I have spent the past few blog posts reviewing the many lessons that can be garnered by the compliance practitioner from the Telia Company AB (Telia) Foreign Corrupt Practices Act (FCPA) resolution. However, there is one additional follow on from the Department of Justice (DOJ) initiative that has not received as much attention but may be as significant as the settlement itself in the long run; that is the forfeiture action brought by the DOJ under the Kleptocracy Asset Recovery Initiative (the “Act”).

The DOJ Press Release announcing the Telia resolution stated the following:

“The resolution, reached in coordination with the SEC and authorities in the Netherlands, marks the second such resolution by a major international telecommunications provider for bribery in Uzbekistan.  On Feb. 18, 2016, Amsterdam-based VimpelCom Limited and its Uzbek subsidiary, Unitel LLC, also entered into resolutions with the Department of Justice and admitted to a conspiracy to make more than $114 million in bribery payments to the same Uzbek government official between 2006 and 2012.  The investigation has thus far yielded a combined total of over $1.76 billion in global fines and disgorgement, including over $500 million in criminal penalties to the Department of Justice.  In related actions, the Department has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland, which constitute bribe payments made by VimpelCom, Telia and a third telecommunications company, or funds involved in the laundering of those corrupt payments, to the Uzbek official.”

The FCPA Blog reported “a federal judge in New York said the DOJ could seize $300 million allegedly linked to the Uzbek telecoms bribery scandal. In a July 9 ruling, U.S. District Judge Andrew Carter allowed the DOJ to impound the funds held by Bank of New York Mellon Corp. in Ireland, Luxembourg, and Belgium, and in accounts at Clearstream Banking SA linked to the companies in Luxembourg.”

The New York Times (NYT) reported, in an article entitled “The Kleptocrats’ Millions, that the DOJ has brought some 25 cases under the Act against 20 foreign officials. While these suits are mainly in the US, the Telia matter is significant because the DOJ has focused on the international dimension of the money laundering and corruption involved.

Scott Patterson and David Gauthier-Villars, writing in a Wall Street Journal (WSJ) article entitled “U.S. Seeks to Seize $1 Billion in Telecom Probe”, noted that in addition to the bribes paid out by Telia, there were at least two other international telecom companies who “funneled hundreds of millions of dollars to businesses controlled by Gulnara Karimova, the elder daughter of Uzbek President Islam Karimov, in an effort to secure wireless frequencies and other deals in that country, according to court documents and people with direct knowledge of the probe.” [VimpelCom Ltd and Mobile TeleSystems PJSC of Russia]

The Kleptocracy squad, created within the Federal Bureau of Investigations (FBI) to investigate and prosecute corruption cases, has begun to bear fruit. At the time this initiative was announced by former US Attorney General Eric Holder, he said, “This morning, I am pleased to announce the creation of a dedicated Kleptocracy squad within the FBI. This specialized unit will partner with our Asset Forfeiture and Money Laundering Section to aggressively investigate and prosecute corruption cases — not only in Ukraine, but around the world. The squad of about a dozen personnel will consist of case agents and forensic analysts who are capable of unraveling the intricate money laundering transactions commonly employed by kleptocrats. Their sophisticated work will be supported by deputy marshals from the United States Marshals Service and analysts from FinCEN, which is our financial intelligence unit. And this new initiative will provide the United States with increased capacity to respond rapidly to political crises as they arise — so we can help prevent stolen assets from being dissipated or secreted away by deposed regimes.”

In the NYT article Kenneth Hurwitz, a senior legal officer with the Open Society Justice Initiative, was quoted as saying, “No one is confident that this will work perfectly. But that’s still better than if the U.S. didn’t try.” Former Assistant Attorney General Leslie R. Caldwell was also quoted in the same article for the following, “We’ve gotten a lot of forfeiture orders that have limited their ability to get their hands on their assets. And that’s still significant.”

The person at the heart of both the Telia and VimpelCom corruption scandals, Gulnara Karimova is currently reported to have been under house arrest in Uzbekistan since 2014. Last December she was interviewed for 23 hours by Swiss prosecutors. They interviewed her regarding efforts by the Swiss government to recover some suspect “800 million Swiss francs ($793 million) seized in Switzerland” which are believed to be “the spoils of Ms. Karimova’s alleged corrupt practices with global telecoms companies.”

As most people understand, the FCPA is a supply side law that focuses on the conduct of the bribe-payor. However through the Kleptocracy Asset Recovery Initiative, the DOJ is able to focus some of its efforts on the bribe-receiver. Any initiative or successful effort to take back the ill-gotten gains of the bribe-receivers is a plus in my book.

Tomorrow I will wrap up this series with the lessons to be learned from the Telia FCPA enforcement action.


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© Thomas R. Fox, 2017