Vedder Thinking | Articles United States v. Esquenazi: Foreign Corrupt Practices Act (FCPA)
The Foreign Corrupt Practices Act (FCPA) was adopted in 1977 in an effort to prohibit the bribing of foreign officials for the purpose of retaining or obtaining business. It also requires that public companies file proper financial statements and maintain a system of internal controls.
In the Esquenazi case, Judge Martinez of the Southern District of Florida sentenced the former president of Terra Telecommunications Corporation (Terra), Joel Esquenazi, to 15 years in prison for his involvement in a scheme to pay bribes to Haitian government officials at Telecommunications D’Haiti S.A.M. (Haiti Teleco), a state-owned telecommunications company. The former vice president, Carlos Rodriguez, was sentenced to seven years’ imprisonment. Esquenazi’s sentence of 15 years was two times greater than the longest sentence previously imposed for substantive violations of the FCPA. Rodriguez’s sentence of seven years is one of the three longest sentences imposed for FCPA violations. As part of the sentence, the defendants were also ordered to forfeit $3.09 million. The defendants were convicted of one count of conspiracy to violate the FCPA and wire fraud; seven counts of FCPA violations; one count of money laundering conspiracy; and 12 counts of money laundering.
Terra was headquartered in Miami-Dade County, Florida. Haiti Teleco was the sole provider of land line telephone service in Haiti. Terra and Haiti Teleco contracted to allow Terra’s customers to place telephone calls to Haiti. Esquenazi was the president and 75% owner of Terra. Esquenazi and Rodriguez orchestrated a bribery scheme from November 2001 through March 2005 to pay $890,000 to shell companies to be used for bribes to Haiti Teleco officials. Esquenazi and Rodriguez authorized the bribe payments to officials in order to obtain various business advantages from the Haitian officials for Terra, including the issuance of preferred telecommunication rates, reductions in the number of minutes for which payment was owed, and the continuance of Terra’s telecommunications connection with Haiti. In order to conceal these bribe payments, the defendants used various shell companies to receive and forward payments. The defendants also created false records claim¬ing that payments were made as “consulting services.” These services were never intended to be performed or actually performed.
Esquenazi’s sentence was determined under the U.S. sentencing guidelines. The determination included a 16-level enhancement due to the $2.2 million loss to the treasury of Haiti; a four-level enhancement for being an organizer and leader of the criminal activity; a four-level enhancement for the sophisticated money laundering operation; and a two-level enhancement for obstruction of justice resulting from his perjury on the witness stand. The primary contributor to the length of Esquenazi’s sentence was the term issued for the money laun¬dering counts, rather than the FCPA counts. He received a level of 40 and a recommended guideline sentence of 292-365 months, yet he received an actual sentence of 180 months. Both Esquenazi and Rodriguez benefited from Judge Martinez’s significant downward departure from the guideline range, which suggests that the lengthy sentence may not be as harsh as it appears. The judge imposed a 60-month sentence on Esquenazi for each of the eight FCPA counts to be served concurrently, and a 120-month sentence for each money laundering count.
Esquenazi’s severe sentence appears to be the product of his role in the scheme. He was found to be the driving force in devising and carrying out the bribe payments as president and majority owner. Esquenazi’s co-defendant, Rodriguez, was faced with the same 21-count indictment, but Esquenazi’s sentence was enhanced by four levels because of his leadership role in the illegal conduct.
Additionally, other members of Terra’s bribery scheme with less involvement pleaded guilty and cooperated with the government, but they also received significant sentences. The matter has involved the largest number of individual FCPA violations to date. A former controller at Terra entered a guilty plea and was sentenced to 24 months, and two persons who forwarded bribes as middlemen of Haitian officials received sentences of 57 months and six months, respectively. The Esquenazi case serves as a reminder of the increasingly serious penalties for individuals found to have violated the FCPA.
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