On May 19 2011 the US Department of Justice (DOJ) announced that Jorge Granados, 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. 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 US government's ongoing and aggressive commitment to prosecute high-level business executives for Foreign Corrupt Practices Act violations.
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 Foreign Corrupt Practices Act (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, chief financial officer (CFO), Juan Pablo Vasquez, chief commercial officer, and Manuel Caceres, vice president for business development – have already pleaded guilty to the Foreign Corrupt Practices Act 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).
Granados's plea agreement reflects the DOJ's aggressive stance on holding high-level business executives accountable for the Foreign Corrupt Practices Act violations. During a Senate committee hearing last November, Senator Arlen Specter had expressed concern regarding the lack of significant prosecutions of individuals who are responsible for the Foreign Corrupt Practices Act 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 Foreign Corrupt Practices Act violations. For example, on January 24 2011 the former CEO and CFO of Innospec Inc, Paul W Jennings, agreed to settle the Foreign Corrupt Practices Act charges with the Securities and Exchange Commission for approving improper payments to Iraqi and Indonesian government officials(7). On May 10 2011 a federal jury in California found Lindsey Manufacturing Co president, Keith Lindsey, its CFO, Steve Lee, and an intermediary guilty on all counts in a criminal prosecution for the Foreign Corrupt Practices Act 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).
For further information on this topic please contact Richard Craig Smith, John Kelly, Fatema Merchant orRabeha Kamaluddin at Fulbright & Jaworski LLP by telephone (+1 202 662 0200), fax (+1 202 662 4643) or email (rcsmith@fulbright.com, jkelly@fulbright.com, fmerchant@fulbright.com,rkamaluddin@fulbright.com)
Endnotes
(1) Criminal Indictment, United States v Latin Node Inc, Case 10-20881, available athttp://www.justice.gov/criminal/fraud/fcpa/cases/granados-jorge/12-21-10granados-indict.pdf
(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.
(4) Criminal Plea Agreement, United States v Latin Node Inc, Case 09-20239, available athttp://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 offence. See Criminal Plea Agreement, 10-CR-20881 (SD Fla May 19 2011)
(6) See "Granados and Caceres Indictments Latest in FCPA Individual Prosecutions," Fulbright & Jaworski LLP Briefing, December 22 2010
(7) See Securities and Exchange Commission 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
(9) DOJ Press Release, "Former CEO of US 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
Contributed by Fulbright & Jaworski LLP
Your reporting on this Jorge Granados case is thorough. I agree that "Foreign bribery undermines competitions. . .and weakens democratics institutions." But it seems that the U.S. Department of justice has always been swayed by political leanings of the moment. And political leanings are corporate reactions to the social climate. So regardless of any Foreign Corrupt Practices Act, business will continue to be transacted under the table. Laws don't prevent this, because it's behavior that's acceptable to an individualistic, opportunistic society.
ReplyDeleteI often touch on similar themes at www.geckogomez.com Please let me know if you'd be interested in writing a guest blog on any theme related to corruption. I'd very much like to have it on my site.