain entry into the Yemeni market, even though Latin Node understood that Yemen Partner A had received the favorable rate by making corrupt payments to certain Yemeni officials. According to the information, Latin Node entered into a revenue sharing agreement with Yemen Partner A under which it agreed to pay Yemen Partner A 40% of its profits to use his existing agreement and equipment in Yemen, even though the company understood and agreed that some or all of the money paid to Yemen Partner A would be passed along to TeleYemen officials. The information further charges that Latin Node internal e-mails indicate that company executives understood that Yemen Partner A had good relationships with the son of the Yemeni president and with high-level TeleYemen executives. According to the information, Latin Node made a total of seventeen payments totaling approximately $1.15 million, either directly to Yemeni officials or to Yemen Partner A, with the knowledge that some or all of the money would be passed along to Yemeni officials.
According to the information, the improper payments in both Honduras and Yemen were made from Latin Node’s U.S. bank account and were approved by company executives who were either U.S. citizens or a permanent resident alien of the U.S.
Based on the above conduct, Latin Node agreed to plead guilty to one count of violating the FCPA’s anti-bribery provisions. Pursuant to the plea agreement, which requires the company to cooperate with the DOJ’s continued investigation, Latin Node agreed to pay a $2 million fine over three years (an amount substantially lower than the $4.2 million to $8.4 million fine available under the U.S. Sentencing Guidelines). Both the plea agreement and the DOJ press release note that the conduct at issue was voluntarily disclosed by Latin Node and its parent corporation, eLandia International Inc. (“eLandia”), that the disclosure and cooperation of the companies was “timely, thorough, and exemplary,” and that the culpable Latin Node executives are no longer employed by eLandia. The Plea agreement further notes that the improper payments all took place prior to eLandia’s acquisition of Latin Node in June 2007.