2 telecommunications companies admit to Uzbek bribery conspiracy

WASHINGTON – Amsterdam-based VimpelCom Limited, 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, entered into resolutions with the Department of Justice Thursday. The companies engaged in a conspiracy where they made bribery payments of more than $114 million to a government official in Uzbekistan between 2006 and 2012. This enabled the companies to enter and continue operating in the Uzbek telecommunications market.

This case was investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and Internal Revenue Service Criminal Investigations (IRS-CI). Law enforcement colleagues within the Public Prosecution Service of the Netherlands (OM), the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland and the Corruption Prevention and Combating Bureau in Latvia, as well as law enforcement agencies in Belgium, France, Ireland, Luxembourg, and the United Kingdom, provided significant cooperation and assistance in this case. 

In a related action, the Department of Justice also filed a civil complaint Wednesday seeking the forfeiture of more than $550 million held in Swiss bank accounts, which constitute bribery payments or funds involved in the laundering of those payments, to the Uzbek official.  The forfeiture complaint follows an earlier civil complaint filed on June 29, 2015, which seeks the forfeiture of more than $300 million in bank and investment accounts held in Belgium, Luxembourg, and Ireland. The funds in these accounts are also traceable to bribes, or the laundering of the bribes, paid by VimpelCom and another telecommunications company to the same Uzbek official.

“Today’s admission of guilt by VimpelCom and Unitel to paying bribes to government officials is a victory for all who fight corruption at all levels,” said IRS-CI Chief Richard Weber.  “It also demonstrates the skill and tenacity of IRS-CI special agents when it comes to delving underneath layers of financial transactions designed to conceal illegal payments for gain.  The global economy demands a level playing field for all.  When certain VimpelCom and Unitel executives chose to use deception in order to continue this scheme and take advantage of insider knowledge, they also chose to become criminals. IRS-CI pledges to continue our efforts on the international stage to stop corrupt financial schemes such as this one.”

The Criminal Resolution

In the criminal case, Unitel pleaded guilty and was sentenced to a one-count criminal information filed today in the Southern District of New York. The information charged the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act.

VimpelCom entered into a deferred prosecution agreement in connection with a criminal information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the Act, and a separate count of violating the internal controls provisions of the Act.  Pursuant to its agreement with the Department of Justic, VimpelCom agreed to pay a total criminal penalty of $230,163,199.20 to the United States, including $40 million in criminal forfeiture. VimpelCom also agreed 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.

In related proceedings, VimpelCom settled with the U.S. Securities and Exchange Commission (SEC) and the OM.  Under the terms of its resolution with the SEC, VimpelCom agreed to a total of $375 million in disgorgement of profits and prejudgment interest, to be divided between the SEC and OM.  VimpelCom agreed to pay the OM a criminal penalty of $230,163,199.20, for a total criminal penalty of $460,326,398.40, and a total resolution amount of more than $835 million. The Department of Justice agreed to credit the criminal penalty paid to the OM as part of its agreement with the company. The SEC agreed to credit the forfeiture to the Department of Justice as part of its agreement with the company.  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. 

According to the companies’ admissions, VimpelCom and Unitel paid bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry. The companies structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official.  The bribes were paid on multiple occasions between approximately 2006 and 2012 so VimpelCom could enter the Uzbek telecommunications market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan. VimpelCom and Unitel contemplated additional bribes in 2013, but those bribes were not completed before VimpelCom opened an internal investigation. 

In addition, VimpelCom admitted that it falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions. VimpelCom also failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection or remediation. Moreover, when the board of directors sought legal opinion to assess corruption risks involved in the transactions, certain VimpelCom management withheld crucial information from outside counsel performing the review that restricted the scope of the legal opinions, rendering them worthless. Rather 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.

A number of significant factors contributed to the department’s criminal resolution with the companies. Among these, the companies received significant credit for their prompt acknowledgement of wrongdoing, their willingness to promptly resolve their criminal liability on an expedited basis and their extensive cooperation with the investigation. Specifically, the criminal penalty reflects a 45 percent reduction from the bottom of the U.S. sentencing guidelines fine range.  The companies, however, did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct after an internal investigation uncovered wrongdoing. 

The Forfeiture Complaints

The department has also filed two civil complaints seeking a total of $850 million in forfeiture.  A complaint filed today seeks forfeiture of approximately $550 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan.  The $550 million is currently located in Swiss bank accounts. The department also filed a prior complaint seeking forfeiture of an additional $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the same Uzbek official. The assets sought to be forfeited in that complaint are restrained in Belgium, Luxembourg and Ireland.  In that case, on Jan. 11, 2016, the U.S. District Court for the Southern District of New York entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan. 

These companies paid more than $800 million in bribes so the Uzbek official would assist VimpelCom and other telecommunications companies in obtaining and retaining business in Uzbekistan. Thereafter, the official’s associates laundered the corruption proceeds through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland. The illicit funds were transmitted through financial institutions in the United States before they were deposited into accounts in these countries, thereby subjecting them to U.S. jurisdiction.