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SEC v. VimpelCom Ltd

 
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VimpelCom Ltd
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SEC Civil
:
February 18, 2016
:
SEC v. VimpelCom Ltd
:
SEC v. VimpelCom Ltd, No. 1:16-cv-1266 (S.D.N.Y. 2016)
:
Although the SEC accused VimpelCom of violating all three provisions of the FCPA (anti-bribery, books and records, and internal controls), in a parallel action by the DOJ, VimpelCom was only charged with (1) conspiracy to violate the anti-bribery and books-and-records provisions, and (2) violating the FCPA’s internal controls provisions. The distinction suggests that the DOJ did not believe it had sufficient evidence to meet the "beyond a reasonable doubt" standard applicable in criminal cases while the SEC believed it could meet the "more likely than not" standard applicable in civil cases.
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Telecommunications-Mobile
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Uzbekistan
:
2006; 2007; 2008; 2009; 2010; 2011; 2012
:
Unnamed Uzbek government official and family member of the President of Uzbekistan
:
VimpelCom Ltd., headquartered in the Netherlands, is a global provider of telecommunications services. VimpelCom is the sixth largest telecommunications company in the world, operating in Europe, Asia, and Africa. It maintains a class of publicly traded securities on NASDAQ and, until 2013, maintained a class of securities on the New York Stock Exchange.

According to the SEC’s Complaint, between 2006 and 2012, VimpelCom paid an Uzbek government official over $114 million for access to the Uzbek telecommunications market and the acquisition of important Uzbek licenses and frequencies. The company concealed many of the alleged bribes by making payments to a shell company, Takilant Ltd., it knew to be beneficially owned by the official.

In June 2007, VimpelCom is accused of paying Takilant $37.5 million to facilitate its entry into Uzbekistan by obtaining permission for VimpelCom to purchase two local Uzbek telecom companies—Unitel LLC and Buzton JV Ltd, which were subsequently merged to form Unitel LLC, VimpelCom’s Uzbek subsidiary. To facilitate the payment, VimpelCom sold a 33.3% ownership stake in a holding company which owned Unitel to Takilant for $20 million. As part of the share purchase agreement, Takilant allegedly retained a put option to sell its indirect interest in Unitel back to VimpelCom in 2009 for a minimum price of $57.5 million. Thus, according to the SEC, in 2009, Takilant sold its indirect interest in Unitel back to VimpelCom, netting a return of $37.5 million.

In the following years, the SEC claims that VimpelCom paid Takilant at least $55 million in connection with the company’s acquisition of 3G and 4G licenses. To complete the acquisitions, the local Uzbek telecommunications authority, Information Agency of Uzbekistan (“ACI”), allegedly issued Takilant 3G licenses, which it would in turn repudiate to ensure the licenses were transferred to Unitel instead. According to the SEC, this transaction should have raised red flags for multiple reasons, including the fact that private parties in Uzbekistan, such as Takilant and Unitel, could not directly transfer telecommunications licenses between themselves. VimpelCom allegedly paid Takilant $25 million for the 3G licenses and $30 million for the 4G licenses.

VimpelCom is also accused of funneling approximately $10 million in payments to the foreign official by structuring a series of layered transactions aimed at disguising the payments to Takilant as payments to local vendors for fake or inflated construction or research services.
Finally, the SEC claims that VimpelCom also directed approximately $38 million in improper payments to the foreign official through charitable donations to organizations directly affiliated with the official.

On February 18, 2016, the SEC announced that it had settled an FCPA enforcement action against VimpelCom for violations of the FCPA’s anti-bribery, books-and-records, and internal controls provisions. The settlement required VimpelCom to pay $167.5 million in disgorgement. The SEC action was coupled with separate actions by the DOJ and Dutch Prosecutor’s office which required the company to pay $230.1 million and $397.5 million, respectively.
:
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
:
Civil Settlement
:
$375 million in disgorgement ($207.5 million of which deemed satisfied by payments to Dutch Public Prosecutor Service and to DOJ); retain independent compliance monitor for 3 years.
:
167,500,000
:
0
:
Issuer
:
Foreign
:
Netherlands
:
Contract Procurement/Retention, License/Permit, Other Business Advantage
:
2,500,000,000
:
Cash, Charitable contribution, Wire/check
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Shell entity
:
114,500,000
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Uzbekistan
:
Belgium, Ireland, Luxembourg, Switzerland
:
No
:
No
:
Netherlands