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Almost $1 Billion Settlement: Telia FCPA Violation

Internationally traded, Swedish telecom Telia has agreed to a $965.7 million global settlement to resolve allegations that it paid at least $330m in bribes to government officials in Uzbekistan to break into the telecom market there.

The settlement was announced last Thursday between Telia, U.S. authorities and law enforcement in Sweden and the Netherlands. Telia was charged with one count of conspiracy to violate the anti-bribery provisions, entering into a deferred prosecution agreement, and Coscom, Telia’s Uzbek subsidiary pled guilty to one count of conspiring to violate the anti-bribery provisions of the FCPA.

The scheme involved allegations of bribery of the eldest daughter of late Uzbek President Islam Karimov, Gulnara Karimova. Karimova is said to have provided telecom licenses and upgrades for over $330MM in bribe payments to shell companies which she controlled. She was already under house arrest since 2014 for complicity in the VimpleCom matter, which reached resolution in February 2016. The bribes were purportedly approved by the highest level of Telia, including senior executives and the Board of Directors

Manhattan’s Acting US Attorney Joon H. Kim stated it was “one of the largest criminal corporate bribery and corruption resolutions ever.”

In a press release he said:  “Telia, whose securities traded publicly in New York, corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City. If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws. Telia and Coscom refused to do so, and they have been held accountable in Manhattan federal court today.”

Homeland Securities Abroad, Special Agent in Charge Patrick J. Lechleitner stated:  “Today’s resolution marks a win against a foreign corruption scheme where millions of dollars in bribery funds were paid to Uzbekistan officials and laundered through the U.S. financial system.  HSI, working hand in hand with our partners at IRS Criminal Investigation, leveled the playing field for publicly traded companies by exposing these corrupt practices and helped the U.S. government collect nearly $275 million in criminal penalties.”

Company President and Chief Executive of Telia, Johan Dennelind said in a statement:
“We have come a long way to establish a more sustainable company with a strong focus on governance and compliance but it is a never-ending journey as we aspire to embed this into our culture making sure that all employees understand the importance of doing the right thing all the time. The resolution and related financial sanction that we announce today is a painful reminder of what happens if we don’t.”

Telia further announced in a press release:
“The settlement announced today relates to the question of the Company’s responsibility for its previous wrongdoings, not if there may be individuals that have a liability for related events. The Swedish prosecutor’s investigation into individuals is still ongoing and the Company may be subject to disgorgement proceedings resulting from that investigation. Telia Company continuously considers all possibilities to protect the rights and interests of the Company.”
Law enforcement and other agencies from numerous countries cooperated in the investigation from Switzerland, Austria, Belgium, Cyprus, France, Ireland, the Isle of Man, Latvia, Luxembourg, Norway, and the United Kingdom.

This high profile international case highlights the need for companies to manage due diligence as an essential part of their strategic approach to corporate governance and compliance.  Performing thorough due diligence investigations should be a matter of policy for corporate boards to reveal red flag issues, and should include executive backgrounds, screening board members and due diligence on international business holdings.

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