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In Step With The DOJ

What does it mean to "cooperate with the government" after discovering serious Foreign Corrupt Practices Act compliance problems? There's a description of organizational cooperation in a recent sentencing memo the Justice Department filed in US v. Latin Node Inc.

Latinode was a privately held company. Publicly-listed eLandia bought it and soon discovered a history of corrupt payments in Yemen and Honduras. The strategy eLandia adopted for itself and Latinode was to cooperate with the DOJ. It culminated in Latinode's guilty plea earlier this month to a one-count criminal information charging it with violating the FCPA's antibribery provisions.

In describing the cooperation, the government said eLandia and Latinode made commendable efforts to uncover evidence of corrupt activities. The cooperation was authentic throughout the investigation, the DOJ said, with significant remedial efforts upon discovery of the misconduct.

Here, largely in the government's words, is what the companies did:

• Latinode and its corporate parent, eLandia, initiated an internal investigation of the corrupt payments immediately upon discovery of the potential problems. This investigation included numerous witness interviews and the review of thousands of documents.

• Within three months of discovering the improper payments, counsel for Latinode and eLandia visited the government to make a voluntary disclosure of the FCPA violations. Latinode and eLandia provided timely, thorough, and exemplary cooperation in connection with the investigation of Latinode's past corporate conduct.

• Through counsel, Latinode and eLandia produced thousands of non-privileged documents to the government and responded promptly and productively to all of its requests.

• The cooperation provided by Latinode and eLandia substantially aided the government in developing its investigation.

• Almost immediately upon determining the culpability of senior Latinode officers and employees, eLandia terminated those individuals.

• Although there is no evidence of misconduct by eLandia employees, the company took steps to strengthen its own anti-corruption compliance program, including training its employees in the FCPA and related laws and committing to anti-corruption due diligence in future acquisitions.

• Perhaps the greatest evidence of eLandia's remedial efforts, the government said, is that it dissolved Latinode from an operational perspective, at a cost to eLandia of millions of dollars, and ceased doing business relating to the tainted contracts.

Did their cooperation help the companies? Yes it did. eLandia wasn't charged at all in the criminal case (it may still face an SEC civil enforcement action). The government accepted a plea to a single criminal count from Latinode, eLandia's subsidiary that was already largely dormant. The government didn't put either company on organizational probation, impose a deferred prosecution agreement or a compliance monitor, saving eLandia enormous out-of-pocket costs. Finally, the criminal penalty of $2,000,000 was far below the fine range in the U.S. sentencing guidelines -- $4,200,000 to $8,400,000 (U.S.S.G. § 8C2.7). eLandia was even given three years to pay the fine.

The plea agreement obligates Latinode (i.e., eLandia) to continue to cooperate with any further investigations by law enforcement agencies. So individuals responsible for the corrupt payments may yet face prosecution.

Download the March 23, 2009 criminal information against Latinode here.

Download Latinode's April 3, 2009 plea agreement here.

Download the DOJ's April 3, 2009 sentencing memo here.
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Full post as published by The FCPA Blog on April 20, 2009 (boomark / email).