Enforcement actions by criminal and supervisory authorities are settled regularly. In light of these developments, companies are advised to take appropriate measures. This month we highlight a USD 1.45 billion provision that the Swedish company Telia recorded in its quarterly report in anticipation of a settlement with US and Dutch authorities. This expected settlement is connected to wider bribery issues in the Uzbek telecom market, which have already led to settlements with Vimpelcom Ltd. and Takilant Ltd. The upcoming settlement with Telia shows Dutch prosecutors' willingness to prosecute corporate misconduct. We also discuss a settlement with the SEC, DOJ and Brazilian authorities for alleged violations of anti-corruption rules by the US aircraft manufacturer Embraer. This settlement emphasises, once again, the importance of having the right compliance framework in place, giving the company the guidance and ability to respond appropriately to incidents.
Telia records USD 1.45 billion provision for settlement
The Swedish company Telia (formerly TeliaSonera) released a quarterly report in October 2016, recording a USD 1.45 billion provision as the "best estimate" for a settlement with US and Dutch authorities. According to Telia's press release, Telia received a settlement proposal on 14 September 2016 resolving investigations into its entry into Uzbekistan's telecom market in 2007. Telia's CEO and president allegedly admitted engaging in malpractice during the market entry and said that Telia had cooperated with the authorities since the start of the investigations. Telia is not certain what ultimately will need to be paid to the authorities, but the amount of USD 1.45 billion is based on the proposal for resolution of the investigation made by the authorities in September 2016.
Both the Telia and Vimpelcom (see In context March 2016) settlements are connected to a broader investigation into Takilant Ltd, which is allegedly owned by the Uzbek president's daughter. Takilant allegedly participated in forgery, money laundering and corruption. The company allegedly solicited and accepted bribes totalling USD 400 million from Netherlands-based companies VimpelCom and Telia. By using Takilant, their payments eventually reached the daughter of the Uzbek president in exchange for entry into and continued business in the Uzbek telecommunications market. On 20 July 2016, the Amsterdam District Court ordered Takilant to forfeit EUR 123 million and pay a EUR 1.6 million fine. This was the first time a legal person was prosecuted for foreign corruption in the Netherlands. For more information on enforcement trends in the US, UK and NL, see our November 2016 In context article on the ISO 37001 standard.
With this upcoming settlement, the Dutch authorities are boosting their record of seriously addressing foreign bribery. We will continue to monitor the Telia case closely and keep you updated as new developments occur.
Embraer settles FCPA charges
US aircraft manufacturer Embraer settled with the SEC, DOJ and Brazilian authorities, and agreed to pay nearly USD 206 million for alleged violations of the U.S. Foreign Corrupt Practices Act. According to the SEC Order, Embraer allegedly paid bribes totalling almost USD 12 million through its subsidiary to foreign officials in the Dominican Republic, Saudi Arabia and Mozambique in order to obtain or retain business there. According to the SEC, Embraer allegedly made more than USD 83 million in profits as a result of the bribe payments. Embraer realised the payments by using third-party agents to mask the bribes. These transactions took place between 2007 and 2011 and involved the sale of executive, commercial and defence aircrafts. By paying government officials, the company influenced the competition and won contracts. To hide the bribe payments, Embraer falsified its books and records.
The total settlement of nearly USD 206 million includes a USD 107 million penalty to the DOJ as part of a deferred prosecution agreement (DPA) and more than USD 98 million in disgorgement and interest to the SEC. Embraer, according to the DOJ, also reached a settlement with Brazilian authorities under which it agreed to pay USD 20 million in disgorgement. As part of the DPA, Embraer has to retain an independent compliance monitor for at least three years.
The penalty on Embraer reflects Embraer's full cooperation, but it also demonstrates the incomplete remediation: Embraer allegedly failed to voluntarily disclose the FCPA violations initially, but did cooperate after the SEC served the company with a subpoena. According to the DOJ, "it disciplined a number of company employees and executives engaged in the misconduct, but did not discipline a senior executive who was aware of bribery discussions in emails in 2004 and had oversight responsibility for the employees engaged in those discussions."
This settlement emphasises the importance of having the right compliance framework in place, giving the company the guidance and ability to respond appropriately to incidents.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.