Telia Agrees to Pay at Least $965 Million Over Uzbek Bribes

  • First big FCPA resolution under Trump, who has criticized law
  • Telia agrees to deferred prosecution; subsidiary pleads guilty

Telia Co AB agreed to pay penalties of at least $965 million to U.S. and international authorities to resolve a long-running investigation into corrupt payments involving telecom contracts in Uzbekistan.

The settlement, resulting from negotiations that started months before President Donald Trump was elected, is the first major foreign corruption case brought under his administration. The resolution is likely to be examined closely by white-collar defense lawyers looking for signs of a change of approach to enforcement of the Foreign Corrupt Practices Act, which Trump has criticized as a “horrible law” that put U.S. companies at a “huge disadvantage.”

Telia’s Uzbek subsidiary, Coscom LLC, pleaded guilty on Thursday to conspiring to violate the anti-bribery provisions of the foreign corruption law while the Telia parent company entered into a deferred-prosecution agreement with the Justice Department. At a hearing on Thursday, U.S. District Judge George Daniels in New York accepted the deferred-prosecution agreement and sentenced Coscom to the terms of its plea agreement, including requirements to commit no further crimes and to implement a compliance program to detect corruption.

“This resolution underscores the department’s continued and unwavering commitment to robust FCPA and white-collar criminal enforcement,” Kenneth Blanco, the acting head of the Justice Department’s criminal division, said in a written statement.

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Telia’s agreement with prosecutors requires a payment of $548.6 million to the Justice Department and about $417 million in disgorgement to the U.S. Securities and Exchange Commission, according to a Justice Department statement. Half of the Justice Department’s portion will go to the Public Prosecution Service of the Netherlands. As much as half of the SEC’s portion will be available to pay possible penalties levied by the Swedish Prosecution Authority.

‘Unfortunate Chapter’

“Today’s settlement brings an end to an unfortunate chapter in Telia Company’s history,” Johan Dennelind, Telia’s chief executive officer, said in a written statement. “Since 2013 the new board and management have worked diligently and responsibly to understand what went wrong, to remedy what has been broken and to regain trust from all our stakeholders.”

Dennelind said the company has worked to establish a corporate culture of “doing the right thing all the time” and that the resolution and financial penalty are a "a painful reminder of what happens if we don’t.”

“Corporate bribery is not just unfair and illegal, it has terribly corrosive effects on business, government and society,” Stephanie Avakian, co-director of the SEC’s enforcement division, said in a written statement.

The action against Telia is the latest to arise from a wider bribery investigation by the Justice Department and other authorities. That probe involved millions of dollars in payments by telecommunication companies that were funneled to a company linked to Gulnara Karimova, the daughter of former Uzbek President Islam Karimov, according to court documents and people familiar with the matter.

Asset Seizures

The Justice Department previously filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland. Those accounts contain money laundered for Gulnara Karimova or bribe payments made by Telia and other telecom providers operating in Uzbekistan, including VimpelCom Ltd. and Mobile TeleSystems PJSC, prosecutors allege. One of those banks, ING Groep NV, disclosed this year that it was under scrutiny by the U.S. over its handling of Uzbek money.

Telia’s penalty is less than the $1.4 billion it said authorities were seeking in September, though it is larger than the one paid by VimpelCom, which agreed to pay $795 million in February 2016 to resolve its own bribery case involving related conduct in the former Soviet republic.

Telia, in the resolution, admitted to making about $331 million in corrupt payments from 2007 through 2010. Those payments were made to a company named Takilant, which was a front for Karimova, according to people familiar with the matter and court papers filed in an asset forfeiture case last year in Manhattan. That money was paid to ensure Telia was awarded the needed licenses to operate in the country, prosecutors allege in the forfeiture case.

Uzbek Payments

Telia entered the Uzbek telecom market in 2007 by purchasing Coscom, which prosecutors said was made possible only through corrupt payments to Takilant, according to court papers.

The illicit payments also included a 26 percent stake in Coscom that Telia gave to Takilant in 2007, according to court papers. Three years later, Telia paid $220 million to repurchase much of that stake, which was $100 million more than the parties initially agreed upon, the filings say.

Telia paid the increased price for Takilant’s stake because of “beneficial political connections,” the Justice Department said in the forfeiture case, citing an unnamed Telia executive, who said Telia’s success in Uzbekistan was dependent on Takilant’s support.

Frequency Rights

Telia also made $55 million in corrupt payments to win the right to additional high-speed frequencies in Uzbekistan. Company managers in late 2012 considered making additional corrupt payments, even though the Swedish news media had begun reporting on the earlier payments.

Telia’s deferred-prosecution agreement with the U.S. will run for three years and will require cooperation with the investigation including any effort to prosecute individuals. The company also promised to implement “rigorous” internal controls, according to the Justice Department, though Telia won’t have to hire an independent monitor.

The company received a break on its penalty for cooperating with the investigation, according to the Justice Department, but failed to win full cooperation credit because it didn’t self-report the conduct to U.S. prosecutors.

— With assistance by Kim McLaughlin, Matt Robinson, and Niclas Rolander

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