Where O’ Where Did Our Monitors Go? — The Telia Bribery Case

by Michael Volkov

Just when everyone was anticipating the beginning of an uptick in FCPA enforcement in 2017, the Justice Department and the SEC delivered a resounding message to remind everyone that FCPA enforcement is here to stay. However, the Telia decision may be the first indication of some changes in DOJ’s FCPA enforcement policies. It is hard to say from just one major DOJ enforcement action but this is something to watch.

In a follow on prosecution relating to the telecommunications industry in Uzbekistan involving the same corrupt daughter of the then-President as the VimpelCom case, the Justice Department and the SEC announced a multi-country, multi-party resolution totaling $965 million in penalties, forfeiture and disgorgement which is to be shared among the United States, Dutch and Swedish prosecutors: (1) Telia Company agreed to a deferred prosecution agreement (DPA) with the US DOJ and the filing of a one-count information charging conspiracy to violate the FCPA, and the payment of a $548 million criminal fine and $40 million forfeiture by its subsidiary Coscom, Inc., subject to offsets: $274 million paid to the Dutch prosecutors office, as well as a future amount to be paid to Swedish prosecutors; (2) Coscom’s agreement to plead guilty to a one-count information charging Coscom with violation of the FCPA and payment of a $500,000 fine and a $40 million forfeiture; and (3)Telia’s settlement with the SEC requiring Telia to pay $457 million disgorgement.

Shortly after the DOJ and SEC announcement, Swedish prosecutors criminally charged the former CEO and two other executives with bribery.

Like the VimpelCom case, Telia committed a large bribery scheme at the direction and knowledge of Telia’s then CEO, the board and senior executives. In total, Telia paid approximately $331 million to Uzbekistan’s President’s daughter, a notorious corrupt official, who was the owner of various shell companies in Uzbekistan. Telia profited from its bribery payments in the amount of $457 million (the disgorged profits paid to the SEC).

The bribery schemes consisted of typical arrangements – the corrupt daughter took an ownership interest in Telia’s partner operating cellular telephone service in Uzbekistan with the right to sell back the ownership shares at a substantial profit; Telia purchased additional mobile frequencies 3G for an $80 million payment along with an ownership shares in Telia’s subsidiary with the right to sell back the ownership share; Telia paid $9.2 million for additional network codes and frequencies; a $220 million payment for the corrupt daughter’s ownership share in a related company; a $15 million payment to a third party to assume a debt owed by the corrupt daughter to a Swiss company.

In its scope and breadth, Telia’s corruption was high-profile, including a televised interview with the CEO in which he acknowledged his role in the bribery scheme, and egregious. Interestingly, the Justice Department did not impose a corporate monitorship, neither the 18-month hybrid nor a full 3-year term. In fact, Telia is not required to prepare and report back to the DOJ or SEC about the status of its compliance program and remediation efforts.

To remediate the violations, Telia replaced its board, its CEO, and implemented a comprehensive compliance program. However, as noted by DOJ, Telia did not voluntarily disclose the offense, and only earned a 25 percent discount from the bottom of the applicable sentencing guideline range.

In light of these facts, it is difficult to argue that Telia’s cooperation was so extraordinary that it was excused from a future compliance report or the appointment of a monitor. This result may reflect a change in DOJ’s and the SEC’s policy concerning compliance reporting and appointment of monitors. Alternatively, Telia’s result may reflect its valuable cooperation and remediation efforts with changes in senior management and enhancement of its compliance program.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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Michael Volkov

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