Last week, the Justice Department announced the resolution of a massive FCPA enforcement action against the Dutch company VimpelCom Ltd.—one of the world’s largest integrated telecommunications providers—and its Uzbeki subsidiary, Unitel. As reported in the Justice Department press release, the total fines and penalties paid by VimpelCom were $795,326,398.40, consisting of a total criminal penalty of $230,163,199.20 to the U.S., with an additional $375 million in disgorgement of profits and prejudgment interest paid to the SEC and a criminal penalty paid to the Public Prosecution Service of the Netherlands (PPS) of $230,163,199.20.
The overall bribery scheme involved VimpelCom purchasing the Uzbeki company Unitel as an entrée into the Uzbekistan market. Contemporaneously with the acquisition of Unitel, which did have a legitimate business purpose, VimpelCom acquired another Uzbeki entity Barkie Uzbekistan Telecom (Butzel) which was at least partially owned by an Uzbeki government official who had control or or influence upon telecom regulation in the company. This foreign official hid their interest through a shell company which was known to VimpelCom. VimpelCom did not articulate a legitimate business reason for the Butzel deal.
After the acquisitions, Unitel funded its bribes to the Uzbeki government official through a variety of mechanisms, which I will explore in further depth in upcoming blog posts. The summary is as follows:
Amount of Bribe Paid
Cash for 3G network
Fake Consulting Invoices
Fake Reseller Payments
Separately the SEC identified $38MM in charitable donations which had no adequate internal controls in place to determine if the donations were legitimate or violations of the FCPA.
Most interestingly are the follow-on criminal forfeiture matters referenced by the Justice Department in its Press Release. The Justice Department had previously filed a civil complaint seeking forfeiture of $300 million held in Swiss bank accounts which represent 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. Last week it added another complaint for an additional $500 million that VimpelCom and two other telecommunications companies paid in bribes to the Uzbek official to obtain and retain the ability to do business in Uzbekistan.