MTS settles FCPA case with SEC, Department of Justice

To the SEC, MTS will pay $100 million. In a related matter, MTS entered a deferred prosecution agreement with the Department of Justice. Its subsidiary pleaded guilty in federal court and has agreed to pay a criminal fine and forfeiture in the amount of $850 million. The Justice Department credited the $100 million penalty that MTS will pay to the SEC. The company must also retain an independent compliance monitor for at least three years.

According to the SEC’s order, MTS bribed an Uzbek official who was related to the former President of Uzbekistan and had influence over the Uzbek telecommunications regulatory authority. During the course of this scheme, MTS made at least $420 million in illicit payments for the purpose of obtaining and retaining business. These payments enabled MTS to enter the telecommunications market in Uzbekistan and operate there for eight years, during which time it generated more than $2.4 billion in revenue. 

In 2012, the Uzbek government expropriated MTS’s Uzbek operations. The SEC order also described how the bribes were funneled to front companies controlled by the Uzbek official and were disguised in MTS’s books as acquisition costs, option payments, purchases of regulatory assets, and charitable donations. 

“The company engaged in egregious misconduct for nearly a decade, secretly funneling hundreds of millions of dollars to a corrupt official,” Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement.

MTS consented to the SEC’s order finding that it violated the anti-bribery, books-and-records, and internal accounting control provisions of the Securities Exchange Act of 1934 and requiring it to pay a $100 million penalty.

Global effort

The SEC thanked numerous agencies that cooperated and assisted in the investigation, highlighting the global nature of the FCPA case. Agencies cited include the Justice Department’s Criminal Division’s Fraud and Money Laundering and Asset Recovery Sections, the Internal Revenue Service, the Department of Homeland Security, the Prosecution Authority of the Netherlands, the National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway (ØKOKRIM), the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland, and the Corruption Prevention and Combating Bureau in Latvia. 

Assistance was also provided by regulatory and law enforcement colleagues in the United Kingdom, France, and Ireland, including the British Virgin Islands Financial Services Commission, the Cayman Islands Monetary Authority, the Bermuda Monetary Authority, the Central Bank of Ireland, the Paris Court of Appeals, the U.K. Serious Fraud Office, and the U.K. Financial Conduct Authority.

This is the third case brought by the SEC and the Department of Justice involving public companies operating in the Uzbek telecommunications market. VimpelCom and Telia were the other two companies. As a whole, these actions have led to the recovery, by U.S. and foreign authorities, of $2.6 billion, the SEC said.