On March 6, 2019, Mobile TeleSystems PJSC (MTS) consented to pay an $850 million sanction—the largest Foreign Corrupt Practices Act (FCPA) criminal penalty ever paid to the United States—and to a three-year monitorship to resolve allegations that MTS and its subsidiary paid $420 million in bribes to Gulnara Karimova, the daughter of the former President of Uzbekistan.
The following day, the US Department of Justice (DOJ) unsealed an indictment charging Karimova and the former CEO of an MTS subsidiary, Bekhzod Akhmedov, for participating in a bribery and money laundering scheme through which Karimova allegedly was paid a total from all sources of over $865 million—the largest bribe ever received by an individual FCPA defendant.
MTS is the largest mobile telecommunications corporation in Russia. Beginning in the early 2000s, Akhmedov allegedly facilitated corrupt bribe payments to Karimova from his employer, MTS’s subsidiary, and from two other telecom corporations seeking to enter and operate in Uzbekistan. Karimova allegedly received more than $865 million in bribes from the three telecom corporations in exchange for exerting her influence over the Uzbek governmental body responsible for regulating the telecom industry. Karimova and Akhmedov allegedly conspired to launder and conceal the bribe payments through shell companies and bank accounts, including accounts located in the United States.
MTS paid $420 million in bribes through Akhmedov to Karimova to obtain favorable treatment in the Uzbek telecom market. MTS is the third telecom corporation to resolve charges with the US Securities and Exchange Commission (SEC) and DOJ related to this decade-long scheme. In total, the investigation has resulted in more than $2.6 billion in fines and disgorgement, including more than $1.3 billion in criminal payments paid to the United States authorities.
MTS consented to a $100 million penalty pursuant to an administrative order with the SEC.1 MTS also entered into a deferred prosecution agreement (DPA) with the DOJ, in which it admitted and accepted responsibility for conspiring to violate the FCPA and violating the internal controls provisions of the FCPA.2 Pursuant to the DPA, MTS will forfeit $850 million. Consistent with its “Piling On” Policy, the DOJ agreed to credit the $100 million SEC penalty toward the $850 million forfeiture.
Under the resolutions with the SEC and the DOJ, MTS is also required to retain an independent compliance monitor for at least three years. The DPA notes that even though MTS “has been enhancing and has committed to continuing to enhance its compliance program and internal account controls,” MTS has “not yet fully implemented or tested its compliance program.” As a result, MTS agreed to retain the monitor “to reduce the risk of misconduct.” One of the other two telecom corporations that previously resolved allegations related to Karimova’s scheme was also required to retain a monitor pursuant to a DPA.
The indictment charges Karimova and Akhmedov, both of whom are Uzbek citizens, with conspiracy to commit money laundering. Akhmedov was also charged with one count of conspiracy to violate the FCPA and two counts of violating the FCPA. The statutory minimums, which may not be reached depending on the Federal Sentencing Guidelines and the discretion of the sentencing judge, are five years’ imprisonment for the bribery and conspiracy charges and twenty years’ imprisonment for the money laundering charges.
Karimova and Akhmedov are still at large. Karimova has not been seen in public since 2014. She was reportedly sentenced to house arrest after being convicted of embezzlement and money laundering by the Uzbek Prosecutor-General. According to Karimova’s daughter, Karimova was forcibly removed from her apartment and sent to jail this month after she violated the terms of her house arrest. Akhmedov currently resides in Russia. The United States does not have an extradition treaty in place with Uzbekistan or Russia.
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The October 2018 Benczkowski memorandum provides that a monitor “will likely not be necessary” if the corporation’s compliance program and internal controls are “effective and appropriately resourced at the time of resolution” (emphasis added). Notably, the DOJ chose not to impose a monitor on another telecom company that resolved allegations related to Karimova’s scheme based on that corporation’s remediation and the state of its compliance program.
MTS’s resolution is evidence of the DOJ’s continued willingness to impose a monitor if it views the corporation’s compliance program as deficient at the time of resolution.3 Upon discovery of a potential violation, a corporation should prioritize enhancing its program and controls to ensure their effectiveness before resolution to avoid incurring the millions of dollars in costs associated with a monitor.
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1 In the Matter of Mobile TeleSystems PJSC, Ref. No. 85261 (March 6, 2019) https://www.sec.gov/litigation/admin/2019/34-85261.pdf.
2 Mobile TeleSystems PJSC, Deferred Prosecution Agreement (February 22, 2019) https://www.justice.gov/opa/press-release/file/1141631/download.
3 For more information on the Benczkowski Memorandum, see Legal Alert: The Department of Justice (DOJ) issues new guidance on choice of compliance monitors for FCPA and other criminal division cases.
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