MOBILE TELESYSTEMS PJSC ("MTS")

INDUSTRY

Telecommunications

CORPORATE HEADQUARTERS

Moscow, Russian Federation

SUMMARY OF ALLEGATIONS

Nationality of Foreign Officials: Uzbekistan

Summary of Allegations:

From 2004 to at least 2012, MTS and its wholly owned Uzbek subsidiary, KOLORIT DIZAYN INK LLC, paid at least USD 420 million in bribes to a government official in Uzbekistan to enable MTS to obtain and retain business within the Uzbek telecommunications market and to receive commercial benefits to its operations. The illicit payments were made by MTS and KOLORIT and other MTS Uzbek subsidiaries through equity transactions with the government official, charitable contributions and sponsorships that the government official directed, and sham contracts. MTS improperly characterized the illicit payments as legitimate expenses in its books and records.   As a result of the scheme, MTS generated over USD 2.4 billion in revenue. Ultimately, the Uzbek government expropriated MTS’s telecommunications assets in Uzbekistan, resulting in no realized pecuniary gain to MTS as a result of their misconduct.

In a larger scheme during the same time period, MTS, VimpelCom Limited (now VEON) and Telia Company AB (Telia) are alleged to have paid a combined USD 865 million in improper payments to Uzbek official Gulnara Karimova, in order to secure her assistance in entering and maintaining their business operations in Uzbekistan’s telecommunications market.


Approximate Alleged Payments to Foreign Officials: MTS and subsidiaries: USD 402 million MTS, Vimpelcom, Telia scheme: USD 865 million

Business Advantage Allegedly Obtained: The bribes allowed the companies to enter the Uzbek telecommunications market, to obtain and receive business, and to receive commercial benefits to operations.

ENFORCEMENT RESULTS

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

In April 2015, media reports indicated that Swedish authorities froze more than 193 million Euros in assets, of which USD 30 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: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Assets Frozen/Forfeited, Cease-and-Desist Order, Civil Penalty, Compliance Monitor, Criminal Fine, Deferred Prosecution Agreement
Year Resolved: 2019
Compliance Monitor: Yes - 3 years
Ongoing: No
Details:

On 19 March 2014, MTS disclosed that the U.S. Department of Justice ("DOJ") and the U.S. Securities and Exchange Commission ("SEC") had commenced an investigation into the company's operations in Uzbekistan.

In April 2015, media reports indicated that Swedish authorities froze more than 193 million Euros in assets, of which USD 30 million was frozen at the request of the US 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.

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

In August 2016, MTS agreed to sell its majority stake (50.01 percent) in Uzbekistan’s Universal Mobile Systems to the Uzbek government. Starting in mid-2012, following US corruption probe into the company and legal disputes with the local government, MTS had stayed away from the Uzbek market. 

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.

07 March 2019 -

The SEC issued a consensual cease-and-desist order against MTS requiring MTS to pay a civil fine of US$ 100 million. MTS neither admitted nor denied the SEC’s findings.

 The DOJ filed a two-count criminal Information charging MTS with violations of the FCPA and entered into a deferred prosecution agreement with MTS through which MTS agreed to pay the United States criminal and regulatory penalties totaling US$ 850 million, which includes (1) a US$ 100 million credit for the civil penalty imposed by the SEC, and (2) a US$ 500,000 criminal fine and US$ 40 million criminal forfeiture that MTS agreed to pay on behalf of KOLORIT.

 Under both the SEC order and the DOJ DPA, MTS agreed to fully cooperate with all investigations, litigation, or other proceedings related to this matter, and to engage an independent compliance monitor to review and assess its compliance program for at least 3 years.

 



Agencies: United States: Department of Justice
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:

07 March 2019 - In connection with the Uzbek bribery scheme involving MTS, VimpelCom (now VEON), and Telia Company AB, Gulnara Karimova 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 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.  



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