Why it matters: On February 18, 2016, the DOJ and SEC announced that they had worked closely with authorities from Denmark and other countries to successfully charge Amsterdam-based telecommunications company VimpelCom Limited and its Uzbek subsidiary with criminal and civil charges under the Foreign Corrupt Practices Act in connection with a multi-million dollar global foreign bribery scheme. VimpelCom Limited agreed to pay over $795 million in criminal and civil penalties to U.S. and Dutch authorities to resolve the charges, making it one of "the largest global foreign bribery resolutions ever." In addition, the DOJ is seeking forfeiture of an additional $850 million in "corrupt proceeds" from foreign bank accounts in what it called "the largest case ever brought under the Kleptocracy Asset Recovery Initiative." Read on for a recap.
Detailed discussion: On February 18, 2016, the DOJ and the SEC issued separate press releases in which they announced the culmination of their coordinated investigation with Dutch and other foreign authorities into a bribery scheme involving VimpelCom Limited (VimpelCom), described as the "world's sixth-largest telecommunications company and an issuer of publicly traded securities in the United States," and its wholly-owned Uzbek subsidiary Unitel LLC (Unitel). As part of the resolutions with the U.S. and Dutch authorities, VimpelCom and Unitel agreed to pay an aggregate of over $795 million in criminal and civil penalties for admitted violations of the Foreign Corrupt Practices Act (FCPA). The DOJ said that it was also seeking forfeiture of over $850 million in "corrupt proceeds" from foreign bank accounts under its Kleptocracy Asset Recovery Initiative. Assistant Attorney General Leslie Caldwell said that "[t]hese 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."
VimpelCom and Unitel admitted to the DOJ's findings in the criminal complaint and resolution documents, which can be briefly summarized as follows: Between 2006 and 2012, executives and employees of VimpelCom and Unitel paid over $114 million in bribes to a well-connected Uzbek government official (allegedly related to the Uzbek president) who had influence over the governmental agency that regulated the telecom industry in Uzbekistan "so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan." The bribes were structured and concealed through payments to a shell company known by VimpelCom and Unitel to be beneficially owned by the Uzbek official. VimpelCom further concealed the scheme by falsifying its books and records and classifying the payments as charitable contributions as well as "equity transactions, consulting and repudiation agreements and reseller transactions." VimpelCom executives "sought ways to give the company plausible deniability of illegality while knowingly proceeding with [the] corrupt business transactions." In addition, VimpelCom failed to implement adequate internal accounting controls "which allowed the bribe payments to occur without detection or remediation." When VimpelCom's board of directors sought an FCPA legal opinion assessing corruption risks, "certain VimpelCom management withheld crucial information from outside counsel performing the review that restricted the scope of FCPA opinions, rendering them worthless."
Under its resolution with the DOJ, VimpelCom pled guilty in the Southern District of New York to conspiracy to violate the anti-bribery provisions of the FCPA, and entered into a three-year deferred prosecution agreement (DPA) with the DOJ pursuant to which it agreed to pay a total criminal penalty exceeding $230 million (including $40 million in forfeiture) for violations of the anti-bribery, books and records and internal control provisions of the FCPA. VimpelCom additionally agreed in the DPA to "implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department's ongoing investigation, including its investigation of individuals." According to the DOJ, VimpelCom and Unitel were given significant credit in the criminal resolution (equating to a "45 percent reduction off of the bottom of the U.S. Sentencing Guidelines") for their "prompt acknowledgement of wrongdoing after being informed of the department's investigation, for their willingness to promptly resolve their criminal liability on an expedited basis and for their extensive cooperation with the department's investigation." The DOJ pointed out, however, that VimpelCom and Unitel didn't receive significant mitigation credit, "either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct to the department after an internal investigation uncovered wrongdoing."
In related proceedings, VimpelCom also entered into FCPA resolutions with the SEC and the Public Prosecution Service of the Netherlands (OM) pursuant to which (1) VimpelCom agreed to disgorge $375 million (including prejudgment interest) to be divided between the SEC and the OM and (2) VimpelCom agreed to pay the OM a criminal penalty of approximately $230.2 million; however, according to the DOJ's press release, both the DOJ and the SEC agreed to credit the criminal penalty paid to the OM and the forfeiture amount paid to the SEC, respectively, as part of their agreements with VimpelCom and "thus, the combined total amount of U.S. and Dutch criminal and regulatory penalties paid by VimpelCom will be $795,326,398.40, making it one of the largest global foreign bribery resolutions ever."
In its press release, the DOJ also said that it was seeking the forfeiture of over $850 million in "corruption proceeds" from the global bribery scheme through civil complaints filed that day and in June 2015 relating to funds currently held in bank and investment accounts in Switzerland, Belgium, Luxembourg and Ireland which the DOJ claimed constituted bribe payments (or the laundered proceeds thereof) made by or at the request of VimpelCom to the Uzbek official. According to allegations in the forfeiture complaints, after payment the bribes were laundered by the Uzbek official's associates through the above-mentioned foreign accounts as well as accounts in Latvia, the U.K. and Hong Kong. The illicit funds became subject to U.S. jurisdiction when they were transmitted through banks in the U.S. (primarily New York) before they were deposited into the foreign accounts. The DOJ said that the forfeiture actions were the largest ever brought under its Kleptocracy Asset Recovery Initiative.
Both the DOJ and the SEC lauded the "significant cooperation" they received in the investigation not only from other U.S. agencies and the Dutch authorities at the OM but also from enforcement authorities around the world, including those in Switzerland, Sweden, Belgium, France, Ireland, Luxembourg, Norway, Spain, Latvia, and the U.K. As Assistant Attorney General Caldwell put it, "[t]he FCPA resolution in this case is … one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA." Added Kara N. Brockmeyer, Chief of the SEC Enforcement Division's FCPA Unit, "[i]nternational cooperation among regulators is critical to holding companies responsible for all facets of a bribery scheme. This closely coordinated settlement is a product of the extraordinary efforts of the SEC, Department of Justice, and law enforcement partners around the globe to jointly pursue those who break the law to win business."
See here to read the DOJ's 2/18/16 press release entitled "VimpelCom Limited and Unitel LLC Enter into Global Foreign Bribery Resolution of More Than $795 Million; United States Seeks $850 Million Forfeiture in Corrupt Proceeds of Bribery Scheme."
See here to read the SEC's 2/18/16 press release entitled "VimpelCom to Pay $795 Million in Global Settlement for FCPA Violations."