Former executives of Latin Node, Inc. charged with FCPA violations for bribing Honduran government officials

Dec 28, 2010   

In its continuing ramp up of enforcement of the Foreign Corrupt Practices Act, (“FCPA”), the government recently announced the indictments of two former senior executives of Latin Node, Inc., a provider of wholesale telecommunications services using Internet protocol technology. The two executives, the former chief executive officer and the vice-president of business development, are charged with violating the anti-bribery provisions of the FCPA and anti-money laundering laws. The indictment may be viewed here.

The FCPA forbids American businesses or persons from paying bribes to officials of a foreign government in order to obtain or retain business. It also requires public companies to make and keep accurate books and records and to devise and maintain accounting controls to detect and prevent the paying of bribes to foreign officials.

The alleged scheme to bribe Honduran officials centered on an “interconnection agreement” Latin Node, Inc. had with Hondutel, the Honduran state owned telecommunications authority. This agreement allowed Latin Node, Inc. to use Hondutels lines to establish a network between Honduras and the United States and provide long distance services. Latin Node, Inc. was required to pay Hondutel a set rate per minute for calls to Honduras.

The charged executives sought a rate reduction from Hondutel. In order to effectuate this rate reduction, they agreed to a secret deal to pay bribes to a Hondutel manager, as well as to a senior attorney for Hondutel who acted as the managers “straw man” and a minister of the Honduran government. More than $500,000 in bribes was paid to the officials, concealing the payments by laundering the money through Latin Node subsidiaries in Guatemala and to accounts in Honduras controlled by Honduran government officials.

Latin Node, Inc. had previously pled guilty to violating the FCPA regarding the same conduct for which the executives were charged. By indicting the executives, who now face prison time if convicted, the Department of Justice is showing it is “committed to holding accountable individuals and companies alike for alleged foreign bribery schemes” according to Assistant Attorney General Lanny Breuer. According to Anthony Mangione, the Special Agent in Charge of ICE Homeland Security Investigations in Miami, “anyone who believes paying bribes in foreign countries is just the cost of doing business should think about the repercussions-whether it is worth going to prison”.

According to John Gillies, Special Agent in Charge of the FBI in Miami, “this new indictment represents the FBIs commitment to investigating not just the corrupt acts of a corporate entity, but the individuals who are behind it.”

Violations of the FCPA are punishable by a maximum of 5 years in prison. Money Laundering is punishable by a maximum of 20 years in prison. The defendants may also be liable for substantial monetary fines if convicted.

It is important for companies and their executives who conduct international business to be familiar with the prohibitions contained in the FCPA and to ensure that their companies and employees are trained on how to comply with its provisions. Lawyers at Fuerst Ittleman PL are experienced in conducting internal investigations of companies and executives in order to prevent violations, and in the event of violations, to defend against regulatory or criminal proceedings brought pursuant to the FCPA.