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Mobile Telesystems Pjsc and Its Uzbek Subsidiary Enter into Resolutions of $850 Million with the Department of Justice for Paying Bribes in Uzbekistan

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Former General Director of MTS’s Uzbek Subsidiary and Former Uzbek Official Charged in Bribery and Money Laundering Scheme Totaling Almost $1 Billion

Moscow-based Mobile TeleSystems PJSC (MTS), the largest mobile telecom­mu­ni­ca­tions com­pa­ny in Russia and an issuer of pub­licly trad­ed secu­ri­ties in the United States, and its whol­ly owned Uzbek sub­sidiary, KOLORIT DIZAYN INK LLC (KOLORIT), have entered into res­o­lu­tions with the Department of Justice and Securities and Exchange Commission (SEC) and agreed to pay a com­bined total penal­ty of $850 mil­lion to resolve charges aris­ing out of a scheme to pay bribes in Uzbekistan.  In addi­tion, charges were unsealed today against a for­mer Uzbek offi­cial who is the daugh­ter of the for­mer pres­i­dent of Uzbekistan and against the for­mer CEO of Uzdunrobita LLC, anoth­er MTS sub­sidiary, for their par­tic­i­pa­tion in a bribery and mon­ey laun­der­ing scheme involv­ing more than $865 mil­lion in bribes from MTS, VimpelCom Limited (now VEON) and Telia Company AB (Telia) to the for­mer Uzbek offi­cial in order to secure her assis­tance in enter­ing and main­tain­ing their busi­ness oper­a­tions in Uzbekistan’s telecom­mu­ni­ca­tions mar­ket.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York, Special Agent in Charge Raymond Villanueva of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Washington, D.C. and Chief Don Fort of IRS Criminal Investigation (IRS-CI) made the announce­ment.

Gulnara Karimova, 46, a cit­i­zen of Uzbekistan, was charged in an indict­ment filed in the Southern District of New York on March 7 with one count of con­spir­a­cy to com­mit mon­ey laun­der­ing.  Karimova is a for­mer Uzbek offi­cial who alleged­ly had influ­ence over the Uzbek gov­ern­men­tal body that reg­u­lat­ed the tele­com indus­try.  Bekhzod Akhmedov, 44, a cit­i­zen of Uzbekistan and the for­mer Uzbek exec­u­tive, was charged in the same indict­ment with one count of con­spir­a­cy to vio­late the Foreign Corrupt Practices Act (FCPA), two counts of vio­lat­ing the FCPA, and one count of con­spir­a­cy to com­mit mon­ey laun­der­ing.  Karimova’s and Akhmedov’s case is assigned to U.S. District Judge Kimba Wood of the Southern District of New York.  

Gulnara Karimova stands accused of exploit­ing her offi­cial posi­tion to solic­it and accept more than $865 mil­lion in bribes from three pub­licly trad­ed tele­com com­pa­nies, and then laun­der­ing those bribes through the U.S. finan­cial sys­tem,” said Assistant Attorney General Benczkowski.  “The indict­ment and cor­po­rate res­o­lu­tion announced today, togeth­er with two pri­or cor­po­rate res­o­lu­tions involv­ing bribes alleged­ly paid to Karimova, demon­strate the Department’s com­pre­hen­sive approach to for­eign cor­rup­tion: we will aggres­sive­ly pur­sue both cor­rupt for­eign offi­cials and the com­pa­nies and indi­vid­u­als who bribe them in order to gain unfair busi­ness advan­tages, and we will do every­thing we can to keep the pro­ceeds of that cor­rup­tion out of the U.S. finan­cial sys­tem.”

This is the third install­ment in a tril­o­gy of cas­es aris­ing from an almost $1 bil­lion bribery scheme that reached the high­est ech­e­lons of the Uzbekistan gov­ern­ment and was orches­trat­ed by some of the largest telecom­mu­ni­ca­tions com­pa­nies in the world,” said U.S. Attorney Berman.  “By fun­nel­ing mul­ti­mil­lion-dol­lar bribe pay­ments through the U.S. finan­cial sys­tem, the com­pa­nies and indi­vid­ual defen­dants cor­rupt­ly tried to tip the glob­al econ­o­my in their favor and line their own pock­ets.  But they are now pay­ing the price.  Today, my Office and our law enforce­ment part­ners are send­ing a bold, unequiv­o­cal mes­sage that the U.S. finan­cial sys­tem is not in busi­ness to enable for­eign bribery or mon­ey laun­der­ing.  This Office stands ready to pre­vent, pros­e­cute, and penal­ize for­eign cor­rupt prac­tices wher­ev­er in the world we find them.”

Corruption of this lev­el and reach poi­sons our integri­ty as a par­tic­i­pant in the glob­al mar­ket­place,” said HSI Washington Special Agent in Charge Villanueva.  “Thanks to our skill­ful and col­lab­o­ra­tive inves­ti­ga­tors at HSI and the IRS-CI, Karimova and Ahkmedov’s exploitive crimes will be pre­sent­ed before the just eye of our courts and no longer will such cor­rup­tion be per­mit­ted to metas­ta­size across our bor­ders.” 

With the increase in glob­al­iza­tion and ease with which funds can be moved, crim­i­nals think their finan­cial trans­ac­tions can­not be tracked—but they would be wrong,” said IRS-CI Chief Fort.  “We will con­tin­ue to inves­ti­gate vio­la­tions of the Foreign Corrupt Practices Act to ensure our country’s finan­cial insti­tu­tions are not used for devi­ous pur­pos­es.  We are com­mit­ted to aggres­sive­ly pur­su­ing all who engage in cor­rup­tion, mon­ey laun­der­ing, and bribery for their own per­son­al gain and at the expense of the U.S. gov­ern­ment.”

According to the indict­ment against Karimova and Akhmedov, in or around the ear­ly 2000s, they agreed that Akhmedov would solic­it and facil­i­tate cor­rupt bribe pay­ments from telecom­mu­ni­ca­tions com­pa­nies seek­ing to enter the Uzbek mar­ket.  In exchange, Karimova alleged­ly used her influ­ence over Uzbek author­i­ties to help the telecom­mu­ni­ca­tions com­pa­nies obtain and retain lucra­tive busi­ness oppor­tu­ni­ties in the Uzbek telecom­mu­ni­ca­tions mar­ket.  In total, Akhmedov con­spired with the tele­com com­pa­nies and oth­ers to pay Karimova more than $865 mil­lion in bribes, and Akhmedov and Karimova con­spired with oth­ers to laun­der and con­ceal those funds to, from and through bank accounts in the United States, in order to pro­mote the ongo­ing bribery scheme, the indict­ment alleges. 

The charges in the indict­ment are mere­ly alle­ga­tions, and the defen­dants are pre­sumed inno­cent until proven guilty beyond a rea­son­able doubt in a court of law.

MTS entered into a deferred pros­e­cu­tion agree­ment with the Department of Justice in con­nec­tion with a crim­i­nal infor­ma­tion filed yes­ter­day in the Southern District of New York charg­ing the com­pa­ny with one count of con­spir­a­cy to vio­late the anti-bribery and books and records pro­vi­sions of the FCPA and one count of vio­lat­ing the inter­nal con­trols pro­vi­sions of the FCPA.  KOLORIT plead­ed guilty to a one-count crim­i­nal infor­ma­tion filed in the Southern District of New York, charg­ing the com­pa­ny with con­spir­a­cy to vio­late the anti-bribery and books and records pro­vi­sions of the FCPA.  Pursuant to its agree­ment with the depart­ment, MTS agreed to pay a total crim­i­nal penal­ty of $850 mil­lion to the United States, includ­ing a $500,000 crim­i­nal fine and $40 mil­lion in crim­i­nal for­fei­ture that MTS agreed to pay on behalf of KOLORIT.  MTS also agreed to the impo­si­tion of an inde­pen­dent com­pli­ance mon­i­tor for a term of three years and to imple­ment rig­or­ous inter­nal con­trols and coop­er­ate ful­ly with the Department’s ongo­ing inves­ti­ga­tion, includ­ing its inves­ti­ga­tion of indi­vid­u­als such as Akhmedov and Karimova.  The case against MTS and KOLORIT is assigned to U.S. District Judge J. Paul Oetken of the Southern District of New York.  

In relat­ed pro­ceed­ings, MTS reached a set­tle­ment with the SEC.  Under the terms of its agree­ment with the SEC, MTS agreed to pay a $100 mil­lion civ­il penal­ty.  Consistent with Coordination of Corporate Resolution Penalties in Parallel and/or Joint Investigations and Proceedings Arising from the Same Misconduct (Justice Manual 1–12.100), the Department of Justice agreed to cred­it the civ­il penal­ty paid to the SEC as part of its agree­ment with MTS.  Thus, the com­bined total amount of crim­i­nal and reg­u­la­to­ry penal­ties paid by MTS and KOLORIT to U.S. author­i­ties will be $850 mil­lion.

According to the com­pa­nies’ admis­sions, MTS and KOLORIT, through var­i­ous man­agers and employ­ees with­in MTS, MTS’s Uzbek sub­sidiaries Uzdunrobita LLC and KOLORIT, and oth­er affil­i­at­ed enti­ties, paid approx­i­mate­ly $420 mil­lion in bribes to Karimova, who had influ­ence over the Uzbek gov­ern­men­tal body that reg­u­lat­ed the tele­com indus­try.  The bribes were paid on mul­ti­ple occa­sions between 2004 and 2012 so that MTS could enter the Uzbek mar­ket through the acqui­si­tion of Uzdunrobita and so that Uzdunrobita could gain valu­able tele­com assets and con­tin­ue oper­at­ing in Uzbekistan.  The com­pa­nies admit­ted­ly struc­tured and con­cealed the bribes through pay­ments to shell com­pa­nies that mem­bers of MTS’s and Uzdunrobita’s man­age­ment knew were ben­e­fi­cial­ly owned by Karimova.  MTS and Uzdunrobita also acquired KOLORIT, know­ing that the price MTS and Uzdunrobita paid was inflat­ed, in order to bribe Karimova in exchange for Uzdunrobita’s con­tin­u­ing to oper­ate in Uzbekistan.  Uzdunrobita made pay­ments to pur­port­ed char­i­ties and for spon­sor­ships to enti­ties relat­ed to Karimova.  The Uzbek gov­ern­ment expro­pri­at­ed Uzdunrobita in 2012 as a result of MTS’s, Uzdunrobita’s and KOLORIT’s fail­ure to meet Karimova’s demands for addi­tion­al pay­ments.

A num­ber of fac­tors con­tributed to the Department’s crim­i­nal res­o­lu­tion with the com­pa­nies, includ­ing (1) the com­pa­nies did not vol­un­tar­i­ly dis­close; (2) the com­pa­nies’ lev­el of coop­er­a­tion and reme­di­a­tion was lack­ing, not proac­tive; (3) the nature and seri­ous­ness of the office, includ­ing $420 mil­lion in bribes to a high-lev­el Uzbek offi­cial; and (4) the mit­i­gat­ing fac­tors present in this case, includ­ing that the Uzbek gov­ern­ment expro­pri­at­ed the com­pa­nies’  telecom­mu­ni­ca­tions assets in Uzbekistan, result­ing in no real­ized pecu­niary gain to the com­pa­nies as a result of the mis­con­duct.

The res­o­lu­tion, reached in coor­di­na­tion with the SEC’s res­o­lu­tion, marks the third such res­o­lu­tion by a major inter­na­tion­al telecom­mu­ni­ca­tions provider for bribery in Uzbekistan.  On Feb. 18, 2016, Amsterdam-based VimpelCom and its Uzbek sub­sidiary, Unitel LLC, entered into res­o­lu­tions with the Department of Justice and admit­ted to a con­spir­a­cy to make more than $114 mil­lion in bribery pay­ments to Karimova between 2006 and 2012.  On Sept. 21, 2017, Stockholm-based Telia and its Uzbek sub­sidiary, Coscom LLC, also entered into res­o­lu­tions with the Department and admit­ted to a con­spir­a­cy to make more than $331 mil­lion in bribery pay­ments to Karimova.  The inves­ti­ga­tion has thus far yield­ed a com­bined total of over $2.6 bil­lion in glob­al fines and dis­gorge­ment, includ­ing over $1.3 bil­lion in crim­i­nal penal­ties to the United States.  In relat­ed actions, the Department has also filed civ­il com­plaints seek­ing the for­fei­ture of more than $850 mil­lion held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland, which con­sti­tute bribe pay­ments made by MTS, VimpelCom and Telia, or funds involved in the laun­der­ing of those cor­rupt pay­ments to Karimova.

The IRS-CI and HSI are inves­ti­gat­ing the cas­es as part of the IRS Global Illicit Financial Team in Washington, D.C.  Assistant Chief Ephraim Wernick and Senior Litigation Counsel Nicola J. Mrazek of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Edward Imperatore and Daniel Noble of the Southern District of New York are pros­e­cut­ing the case against MTS and KOLORIT.  Assistant Chief Wernick and Trial Attorney Elina Rubin-Smith of the Fraud Section and Assistant U.S. Attorneys Imperatore and Noble are pros­e­cut­ing the case against Karimova and Akhmedov.  Trial Attorney Michael Khoo of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) is pros­e­cut­ing the for­fei­ture case with sub­stan­tial assis­tance from for­mer MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington.

Law enforce­ment author­i­ties in Austria, Belgium, Cyprus, France, Ireland, Isle of Man, Latvia, Luxembourg, Norway, the Netherlands, Switzerland, Sweden and the United Kingdom have pro­vid­ed valu­able assis­tance in this case.  The Criminal Division’s Office of International Affairs pro­vid­ed sig­nif­i­cant assis­tance as well.  The SEC referred the mat­ter to the Department and also pro­vid­ed exten­sive coop­er­a­tion and assis­tance.

The Criminal Division’s Fraud Section is respon­si­ble for inves­ti­gat­ing and pros­e­cut­ing all FCPA mat­ters.  Additional infor­ma­tion about the Justice Department’s FCPA enforce­ment efforts can be found at www.justice.gov/criminal/fraud/fcpa.

Individuals with infor­ma­tion about pos­si­ble pro­ceeds of for­eign cor­rup­tion locat­ed in or laun­dered through the United States should con­tact fed­er­al law enforce­ment or send an email to kleptocracy@usdoj.gov.

Attachment(s):

 Download KOLORIT InformationDownload KOLORIT Plea Agreement and AttachmentsDownload MTS DPADownload MTS InformationDownload Karimova and Akhmedov Indictment

Topic(s): Financial FraudForeign Corruption

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