In this episode, Matt Kelly and I take a deep dive into the Telia FCPA enforcement action. It is the largest FCPA fine ever, coming in at $965MM. The breadth and scope of Telia’s illegal conduct was about as far-ranging as one could imagine. The fines and penalties certain bore this out. The bribes were specifically approved by the highest level of Telia, including senior executives and the Board of Directors. There was an explicit awareness that the bribery scheme would violate the FCPA, so the company tried to navigate its way out of potential FCPA liability. Clearly those efforts were lacking.

We discuss the blatant nature of the bribery scheme, the international investigation and enforcement effort involved, how this enforcement actions differs from other types of enforcement actions and lessons to be learned from the matter. We also consider that the company did not self-disclose but did cooperate in the investigation and provided extensive remediation. This netted the company a 25% discount off the minimum penalty as calculated under the US Sentencing Guidelines.

The resolution documents include the SEC Cease and Desist Order, the DOJ issued an Information and a Deferred Prosecution Agreement, Telia. The DOJ also issued an Information and DPA for Coscom LLC, the Telia subsidiary through which the bribery occurred and a Plea Agreement.

In a separate Press Release, Telia said in part, “The information being reported by media about the terms of the resolution is not complete. Telia Company has already announced that it has taken a provision with respect to the expected financial sanctions. It is correct that we are very close to a final resolution with all authorities (SEC, DOJ and the Dutch prosecutor), but cannot comment further at this time.” Cassin reported, “The company said in April it had adjusted its “estimate of the most likely outcome of the ongoing investigations into the company’s market entry and operations in Uzbekistan to $1 billion from $1.45 billion.””

The bribery scheme involved the company illegally buying its way into the Uzbekistan telecom market through its bribery of Gulnara Karimova, the eldest daughter of the late Uzbek President Islam Karimov. Karimova was also the bribery conduit in the VimpleCom matter, resolved in February 2016. In the Telia case Karimova parlayed her providing telecom licenses and upgrades into bribe payments of over $330MM to shell companies which she controlled.

In the DOJ Press Release, Acting US Attorney Joon H. Kim stated “Telia, whose securities traded publicly in New York, corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City. If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws. Telia and Coscom refused to do so, and they have been held accountable in Manhattan federal court today.”

The SEC Press Release stated, “Telia entered the Uzbek telecommunications market by offering and paying at least $330 million in bribes to a shell company under the guise of payments for lobbying and consulting services that never actually occurred. The shell company was controlled by an Uzbek government official who was a family member of the President of Uzbekistan and able to exert significant influence over other Uzbek officials, causing them to take official actions to benefit Telia’s business in Uzbekistan.”

For more on the Telia enforcement action, see Tom’s blog posts:

Part I-Background;

Part II-the Bribery Schemes; and

Part III-the Individuals involved

 

Compliance into the Weeds is a part of the Compliance Podcast Network

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