Most employers already know that violating the Foreign Corrupt Practices Act of 1977 (FCPA) has serious consequences, including significant fines. Those potential fines just got even heavier. On February 18, 2016, the U.S. Securities and Exchange Commission (SEC) agreed to a $795 million global settlement, the second largest in history, with VimpelCom Ltd., a company registered in Bermuda and headquartered in Amsterdam that is traded on the NASDAQ exchange. VimpelCom, a global telecommunications company, was found to have violated the FCPA because it made at least $114 million in bribe payments in Uzbekistan, which led to $2.5 billion in revenue.
According to the SEC’s complaint, a joint investigation conducted by the SEC, the U.S. Department of Justice (DOJ), and local Dutch prosecutors found that VimpelCom had made bribe payments amounting to at least $114 million from 2006 to 2012. In 2006, VimpelCom entered into the Uzbek market when it acquired Unitel and Buztel. The SEC alleged that these acquisitions had been facilitated by a local government official who was related to the Uzbek president and had significant influence over Uzbek government officials. According to the SEC, this individual, at various times in the six-year period, helped VimpelCom win government-issued permits and licenses to expand into the Uzbek telecom market through improper means. The complaint states that (1) payments were primarily made through sham contracts, but also through fake charitable contributions or sponsorships; and (2) these transactions were improperly characterized in the records of VimpelCom’s subsidiaries as legitimate expenses and were entered into VimpelCom’s financial statements, which were filed with the SEC.
Under the terms of the settlement, VimpelCom is required to pay $167.5 million to the SEC, $230.1 million to the DOJ, and $397.5 million to Dutch regulators. This is the second-largest FCPA settlement amount in history, after the $800 million fine that was imposed on Siemens in 2008.
In addition to the heavy settlement amount, a key takeaway from this case is the increasing trend of U.S. regulators cooperating and coordinating carefully with their foreign counterparts in conducting comprehensive corruption investigations. According to the SEC’s press release and the complaint announcing the settlement, multiple jurisdictions participated in the investigations, including Bermuda, the British Virgin Islands, the Cayman Islands, Estonia, Gibraltar, Ireland, Latvia, the Marshall Islands, the Netherlands, Norway, Spain, Sweden, Switzerland, and the United Arab Emirates. Not only is the FCPA in play, but local anticorruption legislation is as well.
Given how much focus VimpelCom has brought to these issues and how much is at stake, comprehensive anticorruption due diligence is critical in the international mergers and acquisitions context. Likewise, post-deal, strong anticorruption compliance programs are a must.