US prosecutors say Sweden's Telia agrees $1bn Uzbek telecoms bribery settlement

US prosecutors say Sweden's Telia agrees $1bn Uzbek telecoms bribery settlement
Stockholm-based Telia and Uzbek unit Coscom (pictured is its Tashkent office) built a corrupt business in Uzbekistan and exposed themselves to US prosecution via a New York listing and use of the American financial system.
By bne IntelliNews September 22, 2017

Swedish telecom carrier Telia and its Uzbek subsidiary Coscom LLC have agreed to pay a global foreign bribery penalty amounting to $965mn to resolve charges related to hundreds of millions of dollars in bribes paid out to enter Uzbekistan’s mobile market, US prosecutors said on September 21.

Telia, along with Russian VimpelCom (now VEON) and MTS, have been pursued by prosecutors for bribing entities connected to Gulnara Karimova, the now disgraced eldest daughter of late Uzbek President Islam Karimov, to win licences to operate 3G and 4G services on the Uzbek mobile market. VimpelCom was fined $795m by US and Dutch authorities for the bribes it paid in Uzbekistan. Telia gave over $331mn in bribes to an Uzbek official between 2007 and 2010, according to Joon Kim, acting US attorney for Manhattan.

The official who received the bribes was a close relative of a high-ranking government official who had influence over the Uzbek governmental body that regulated the telecom industry, he added.

“Swedish telecom company Telia and its Uzbek subsidiary Coscom have admitted to paying, over many years, more than $331 million in bribes to an Uzbek government official,” the prosecutor 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.”

Telia’s settlement includes $548mn in criminal penalties split between the US and the Netherlands and another $457mn for disgorgement of profits to the US Securities and Exchange Commission (SEC). However, the SEC agreed to credit a $40mn amount in forfeiture paid to the US Department of Justice as part of its agreement with Telia and, thus, brought the total size of the settlement down to $965mn.

The settlement was made possible after Telia entered into a deferred prosecution agreement in connection with criminal information charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Coscom, meanwhile, pled guilty. It was sentenced on a one-count criminal information that charged the company with conspiracy to violate the anti-bribery provisions of the FCPA.

As part of its agreement, Telia will also implement rigorous internal controls and cooperate fully with the Justice Department’s ongoing investigation, including its investigation of individuals.

Telia’s Uzbek subsidiary, Ucell, started operating in Uzbekistan under the brand of COSCOM in 1996. Currently, the company has over 9mn subscribers in Uzbekistan, providing 2G, 3G and 4G services. It was recently granted a 15-year extension of its operating licence in Uzbekistan.

Telia owns mobile operators in seven countries across the Central Asian region (Nepal, Kazakhstan, Uzbekistan, Azerbaijan, Georgia, Moldova and Tajikistan), and has over 40mn local subscribers. The group has said it intends to gradually exit Eurasia.

The Swedish and Finnish governments hold 37.3% and 3.2% stakes in Telia, respectively. Telia’s bribery case was under investigation by the Swedish Prosecution Authority, the US Department of Justice and the US Securities and Exchange Commission.

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