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Telecommunications
São Paulo, Brazil
Nationality of Foreign Officials: Brazil, Unspecified
Summary of Allegations:
In 2012 and 2013, Telefônica Brasil, the Brazilian subsidiary of Spain's Telefónica S.A.’s and a listed company on the NYSE, purchased USD 5.1 million worth of World Cup tickets and USD 428,000 worth Confederations Cup tickets to use in connection with "relationship-building activities with strategic audiences." Among the recipients of these gifts were numerous Brazilian government officials. Including hospitality, the average value of these gifts was approximately USD 3,204 for the World Cup and USD 3,085 for the Confederations Cup.
The officials receiving the tickets included federal congressmen and senators, customs clearance officers, mayors, and personnel of foreign embassies. Internal communications suggested that the gifts were used by Telefônica's Institutional Relations Department to reward and encourage favorable treatment and legislative assistance from the government officials. The expenses were recorded in the company's books as “Publicity Institutional Events” and “Advertising & Publicity”.
Approximate Alleged Payments to Foreign Officials: USD 738,806
Business Advantage Allegedly Obtained: Clearance of the company's goods in a tax-free trade zone and legislative amendments favorable to the company's business.
Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty
Year Resolved: 2019
Compliance Monitor: No
Ongoing: No
Details:
Telefónica S.A. disclosed in a Form 6-K filed on 2 March 2017 that it was conducting an internal investigation concerning possible violations of anticorruption laws.
In the same year, the SEC launched an FCPA probe into potential violation of the FCPA’s internal control and bookkeeping provisions relating to its ticket purchase and distribution in Brazil to domestic and foreign officials.
On 9 May 2019, Telefônica Brasil reached a settlement with the SEC. In a cease-and-desist order, the Commission found that Telefônica had violated the FCPA's internal accounting controls provision: although the company's code of ethics explicitly prohibited the use of gifts to reward or influence business decisions, its implementation of the policy focused on its employees' acceptance of such gifts and hospitality rather than their provision to government officials.
The SEC also found that Telefônica had violated the FCPA's books and records provision by describing the expenses as having been made for general advertising and publicity purposes with no indication that government officials were among the beneficiaries.
The SEC ordered payment of a civil penalty of USD 4.125 million. The Commission took into account Telefônica's remediation efforts and cooperation, which included enhancing its internal accounting controls and compliance function and adopting a new anti-corruption policy and compliance structure.
Discovery Method: Internal Investigation
Details:
Unspecified.
Country: