When asked about the relatively slow year of Foreign Corrupt Practices Act (“FCPA”) prosecutions in 2015, the Chief of the DOJ Criminal Division’s Fraud Section suggested last month: “one year isn’t long enough to tell the whole story…If we just wait three months, it might be a very different picture.” It turned out we needed less than a month for a different picture to emerge.
On February 18, 2016, VimpelCom Ltd., a global telecommunications provider based in Amsterdam, and its Uzbek subsidiary, Unitel LLC, agreed to pay more than $795 million to U.S. and Dutch regulators to settle allegations of bribing a government official to win business in Uzbekistan. In addition to paying $387.5 million to Dutch regulators, VimpelCom agreed to pay $167.5 million to the Securities and Exchange Commission (“SEC”) and $230.1 million to the U.S. Department of Justice (“DOJ”) – placing the settlement within the top 10 list of monetary resolutions under the FCPA.
In reaching the settlement, VimpelCom and Unitel admitted to a conspiracy to make more than $114 million in bribes over an eight-year period to a high-ranking Uzbek government official. This official, a family member of the president of Uzbekistan, maintained influence over the government’s agency responsible for regulating the telecom industry. The bribes allowed VimpelCom to enter the Uzbek market and Unitel to obtain valuable telecom assets and licenses. The companies disguised the payments in their books as equity transactions, consulting agreements, reseller transactions, and charitable contributions or sponsorships.
As part of the criminal case, Unitel pleaded guilty and VimpelCom entered into a deferred prosecution agreement with the DOJ that includes the retention of a compliance monitor for a three-year term, continued cooperation with the department’s ongoing investigation of individuals, and implementation of rigorous internal controls. The DOJ also has filed two civil cases seeking $850 million in forfeiture related to the bribery proceeds or property involved in laundering bribe payments. These funds are located in bank accounts in Switzerland, Belgium, Luxembourg, and Ireland.
- Individual Enforcement Actions Are Likely Next. The corporate settlement is likely to be followed by enforcement actions involving individuals. In its news release, the DOJ emphasized VimpelCom’s commitment to cooperate fully with its ongoing investigation including its investigation of individuals. Moreover, the DOJ reported that certain VimpelCom management “withheld certain information from outside counsel” after the company’s board of directors sought a legal opinion assessing FCPA risk in certain transactions. As a result, the DOJ stated that “certain VimpelCom executives sought ways to give the company plausible deniability of illegality while knowingly proceeding with corrupt business transactions.”
- International and Agency Cooperation Remains Strong. Assistant Attorney General Leslie Caldwell described the settlement as “one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA.” U.S. and Dutch officials played the primary enforcement role, but were assisted by enforcement authorities in Belgium, France, Ireland, Latvia, Luxembourg, Sweden, Switzerland, and the United Kingdom. In addition, IRS Criminal Investigation special agents, noted for their role in the recent FCPA investigation against SAP and one of its executives, played a critical role in the investigation against VimpelCom.
- Limited Credit for Cooperation. The DOJ acknowledged that VimpelCom received credit for “prompt acknowledgement of wrongdoing” after the DOJ informed the company of its investigation. But, following in the DOJ’s (and the SEC’s) repeated advisements that companies self-disclose misconduct, the DOJ stated that VimpelCom did not receive more significant credit (in the penalty or the form of resolution) because the company failed to voluntarily disclose misconduct after an internal investigation uncovered wrongdoing.
- FCPA & Civil Forfeiture: “Two Sides of the Same Coin.” In conjunction with its criminal case, the DOJ is seeking $850 million in forfeiture for funds that it claims were transmitted through U.S. financial institutions, laundered, and deposited into foreign accounts. The forfeiture actions are part of the DOJ’s Kleptocracy Initiative formalized in 2010 to seek assets involving high-level foreign officials linked to criminal acts. Assistant Attorney General Caldwell described the Kleptocracy Initiative and FCPA enforcement as “two sides of the same anti-corruption coin,” and the coordinated approach suggests the Department’s tactics in future significant corruption cases.