While the resolution of the Telia Company (Telia) Foreign Corrupt Practices Act (FCPA) matter has long been awaited, the results announced yesterday by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) were stunning nonetheless. As usual, Dick Cassin at the FCPA Blog was the first to get the story out and it was so big, it took him two blog posts. (Here and here.) Over the next few blog posts, I will be exploring the resolution and what lessons the compliance practitioner can draw from the case, the parallel actions and what it may portend for FCPA enforcement going forward under the Sessions DOJ. Today I will consider the underlying facts of the settlements.

The SEC settled via a Cease and Desist Order (Order). The SEC issued a Press Release. The DOJ issued an Information (Telia Information) and a Deferred Prosecution Agreement (Telia DPA), both for Telia. The DOJ issued an Information and DPA for Coscom LLC (Coscom Information), a Plea Agreement and also issued a Press Release. 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 below chart lists the fines and penalty amounts identified in the settlement documents and Press Releases.

Company Criminal Fine Civil Forfeiture Amt Paid to US Amt Paid to Netherlands Amt Paid to Sweden
Telia $500MM $475MM $699MM $274MM (not yet set)
Coscom $48.6MM
Subtotal $588.6 $475MM
Total Fines and Penalties to be paid by Telia to all countries $965MM

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 in a position to exert significant influence over other Uzbek officials, causing them to take official actions to benefit Telia’s business in Uzbekistan.”

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. I will take a deep dive into the bribery scheme in a subsequent blog post.

A couple of other initial observations are important. The first was the truly international scope of the investigation and cooperation in the enforcement action. In the DOJ Press Release it noted involvement of “PPS, the Swedish Prosecution Authority, and the Office of the Attorney General in Switzerland, as well as law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, the Isle of Man, Latvia, Luxembourg, Norway, Switzerland, the Isle of Man, and the United Kingdom.”

The SEC Press Released acknowledged and thank the following international enforcement actions, “Dutch Openbaar Ministerie, National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway, Swedish Prosecution Authority, Office of the Attorney General in Switzerland, and Corruption Prevention and Combating Bureau in Latvia. The SEC also appreciates the assistance from regulators and law enforcement in France, Spain, and Hong Kong as well as the Financial Conduct Authority, British Virgin Islands Financial Services Commission, Cayman Islands Monetary Authority, Bermuda Monetary Authority, Cyprus Securities and Exchange Commission, and Central Bank of Ireland.” Both the IRS and Department of Homeland Security were acknowledged to have been involved. Also noted was DOJ Money Laundering and Asset Recovery Section.

The DPA laid out the calculations which led to the criminal fine and forfeiture. It was noted 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.

As to Karimova, she has been under house arrest since 2014. In 2015, the DOJ won a federal court order to impound $300 million in bank accounts linked to her. The accounts were held by Bank of New York Mellon Corp. in Ireland, Luxembourg, and Belgium, and in accounts at Clearstream Banking SA. In 2014, prosecutors in Switzerland seized about $820 million as part of a money-laundering investigation into Karimova.

The Telia FCPA enforcement action continues a key theme from 2016-international cooperation. This cooperation was in both the investigation and enforcement aspects. All-in-all a stunning result for all the prosecutors involved.


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© Thomas R. Fox, 2017