International telecom provider VimpelCom and its subsidiary Silkway Holdings BV (hereinafter referred to as VimpelCom) have accepted a settlement offered by the Dutch Public Prosecution Service (DPPS) totaling 397,500,000 US dollars. VimpelCom is headquarted in Amsterdam. The DPPS accuses VimpelCom of the criminal offences bribery of government officials and inaccurate books and records. It concerns the period around the time of gaining access to the Uzbek telecom market and thereafter (from 2006 up to and including 2012).
Parallel to the Dutch investigation conducted by the Fiscal Intelligence and Investigation Service (FIOD) investigations were carried out by the United States Department of Justice (DoJ) and the United States Securities and Exchange Commission (SEC). Vimpelcom will pay a total of 795.000.000 USD in fines and towards conviscation in the US and in the Netherlands. Half of this amount will be paid to the Netherlands and the other half to the USA. In the past decade, multinational VimpelCom has become one of the six largest telecom providers in the world, with a presence in Russia, Italy, Asia, Africa, Ukraine, Kazakhstan and Uzbekistan among others. The company is listed on the Nasdaq Global Select Market exchange and is headquarted in Amsterdam since 2010.
Criminal investigation
The criminal investigation was initiated in 2013. The Dutch criminal investigation was carried out by the FIOD under supervision of the National Prosecutor’s Office for Serious Fraud, Environmental Crime and Asset Confiscation (“Functioneel Parket”). During the investigation, VimpelCom’s head office in Amsterdam was searched in March 2014.
Vimpelcom has initiated its own investigation into its activities in Uzbekistan. This investigation was conducted by internal investigators, by an American specialized law firm and by forensic accountants. Both the DPPS and the US authorities were regularly informed about the results of this internal investigation.
The OM holds that VimpelCom, via its subsidiary Unitel, has paid bribes to government officials. These bribes were paid in connection with its entry to the Uzbek telecom market in 2006 and in connection with obtaining telecommunication licenses for 3G and LTE frequencies. In total VimpelCom paid 114,500,000 US dollars.In addition to these bribe payments, Unitel paid over 30,000,000 US dollars in sponsorships or charitable contributions. Some of these payments can be linked to the acquisition of licenses, permits and number blocks of Unitel in Uzbekistan. The OM holds that these payments constitute the criminal offences of bribery of government officials (corruption) and books and records violations.
Seriousness of the offences
Corruption and related offences are serious because of their undermining and corrupting nature and the consequences for society. Corruption distorts competition and constitutes a serious violation of the integrity of governments, with great moral and political consequences. According to the DPPS, the bribery committed throughout the years resulted in a dominant position in the telecommunication market in Uzbekistan and significant profits as a consequence. By its conduct, Vimpelcom has contributed to corruption in Uzbekistan.
The OM considers the fine and confiscation order imposed on VimpelCom appropriate. It is a punishment that hurts, and it does justice to the significance of the acts committed as well as to the disruption these acts caused to the legal order. This judicial response contains the components punishment (fine), rehabilitation (confiscation) and prevention (compliance).
The punishment acts as a deterrent to other companies. This settlement provides for compliance within the company. A large number of compliance measures have been taken within VimpelCom, decreasing the risk of recurrence in the future. In addition it has been taken into account that the company has also reached settlements with the US DoJ and SEC. This parallel government action against corruption demonstrates that corruption is tackled internationally.
Compliance and imposition of punishment
As a condition for the out of court settlement the US authorities imposed the appointment of an external compliance monitor for VimpelCom for the duration of three years. This appointment means that during three years the business operation of the entire Vimpelcom Group will be monitored by a legal supervisor. Reports will be submitted to the United States. In addition, the OM and VimpelCom have agreed that the latter will actively re-establish its compliance and to report irregularities on its own initiative.
The punishment includes a fine of 100,000,000 US dollars and the confiscation of 130,000,000 US dollars. In determining the Dutch fine it was taken into account that the payments to government officials took place during a long time (7 years) and that the bribe payments were significant. As is the case when a sentence is formulated in court, the defendant’s attitude was taken into account as well. VimpelCom has cooperated in the investigation and has made its internal findings available. The company is taking action to make a clean sweep and to get its compliance in order. In the meantime, executives who participated in the bribery, directly or indirectly, have left the company.
VimpelCom has gained access to the Uzbek market via Unitel (name of its subsidiary). In the opinion of the DPPS access has been gained by paying bribes to (the company of) a government official. Without those payments, the entry to the Uzbek market would not have been successful. After the entry into the market, Unitel was able to acquire new licenses and number blocks, in relation to which bribes were paid as well. This resulted in the company acquiring a dominant position in the Uzbek telecommunication market and thus, all activities in Uzbekistan can be related to the bribery. Therefore, according to the DPPS, Unitel’s earnings from the time of entering the market until the beginning of 2014 constitute illegally obtained profits. Since Unitel is a 100% subsidiary of VimpelCom, these profits are recovered from VimpelCom. In the Netherlands, the amount of 167.500.00 USD is confiscated.
The OM holds that individuals who are suspected of having had a leading role in the corruption should be prosecuted if their involvement can be proven legally and convincingly. The OM is conducting a criminal investigation into several individuals, one of which has the Dutch nationality. He was arrested in November and taken into custody. The investigation is on-going. The Dutch Prosecution has shared the information from its investigation with countries in which prosecution of the other individuals is possible.
