Telefônica Brasil resolves ‘World Cup hospitality’ FCPA offenses
Friday, May 10, 2019 at 7:38AM
Richard L. Cassin in Brazil, Hospitality, Telefônica Brasil S.A., World Cup

The SEC Thursday fined Telefônica Brasil S.A. $4.125 million for providing soccer tickets and hospitality to government officials who could help the company's business.

The SEC charged the company with violating the FCPA's internal accounting controls and recordkeeping provisions.

The São Paulo-based telecom spent $5.1 million to buy 2014 World Cup tickets and $428,000 for 2013 Confederations Cup tickets. It booked the costs as “Publicity Institutional Events” and “Advertising & Publicity.”

World Cup tickets and hospitality went to 93 government officials and Confederations Cup tickets to 34 government officials, the SEC said. Brazil hosted both tournaments.

Telefônica Brasil -- a unit of Spain's Telefónica, S.A. -- provides services under the Vivo brand. It's the biggest telecom operator in Brazil with about 34,000 employees and $14 billion in revenues.

Telefônica Brasil first disclosed the FCPA investigation in February 2017. The company's American Depositary Receipts are registered with the SEC and traded on the New York Stock Exchange under the symbol “VIV.”

The SEC resolved the case through an internal administrative order (pdf) and didn't go to court. 

Telefônica Brasil settled without admitting or denying the SEC's findings.

Payments for the World Cup and Confederations Cup tickets weren't accurately reflected in Telefônica Brasil’s books and records and the company failed to devise and maintain a sufficient system of internal accounting controls, the SEC said.

"This conduct arose in an environment in which the company failed to adequately enforce its corporate anti-bribery and anti-corruption policies," the SEC said.

A manager in Telefônica Brasil's Institutional Relations Department said in an internal email that a World Cup guest list he suggested took “into account the importance of the actions that each guest has already effectively done in our favor.”

A federal legislator’s chief of staff on the list had "opened many doors" for the company, the email said.

A customs clearance officer on the list had provided "ongoing support" for clearing the company's goods in a tax free trade zone.

Two Brazilian mayors were considered for the World Cup list because they could help the company with important “legislative amendments,” according to another internal email.

The SEC said the settlement took into account Telefônica Brasil's remedial action and cooperation. The company enhanced its internal accounting controls and compliance functions and adopted "a new anti-corruption policy and compliance structure."

Telefônica Brasil's cooperation included "timely sharing of facts developed during the course of an internal investigation by its board and voluntarily producing and translating documents," the SEC said.

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Richard L. Cassin is editor at large of the FCPA Blog.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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