A former privately held company that had serious undisclosed Foreign Corrupt Practices Act violations when it was acquired by a U.S. public company has pleaded guilty and agreed to pay a fine of $2 million over the next three years. Latin Node Inc. (Latinode), a Florida corporation, pleaded guilty on April 7, 2009 to a one-count criminal information in the U.S. District Court for the Southern District of Florida. It was charged with violating the FCPA’s antibribery provisions by making improper payments in Honduras and Yemen.
Soon after Coral Gables, Fla.-based eLandia International Inc. acquired Latinode in 2007, it discovered potential FCPA violations. The DOJ said eLandia self-reported them immediately, conducted an internal FCPA investigation, shared the results of the investigation with the DOJ, cooperated fully in the government’s investigation, and took appropriate remedial action, including terminating senior Latinode management involved in or having knowledge of the violations. eLandia trades on the over-the-counter bulletin board under the symbol ELAN.OB.
In eLandia’s Form 10Q/A for September 2008, it said: [W]e engaged in a review of Latin Node’s internal controls and legal compliance procedures within its finance and accounting department as a part of our acquisition and integration of Latin Node. As a result of this review, certain past payments in Central America were identified as having been made in the absence of adequate records and controls for a U.S. public company. We have initiated an internal investigation to determine whether any direct or indirect payments by Latin Node prior and subsequent to its acquisition by us were made in violation of the Foreign Corrupt Practices Act (“FCPA”). The internal investigation of the FCPA matter is being conducted by a Special Committee of the Board of Directors. The Special Committee has retained independent legal counsel to assist in the investigation of the FCPA matter.
eLandia also disclosed that its purchase price for Latin Node “was approximately $20.6 million in excess of the fair value of the net assets acquired from Latin Node mostly due to the cost of the FCPA investigation, the resulting fines and penalties to which it may be subject, the termination of Latin Node’s senior management, and the resultant loss of business. Therefore, we allocated approximately $20.6 million of the purchase price as a direct charge to operations during the quarter ended June 30, 2007.”
Before some of its business was discontinued by eLandia, Latinode provided wholesale telecommunications services using internet protocol technology to countries throughout the world, including Honduras and Yemen. From March 2004 through June 2007, it paid or arranged payments of $1,099,889 to third parties to be used to bribe officials at Hondutel, the Honduran state-owned telecommunications company. The payments were in exchange for an interconnection agreement and a reduced rate per minute under it. The payments were made from Latinode’s Miami bank account and approved by the company’s senior executives. Recipients included a member of the evaluation committee responsible for awarding Hondutel interconnection agreements, the deputy general manager (who later became the general manager) of Hondutel, and a senior attorney for Hondutel.
And from July 2005 to April 2006, Latinode made 17 other payments from its Miami bank totaling $1,150,654, either directly to Yemeni officials or through a third-party consultant, in exchange for favorable interconnection rates. Internal company emails showed that the intended recipients included the son of the Yemeni president; the vice president of operations at TeleYemen, the Yemeni government-owned telecommunications company; other officials of TeleYemen; and officials from the Yemeni Ministry of Telecommunications.
View the DOJ’s April 7, 2009 release here.
Download the criminal information here.
Download the plea agreement here.
Download the sentencing memo here.