Highlighting the dangers of insufficient pre-acquisition due diligence and the DOJ's continued enforcement of FCPA liability related to acquisitions, on April 7, 2009, the DOJ secured a guilty plea from Latin Node Inc. ("Latinode"), a privately held Miami-based provider of international VoIP services, for making US$2.25 million in business-related improper payments to government officials in Honduras and Yemen, in violation of the FCPA. As part of the plea agreement, Latinode agreed to pay a US$2 million fine over a three-year period.
Latinode's improper conduct was uncovered post-acquisition by Latinode's parent company, eLandia International Inc. ("eLandia"), a US publicly traded information and communications technology provider, during the course of its integration of Latinode. eLandia announced in a June 2007 Form 8-K/A that it had initiated an internal FCPA investigation after a review of Latinode's internal controls and legal compliance procedures revealed inadequate records of past payments made to Central American consultants. The 8-K also indicated that eLandia was designing proper controls and compliance policies for Latinode. Further, upon discovering the unlawful conduct, eLandia promptly disclosed the information to the DOJ. eLandia later shared the factual results of the internal investigation with the DOJ and cooperated fully with the DOJ's ongoing investigation. These steps, along with eLandia's taking appropriate remedial action in terminating senior Latinode management involved in the bribes, were acknowledged by the DOJ in its press release announcing Latinode's guilty plea.
"The resolution of the criminal investigation of Latinode reflects, in large part, the actions of Latinode's corporate parent, eLandia International Inc. (eLandia), in disclosing potential FCPA violations to the Department after eLandia's acquisition of Latinode and post-closing discovery of the improper payments. eLandia's counsel voluntarily disclosed the unlawful conduct to the Department promptly upon discovering it; conducted an internal FCPA investigation; shared the factual results of that investigation with the Department; cooperated fully with the Department in its ongoing investigation; and took appropriate remedial action, including terminating senior Latinode management with involvement in or knowledge of the violations."
According to the one-count information, Latinode committed the FCPA violations in Honduras when it paid nearly US$1.1 million to third parties knowing that the funds would be passed on to employees of the Honduran state-owned telecommunications company. In Yemen, Latinode paid over US$1.1 million either directly or through third-party consultants to employees of the Yemeni government-owned telecommunications company, officials from the Yemeni Ministry of Telecommunications and the son of the Yemeni president. The FCPA's definition of foreign government officials includes employees of state-owned companies.
- The DOJ's press release can be found here.
- The criminal information can be found here.
- The plea agreement can be found here.