Vimpelcom FCPA DPA is APD on Steroids

Amsterdam-based Vimpelcom, the world’s sixth largest telecom company, engaged in corporate crime.

Massive foreign bribery to be exact.

Yet, the company was not forced to plead guilty to its crimes.

Instead, they were allowed to enter into a deferred prosecution agreement (DPA) and pay $795 million.

Call it an abuse of prosecutorial discretion (APD).

In most major corporate crime cases, DPA is APD.

In this case, DPA is APD on steroids.

The basic facts are pretty straightforward.

Vimpelcom wanted in on the telecommunications market in Uzbekistan.

To gain and keep access to the market, Vimpelcom and its wholly owned Uzbek unit — Unitel LLC — made more than $114 million in bribery payments to a government official in Uzbekistan between 2006 and 2012 — a clear violation of the Foreign Corrupt Practices Act (FCPA).

Unitel plead guilty.

Vimpelcom had its prosecution deferred.

Why the difference?

Why wasn’t Vimpelcom forced to plead guilty to its crimes — especially since it failed to self-report?

When asked that question during a telephone press briefing last week, Criminal Division chief Leslie Caldwell said that Unitel was “the company that actually was primarily engaged in the actual wrongdoing in Uzbekistan, where the bribes were paid and where there were various people lined up to help launder the money.”

“That was the reason why they pled guilty,” Caldwell said. “And the parent company is the company that entered into the deferred prosecution agreement.”

What were the factors that you considered in concluding that the parent company would get a deferred prosecution agreement and not be forced to plead guilty?

“One of the things that led to the deferred prosecution decision in this case was the fact that although the company did not self-report, as soon as they were contacted by the government they immediately acknowledged their responsibility, they immediately began cooperating. Their cooperation, as detailed in the plea document, their cooperation was very proactive, it was very extensive. It involved production of a lot of overseas materials that we would have had to wait for years for and may never have gotten. And their cooperation is ongoing in our ongoing investigation of individuals in other companies.”

Mike Koehler, for one, is not buying Caldwell’s explanation.

Koehler is a Professor of Law at the University of Southern Illinois School of Law.

“Having read the Department of Justice’s own documents, I question how Ms.Caldwell could have made this statement as the documents contain numerous allegations about VimpelCom executive officers as well as various VimpelCom corporate committees that were engaged in the improper conduct,”  Koehler told Corporate Crime Reporter.

“The allegations in this case are egregious and paint a picture of a culture of corruption at VimpelCom with high-level executives seeking legal cover at nearly every turn to facilitate the alleged bribery scheme.”

“That the Department allowed VimpelCom to resolve this matter with merely a deferred prosecution agreement is troubling, particularly since VimpelCom did not voluntarily disclose.”

University of Virginia Law Professor Brandon Garrett, author of Too Big to Jail: How Prosecutors Compromise with Corporations. also questioned the outcome in Vimpelcom.

“Is seems as if voluntary self disclosure may garner a non prosecution agreement while mere cooperation may garner deferred prosecution agreement and with a fine reduction by a percent reflecting the degree of cooperation,” Garrett told Corporate Crime Reporter. “Any such fine distinctions are not reflected in policy and any practice may be too complex to do a good job of deterring crime and rewarding ethical behavior.”

The statement of facts attached to the Vimpelcom deferred prosecution agreement makes for compelling reading.

The facts make clear that the company “failed to self-disclose voluntarily its misconduct to the (Justice Department) after an internal investigation had been initiated and uncovered wrongdoing.”

A member of Vimpelcom’s finance committee “expressed concern on the structure of the deal and FCPA issues” and noted “that if Vimpelcom goes into this deal under this structure and if the structure violates the FCPA picture, Vimpelcom’s name could be damaged.”

Open discussion of the corrupt nature of the deal made it to Vimpelcom’s board of directors.

According to the statement of facts, “during a December 14, 2005 Vimpelcom board meeting, the likelihood of corruption was further discussed.”

“Concerns were raised about doing business” with the corrupt foreign official and that  with “there was a recognition that a thorough analysis was needed to ensure that the . . . payment was not merely a corrupt pretext for other services and favors.”

“There were also numerous requests to ensure that the deal complied with the FCPA.”

“Ultimately, Vimpelcom’s board approved” the deals “with a condition that FCPA analysis from an international law firm be provided to Vimpelcom.

Vimpelcom’s management then sought FCPA advice that could be used to satisfy the board’s requirement while allowing Vimpelcom to proceed with a knowingly corrupt deal.

When the board of directors sought an FCPA legal opinion assessing corruption risks involved in the transactions, certain VimpelCom executives withheld crucial information from outside counsel performing the review that restricted the scope of FCPA opinions, rendering them worthless.

VimpelCom admitted that it falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions.

VimpelCom also failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection or remediation.

According to the Department, rather than implement and enforce a strong anti-corruption ethic, certain VimpelCom executives sought ways to give the company plausible deniability of illegality while knowingly proceeding with corrupt business transactions.

What part of this is deferrable?


Russell Mokhiber is the editor of the Corporate Crime Reporter..