The recent settlement by Telia Company AB (“Telia”), one of the first of the U.S. Department of Justice (“DOJ”) under the Trump administration and one of the largest FCPA enforcement actions to date, has been touted by some as a sign that enforcement will remain tough. In this area of the law with scant case law or other guidance for companies looking to evaluate their own conduct and compliance programs, do these charting and resolution documents offer anything new? Telia obtained the maximum downward departure from the US Sentencing Guidelines and avoided the imposition of an independent monitor – what can be gleaned from the facts of the resolution as to how?
On September 21, 2017, Telia, a Swedish telecommunications company, entered into a $965 million joint settlement with U.S., Dutch, and Swedish authorities. The settlement revolved around allegations that Telia bribed a foreign official (widely reported to be Gulnara Karimova, the eldest daughter of Uzbekistan’s former president Islam Karimov), to assist Telia and its Uzbeki subsidiary, Coscom LLC (“Coscom”) in expanding the company’s share of the Uzbeki telecommunications market. According to the settlement documents (Links to the settlements: DOJ and SEC), from 2006 to 2007, Telia made approximately $331 million in corrupt payments to secure approvals from the Uzbek Agency for Communications and Information and business in the Uzbek telecommunications sector, generating more than $2.5 billion in revenues and approximately $457 million in profit.
Telia allegedly disguised the bribes through a series of mechanisms, including a corporate partnership agreement with a shell company associated with Karimova (“Uzbek Partner”) and payments to associates of Karimova. Under the terms of the agreement, Telia paid the Uzbek Partner $30 million and granted the Uzbek Partner shares of Telia, with the option to sell the shares back to Telia at a substantial profit. The agreement was negotiated by a high ranking Telia executive with authority over the company’s Eurasian business (“Executive A”), along with “certain management and employees within Telia.” Although Executive A failed to disclose to others within the company Ms. Karimova’s role in the Uzbek Partner agreement, Telia management became aware of her involvement through an update from an outside legal advisor who suggested taking “Coscom out of [the] US structure for a couple of reasons including the FCPA.” Finally, even after the Swedish Prosecution Authority opened an investigation into Telia’s dealings in Uzbekistan, Telia management failed to sever its ties with the Uzbek Partner and even considered making further payments to Ms. Karimova.
Telia entered into a deferred prosecution agreement (“DPA”) with DOJ, while Coscom pled guilty to one count of conspiracy to violate the FCPA. In addition, Telia consented to the entry of an administrative order by the U.S. Securities and Exchange Commission (“SEC”) for violations of the FCPA’s anti-bribery and internal control provisions. Under the DOJ agreement, Telia will pay $548.6 million in criminal penalties, including $274 million in fines imposed by Dutch regulators. According to the DPA, $40 million of the penalties represent forfeiture by Telia on behalf of Coscom as part of Coscom’s guilty plea.
Telia’s fine represents a 25% downward departure from the bottom of the U.S. Sentencing Guideline’s penalty range, which prescribe a fine range from $731 million to $1.46 billion. This is the maximum discount available under the DOJ’s FCPA pilot program for a company that did not voluntarily disclose the misconduct in question. Nonetheless, Telia’s DOJ settlement, on its own, represents the sixth largest FCPA enforcement action ever.
It is larger still considering the agreement with the SEC, in which Telia will disgorge $457 million in profits. Of that amount, $208.5 million will be collected by Swedish or Dutch authorities, and $208.5 million will be paid to the SEC. The SEC also gave Telia credit for the $40 million forfeiture imposed by DOJ on Telia as part of Coscom’s guilty plea. The $457 million disgorgement is the largest ever in an FCPA case.
Taken together, the $965 million cumulative settlement represents one of the largest FCPA enforcement action of all time. Nonetheless, that figure represents a 31% discount from the $1.4 billion that authorities had initially asked the company to pay 12 months earlier. Moreover, the settlements did not require the imposition of an independent monitor.
A day after the Telia settlements were announced, Sweden’s Prosecution Service announced that it charged three former Telia employees, believed to be former CEO Lars Nyberg, former head of Eurasia Tero Kivisaari, and former in-house counsel, Olli Tuohimaa, with corruption offenses under Swedish criminal law. All of the accused reportedly deny allegations of wrongdoing.
COOPERATION AND REMEDIAL MEASURES
So what insight do the resolution documents offer to help guide other companies in how to approach cooperation and remediation? As is typical in these types of matters, very little. The list of stated items that U.S. authorities considered for credit for cooperation in the investigation included high-level categories. While none of these items are groundbreaking, they still highlight the importance of thinking about how to address each area when faced with an FCPA inquiry by a US authority:
- conducting a thorough internal investigation;
- producing documents from foreign jurisdictions;
- voluntarily assisting in making former employees available for interviews in the United States;
- making regular factual presentations to DOJ; and
- providing information about the individuals involved in the conduct.
The hints as to how the DOJ determined that an independent compliance monitor was unnecessary are similarly few. DOJ focused on Telia’s “extensive” remedial measures and the state of its compliance program, including:
- terminating all individuals involved in the misconduct;
- terminating all individuals who had a supervisory role over those engaged in the misconduct, including every board member who took part in the decision to enter Uzbekistan or failed to detect the corrupt conduct;
- creating a “new and robust” compliance function;
- implementing a “comprehensive” anti-corruption program; and
- overhauling the company’s corporate governance structure.
Aside from corrective measures (such as terminating individuals), the resolution documents provide little insight into what the “new and robust” compliance function included. This is unsurprising, given the repeated statements in DOJ and SEC guidance that there is no one-size-fits-all model for compliance programs. Telia’s former chief ethics and compliance counsel, Michaela Ahlberg, spoke at a legal industry conference and reportedly fleshed out some of the specifics behind Telia’s efforts. According to Ahlberg, the compliance program was modelled on the DOJ’s Evaluation of Corporate Compliance Programs guidance and included a mobile phone app to help Telia employees answer common anti-bribery compliance questions.
Another factor to consider is that Telia, which used to have shares traded on a US stock exchange, no longer an SEC registrant and therefore not an “issuer” under the FCPA. This likely influenced the ability to impose a monitor. In addition, there was no books and records component of the enforcement action.DOJ officials have pointed to the Telia settlement as a sign that any apparent lull in FCPA enforcement has come to an end. The settlement further highlights the importance of having a robust FCPA compliance program and, in the case of an investigation, fully cooperating and implementing extensive remedial measures.
DOJ officials have pointed to the Telia settlement as a sign that any apparent lull in FCPA enforcement has come to an end. The settlement further highlights the importance of having a robust FCPA compliance program and, in the case of an investigation, fully cooperating and implementing extensive remedial measures.