The following first appeared in the FCPAmericas blog and is reprinted with permission.
Earlier this week, FCPAméricas discussed Latin America’s Top FCPA Enforcement Activity in 2012. Today’s post offers three other notable FCPA developments in the region last year. These developments demonstrate how FCPA enforcement efforts are playing out there.
Embraer Investigation Continues: The SEC’s investigation into potential corrupt payments by Brazil-based commercial airline manufacturer Embraer (the world’s third largest) in three non-U.S. countries was announced near the end of 2011. The company had received a subpoena from the SEC related to its sales of aircraft outside of Brazil. In 2012, the company made SEC disclosures with updated information about the investigation. In its October 2012 filing to the SEC, it stated:
In the event that the SEC and/or DOJ investigations result in enforcement action, we may be required to pay substantial fines and/or to incur other sanctions, as provided in the FCPA. Our management, based upon the opinion of our outside counsel, continues to believe that there is no basis for estimating reserves or quantifying any possible contingency.
The press has reported that the investigation focuses on payments related to the sale of aircraft to Argentina’s government-controlled Aerolineas Argentinas. There is also speculation that one of the other two countries to which payments were made is Saudi Arabia. The fact that Embraer lawyers are beginning to attend high-level compliance conferences suggests that the company has started changing course and is implementing a program to prevent further bribe activity.
If the Embraer investigation results in a settlement with the SEC or DOJ, the impact in Latin America will be considerable. Brazilians have great national pride for the company, and an expensive settlement would quickly cause other Brazilian-based multinationals to have a heightened appreciation for FCPA risks. Large companies in countries like Argentina, Chile, and Colombia will also take notice.
Latin Node Executives Sentenced: In 2009, Miami-based telecommunications company Latin Node pled guilty to violating the anti-bribery provisions of the FCPA and paid a $2 million fine. The company had used a Guatemalan third party to enter into fake agreements used to facilitate bribe payments to officials in Honduras and Yemen. Payments were made to obtain interconnection agreements and reduced rates with state-owned telecommunications companies in those countries.
Senior executives at Latin Node approved the payments. In 2012, Manuel Caceres (Former Vice President for Business Development), Juan Pablo Vasquez (Former Senior Commercial Executive and CCO), and Manuel Salvoch (Former Chief Financial Officer) were sentenced to jail for their participation in the Honduras payments that totaled over a half million dollars.
Mr. Caceres was charged with conspiracy, money laundering, and various violations of the FCPA. Mr. Vasquez and Mr. Salvoch were charged with conspiracy. The government alleged that Mr. Caceres negotiated the payment of the bribes and that Mr. Vasquez and Mr. Salvoch facilitated the scheme. The defendants were also alleged to have made efforts to hide the bribes in preparation for an acquisition of their company. They each pled to conspiracy. Mr. Caceres was sentenced in 2012 to 23 months in prison, Mr. Vasquez to three years probation and a $7,500 fine, and Mr. Salvoch was sentenced to ten months in prison and supervised release.
Haiti Telco Directors Sentenced: In 2012, three former directors of Haiti’s state-owned telecommunications company, Telecommunications D’Haiti, were sentenced in the United States to prison for conspiracy to money laundering related to bribes they were paid by U.S. companies, including Terra Telecommunications Corp. The former president of Terra previously had received the longest prison sentence for FCPA violations in history, fifteen years in jail. The sentencing of the three former directors, Mr. Jean Rene Duperval, Mr. Robert Antoine, and Mr. Patrick Joseph, all Haitian citizens, shows U.S. enforcement’s willingness to proceed against non-U.S. government officials who receive bribes.
In return for the bribes, the Haiti Telco officials provided preferential rates and credits. Since the FCPA does not reach bribe acceptors, the officials were charged with money laundering-related violations instead. Mr. Antoine pled guilty and was sentenced to 48 months, which was reduced to 18 months. Mr. Duval was convicted at trial and sentenced to 108 months, three years of supervised release, and an assessment of $2,100. He has appealed the conviction. Mr. Joseph pled guilty and was sentenced to one year in prison.
Onward to 2013…
About the Author
Matteson Ellis is founder and principal of Matteson Ellis Law PLLC, a law firm focusing on U.S. Foreign Corrupt Practices Act (FCPA) compliance and enforcement. He has extensive experience in a broad range of international anti-corruption areas. Before forming Matteson Ellis Law, he worked on FCPA and anti-corruption matters in the Washington, D.C., offices of Miller & Chevalier Chartered, Coudert Brothers LLP and The World Bank.