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U.S., Netherlands levy nearly $1 billion FCPA penalty against Swedish telecommunications company

Thursday, September 28, 2017   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
September 28, 2017

U.S. and Dutch authorities have levied $965 million in penalties against a Swedish telecommunications company in a global settlement for paying hundreds of millions of dollars in bribes to secure lucrative government contracts in Uzbekistan.

The U.S. Department of Justice, Securities Exchange Commission and Public Prosecution Service of the Netherlands have negotiated the deferred prosecution agreement with Telia Company AB, and its Uzbek subsidiary Coscom LLC, for paying more than $331 million in bribes to a government official in Uzbekistan in violation of the U.S. Foreign Corrupt Practices Act (FCPA).

In the agreement, Telia will pay nearly $275 million to the DOJ, nearly $460 million to the SEC and $274 million to Dutch authorities.

The penalty, according to the U.S. Justice Department is the third largest ever FCPA-related penalty.

But depending on how Telia pays the fines, and various credits, it could be tabulated as the highest penalty, or the fourth highest penalty, according to the FCPA Blog, which analyzed the potential final figures here.

The company and actions have clear ties to the United States, particularly though New York. Telia traded publicly in New York from 2002 until 2007.

The company “corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City,” said Acting U.S. Attorney Joon Kim, in a statement. “If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws.”  

In the scheme Telia and Coscom, through a panoply of executives, employees, and affiliated entities, paid hundreds of millions in bribes to illegally obtain telecommunications business in Uzbekistan.

The company paid the bribes to an Uzbek government official who was a close relative of a high-ranking government official and who exercised influence over Uzbek telecommunications industry regulators. 

Telia and Coscom “structured and concealed the bribes through various payments to a shell company that certain Telia and Coscom management executives knew was beneficially owned by the foreign official.”

The company paid the bribes on “multiple occasions over a period of approximately five years so that Telia could enter the Uzbek market and Coscom could gain valuable telecom assets and continue operating in Uzbekistan.”

More momentum for global resolutions

The hefty global resolution keeps up a trend of international coordination and cooperation that hit its stride in 2016 – a record year that saw nearly $2.5 billion in FCPA enforcement actions, ensnaring entities from banks to energy firms to drug makers and telecommunications. To read ACFCS coverage of the record year of FCPA enforcement in 2016, please click here.

A key factor driving 2016's hefty enforcement totals was the collaborative approach taken by US prosecutors.

The year's FCPA cases involved cooperative investigations with countries such as Brazil, Russia, China, Switzerland, and others. This framework of reciprocity clearly played a role in the Telia agreement, and is likely to bolster future cases. 

In the Telia case, U.S. officials got help from several countries and their respective banking and investigative units, including the PPS, the Swedish Prosecution Authority, and the Office of the Attorney General in Switzerland, as well as law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, the Isle of Man, Latvia, Luxembourg, Norway, Switzerland, the Isle of Man, and the United Kingdom.

Telia Company, formerly known as TeliaSonera, was “caught funneling US$ 330 million in bribes through a slush fund spearheaded by the late Uzbek president's daughter, Gulnara Karimova,” according to the OCCRP, which reported on some of the actions in 2015.  

The money was intended to facilitate Telia's entrance into the Uzbek telecommunications market, OCCRP reported. Telia's Uzbek branch, Coscom formally admitted to the claims.

According to the same OCCRP investigation, Russian-Norwegian telecommunications company VimpelCom profited from the same kind of corruption. VimpelCom admitted last February to bribing Karimova, and consequently agreed to pay $795 million to U.S. and Dutch authorities.

In related actions, U.S. authorities have also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg, and Ireland, which constitute bribe payments made by VimpelCom, Telia, and a third telecommunications company to the Uzbek official, or funds involved in the laundering of those corrupt payments. 

Former Telia Chief Executive Officer, Lars Nyberg and two other Telia employees will be charged by Swedish prosecutors for their involvement with the Uzbek bribes, according to a report by Channel NewsAsia.

Settlements leads to stronger corruption defenses

Current Telia CEO Johan Dennelind released a statement saying the resolution “brings an end to an unfortunate chapter in Telia Company’s history,” adding that since 2013 the company has completely overhauled its board and management and is committed to finding out “what went wrong, to remedy what has been broken and to regain trust from all our stakeholders.”

Telia also does not have to engage an expensive corporate monitor. The company did get a 25 percent penalty reduction due to its cooperation and compliance remediation improvements, including:

·         Terminating all individuals involved in the misconduct.

·         Creating a new and robust compliance function throughout the company

·         Implementing a comprehensive anti-corruption program.

·         Overhauling the company’s corporate governance structure.

The company now has a “strong focus on governance and compliance, but it is a never-ending journey as we aspire to embed this into our culture making sure that all employees understand the importance of doing the right thing all the time,” Dennelind said. 

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