Late last week, one of the world’s largest integrated telecommunications services operators, VimpelCom, agreed to pay a $835 million settlement to U.S. and Dutch authorities.
The company is accused of paying $114 million to Uzbek president Islam Karimov’s relative, widely believed to be his daughter, Gulnara Karimova. The U.S. Department of Justice (DoJ) claims that VimpelCom used a network of shell companies and phony consulting contracts to funnel bribes to Karimova in exchange for access to Uzbekistan’s telecommunications market.
VimpelCom will pay $167.5 million to the U.S. Securities and Exchange Commission (SEC), $230.1 million to the DoJ, and $397.5 million to the Dutch public prosecution service. U.S. Assistant Attorney General Leslie R. Caldwell, stated that “the FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”
The case is part of a wider investigation into alleged corruption involving Gulnara Karimova. TeleSystems PJSC (MTS), TeliaSonera, and Takilant are also under separate investigations. According to research by the Organized Crime and Corruption Reporting Project Karimova received more than $1 billion worth of bribes from various telecom companies, including VimpelCom.
Karimova is only the latest foreign official to come under fire from the DoJ. Increasingly, the DoJ is leading an effort to recover assets stolen by government officials and laundered through U.S. financial systems. The U.S. government has in the past pursued cases against the former Ukrainian prime minister, Pavlo Lazarenko, the former president of Taiwan, Chen Shui-bian, and Nigerian dictator, General Sani Abacha, amongst others.
The Vimpelcom case fits into a larger trend. Over the past nine years, the DoJ and SEC have used the FCPA to pursue cases against foreign companies. In the list of the ten largest FCPA cases, only two involved U.S. companies. According to the FCPA, if finances used for overseas corruption schemes pass through U.S. bank accounts, the DoJ has jurisdiction.
In the case of VimpelCom, Karimova’s associates laundered money through accounts in Latvia, the UK, Switzerland, Ireland, Belgium and the U.S., according to court documents. Because the ill-gotten funds were transmitted through U.S. financial institutions, they are subject to U.S. jurisdiction.
Though the settlement is one of the largest in FCPA history, Caldwell indicated that the fines could have been much higher. Vimpelcom had its penalties reduced by 45 percent for giving full cooperation to investigators. Had the company self-reported the violations, the savings would likely have been much higher.
Read more here.
This post was originally published on Corporate Compliance Trends by April Snedeker in Eurasia.
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