Mikhail Fridman's VimpelCom to pay $835 mn to settle bribery charges
19 February 2016
VimpelCom Ltd, one of the world's largest telecommunications companies controlled by Russian billionaire Mikhail Fridman, yesterday agreed to pay $835 million to settle US and Dutch charges that it paid bribes to enter the Uzbekistan telecommunications market.
VimpelCom's subsidiary, Unitel LLC, was accused under the US Foreign Corrupt Practices Act (FCPA) of using several executives and employees to pay more than $114 million to a ''relative'' of Uzbek president Islam Karimov between 2006 and 2012 for mobile phone licenses and frequencies.
The charges were brought on by the US Department of Justice (DoJ), US Securities and Exchange Commission (SEC), and the Public Prosecution Service of the Netherlands.
VimpelCom is the world's sixth largest telecommunications company and is subject to US regulators since its shares are traded on the New York Nasdaq stock exchange.
The settlement includes $167.5 million for the SEC, $230.1 million for the DoJ, and $397.5 million to the public prosecution service of the Netherlands.
The DoJ said that it had moved to seize $850 million paid as bribes by VimpelCom and other companies doing business in Uzbekistan in Swiss and other European accounts controlled by the relative of Uzbek president Islam Karimov who had influence over the Uzbek governmental body that regulated the telecom industry.
US regulators said that their investigation led to several countries, including Switzerland, the Netherlands, Latvia, Norway, and others, including a number of countries which are the hub of banking secrecy and money laundering like the Cayman Islands and British Virgin Islands.
Although the US and Dutch regulators did not name the relative, but media speculated it was Karimov's eldest daughter Gulnara Karimova, who was placed under house arrest two years ago for corruption.
Gulnara is multi-faceted woman who had served as the country's envoy to the United Nations, apart from being a fashion designer, pop musician, and is a popular culture celebrity in Uzbekistan.
According to VimpelCom and Unitel admissions, 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.
According to the Doj, VimpelCom and Unitel 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. VimpelCom and Unitel contemplated additional bribes in 2013, but those bribes were not completed before VimpelCom opened an internal investigation.
VimpelCom admitted that it falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions.
VimpelCom and Unitel paid a total of more than $800 million in bribes and the official's laundered the corruption proceeds through accounts held in Latvia, the UK, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland.
The bribe money was transmitted through financial institutions in the US before they were deposited into accounts in these countries, thereby also subjecting them to US jurisdiction.
''As they have admitted in court filings, VimpelCom, the world's sixth largest telecommunications company, with securities traded in New York, and its subsidiary, Unitel, built their business in Uzbekistan on over $114 million in bribes funneled to a government official. Those payments, falsely recorded in the company's books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York.'' said US Attorney Bharara.