VimpelCom reaches $795 million resolution with U.S., Dutch authorities
Thursday, February 18, 2016 at 5:28PM
Richard L. Cassin in Charitable Contributions, Forfeiture, Gulnara Karimova, MTS Systems, Takilant, Uzbekistan, VimpelCom

Amsterdam-based VimpelCom Limited, the world’s sixth-largest telecommunications company, and its wholly owned Uzbek subsidiary, Unitel LLC, entered into resolutions with the DOJ, SEC, and Dutch authorities Thursday for paying more than $114 million in bribes to a government official in Uzbekistan between 2006 and 2012.

The settlement requires VimpelCom to pay a $230.1 million criminal penalty to the DOJ, $167.5 million in disgorgement and pre-judgment interest to the SEC, and $397.5 million to Dutch prosecutors.

The U.S. penalties of $397.6 million made Thursday's resolution the sixth biggest Foreign Corrupt Practices Act enforcement action in history.

The DOJ charged VimpelCom with conspiracy to violate the antibribery and books and records provisions of the FCPA, with a separate count of violating the FCPA's internal controls provisions. Prosecutors filed a criminal information Thursday in the Southern District of New York. The case was assigned to Judge Edgardo Ramos.

VimpelCom agreed in a deferred prosecution agreement to retain an independent corporate monitor for at least three years. It also agreed to implement "rigorous internal controls . . . and cooperate fully with the department’s ongoing investigation, including its investigation of individuals," the DOJ said.

Unitel pleaded guilty and was sentenced under a one-count DOJ criminal information that charged the company with conspiracy to violate the antibribery provisions of the Foreign Corrupt Practices Act.

The SEC Thursday filed a civil complaint against VimpelCom, also in federal court in New York.

VimpelCom's disgorgement and pre-judgment interest payment of $167.5 million to the SEC is the third biggest FCPA disgorgement on record.

Also Thursday, VimpelCom settled with the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM), paying $397.5 million in penalties.

VimpelCom is part of Norway's Telenor. Norway's government owns 54 percent of Telenor. In an earnings release Wednesday, VimpelCom said Telenor is trying to sell its stake in the company.

VimpelCom trades on the NASDAQ Global Select Market under the symbol VIP.

In November last year, VimpelCom said it had reserved $900 million for settlements with U.S. and Dutch authorities.

The DOJ also filed a civil complaint Thursday seeking the forfeiture of more than $550 million held in Swiss bank accounts. The money is from bribe payments VimpelCom and two other telecommunications companies made to the Uzbek official, or is related money that was laundered, according to the DOJ.

The DOJ had already filed a separate civil forfeiture complaint in June 2015 seeking more than $300 million in bank and investment accounts held in Belgium, Luxembourg, and Ireland. The DOJ said the money is traceable to bribes or laundered money paid by VimpelCom and another telecommunications company to the same Uzbek official.
 
VimpelCom and Unitel admitted Thursday that various executives and employees "bribed an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry."

U.S., Dutch, and Swiss investigations had focused on payments to Gibraltar-registered Takilant Ltd, a company tied to Gulnara Karimova, the eldest daughter of Uzbek President Islam Karimov.

Karimova, 43, has been under house arrest in the Uzbek capital of Tashkent for corruption since September 2014.

In earlier forfeiture-related court filings, the DOJ alleged that Karimova received bribes from VimpelCom, MTS of Russia, and TeliaSonera of Sweden.

The DOJ said Thursday that VimpelCom and two other companies "structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official."

VimpelCom and Unitel paid the bribes between 2006 and 2012. They stopped paying when VimpelCom opened an internal investigation in 2013. The SEC said the bribes generated more than $2.5 billion in revenues for VimpelCom.

In court Thursday, VimpelCom's general counsel, Scott Dresser, said the "company deeply regrets its actions here, and we will make sure it never happens again."

VimpelCom admitted that it falsified its books and records and tried to hide the bribes. It recorded the payments as equity transactions, consulting agreements, and reseller transactions.

When the company's board of directors sought an FCPA legal opinion about corruption risks, "certain VimpelCom management withheld crucial information from outside counsel." That rendered the FCPA opinions worthless.

The DOJ said,

Rather than implement and enforce a strong anti-corruption ethic, certain VimpelCom executives sought ways to give the company plausible deniability of illegality while knowingly proceeding with corrupt business transactions.

The SEC said that from 2009 and through 2013, Unitel provided about $38 million in sponsorships or charitable contributions in Uzbekistan.

"Despite the presence of red flags," the SEC said, " these transactions were not vetted to ensure that they were not improperly benefitting government officials."

VimpelCom and Unitel received "significant credit" from the DOJ for their "prompt acknowledgement of wrongdoing after being informed of the DOJ's investigation, for their willingness to promptly resolve their criminal liability on an expedited basis, and for their extensive cooperation with the DOJ's investigation," the DOJ said Thursday. 

The $230.1 million criminal penalty reflected a 45 percent reduction from the bottom of the U.S. Sentencing Guidelines fine range, the DOJ said. 

The company was represented by Mark Rochon and John Davis of Miller Chevalier in Washington D.C.

The companies didn't receive "more significant mitigation credit" because they failed to voluntarily self-disclose their misconduct after an internal investigation uncovered wrongdoing, the DOJ said.

Assistant Attorney General Leslie Caldwell said the "cases combine a landmark FCPA resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official."

“The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin," Caldwell said.

VimpelCom's CEO, Jean Yves Charlier, said in a statement Thursday: “Resolving this has been a top priority for VimpelCom. While this has been a very challenging experience for our business and our employees, we are pleased to have now reached settlements with the authorities. The wrongdoing, which we deeply regret, is unacceptable."

Since the launch of the bribery investigation, Charlier said, VimpelCom has appointed a new chief executive officer, chief financial officer, group general counsel, chief performance officer, and group chief compliance officer.

The DOJ said it worked with law enforcement officials from the Dutch OM, the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland, and the Corruption Prevention and Combating Bureau in Latvia. 

The DOJ also thanked law enforcement officials in Belgium, France, Ireland, Luxembourg, and the United Kingdom for their "valuable assistance." 

The civil complaint in SEC v. ViimpelCom Ltd. is here (pdf).

______

Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
See website for complete article licensing information.