Enforcement Report For Q-3 '11

During the calendar quarter just ended, there were three corporate enforcement actions and two individual convictions. A defendant received one of the FCPA's longest jail sentences, the DOJ released three new FCPA-related indictments, and prosecutors dropped the appeal of a short FCPA prison term.

But the biggest news was the mistrial in the first Africa sting case. It's not an outright win for the defendants -- the government said it will retry them. Meanwhile, the trial of the second group of sting defendants started during the quarter.

Here's a complete rundown for Q-3:

DOJ / SEC Enforcement Resolutions

Armor Holdings Inc. (July 13) a military and law enforcement equipment company formerly listed on the NYSE and now owned by BAE Systems agreed to pay $16 million to resolve FCPA violations arising from bribes to secure U.N. contracts and covering up the payments. Armor will pay the DOJ a criminal penalty of $10.3 million and will disgorge $5.7 million to the SEC. Former Armor executive Jonathan Spiller was indicted with the 22 Africa sting defendants. He pleaded guilty earlier this year to conspiracy to violate the FCPA. He hasn't been sentenced.

Diageo plc (July 27) agreed to pay the SEC $16.4 million to resolve FCPA offenses that stretched over six years and involved bribes to foreign officials in India, Thailand, and South Korea. The London-based maker of many top liquor brands -- including Johnnie Walker and Windsor Scotch whiskeys -- paid $2.7 million in bribes through subsidiaries for sales and tax benefits.

Bridgestone Corporation (September 15) agreed to plead guilty and pay a $28 million criminal fine for its role in conspiracies to rig bids and make corrupt payments to foreign government officials in Latin America. The Tokyo-based maker of marine hose and other industrial products was charged with conspiring to violate the Sherman Act and the Foreign Corrupt Practices Act. 

Convicted

Joel Esquenazi (August 4), 52, of Miami, Florida was convicted in the Haiti Telco case of one count of conspiracy to violate the FCPA and commit wire fraud, seven substantive FCPA counts, one count of money laundering conspiracy, and twelve counts of money laundering. Esquenazi was the president of Miami-based Terra Telecommunications Corp. Sentencing is pending.

Carlos Rodriguez (August 4), 55, of Davie, Florida, was tried and convicted on the same counts with Joel Esquenazi in the Haiti Telco case (see above). Rodriguez was the executive vice president of Terra Telecommunications Corp. Sentencing is pending.

Mistrial Declared

Pankesh Patel, Andrew Bigelow, John Benson Weir, and Lee Allen Tolleson (July 7) The judge in the first Africa sting trial declared a mistrial after the jury deliberated five days without reaching a verdict. The defendants were charged with conspiracy to violate the FCPA, violating the FCPA, conspiracy to commit money laundering, and aiding and abetting. They also faced a forfeiture count. The government said it will retry them.

Indicted

Cinergy Telecommunications Inc. (July 13), a privately-held telecommunications company incorporated in Florida, was charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering, and 19 counts of money laundering, in connection with alleged bribes to Haitian government officials.

Washington Vasconez Cruz (July 13), 63, of Miami, the president of Cinergy, was charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering, and 19 counts of money laundering.

Amadeus Richers (July 13), 60, of Pembroke Pines, Florida and Brazil, a former director of Cinergy, was charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering, and 19 counts of money laundering.

Sentenced

Jorge Granados (September 7), 55, former CEO of Florida-based telecommunications company Latin Node Inc., was sentenced in federal court in Miami to 46 months in prison for bribing government officials in Honduras. He pleaded guilty in May to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act by paying more than $500,000 in bribes.

Appeal Dropped

Gerald and Patricia Green (August 24) The government dropped its appeal of the six-month prison sentences already served by the Hollywood producer and his wife. Gerald Green, 79, and his wife Patricia, 56, were released from federal custody in May. An LA jury convicted them in 2009 of FCPA and money laundering. The Greens paid $1.8 million in bribes to Juthamas Siriwan, then-governor of the Tourism Authority of Thailand, in exchange for $13.5 million in contracts to produce the Bangkok film festival.

Trial Commenced

Patrick Caldwell, John Mushriqui, Jeana Mushriqui, Stephen Giordanella, John Godsey, and Marc Morales (September 28), the second batch of Africa sting defendants to go on trial face one count of conspiracy to violate the FCPA. Except for Giordanella, they also face multiple substantive FCPA counts. The government has included a forfeiture count against all of them.

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Our Enforcement Report for Q-1 '11 is here and for Q-2 '11 is here.

Our 2010 FCPA Enforcement Index is here, the 2009 Index can be found here, and our 2008 Index here.

LatiNode CEO Jailed For Bribery

Jorge Granados, who once headed Florida-based telecommunications company Latin Node Inc. (LatiNode),  was sentenced Wednesday in federal court in Miami to 46 months in prison for bribing government officials in Honduras.

He pleaded guilty in May to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act by paying more than $500,000 in bribes.

Four senior executives of LatiNode, the DOJ said, have pleaded guilty to FCPA conspiracy charges.

Granados, 55, admitted authorizing bribes to officials from Honduras’s state-owned telecommunications company, Empresa Hondureña de Telecomunicaciones (Hondutel). In 2005, LatiNode won an exclusive “interconnection agreement” with Hondutel for long-distance phone service between Honduras and the U.S.

Granados, Manuel Salvoch, LatiNode's chief financial officer, Manuel Caceres, the vice president for business development, and Juan Pablo Vasquez, the chief commercial officer, agreed in 2006 and 2007 to bribe a general manager at Hondutel, a senior attorney, and a Honduran government minister who served on Hondutel's board.

The defendants laundered the $500,000 bribe money through LatiNode subsidiaries in Guatemala and accounts in Honduras controlled by the Honduran officials.

LatiNode pleaded guilty in 2009 to a criminal information with one count of violating the FCPA. It agreed to pay a $2 million fine. LatiNode's parent, eLandia International Inc., discovered the bribery when it acquired Latinode in 2007. It self-disclosed the payments to the DOJ.

Salvoch and Vasquez pleaded guilty in January this year and are scheduled to be sentenced on December 7 and 8 respectively. Caceres pleaded guilty in May and is scheduled to be sentenced on November 28. They all face up to five years in prison for conspiracy to violate the FCPA.

View the DOJ's September 8, 2011 release here.

From Costa Rican Jail, Ex Alcatel Boss Supports ICE's 'Victim' Claim

A Costa Rican citizen serving jail time there has said in a sworn statement filed in U.S. federal court that no one at the Instituto Costarricense de Electricidad S.A. (ICE) knew about Alcatel's bribery except those directly involved.

Edgar Valverde Acosta, 63, was Alcatel’s president in Costa Rica. In his sworn statement, Acosta said:

I am a citizen of Costa Rica and currently incarcerated and serving twelve months of preventive detention as a result of my recent conviction in criminal court in Costa Rica. My conviction was related to allegations of corruption in connection with the sale of products and services to [ICE] by Alcatel-Lucent S.A. . . . .

The DOJ indicted Acosta in June 2007. He has been an FCPA fugitive since then.

His May 31 declaration was filed by ICE, a Costa Rican state-owned enterprise trying to gain victim's status and receive restitution under U.S. law. ICE intervened in the DOJ's enforcement action against Alcatel-Lucent. Settlement of that case still needs final approval by a federal judge in Florida.

ICE's petition is the first time a U.S. court has been asked to grant victim's status to an overseas government-linked institution in an FCPA enforcement action.

The DOJ is opposing ICE, arguing it isn't a victim. In a court filing last month the DOJ said, "The evidence gathered during the investigation suggests that corruption at ICE was pervasive in the tender process and occurred at the highest reaches of ICE."

In his sworn statement, Acosta said in 2004 the Costa Rican press exposed Alcatel-Lucent's corrupt payments. "Prior to that time," he wrote, "no one at ICE, other than the individuals who were receiving the payments had knowledge of these matters, nor, do I believe, they could have known of these matters. . . . ."

In other court filings, ICE said only three of its directors and three other employees knew about Alcatel-Lucent's bribery.

In September 2008, former Alcatel executive Christian Sapsizian, now 65, was sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing ICE employees. He pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act. He and Acosta were named in a joint superceding indictment.

Sapsizian admitted to conspiring with Acosta to arrange the bribes. He was released from prison in the U.S. on March 18 this year, according to federal records.

Alcatel-Lucent agreed with the DOJ and SEC in December last year to resolve FCPA-related charges by paying $137 million -- $92 million for criminal charges with the DOJ and $45 million in disgorgement to the SEC. In addition to the bribery in Costa Rica, the company admitted making corrupt payments in Honduras, Malaysia, and Taiwan. The settlement isn't final until it's approved in federal court.

Download a copy of Edgar Valverde Acosta's May 31, 2011 sworn statement here.

More Guilty Pleas In Honduras Bribe Case

The DOJ said today that Jorge Granados, the former CEO of Miami-based Latin Node Inc. (LatiNode), pleaded guilty to conspiring to pay bribes to government officials in Honduras.

Four former senior executives of LatiNode have now pleaded guilty in the case.

Granados, 54, appeared in federal district court in Miami to plead to conspiracy to violate the FCPA's anti-bribery provisions.

He's scheduled to be sentenced on August 22. He faces up to five years in prison and a fine of $250,000 or more.

The DOJ said today that three other LatiNode executives -- Manuel Salvoch, the chief financial officer, Juan Pablo Vasquez, the chief commercial officer, and Manuel Caceres, the vice president for business development -- pleaded guilty to conspiracy to violate the FCPA this year.

Salvoch and Vasquez pleaded in January. Caceres entered his plea yesterday (May 18). They all face prison sentences of up to five years. The DOJ didn't make a separate announcement about Caceres' plea.

In April 2009, LatiNode pleaded guilty to a one-count information charging it with a criminal violation of the FCPA. The company paid a $2 million fine. 

In 2006 and 2007, the DOJ said, the LatiNode executives paid more than $500,000 in bribes to officials at Empresa Hondureña de Telecomunicaciones (Hondutel), Honduras' the state-owned telecommunications authority. The defendants concealed the payments by laundering the money through LatiNode subsidiaries in Guatemala and to accounts in Honduras controlled by the Honduran government officials. Granados admitted that he authorized bribe payments.

View the DOJ's May 19, 2011 release here.

Download the indictment in U.S. v. Granados here.

Download the plea agreement in U.S. v. Salvoch here.

Download the plea agreement in U.S. v. Vasquez here.

Download the plea agreement in US v. Latinode here.

Unsealed: US v. Salvoch

As reported first today by the FCPA Professor, the former CFO of Latin Node Inc. (LatiNode) was charged in December in a sealed criminal information with conspiracy to violate the FCPA.

Manuel Salvoch was arrested on January 11 and pleaded guilty the next day, when the court record was unsealed. As Mike Koehler pointed out, the DOJ didn't say anything publicly about the case.

In December, the DOJ announced the arrest of two other former executives of Miami-based telecommunications company LatiNode. They were charged with paying more than $500,000 in bribes to government officials in Honduras.
 
Jorge Granados, 54, the company's former CEO, and Manuel Caceres, 64, a former vice president, were indicted on December 14 by a federal grand jury. They face one count of conspiracy to violate the FCPA, 12 counts of violating the FCPA, five counts of money laundering, and one count of conspiracy to commit money laundering. The indictment also asks for criminal forfeiture.

The DOJ alleged the defendants and others at LatiNode agreed to bribe a manager of the state-owned telecommunications company Empresa Hondureña de Telecomunicaciones, known as Hondutel, and a senior attorney for Hondutel who acted as the manager’s “straw man,” and a minister of the Honduran government who became a representative on the Hondutel board of directors.

Salvoch faces up to five years in prison and fine of $250,000 or more, and three years of supervised released. But the criminal information -- instead of an indictment -- and his unannounced plea deal indicate he's been helping the government make its case against Grandados and Caceres. Their trial is set to start in September.

How much sentencing credit will Salvoch receive as a cooperating witness? That's up to the DOJ. Here's what his plea agreement says:

The [Justice] Department reserves the right to evaluate the nature and extent of the defendant's cooperation and to make the defendant's cooperation, or lack thereof, known to the Court at the time of sentencing. If, in the sole and unreviewable judgment of the Department, defendant's cooperation is of such quality and significance to the investigation or prosecution of other criminal matters as to warrant the Court's downward departure from the sentence required by the Sentencing Guidelines, the Department may at or before sentencing make a motion pursuant to Title 18, United States Code, Section 3553(e), Section 5Kl.l of the Sentencing Guidelines, and/or Rule 35 of the Federal Rules of Criminal Procedure subsequent to sentencing,
reflecting that the defendant has provided substantial assistance in the investigation or prosecution of other criminal matters, the extent of any assistance provided, and a recommendation for sentence reduction. The defendant acknowledges and agrees, however, that nothing in this agreement may be construed to require the Department to file such a motion and that the Department's assessment of the nature, value, truthfulness, completeness, and accuracy of the defendant's cooperation shall be binding on the defendant.

Download the December 17, 2010 criminal information U.S. v. Manuel Salvoch, Court Docket Number: 10-CR-20893 here.

Download Salvoch's January 12, 2011 plea agreement here.