On 18 February 2016, US DoJ and SEC announced “a global settlement that requires telecommunications provider VimpelCom Ltd. to pay more than $795 million: $167.5 million to the SEC, $230.1 million to the U.S. Department of Justice, and $397.5 million to Dutch regulators.”
According to the companies’ confession, “VimpelCom and Unitel, through various executives and employees, paid bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry. The companies structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official. The bribes were paid on multiple occasions between approximately 2006 and 2012 so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan.”
You may ask yourself what interest does the U.S. have in investigating Dutch, Norwegian and Russian companies that bribe Uzbekistan officials? What link with the U.S. has triggered FCPA enforcement? And, finally, why should we bother in Ukraine?
First of all, VimpelCom shares are traded on the U.S. Nasdaq stock exchange and, according to FCPA, this fact triggers FCPA application. For those of you who are curious about an impact the case had on VimpelCom, please check Nasdaq website for statistics of VimpelCom share price.
Furthermore, bribes paid to Uzbek officials have been laundered through financial institutions in the United States before they were deposited into accounts in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland. Similarly to Statoil case overviewed in one of our previous posts, transfer of bribes though the U.S. bank is sufficient justification for FCPA to step in. As such, VimpelCom case once again re-confirmed that FCPA outreach is extremely broad and your business does not necessarily need to be a U.S. company to fall into FCPA nets.
Another notable fact of the case is that enforcement authorities revealed that VimpelCom falsified its books in order to conceal and disguise bribery arrangements by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions. It is not a secret that similar schemes are widespread in Ukraine; therefore, considering the deepening expertize of anti-corruption enforcement authorities in revealing corruption and increasing international cooperation in this field, no corruptionist should feel secure even if the bribery scheme has been sophisticatedly designed.
The next conclusion from this case is that investigation of concealed and complex international bribery arrangements requires vast amounts of time, efforts and cooperation between enforcement authorities. In fact, it takes years to investigate such bribery cases, but international cooperation in anti-corruption enforcement is steadily increasing, so as the inevitability of liability for bribery.
Interestingly, when the board of directors of VimpelCom sought an FCPA legal opinion assessing corruption risks involved in the transactions, certain management members withheld crucial information from outside counsel performing the review that restricted the scope of FCPA opinions, rendering them worthless. Rather than implement and enforce a strong anti-corruption ethic, certain VimpelCom executives sought ways to have window dressing compliance while knowingly proceeding with corrupt business transactions. These findings emphasizes the importance of an anti-bribery culture for every business and a paramount importance company management should play in establishment and maintenance of compliant organization.
In its agreement with prosecution VimpelCom agreed to “implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.” Here I have to stress a tendency of increasing prosecution of individuals for bribery offences emphasized in Yates memo summarized in one of my previous posts. As such, corporate bribery will not only expose corporations to huge financial penalties, but also threat responsible individuals with long-term imprisonment and fines.
One of the companies appearing in VimpelCom case investigation documents is MTS, another telecommunications company that might become on object of investigation on anti-bribery compliance issues in the future. I will keep an eye on further effects of VimpelCom case and will share with you any worthwhile developments. In the meantime, stay tuned and be compliant!
Volodymyr Grabchak is a legal counsel with an international FMCG company, responsible, inter alia for anti-corruption compliance issues in Ukraine and Moldova. He got his law degree in Ukraine and LL.M. degree in the Netherlands.
Volodymyr is attorney at law admitted to Ukrainian Bar and a member of the International Bar Association (IBA).