Amsterdam-based VimpelCom, a global telecommunication services provider, said last week in its annual report with the Securities and Exchange Commission that it has set aside $105 million for legal expenses associated with its $795 million settlement reached last month with U.S. and Dutch prosecutors for paying bribes to a government official in Uzbekistan.
As Compliance Week previously reported, VimpelCom last month paid a $230.2 million criminal penalty to the Department of Justice, $167.5 million civil penalty to the Securities and Exchange Commission, and $397.5 million to the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM). The combined total amount of U.S. and Dutch criminal and regulatory penalties paid by VimpelCom will be more than $795 million, making it one of the largest global foreign bribery resolutions ever.
In a related action, the Justice Department also filed a civil complaint in February seeking the forfeiture of more than $550 million held in Swiss bank accounts, which constitute bribe payments made by VimpelCom and two separate telecommunications companies, or funds involved in the laundering of those payments, to the Uzbek official. The forfeiture complaint follows an earlier civil complaint filed in June 2015, which seeks forfeiture of more than $300 million in bank and investment accounts held in Belgium, Luxembourg and Ireland that also constitute funds traceable to bribes, or funds involved in the laundering of the bribes, paid by VimpelCom and another telecommunications company to the same Uzbek official.
VimpelCom entered into a three-year deferred prosecution agreement in connection with a criminal information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the Foreign Corrupt Practices Act (FCPA), and a separate count of violating the internal controls provisions of the FCPA. In addition to having to pay the $230.2 million criminal penalty, VimpelCom also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years, and cooperate fully with the Justice Department’s ongoing investigation, including its investigation of individuals.
In its annual report last week, Vimpelcom said that all amounts to be paid under the DPA, the guilty plea, the Dutch settlement agreement and the consent were paid in February and March and were included in the provision made by VimpelCom in its financial statements for the year ended Dec. 31, 2015.
Vimpelcom added that it “may face other potentially negative consequences” relating to the investigations by, and agreements with, U.S. and Dutch prosecutors. These consequences could include additional investigations “with respect to the facts not covered in the agreements or in other jurisdictions.” Furthermore, the Norwegian Government has stated that it plans to hold parliamentary hearings concerning the investigations, the company said.
Similarly, the agreements do not preclude shareholder litigation related to these matters. In November 2015, for example, a securities class-action lawsuit was filed against VimpelCom and certain of its current and former officers alleging certain violations of federal securities laws relating to its operations in Uzbekistan. Then in December 2015, a second complaint was filed that asserts essentially the same claims in connection with essentially the same disclosures.
“The company is currently reviewing the lawsuits and their implications, which remain in their early stages, and intends to vigorously defend against these claims,” VimpelCom said in its annual report.
“Any collateral investigations, litigation or other government or third-party actions resulting from these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects,” VimpelCom said. “In addition, ongoing media and governmental interest in the investigations, settlements and lawsuits and any announced investigations and/or arrests of our former executive officers could impact the perception of us and result in reputational harm to our company.”