VIMPELCOM LTD.

INDUSTRY

Telecommunications

CORPORATE HEADQUARTERS

Amsterdam, North Holland, Netherlands

SUMMARY OF ALLEGATIONS

Nationality of Foreign Officials: Uzbekistan

Summary of Allegations:

From 2006 to 2012, VimpelCom allegedly made at least USD 114 million in improper payments to an Uzbek government official through Takilant, a shell company of the official. VimpelCom allegedly understood that the official was a close relative of a high-ranking Uzbek government official and had significant influence over other Uzbek government officials. This official is reported as Gulnara Karimova, daughter of Uzbek President Islam Karimov. In addition to the sham contracts, the bribes were disguised as charitable donations and sponsorships made to charities directly affiliated with the official. As result, VimpelCom allegedly obtained and retained business that generated more than USD 2.5 billion in revenues for the company.

VimpelCom's subsidiaries improperly recorded the payments as legitimate expenses in its books, and they were later consolidated into VimpelCom's financial statements.


Approximate Alleged Payments to Foreign Officials: at least USD 114 million

Business Advantage Allegedly Obtained: more than USD 2.5 billion revenue generation for VimpelCom

ENFORCEMENT RESULTS

Agencies: Netherlands: National Public Prosecutor's Office for Financial, Economic and Environmental Offences
Results: Criminal Fine, Disgorgement
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

In Form 6-K filed with the U.S. Securities and Exchange Commission ("SEC") on 12 March 2014, VimpelCom disclosed that Company's headquarter in Amsterdam was raided by the Dutch authorities, including the Dutch Public Prosecution Service (Openbaar Ministerie), who obtained documents and informed Vimpelcom it was under investigation concerning the company's operations in Uzbekistan. In April 2015, media reports indicated that Dutch authorities had opened an investigation into the company for allegedly paying bribes to Karimova.

On 3 November 2015, VimpelCom announced that the company has been exploring resolution of their potential liabilities and based on its ongoing assessment of the investigation by the US and Dutch authorities during the third quarter of 2015, VimpelCom will make a provision in the amount of USD 900 million in its third quarter financial statements.

In its 4Q15 and FY15 earnings report released on 17 February 2016, VimpelCom announced its prospective settlements with the US and Dutch authorities. Based on the terms of the prospective settlements, VimpelCom would acknowledge certain violations of the U.S. Foreign Corrupt Practices Act ("FCPA") and relevant Dutch laws and pay fines and disgorgements to the authorities.

On 18 February 2016, VimpelCom announced its settlements with the US and Dutch authorities. Under the terms of its resolution with the SEC, VimpelCom agreed to a total of USD 375 million in disgorgement of profits and prejudgment interests, to be divided between the SEC and OM and agreed to pay the OM a criminal penalty of USD 230,163.199.20 for a total criminal penalty of USD 460,326,398.40, and a total resolution amount of more than USD 835 million. The DOJ agreed to credit the criminal penalty paid to the OM as part of its agreement with VimpelCom and the SEC agreed to credit the forfeiture paid to the DOJ as part of its agreement with VimpelCom. As result, VimpelCom will pay fines and disgorgements to the US and Dutch authorities in an aggregated amount of USD 795 million, USD 167.5 million to the SEC, USD 230.1 million to the DOJ, and USD 397.5 million to Dutch regulators. In addition, VimpelCom agreed to retain an independent compliance monitor for at least three years.

In its SEC Form 20-F filed on 31 March 2016, VimpelCom disclosed that all FCPA settlement amounts were paid in February and March 2016 and were included in the provision made by VimpelCom in its financial statements for the year ended 31 December 2015. In addition, the remaining provision of USD 105 has been  reserved to cover expected direct and incremental legal expenses associated with the resolution.



Agencies: Norway: Public Prosecutor
Results:
Year Resolved:
Compliance Monitor: N/A
Ongoing: Yes
Details:

On 5 November 2015, Norwegian prosecutors detained and questioned Jo Lunder, a former VimpelCom CEO from 2011 to 2015, on suspicions of corruption related to VimpelCom's operations in Uzbekistan. Lunder was held for six days while officials searched his home and questioned other witnesses in the case. Lunder denied the allegations and stated that he's neither been to Uzbekistan nor met Karimova. Norwegian investigation of Lunder continues.

Immediately following the arrest, Fredriksen Group suspended Lunder from all his roles in the company as CEO until further notice. Lunder had taken over as CEO of the Fredriksen Group in September 2015.

On 5 November 2015, Norway's chief public prosecutor, Marianne Djupesland confirmed Norway's decision to launch its own probe into VimpelCom.



Agencies: Norway: Telenor Internal Investigation
Results:
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

Since the emergence of VimpelCom's bribery scandal, Norwegian government, 53.97% owner of Telenor, has questioned how much Telenor knew about VimpelCom's activities in Uzbekistan. On 30 October 2015, Svein Aaser, Telenor's chairman, stepped down from his position citing a disagreement with Norwegian government over his handling of the VimpelCom affair. On the same day, Norway's Minister of Trade and Industry Monica Maeland stated that she no longer has confidence in Aaser based on new information received on the affair. Maeland further stated that she has ordered Telenor's nomination committee to replace Aaser immediately.

In November 2015, Telenor hired Deloitte to review the group's handling and oversight of its minority ownership in VimpelCom.

On 9 November 2015, Telenor severed its consultancy agreement with ex-CEO Jon Fredrik Baksaas.

On 11 November 2015, Telenor announced that it has temporarily suspended CFO Richard Olav Aa, General Counsel Paal Wien Espen, Fridtjof Rusten (CFO at Telenor's Thai subsidiary dtac & former Telenor nominee to the VimpelCom board), and Ole Bjoern Sjulstad (head of Telenor Russia & former Telenor nominee to the VimpelCom board). It was added, however, Telenor had no reason to believe that the suspended executives has been involved in the VimpelCom affair.

On 29 April 2016, Telenor published the Deloitte review which did not uncover any corruption at Telenor but pointed out the weaknesses in its organizational structure, communication and leadership relating to its role as VimpelCom's owner. Along with the publication of the review, Telenor announced that it has accepted the resignation of previously suspended CFO Richard Olav Aa and General Council Pal Wien Espen. Telenor indicated that the two waited too long to inform the then CEO of the potential corruption at VimpelCom.  Other two executives who were also suspended, Fridtjof Rusten and Ole Bjoern Sjulstad, will return to their jobs.



Agencies: Sweden: Prosecution Authority, Anti-Corruption Unit
Results:
Year Resolved:
Compliance Monitor: N/A
Ongoing: Yes
Details:

According to media reports, Sweden began its investigation into in 2012. A few weeks later, on 16 October 2012, the Swedish court approved the prosecutors' request to freeze an account controlled by Takilant at Nordea Bank, which holds about USD 30.4 million. The court agreed to the freeze by explaining that it had grounds to suspect two Uzbek nationals, Gayane Avakyan and Alisher Ergashev, of money laundering. Attorneys for the two Uzbekis have denied the money laundering allegations.

In April 2015, media reports indicated that Swedish authorities froze more than 193 million Euros in assets, of which USD 30.4 million was frozen at the request of the United States as part of its investigations into VimpelCom, MTS and TeliaSonera.

The investigation is ongoing.



Agencies: Switzerland: Office of the Attorney General
Results:
Year Resolved:
Compliance Monitor: N/A
Ongoing: Yes
Details:

According to media reports, Swiss authorities initiated an investigation into claims of bribery related to TeliaSonera and VimpelCom in 2012. On 19 August 2015, the Switzerland's Office of the Attorney General announced it has confiscated more than 800 million Swiss francs (USD 826 million) in the investigation.

On 24 August 2015, Swiss authorities have agreed to the August 2015 request by the US authorities to freeze funds with suspected links to Gulnara Karimova and the investigation.

The investigation is ongoing.

 



Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Compliance Monitor, Criminal Fine, Deferred Prosecution Agreement, Disgorgement
Year Resolved: 2016
Compliance Monitor: 3 years
Ongoing: No
Details:

In Form 6-K filed with the SEC on 12 March 2014, VimpelCom disclosed that it was being investigated by the SEC concerning its operations in Uzbekistan. On 18 March 2014, VimpelCom also disclosed that it was also being investigated by the U.S. Department of Justice ("DOJ").

In March 2015, Swedish authorities froze more than 193 million Euros in assets, of which USD 30.4 million was frozen at the request of the U.S. authorities as part of its investigations into VimpelCom, MTS and TeliaSonera.

According to media reports, the DOJ filed a complaint in U.S. Federal court in Manhattan, NY on 29 June 2015 to seize USD 300 million from bank accounts in Ireland, Luxembourg and Belgium that allegedly are corrupt payments made by MTS and Vimpelcom to obtain mobile licenses and radio frequencies. The DOJ alleged that some of the funds are held by Takilant Ltd., a company owned by a relative of Uzbekistan's president Islam Karimov. The court approved the seizure of the funds on 9 July 2015.

According to media reports in August 2015, the U.S. authorities are asking European counterparts to seize about USD 1 billion in assets related to the investigation in effort to target what prosecutors believe are the spoils of alleged corrupt activities overseas. On 24 August 2015, Swiss authorities have agreed to the U.S. request to freeze funds.

On 3 November 2015, VimpelCom announced that the company has been exploring resolution of their potential liabilities and based on its ongoing assessment of the investigation by the US and Dutch authorities during the third quarter of 2015, VimpelCom will make a provision in the amount of USD 900 million in its third quarter financial statements.

On 25 November 2015, Bloomberg reported that VimpelCom is discussing a settlement with U.S. authorities that would involve USD 775 million in fines and penalties.

In its 4Q15 and FY15 earnings report released on 17 February 2016, VimpelCom announced its prospective settlements with the US and Dutch authorities. Based on the terms of the prospective settlements, VimpelCom would acknowledge certain violations of the FCPA and relevant Dutch laws and pay fines and disgorgements to the authorities.

On 18 February 2016, VimpelCom entered into settlements with the US and Dutch authorities. VimpelCom has agreed to a deferred prosecution agreement with the DOJ and a consent agreement with the SEC. In addition, Unitel has entered a guilty plea with the DOJ. Under the terms of its resolution with the SEC, VimpelCom agreed to a total of USD 375 million in disgorgement of profits and prejudgment interests, to be divided between the SEC and OM and agreed to pay the OM a criminal penalty of USD 230,163.199.20 for a total criminal penalty of USD 460,326,398.40, and a total resolution amount of more than USD 835 million. The DOJ agreed to credit the criminal penalty paid to the OM as part of its agreement with VimpelCom and the SEC agreed to credit the forfeiture paid to the DOJ as part of its agreement with VimpelCom. As result, VimpelCom will pay fines and disgorgements to the US and Dutch authorities in an aggregated amount of USD 795 million, USD 167.5 million to the SEC, USD 230.1 million to the DOJ, and USD 397.5 million to Dutch regulators. In addition, VimpelCom agreed to retain an independent compliance monitor for at least three years.

VimpelCom, through its press release on 18 February 2016, noted that its cooperation in the investigation and actions in rapidly resolving this matter, together with substantial upgrades to its compliance program, have been recognized by the authorities in the settlements.

On the same day, the DOJ announced that two civil complaints seeking a total of USD 850 million in forfeiture have been filed in relation to this matter. The civil compliant, filed on 18 February 2016, seeks forfeiture of approximately USD 550 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan. The civil complaint, filed on 29 June 2015, seeks the forfeiture of remaining USD 300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the same Uzbek official.

According to media reports, the DOJ filed a complaint in U.S. Federal court in Manhattan, NY on 29 June 2015 to seize USD 300 million from bank accounts in Ireland, Luxembourg and Belgium that allegedly are corrupt payments made by MTS and Vimpelcom to obtain mobile licenses and radio frequencies. The DOJ alleged that some of the funds are held by Takilant Ltd., a company owned by a relative of Uzbekistan's president Islam Karimov. The court approved the seizure of the funds on 9 July 2015.

In July 2016, authorities agreed to stay the court order as settlement talks continues.

A group of Uzbek political exiles has requested that the Irish government not return the seized funds to the government of Uzbekistan, but instead give the proceeds to charities and trusts to benefit the people of Uzbekistan.

In its SEC Form 20-F filed on 31 March 2016, VimpelCom disclosed that all FCPA settlement amounts were paid in February and March 2016 and were included in the provision made by VimpelCom in its financial statements for the year ended 31 December 2015. In addition, the remaining provision of USD 105 has been  reserved to cover expected direct and incremental legal expenses associated with the resolution.

The DOJ's investigation into the individual involved in the case is ongoing.



ENTITIES/INDIVIDUALS INVOLVED

DETAILS OF HOW CONDUCT WAS DISCOVERED

Discovery Method: Voluntary Disclosure
Details:

The company disclosed its relationship with Takilant in an SEC filing.


Country:

Discovery Method: Cooperation with Authorities
Details:

The company disclosed its relationship with Takilant in an SEC filing.


Country:

KEY TAKEAWAYS

TBD.

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