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DOJ Catch Of The Week -- VimpelCom

Posted  February 22, 2016

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “Catch of the Week” goes to Amsterdam-based telecommunications company VimpelCom Limited.  Yesterday, the company and its wholly owned Uzbek subsidiary, Unitel LLC, agreed to pay roughly $795 million under settlements with the DOJ, U.S. Securities and Exchange Commission and the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM) to settle charges of violating the anti-bribery provisions of the Foreign Corrupt Practices Act.  Specifically, the companies admitted making more than $114 million in bribery payments to a government official in Uzbekistan to enable them to enter and continue operating in the Uzbek telecommunications market.  It is one of the largest global FCPA settlements ever and the largest case to date brought under the DOJ’s Kleptocracy Asset Recovery Initiative.  See DOJ Press Release.

As part of the DOJ settlement, VimpelCom and Unitel admitted that through various executives and employees, they 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 concealed the bribes through payments to a shell company owned by the foreign official.  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, subjecting them to U.S. jurisdiction.

VimpelCom also admitted falsifying books and records and attempting to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions.   The government found that VimpelCom also failed to implement and enforce adequate internal accounting controls that would have allowed the company to uncover the scheme.  In addition, VimpelCom management withheld crucial information from outside counsel performing a board-directed FCPA legal assessment, rendering the opinion worthless.  According to the government, “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.”

Under the DOJ settlement, VimpelCom agreed to pay a total criminal penalty of $230 million.  Under the SEC settlement, VimpelCom agreed to a total of $375 million in disgorgement of profits and prejudgment interest, to be divided between the SEC and OM.  See SEC Press Release.  VimpelCom also agreed to pay the OM an additional criminal penalty of $230 million for a total regulatory payout of roughly $795 million (when certain credits are applied).  DOJ significantly reduced the criminal penalty it imposed on the companies because of their prompt acknowledgement of wrongdoing and extensive cooperation with the agency’s investigation.  But the mitigation was still limited because the companies did not voluntarily self-disclose their misconduct after an internal investigation uncovered wrongdoing.

DOJ has also filed two civil complaints seeking a total of $850 million in forfeiture — one filed yesterday seeking roughly $550 million in proceeds of illegal bribes paid to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan; and another filed previously seeking an additional $300 million in proceeds of illegal bribes paid the same Uzbek official.  DOJ brought these forfeiture actions under the Kleptocracy Asset Recovery Initiative in the DOJ Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by corruption and abuse of office.

In announcing the settlement, Assistant Attorney General Leslie R. Caldwell of DOJ’s Criminal Division stressed the agency’s commitment to go after foreign bribery.  “These 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.  The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin.  The FCPA resolution in this case . . . demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”

Tagged in: Catch of the Week, FCPA, Money Laundering,