Tuesday, July 26, 2016


Russia

VimpelCom Agrees To Pay $795 Million To Settle Uzbek Bribery Claims

Court records, legal documents, and other media accounts suggest that Gulnara Karimova, the daughter of the Uzbek president, may have been involved in the shady dealings.
Court records, legal documents, and other media accounts suggest that Gulnara Karimova, the daughter of the Uzbek president, may have been involved in the shady dealings.
By Carl Schreck and Mike Eckel

WASHINGTON -- VimpelCom, the Dutch-headquartered telecom that operates one of Russia’s largest mobile communications providers, says it has agreed to pay $795 million to resolve U.S. and Dutch investigations into a bribery scheme in Uzbekistan.

The U.S. Justice Department said in an announcement on February 18 that VimpelCom had admitted bribing officials in Uzbekistan to gain licenses.The Amsterdam-based company confirmed the settlement deals in a statement. 

It was the most significant development to date in the spiraling multinational investigation into alleged bribery and other illegal payments by several major telecoms looking to invest in the Central Asian nation.

VimpelCom CEO Jean-Yves Charlier said in a statement that the "wrongdoing…which we deeply regret, is unacceptable."

The Justice Department said VimpelCom had admitted to a conspiracy to pay more than $114 million between 2006 and 2012 to an Uzbek official in order to enter the Uzbek market, one of the largest in the region.

That official is identified only as "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." 

Previous court records, legal documents, and other media accounts point to that official as Gulnara Karimova, the daughter of authoritarian Uzbek President Islam Karimov.

VimpelCom "built their business in Uzbekistan on over $114 million in bribes funneled to a government official," Preet Bharara, the U.S. District Attorney for the District of New York, said in a statement. "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."

As part of the settlements, the Justice Department said, VimpelCom, agreed to pay a $230 million criminal penalty to both U.S. and Dutch authorities, as well as a $375 million penalty to the U.S. Securities and Exchange Commission (SEC).

The deal was announced as the Justice Department filed a civil complaint seeking the forfeiture of $550 million in Swiss bank accounts tied to corrupt payments that VimpelCom and two other companies made to the Uzbek official. 

The corruption allegations date back several years, though it wasn’t until early 2014 when VimpelCom and two other companies -- MTS and Scandinavian giant TeliaSonera -- announced they were under investigation for possible violations of the Foreign Corrupt Practices Act. 

U.S. authorities have aggressively used the 39-year-old statute to investigate corruption around the world, such as last year’s probe of world soccer’s governing body, FIFA. 

Other Legal Troubles

U.S. authorities have also used a related program called the Kleptocracy Asset Recovery Initiative, to seize U.S.-based assets from individuals and entities who have laundered funds or received ill-gotten money. The Justice Department said the VimpelCom case was the largest ever under the six-year-old program. 

VimpelCom is controlled, through a series of intermediary companies, by Russian billionaire Mikhail Fridman. The company, which is traded on the NASDAQ stock exchange, last year hinted at looming criminal liability, saying it was putting aside nearly $1 billion to deal with potential liabilities. 

MTS is Russia’s largest mobile phone operator, controlled by Russian conglomerate Sistema, whose majority shareholder is billionaire Vladimir Yevtushenkov. 

In addition to legal action in the United States and the Netherlands, VimpelCom has faced legal troubles in Norway related to its Central Asian projects. 

VimpelCom's minority shareholder is Telenor ASA, which is majority-owned by the Norwegian government. Telenor’s links with VimpelCom and questions of whether government-owned shares were tainted by illegal payments sparked sharp political debates in Oslo last year.

Vimpelcom's former chief executive officer was detained last year by Norwegian police. The government also forced the resignation of Telenor’s chairman in October. 

The other company facing potential U.S. liability is TeliaSonera, a Swedish-Finnish communications giant. Swedish authorities have aggressively investigated Uzbek-related bribery allegations after reports on Swedish television, and four senior executives later resigned. 

A criminal investigation by Swedish prosecutors may return indictments in that case sometime this year.

Last March, the U.S. Justice Department asked Sweden to seize $30 million in funds held in the Scandinavian bank Nordea in connection with the probe.

Gulnara Karimova, the president’s eldest daughter, spent years in the limelight as an aspiring pop star, fashion designer and famous socialite. Central Asian watchers at one point speculated she might succeed her aging father, who recently celebrated his 78th birthday. 

But she appeared to fall out of favor in 2014 as the multinational corruption investigation gathered steam, and photographs were published last year that purported to show her under house arrest in Uzbekistan. 

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