VimpelCom, the wireless carrier under investigation for corruption in Uzbekistan, will pay a near-record $795mn to settle US and Dutch claims that it bribed officials to win business in the former Soviet republic.
The settlement is part of a wider, years-long, investigation by US, Dutch, Swedish and Swiss authorities into claims that VimpelCom, Mobile TeleSystems, and TeliaSonera paid bribes in exchange for business and investment opportunities in the central Asian country. Some of the allegations focused on a company linked to Gulnara Karimova, the daughter of Uzbek President Islam Karimov, according to court documents and people familiar with the matter.
Amsterdam-based VimpelCom, which is partly owned by Russian billionaire Mikhail Fridman and Norway’s Telenor, agreed to plead guilty to violating US corruption laws at a hearing in New York federal court on Thursday. The charges will be dropped in three years if VimpelCom abides by terms of an agreement with the US, according to prosecutor Nicola Mrazek.
VimpelCom and its subsidiary Unitel paid more than $114mn in bribes from 2006 to 2012 to a high-ranking foreign official to gain access to the Uzbek market, Mrazek told the judge.
Jean-Yves Charlier, chief executive officer of VimpelCom, said in a statement the company has “significantly strengthened” its internal controls and compliance programme since the start of the investigation and that the carrier is pleased to have reached the settlements.
VimpelCom’s settlement removes risks for Telenor, which plans to divest its 33% stake in the carrier, said Alexander Vengranovich, an analyst at Otkritie Capital in Moscow. “Now, once the uncertainty is gone, it will become easier for Telenor to discuss sale terms with potential buyers.”
VimpelCom’s settlement may also indicate what lies ahead for rivals TeliaSonera and Mobile TeleSystems, Vengranovich said, while noting that each carrier’s case is unique.
“As VimpelCom acknowledged certain violations in Uzbekistan, there is a higher probability now that the US Justice Department will require similar penalties for MTS and TeliaSonera also,” he said.
No company or person has been charged as part of the US and European investigations. The $795mn penalty is the second-largest levied for violations of the Foreign Corrupt Practices Act, which bans bribing officials to win business. The largest, $800mn, was paid by Siemens, which pleaded guilty to violating US anti-corruption laws in 2008.
TeliaSonera spokesman Henrik Westman said in an e-mail that the former Swedish phone monopoly hasn’t heard anything new from the US authorities and “continues to support them in the best possible ways.”
MTS hasn’t made a provision in relation to the investigation by US authorities regarding its business activities in Uzbekistan, the company said in an e-mailed comment.
“MTS continues to co-operate with the authorities,” it said. “At the current stage of the investigations, MTS has no reliable basis to predict any outcome.”
VimpelCom, Russia’s third-biggest wireless carrier, set aside $900mn last year for potential liabilities stemming from Dutch and US investigations. The fact that VimpelCom acknowledged violations as part of Thursday’s settlement increases the risk that minority investors can win claims against the company for not informing them properly about risks in Uzbekistan, Vengranovich said.
Manhattan US Attorney Preet Bharara alleged in a civil forfeiture complaint in June that VimpelCom and a rival company made more than $500mn in corrupt payments using a web of shell companies and phony consulting contracts to a close relative of Karimov’s.
Bharara said the funds were tied to an international money-laundering conspiracy involving payments to a Karimov relative, who wasn’t identified in the lawsuit.
The US in July won permission to seize those assets, which were held in Bank of New York Mellon Corp branches in Ireland, Luxembourg and Belgium.