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Catch of the Week — Mobile TeleSystems settles FCPA claims for $850M

Posted  March 7, 2019

Russian telecom giant Mobile TeleSystems PJSC (MTS) agreed to pay approximately $850 million to settle allegations the company violated the Foreign Corrupt Practices Act (“FCPA”) by bribing an Uzbek official, a relative of Uzbekistan’s president at the time. $100M will be paid to the SEC to resolve the charges and will be credited against a criminal fine and forfeiture of $850M based on related criminal charges. MTS is a traded on the New York Stock Exchange as a Level Three American Depository Receipt, meaning the company is obligated to make periodic filings with the SEC and is thus subject to the SEC’s jurisdiction.

Per the SEC, the bribes at issue totaled at least $420M and aided MTS in obtaining business in the country, which over eight years generated over $2.4B in revenues for MTS. The conduct ended in 2012 when the Uzbek government ceased MTS’s operations in the country. The bribes were allegedly funneled through front companies controlled by the President’s relative, who also held a government post, and were disguised as acquisition costs, charitable donations, and various other misleading line items. In addition to the $850 payment, the company must also retain an independent compliance monitor for at least the next three years.

This is the third major FCPA settlement relating to the Uzbek telecom business that the United States government has announced. In 2016, VimpelCom, a Dutch-based telecom company paid $795M to settle allegations that it made $114M in bribery payments to an Uzbek official, and relative of Uzbekistan’s then president, to enter the country’s telecom market. In 2017, Telia, a Swedish company, paid $965M to settle allegations that it made $331M in payments for the same reasons, also to an Uzbek official and relative of the president. In total, these actions have resulted in roughly $2.6B in penalties.

Individuals with knowledge of FCPA violations may be able to make a claim through the SEC’s Whistleblower Program, which provides monetary rewards to whistleblowers. Whistleblowers need not be United States citizens or residents to report foreign corrupt practices, such as the bribery at issue here, to the SEC. If you have information about possible FCPA violations, and would like to talk to the whistleblower attorneys at Constantine Cannon, please contact us.


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