Recent FCPA Guilty Plea Demonstrates the DOJ’s Ongoing Commitment to Prosecuting Executives for FCPA Violations

May 24, 2011 Author: Richard Craig Smith

On May 19, 2011, the United States Department of Justice (“DOJ”) announced that Jorge Granados, the former Chief Executive Officer (“CEO”) of Miami-based telecommunications company Latin Node Inc. (“LatiNode”), pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”). On December 21, 2010, the DOJ obtained a 19-count indictment against Granados and other LatiNode senior executives for their roles in a conspiracy to pay over $500,000 in bribes to Honduran government officials to retain a lucrative telecommunications contract. Granados’s plea represents the latest example of the U.S. government’s ongoing and aggressive commitment to prosecute high-level business executives for FCPA violations.

Background

In December 2005, LatiNode was awarded a contract with Empresa Hondurena de Telecomunicaciones (“Hondutel”), the wholly state-owned telecommunications authority in Honduras. Almost immediately after winning the contract, LatiNode executives learned that LatiNode would need to bribe Hondutel employees in order to keep them from rescinding the contract. The indictment alleged that Granados and other LatiNode executives agreed to a secret deal to pay bribes to Hondutel officials, including the general manager, a Hondutel senior attorney, and a minister of the Honduran government who became a representative on the Hondutel Board of Directors.[1] The indictment also alleged that Granados actively participated in making concealed payments by laundering money through LatiNode subsidiaries in Guatemala and to accounts in Honduras controlled by government officials.[2] On April 7, 2009, LatiNode pleaded guilty to a one-count criminal violation of the FCPA.[3] As part of the plea agreement, LatiNode agreed to pay a $2 million fine and cooperate with any further investigations by law enforcement agencies.[4]

Three other former LatiNode senior executives – Manuel Salvoch, the Chief Financial Officer (“CFO”), Juan Pablo Vasquez, the Chief Commercial Officer, and Manuel Caceres, the Vice President for Business Development – have already pleaded guilty to FCPA violations this year for their involvement in the Hondutel bribery scheme. Granados is scheduled for sentencing on August 22, 2011, and faces up to five years in prison and a fine of $250,000 or more.[5]

Analysis

Granados’s plea agreement reflects the DOJ’s aggressive stance on holding high-level business executives accountable for FCPA violations. During a Senate committee hearing in November of last year, Senator Arlen Specter had expressed concern regarding the lack of significant prosecutions of individuals who are responsible for FCPA violations, notwithstanding the penalties against companies and shareholders for such violations.[6]

Recent cases suggest that, in fact, high-level business executives are being held accountable for FCPA violations. For example, on January 24, 2011, the former CEO and CFO of Innospec Inc., Paul W. Jennings, agreed to settle FCPA charges with the SEC for approving improper payments to Iraqi and Indonesian government officials.[7] On May 10, 2011, a federal jury in California found the President of Lindsey Manufacturing Co., Keith Lindsey, its CFO, Steve Lee, and an intermediary guilty on all counts in a criminal prosecution for FCPA violations.[8] As Assistant Attorney General Lanny A. Breuer of the Criminal Division of the DOJ remarked about the Granados case, “[f]oreign bribery undermines competition in the marketplace, and weakens democratic institutions. CEOs and other corporate executives should know that now, more than ever, violating the Foreign Corrupt Practices Act will lead to criminal prosecution.”[9]

This article was prepared by Richard C. Smith (rcsmith@fulbright.com or 202 662 4795), John E. Kelly (jkelly@fulbright.com or 202 662 0256), Fatema Merchant (fmerchant@fulbright.com or 202 662 4626) and Rabeha Kamaluddin (rkamaluddin@fulbright.com or 202 662 4576) from Fulbright’s White Collar Crime Practice Group, Fulbright's FCPA and International Anti-Corruption Practice Group and Fulbright's Investigations Practice Group.

Fulbright’s White Collar Crime, FCPA and International Anti-Corruption and Investigations Practice Groups
Attorneys in Fulbright’s White Collar Crime, FCPA and International Anti-Corruption and Investigations Practice Groups are experienced in all phases of governmental investigations and criminal and civil litigation. They routinely handle the management of complex federal and state civil and criminal litigation on behalf of U.S. companies, including Fortune 500 corporations, their officers and directors, international corporations and entities, and individuals. Our attorneys are also experienced in the practice of preventative counseling and compliance programs. From a strategic perspective, this is important for reducing the risk of civil and criminal litigation. 

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[1] Criminal Indictment, United States v. Latin Node, Inc., Case No. 10-20881, available at http://www.justice.gov/criminal/fraud/fcpa/cases/granados-jorge/12-21-10granados-indict.pdf.

[2] Id. at 22-23.

[3] In early 2007, Florida-based eLandia International, Inc. (“eLandia”) acquired LatiNode. Following the acquisition, eLandia discovered the bribes and self-disclosed the violations to the DOJ and Securities and Exchange Commission (“SEC”).

[4] Criminal Plea Agreement, United States v. Latin Node, Inc., Case No. 09-20239, available at
http://www.justice.gov/criminal/fraud/fcpa/cases/litton-applied/04-03-09latinnode-plea-agree.pdf

[5] Specifically, Granados faces a fine of the greater of $250,000, or twice the gross amount of any pecuniary gain or loss that any person derived or sustained from the offense. See Criminal Plea Agreement, 10-CR-20881 (S.D. Fla. May 19, 2011).

[6] See “Granados and Caceres Indictments Latest in FCPA Individual Prosecutions,” Fulbright & Jaworski L.L.P. Briefing, Dec. 22, 2010.

[7] See SEC Press Release, SEC Charges Former CEO of Innospec for Role in Bribery Scheme, available at http://www.sec.gov/news/press/2011/2011-21.htm.

[8] United States v. Noriega, et al., 2:10-CR-01031 (C.D. Cal. May 10, 2011).

[9] DOJ Press Release, Former CEO of U.S. Telecommunications Company Pleads Guilty to Foreign Bribery Conspiracy (May 19, 2011), available at http://www.justice.gov/opa/pr/2011/May/11-crm-644.html.