Telecom Executive Sentenced To 4 Years In Prison For Violations Of The Foreign Corrupt Practices Act - Three Other Former Executives Of Now-Defunct Company To Be Sentenced By End Of The Year

Author:Mr D. Anthony Rodriguez
Profession:Morrison & Foerster LLP

Last Wednesday, a United States District Court judge in the Southern District of Florida sentenced the former CEO of Latin Node, a now-defunct Florida-based telecommunication company, to 46 months in prison for paying bribes to Honduran government officials. Three other former executives will be sentenced later this year, bringing to a close the extensive -- and expensive -- fall-out from events that carry many lessons regarding the FCPA.


Payments to Employees of State-Owned Telecommunications Company

The former CEO, like his three other colleagues (the then-CFO, vice president of business development, and the chief commercial officer), pled guilty to arranging bribes to the general manager, an attorney, and a Honduran government representative to the board of directors of Empresa Hondurena de Telecommunicaciones (Hondutel), the Honduran state-owned telecommunications company. The bribes totaled more than $500,000 over a nearly 18 month period, and were laundered through Latin Node subsidiaries in Guatemala and through Honduran accounts that the government officials controlled. Nine months before the bribes began, Latin Node had been named the sole winner of an interconnection agreement with Hondutel, allowing Latin Node to provide long distance service between the two countries. The bribes were paid to retain the interconnection agreement and to continue to do business with Hondutel. In its plea agreement, Latin Node admitted to having paid bribes to Honduran officials and also to Yemeni officials.


The Importance of Diligence and Contractual Protections

Halfway through the period during which Latin Node was paying bribes to the Honduran officials, eLandia signed a share purchase agreement with Latin Node's owner for approximately $20 million. Two months after the closing (and six months after signing the share purchase agreement) eLandia filed a Form 10-Q in which it stated that control deficiencies in Latin Node's financial reporting departments "may exist." One month later, eLandia disclosed that, in the course of integrating Latin Node, it had identified questionable payments and had begun an investigation. Within three months, the investigation had reached the preliminary findings stage; soon thereafter, eLandia self-reported the situation to the Department of Justice and to the Securities and Exchange Commission.

The last bribe was paid before the...

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