On February 19, 2016, the U.S. Department of Justice ("DOJ"), the U.S. Securities and Exchange Commission ("SEC") and Dutch regulators announced a global resolution requiring telecommunications provider, VimpelCom Limited ("VimpelCom" or the "Company"), to pay more than $795 million to resolve allegations that it violated the U.S. Foreign Corrupt Practices Act ("FCPA") by making improper payments to win business in Uzbekistan. VimpelCom is to pay $397.5 million to Dutch prosecutors, $230.1 million in criminal penalties to the DOJ and $167.5 million in disgorgement to the SEC. The Company entered into a Deferred Prosecution Agreement with DOJ and is required to retain an independent compliance monitor for a period of three years. VimpelCom's wholly-owned Uzbek subsidiary, Unitel LLC ("Unitel"), pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.
This resolution ranks as the sixth-largest FCPA enforcement action ever recorded and the first to make the top ten since the Alstom resolution in December 2014. The enforcement action is being touted by U.S. Assistant Attorney General Leslie Caldwell as "one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA."
Between 2006 and 2012, VimpelCom and Unitel allegedly made more than $114 million in improper payments – which were concealed as equity transactions, reseller transactions and charitable contributions – to a government official in Uzbekistan. Although the specific recipient of the bribes remains unconfirmed, U.S. and Dutch officials primarily focused on payments to a company tied to the daughter of the Uzbek president. The SEC claims that the payments can be tied to $2.5 billion in revenue for VimpelCom.
During VimpelCom's internal investigation by outside counsel, it was reported that Company executives concealed material information. The DOJ said: "[r]ather 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." Nevertheless, the Company still received significant cooperation credit: the fine reflected a 45% reduction from the bottom of the U.S. Sentencing Guidelines Fine Range. The reduction resulted from VimpelCom's "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." However, the DOJ disclaimed that the company would have received more significant credit had they voluntarily self-disclosed the misconduct following the results of their internal investigation.
Separately, the United States is still seeking $850 million in forfeiture of funds from bank and investment accounts held in in Belgium, Luxembourg, Ireland and Switzerland. The United States says the monies used to bribe the Uzbek government officials were funneled through the United States and laundered before being deposited into banking institutions in the above-listed countries. If the $850 million sought in forfeiture is recovered, the monetary penalties would total $1.64 billion.
There are several takeaways from the VimpelCom case, including:
- If we thought the days of high dollar enforcement actions were over, we may have been wrong. This $795 million resolution places it as the sixth largest FCPA enforcement action ever.
- In September 2015, the DOJ made clear its intent to pursue charges against individuals for FCPA violations through the issuance of the Yates Memorandum. Although no individuals have been charged to date, the DOJ's press release specifically noted that VimpelCom would continue to cooperate with government's ongoing investigation of individuals.
- The DOJ continues to emphasize the importance of timely voluntary disclosure and cooperation. While, VimpelCom received significant credit for their cooperation once the investigation commenced, the DOJ expressly noted the Company's failure to timely disclose the misconduct uncovered during the Company's internal investigation.
- VimpelCom arguably qualifies as a state-owned entity under the FCPA. The company is owned in part by private Russian investors and, in part, by Norwegian state-controlled telecommunications provider Telenor ASA ("Telenor"). In an earnings release, the Company said that Telenor put its 33% holding in VimpelCom up for sale. Telenor's chairman resigned in October 2015 because of the investigation. It is unclear whether or how much Telenor knew about the improper payments in Uzbekistan.
- Finally, this enforcement showcases cross-border cooperation. In this instance, the efforts uniquely led to simultaneous resolutions with the United States and the Netherlands. Enforcement agencies in at least eight other countries – Sweden, Switzerland, Latvia, Belgium, France, Ireland, Luxembourg and the United Kingdom – provided assistance.
We would like to thank Jean-Pierre Denour, a Bass, Berry & Sims law clerk based in our Washington, D.C. office, for his assistance in drafting this alert.